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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 December 28, 1996.
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
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(Exact name of Registrant as specified in its charter)
DELAWARE 95-2647125
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8105 Irvine Center Drive
Irvine, California 92618
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(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE (714) 932-5000
N/A
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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 February 1, 1997 is
43,879,587.
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WESTERN DIGITAL CORPORATION
INDEX
PAGE NO.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Income - Three-Month Periods
Ended December 28, 1996 and December 30, 1995 . . . . . . . . . . . . . 3
Consolidated Statements of Income - Six-Month Periods
Ended December 28, 1996 and December 30, 1995 . . . . . . . . . . . . . 4
Consolidated Balance Sheets - December 28, 1996 and
June 29, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows - Six-Month Periods
Ended December 28, 1996 and December 30, 1995 . . . . . . . . . . . . . 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 4. Submission of Matters to Vote of Security Holders . . . . . . . . . . . 12
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . 13
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WESTERN DIGITAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE-MONTH PERIOD ENDED
----------------------------------
DEC. 28, DEC. 30,
1996 1995
------------ ----------
Revenues, net . . . . . . . . . . . . . . . . . . . . . . $ 1,118,647 $ 757,992
Costs and expenses:
Cost of revenues . . . . . . . . . . . . . . . . . 955,258 654,613
Research and development . . . . . . . . . . . . . 36,001 38,665
Selling, general and administrative . . . . . . . . 55,553 43,539
------------ ----------
Total costs and expenses . . . . . . . . . . . 1,046,812 736,817
------------ ----------
Operating income . . . . . . . . . . . . . . . . . . . . 71,835 21,175
Interest and other income . . . . . . . . . . . . . . . . 3,729 3,155
Gain on sale of multimedia business . . . . . . . . . . . -- 17,275
------------ ----------
Income before income taxes . . . . . . . . . . . . . . . 75,564 41,605
Provision for income taxes . . . . . . . . . . . . . . . 11,335 5,212
------------ ----------
Net income . . . . . . . . . . . . . . . . . . . . . . . $ 64,229 $ 36,393
============ ==========
Earnings per common and common
equivalent share (Note 2):
Primary . . . . . . . . . . . . . . . . . . . $ 1.36 $ .75
============ ==========
Fully diluted . . . . . . . . . . . . . . . . $ 1.35 $ .75
============ ==========
Common and common equivalent shares used
in computing per share amounts:
Primary . . . . . . . . . . . . . . . . . . . 47,380 48,438
============ ==========
Fully diluted . . . . . . . . . . . . . . . . 47,543 48,688
============ ==========
The accompanying notes are an integral part of these financial statements.
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WESTERN DIGITAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
SIX-MONTH PERIOD ENDED
----------------------------------
DEC. 28, DEC. 30,
1996 1995
------------ ----------
Revenues, net . . . . . . . . . . . . . . . . . . . . . . $ 2,001,762 $1,316,141
Costs and expenses:
Cost of revenues . . . . . . . . . . . . . . . . . 1,725,484 1,131,970
Research and development . . . . . . . . . . . . . 70,261 79,388
Selling, general and administrative . . . . . . . . 98,413 77,443
------------ ----------
Total costs and expenses . . . . . . . . . . . 1,894,158 1,288,801
------------ ----------
Operating income . . . . . . . . . . . . . . . . . . . . 107,604 27,340
Interest and other income . . . . . . . . . . . . . . . . 6,640 6,787
Gain on sale of multimedia business . . . . . . . . . . . -- 17,275
------------ ----------
Income before income taxes . . . . . . . . . . . . . . . 114,244 51,402
Provision for income taxes . . . . . . . . . . . . . . . 17,137 6,682
------------ ----------
Net income . . . . . . . . . . . . . . . . . . . . . . . $ 97,107 $ 44,720
============ ==========
Earnings per common and common
equivalent share (Note 2):
Primary . . . . . . . . . . . . . . . . . . . $ 2.07 $ .89
============ ==========
Fully diluted . . . . . . . . . . . . . . . . $ 2.06 $ .89
============ ==========
Common and common equivalent shares used
in computing per share amounts:
Primary . . . . . . . . . . . . . . . . . . . 46,841 50,039
============ ==========
Fully diluted . . . . . . . . . . . . . . . . 47,184 50,166
============ ==========
The accompanying notes are an integral part of these financial statements.
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WESTERN DIGITAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
DEC. 28, JUNE 29,
1996 1996
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ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . $ 273,969 $ 182,565
Short-term investments (Note 3) . . . . . . . . . . -- 36,598
Accounts receivable, less allowance for doubtful
accounts of $9,929 and $9,376 . . . . . . . . 494,194 409,473
Inventories (Note 4) . . . . . . . . . . . . . . . 155,740 142,622
Prepaid expenses . . . . . . . . . . . . . . . . . 27,669 23,006
------------ ------------
Total current assets . . . . . . . . . . . . . 951,572 794,264
Property and equipment at cost, net . . . . . . . . . . . 192,983 148,258
Intangible and other assets, net . . . . . . . . . . . . 33,136 41,621
------------ ------------
Total assets . . . . . . . . . . . . . . . . . $ 1,177,691 $ 984,143
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . $ 422,839 $ 345,866
Accrued compensation . . . . . . . . . . . . . . . 37,893 30,457
Accrued expenses . . . . . . . . . . . . . . . . . 189,648 137,699
------------ ------------
Total current liabilities . . . . . . . . . . 650,380 514,022
Deferred income taxes . . . . . . . . . . . . . . . . . . 16,016 16,229
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: 50,666 shares at
December 28 and at June 29 . . . . . . . . . . 5,066 5,066
Additional paid-in capital . . . . . . . . . . . . 342,621 349,773
Retained earnings . . . . . . . . . . . . . . . . . 317,577 220,470
Treasury stock-common stock at cost;
7,153 shares at December 28 and
7,095 shares at June 29 (Note 5) . . . . . . . (153,969) (121,417)
------------ ------------
Total shareholders' equity . . . . . . . . . . 511,295 453,892
------------ ------------
Total liabilities and shareholders' equity . . $ 1,177,691 $ 984,143
============ ============
The accompanying notes are an integral part of these financial statements.
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WESTERN DIGITAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
SIX-MONTH PERIOD ENDED
-----------------------------------
DEC. 28, DEC. 30,
1996 1995
------------ -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . $ 97,107 $ 44,720
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization . . . . . . . . . . . 28,323 25,854
Gain on sale of multimedia business . . . . . . . . -- (17,275)
Changes in current assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . (84,721) (57,096)
Inventories . . . . . . . . . . . . . . . . . . (13,118) (30,721)
Prepaid expenses . . . . . . . . . . . . . . . (4,663) 3,552
Accounts payable and accrued expenses . . . . . 136,358 47,495
Other assets . . . . . . . . . . . . . . . . . . . . 500 (1,275)
Deferred income taxes . . . . . . . . . . . . . . . (213) 920
------------ -----------
Net cash provided by operating activities . . . . 159,573 16,174
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in short-term investments (Note 3) . . . . . . . 36,598 27,346
Capital expenditures, net . . . . . . . . . . . . . . . . (69,566) (35,404)
Decrease (increase) in other assets . . . . . . . . . . . 4,503 (4,375)
Proceeds from sale of multimedia business . . . . . . . . -- 51,915
------------ -----------
Net cash provided by (used for)
investing activities . . . . . . . . . . . . . (28,465) 39,482
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase of common stock (Note 5) . . . . . . . . . . . (49,840) (72,656)
Proceeds from stock options exercised . . . . . . . . . . 5,758 2,472
Proceeds from ESPP shares issued . . . . . . . . . . . . 4,378 3,795
------------ -----------
Net cash used for financing activities . . . . . (39,704) (66,389)
------------ -----------
Net increase (decrease) in cash and cash equivalents . . 91,404 (10,733)
Cash and cash equivalents, beginning of period . . . . . 182,565 217,531
------------ -----------
Cash and cash equivalents, end of period . . . . . . . . $ 273,969 $ 206,798
============ ===========
SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for income taxes . . . . . . . . . $ 4,996 $ 1,682
The accompanying notes are an integral part of these financial statements.
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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 29, 1996.
2. Primary and fully diluted earnings per share amounts are based upon
the weighted average number of shares and dilutive common stock
equivalents for each period presented.
3. At June 29, 1996, the Company held $36.6 million in U.S. Treasury
Bills that were classified as short-term investments. During the
first six months of 1997, these securities matured and were replaced
by highly liquid investments with original maturities of three months
or less. The new investments were classified as cash equivalents on
the Company's consolidated balance sheet at December 28, 1996.
4. Inventories comprised the following:
DEC. 28, JUNE 29,
1996 1996
------------ -----------
(in thousands)
Finished goods . . . . . . . . . . . . . . . . . $ 55,629 $ 72,239
Work in process . . . . . . . . . . . . . . . . 49,778 31,781
Raw materials and component parts . . . . . . . 50,333 38,602
------------ -----------
$ 155,740 $ 142,622
============ ===========
5. During the six-month period ended December 28, 1996, the Company
purchased 1.1 million shares of its common stock in the open market at
a cost of $49.8 million. During the same period, approximately
290,000 and 789,000 shares were distributed in connection with the
Employee Stock Purchase Plan ("ESPP") and common stock option
exercises, respectively, for $11.5 million.
6. In the opinion of management, all adjustments necessary to fairly
state the results of operations for the three- and six-month periods
ended December 28, 1996 and December 30, 1995 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 29, 1996.
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WHEN USED IN THIS DISCUSSION, THE WORDS "ANTICIPATES", "BELIEVES", "EXPECTS",
"INTENDS", "FORECASTS", "PLANS", "FUTURE", "STRATEGY" OR WORDS OF SIMILAR
IMPORT ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS
ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES WHICH COULD CAUSE ACTUAL RESULTS
TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN THE FORWARD-LOOKING STATEMENTS.
READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING
STATEMENTS WHICH SPEAK ONLY AS OF THE DATE HEREOF. THE COMPANY UNDERTAKES NO
OBLIGATION TO PUBLISH REVISED FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR
CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF
UNANTICIPATED EVENTS. READERS ARE URGED TO CAREFULLY REVIEW AND CONSIDER THE
VARIOUS DISCLOSURES MADE BY THE COMPANY WHICH ATTEMPT TO ADVISE INTERESTED
PARTIES OF THE FACTORS WHICH AFFECT THE COMPANY'S BUSINESS, INCLUDING THE
DISCLOSURES MADE UNDER THE CAPTION "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" IN THIS REPORT, AS WELL AS THE
COMPANY'S OTHER PERIODIC REPORTS ON FORMS 10-K, 10-Q AND 8-K FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Unless otherwise indicated, references herein to specific years and quarters
are to the Company's fiscal years and fiscal quarters. Consolidated sales were
$1.1 billion in the second quarter of 1997, compared with $883 million in the
immediately preceding quarter and $758 million in the second quarter of 1996.
Consolidated sales were $2.0 billion in the first six months of 1997, an
increase of $686 million or 52% from the same period of the prior year. The
growth in revenues stemmed from 53% and 62% increases in hard drive unit
shipments for the three- and six-month periods ended December 28, 1996,
respectively, over the corresponding periods of the prior year. The higher
volume was partially offset by a decline in the average selling prices of hard
drive products. The increase in revenues from the immediately preceding
quarter is primarily the result of a 24% increase in hard drive unit shipments
and an improved pricing environment for the Company's hard-drive products.
The consolidated gross margin percentage was 14.6% in the second quarter of
1997, an increase of 1.8 and 1.0 percentage points from the immediately
preceding quarter and the second quarter of 1996, respectively. The increases
in the consolidated gross margin percentage were primarily the result of the
improved pricing environment combined with reductions in the cost of the
Company's hard drive products. The Company started volume shipments of hard
drives from its enterprise storage product line in the second quarter of 1997.
However, this did not have a material effect on the consolidated gross margin
percentage. The consolidated gross margin percentage was 13.8% in the first
six months of 1997, down .2 percentage points from the same period of 1996.
The decrease in gross margin percentage from the first six months of 1996 was
primarily due to the sale of the Company's microcomputer products ("MCP")
businesses in 1996, which had higher average gross margins than the Company's
hard drive products.
Research and development ("R&D") expense for the current quarter was 3.2% of
revenues, versus 3.9% and 5.1% of revenues in the immediately preceding quarter
and second quarter of 1996, respectively. R&D expense for the first six months
of 1997 was 3.5% of revenues as compared to 6.0% of revenues in the
corresponding period of 1996. The decreases were primarily attributable to the
elimination of MCP-related expenditures and the higher revenue base in the
current year. These amounts were partially offset by higher expenditures to
support the development of enterprise and mobile hard-drive products.
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Selling, general and administrative ("SG&A") expenses for the second quarter of
1997 were 5.0% of revenues, as compared to 4.9% and 5.7% of revenues in the
immediately preceding quarter and second quarter of 1996, respectively. SG&A
expenses for the first six months of 1997 were 4.9% of revenues as compared to
5.9% of revenues in the corresponding period of 1996. The decreases from the
prior year were primarily attributable to the higher revenue base in the
current year. The increases in the absolute dollars of SG&A expenses from the
three- and six-month periods ended December 30, 1995 were primarily the result
of incremental selling, marketing and other related expenses in support of the
higher revenue levels and higher accruals for the Company's pay-for-performance
and profit sharing plans.
The effective tax rate for the first six months of 1997 was 15%, as compared to
13% for the corresponding period of 1996. The increase reflects a change in
the mix of earnings among the Company's subsidiaries and the various tax
jurisdictions within which they operate.
FINANCIAL CONDITION
Cash and short-term investments totaled $274.0 million at December 28, 1996 as
compared with $219.2 million at June 29, 1996. Net cash provided by operating
activities was $159.6 million for the six-month period ended December 28, 1996.
Cash flows from earnings, depreciation and an increase in current liabilities
were partially offset by cash used to fund increases in accounts receivable and
inventories. Other significant uses of cash during the first six months of
1997 were $69.6 million of capital expenditures, which was incurred primarily
to support increased production of hard drives and related components, and the
acquisition of 1.1 million shares of the Company's common stock in the open
market for $49.8 million. Partially offsetting these uses of cash was $36.6
million provided by short-term investments that matured during the first six
months of 1997.
During the quarter ended December 28, 1996, the allowance for doubtful accounts
decreased by $2.4 million. The decrease is primarily the result of write-offs
of accounts receivable that were fully reserved in prior periods, partially
offset by normal provisions for doubtful accounts.
The Company has an $150 million revolving credit agreement with certain
financial institutions extending through April 1999. This facility is intended
to meet short-term working capital requirements which may arise from time to
time. The Company believes that its current cash balances combined with cash
flow from operations and its revolving credit agreement will be sufficient to
meet its working capital needs for the foreseeable future. However, the
Company's ability to sustain its favorable working capital position is
dependent upon a number of factors that are discussed below and in the
Company's Annual Report on Form 10-K for the year ended June 29, 1996 under the
heading "Certain Factors Affecting Future Operating Results."
CERTAIN FACTORS AFFECTING WESTERN DIGITAL CORPORATION AND THE DISK DRIVE
INDUSTRY
The hard drive industry in which the Company competes is subject to a number of
risks which have affected the Company's operating results in the past and could
affect its future operating results. Demand for the Company's hard drive
products depends on the demand for the computer systems manufactured by its
customers and storage upgrades to computer systems, which in turn are affected
by computer system product cycles, end user demand for increased storage
capacity, and prevailing economic conditions. The press has reported slower
retail computer sales during the 1996 holiday season, but the Company believes
that overall the computer market remains strong, with the non-retail sector
showing a combination of corporate upgrades to Windows NT on Pentium Pro
desktop systems, a strong demand for higher capacity, high-performance Western
Digital Caviar desktop drives and strength in the server market.
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The computing industry is intensely competitive and has been characterized by
significant price erosion over the life of a product, periodic rapid price
declines due to industry over-capacity or other competitive factors,
technological changes, changing market requirements, occasional shortages of
materials, dependence upon a limited number of vendors for certain components,
dependence upon highly skilled engineering and other personnel, and significant
expenditures for product development. The hard drive market in particular has
been subject to recurring periods of severe price competition, although the
Company believes that the current pricing environment remains stable by
historical industry standards.
The Company's principal competitors are Quantum Corporation ("Quantum"),
Seagate Technology, Inc. ("Seagate Technology") and large computer
manufacturers such as IBM that manufacture drives for use in their own products
and for sale to others. In February 1996, Seagate Technology merged with
Conner Peripherals, Inc. ("Conner") formerly one of the Company's principal
competitors. This merger changed the industry dynamics by reducing the number
of competitors and by significantly increasing the size of Seagate Technology.
The Company is unable to predict the long-term effects that the merger will
have on this industry and/or the Company, although the Company currently
believes that consolidation has brought more stability to the hard drive
industry. The Company has increased its market share recently in part by
capitalizing on some missteps made by its competitors. While the Company
believes that its products and its marketing efforts will continue to be
competitive, there can be no assurance that its competitors will not improve
their position in the market through new product introduction or other means.
Even during periods of consistent demand, the hard drive industry has been
characterized by intense competition and ongoing price erosion over the life of
a given drive product, and the Company expects that price erosion in the data
storage industry will continue for the foreseeable future. In general, the
unit price for a given product in all of the Company's markets decreases over
time as increases in industry supply and cost reductions occur and as
technological advancements are achieved. Cost reductions are primarily
achieved as volume efficiencies are realized, component cost reductions are
achieved, experience is gained in manufacturing the product and design
enhancements are made. Competitive pressures and customer expectations result
in these cost improvements being passed along as reductions in selling prices.
At times, the rate of general price decline is accelerated when some
competitors lower prices to absorb excess capacity, to liquidate excess
inventories and/or to gain market share. The competition and continuing price
erosion could adversely affect the Company's results of operations in any given
quarter, and such adverse effect often cannot be anticipated until late in any
given quarter.
A number of the components used by the Company are available from a single or
limited number of outside suppliers. Some of these materials may periodically
be in short supply, and the Company has, on occasion, experienced temporary
delays or increased costs in obtaining these materials. Because the Company is
less vertically integrated than its competitors, an extended shortage of
required materials and supplies could have a more severe effect on the
Company's revenues and earnings as compared to its competition. The Company
must allow for significant lead times when procuring certain materials and
supplies. The Company has more than one available source of supply for most of
its required materials. Where there is only one source of supply, the Company
has entered into close technical and manufacturing relationships, has access
to more than one manufacturing location in most instances, and believes that a
second source could be obtained over a period of time. However, no assurance
can be given that the Company's results of operations would not be adversely
affected until a new source could be secured. Although the Company obtains
headstack assemblies from several sources, the supply of these components at
the desired technology levels is currently a critical issue for the Company as
it plans to meet the current strong demand for desktop storage products. A
shortage in the supply of headstack assemblies at the desired technology levels
could adversely affect the Company's ability to meet anticipated customer
demand for enterprise storage products and could limit the Company's ability to
manufacture desktop storage products to or above its current planned levels.
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Hard drive customers' demand for greater storage capacity and higher
performance has led to short product life cycles that require the Company to
constantly develop and introduce new drive products on a cost effective and
timely basis. Failure of the Company to execute its strategy of achieving
time-to-market in sufficient volume with these new products, or any delay in
introduction of advanced and cost effective products, could result in
significantly lower gross margins. The Company's future is therefore dependent
upon its ability to develop new products, to qualify these new products with
its customers, to successfully introduce these products to the market on a
timely basis, and to commence volume production to meet customer demands.
The Company experiences fluctuations in manufacturing yields that can
materially affect the Company's operations, particularly in the start-up phase
of new products or new manufacturing processes. With the continued pressures
to shorten the time required to introduce new products, the Company must
accelerate production learning curves to shorten the time to achieve acceptable
manufacturing yields and costs. Production of the Company's new enterprise
storage products is expected to increase considerably over the next several
quarters. The Company's inability to successfully achieve its production and
sales goals for its enterprise storage products would significantly impact the
Company's future operating results. Although the mobile PC market represents a
smaller portion of the Company's potential business, the Company is also
working to achieve volume production of the 3.0-inch form factor hard drive for
mobile products in 1997. The Company's future operating results may be
adversely affected if it is unsuccessful in ramping to volume production and
marketing the 3.0-inch form factor hard drive.
All of the Company's hard drive products currently utilize conventional thin
film or metal-in-gap ("MIG") inductive head technologies. The Company believes
that MR heads, which enable higher capacity per disk than conventional thin
film or MIG inductive heads, will eventually replace thin film and MIG
inductive heads as the leading recording head technology. Several of the
Company's major competitors incorporate MR head technology into some of their
current products and with higher capacity drives using MR heads, the Company's
competitors have achieved time-to-market leadership. Failure of the Company to
successfully manufacture and market products incorporating MR head technology
in a timely manner and/or in sufficient volume could have a material adverse
effect on the Company's business and results of operations.
The Company's operating results have been and may in the future be subject to
significant quarterly fluctuations as a result of a number of other factors.
These factors have included the timing of orders from and shipment of products
to major customers, product mix, pricing, delays in product development and/or
introduction to production, competing technologies, variations in product cost,
component availability due to single or limited sources of supply, foreign
exchange fluctuations, increased competition and general economic and industry
fluctuations. The Company's future operating results may also be adversely
affected by an adverse judgment or settlement in the legal proceedings in which
the Company is currently involved. This statement should be read in
conjunction with "PART I, Item 3. Legal Proceedings" included in the Company's
Annual Report on Form 10-K for the year ended June 29, 1996.
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PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
The annual meeting of shareholders was held on November 14, 1996.
The shareholders elected the following eight directors to hold
office until the next annual meeting and until their successors are
elected and qualified:
Number of Votes
---------------
For Withheld
--- --------
James A. Abrahamson 40,863,553 167,394
Peter D. Behrendt 40,865,172 165,775
I. M. Booth 40,861,758 169,189
Irwin Federman 40,862,925 168,022
Charles A. Haggerty 40,870,282 160,665
Andre R. Horn 40,863,385 167,562
Anne O. Krueger 40,861,318 169,629
Thomas E. Pardun 40,865,925 165,022
In addition, the shareholders approved the following proposals:
Number of Votes
-------------------
For Against*
--- -------
1. To approve the amendment to the Company's
Employee Stock Option Plan. 20,217,558 11,292,078
2. To approve the amendment to the Company's
Employee Stock Purchase Plan. 30,784,469 725,167
3. To ratify the selection of KPMG Peat Marwick LLP
as independent accountants for the Company for
the fiscal year ended June 28, 1997. 40,911,170 119,774
* includes abstentions
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
4.2.1 Amendment No. 2 to Rights Agreement dated as of
January 15, 1997, by and between Western Digital
Corporation and American Stock Transfer & Trust
Company, as Rights Agent (1)
10.1.1 Western Digital Corporation Amended and Restated
Employee Stock Option Plan, as amended on November
14, 1996.
10.3.1 Western Digital Corporation 1993 Employee Stock
Purchase Plan, as amended on November 14, 1996.
10.32.1 Third Amendment to the Company's Retirement Savings
and Profit Sharing Plan.
11 Computation of Per Share Earnings.
27 Financial Data Schedule.
--------------
(1) Incorporated by reference to the Company's Current
Report on Form 8-K as filed with the Securities and
Exchange Commission on February 5, 1997.
(b) Reports on Form 8-K:
On February 5, 1997, the Company filed a Current Report on
Form 8-K with the Securities and Exchange Commission reporting
that the Company's Rights Agreement has been amended.
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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/Duston Williams
------------------------------------------
Duston M. Williams
Senior Vice President
and Chief Financial Officer
Date: February 10, 1997
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EXHIBIT INDEX
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
10.1.1 Western Digital Corporation Amended and Restated
Employee Stock Option Plan, as amended on
November 14, 1996 . . . . . . . . . . . . . . . . . . . .
10.3.1 Western Digital Corporation 1993 Employee Stock
Purchase Plan, as amended on November 14, 1996 . . . . .
10.32.1 Third Amendment to the Company's Retirement Savings and
Profit Sharing Plan . . . . . . . . . . . . . . . . . . .
11 Computation of Per Share Earnings . . . . . . . . . . . .
27 Financial Data Schedule . . . . . . . . . . . . . . . . .
15
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
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corporations shall be eligible to receive a grant or grants of such options
under the Plan if at the time such options 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 15,450,000 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 the Nasdaq National Market on such
date, or (c) if the Common Stock is not then listed on an exchange or quoted on
the Nasdaq National Market, an amount determined in good faith by the
Administrator.
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
2
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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, 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.
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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 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,
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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) except that no such modification, extension or
renewal shall result in a reduction in the exercise price of such option.
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 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
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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.
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Exhibit 10.3.1
WESTERN DIGITAL CORPORATION
1993 EMPLOYEE STOCK PURCHASE PLAN
The Western Digital Corporation 1993 Employee Stock Purchase Plan (the
"Plan") shall be established and operated in accordance with the following
terms and provisions.
1. Definitions
As used in the Plan the following terms shall have the meanings set
forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Committee" means the committee appointed by the Board to
administer the Plan as described in Section 4 below.
(d) "Common Stock" means the Common Stock, $0.10 par value, of the
Company.
(e) "Company" means Western Digital Corporation, a Delaware
corporation.
(f) "Continuous Employment" means the absence of any interruption
or termination of service as an Employee with the Company and/or its
Participating Subsidiaries. Continuous Employment shall not be considered
interrupted in the case of a leave of absence agreed to in writing by the
Company, provided that such leave is for a period of not more than 90 days or
reemployment upon the expiration of such leave is guaranteed by contract or
statute.
(g) "Eligible Compensation" means, with respect to each
Participant for each pay period, the full salary and wages paid to such
Participant by the Company or a Participating Subsidiary, including
commissions, bonuses (to the extent not excluded below), overtime pay and shift
differentials. Except as otherwise determined by the Committee, "Eligible
Compensation" does not include
(i) any amounts contributed by the Company or a
Participating Subsidiary to any pension plan or plan of deferred compensation,
(ii) any automobile or relocation allowances (or
reimbursement for any such expenses),
(iii) any amounts paid as a starting bonus or finder's fee,
(iv) any amounts realized from the exercise of qualified
or non-qualified stock options, or
(v) any amounts paid by the Company or a Participating
Subsidiary for other fringe benefits, such as health and welfare,
hospitalization and group life insurance benefits, or perquisites, or paid in
lieu of such benefits, such as cash-out of credits generated under a plan
qualified under Code Section 125.
(h) "Eligible Employee" means an Employee who is eligible to
participate in the Plan as described in Section 5 below.
(i) "Employee" means any person, including an officer, who is
customarily employed for at least twenty (20) hours per week and more than five
(5) months in a calendar year by the Company or one of its Participating
Subsidiaries.
(j) "Enrollment Date" means the first day of each Offering Period.
(k) "Exercise Date" means each July 31 and January 31 during each
Offering Period.
(l) "Exercise Period" means a period commencing on February 1 and
terminating on the following July 31 or commencing on August 1 and terminating
on the following January 31.
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(m) "Exercise Price" means the price per share of shares offered
in a given Offering Period determined as provided in Section 10 below.
(n) "Fair Market Value" means, with respect to a share of Common
Stock as of any Enrollment Date or Exercise Date, the closing price of such
Common Stock on the New York Stock Exchange on such date, as reported in The
Wall Street Journal. In the event that such a closing price is not available
for an Enrollment Date or an Exercise Date, the Fair Market Value of a share of
Common Stock on such date shall be the closing price of a share of the Common
Stock on the New York Stock Exchange on the last business day prior to such
date or such other amount as may be determined by the Committee by any fair and
reasonable means.
(o) "Offering Period" means a period of twenty-four (24) months
during which an option granted pursuant to the Plan may be exercised. A new
Offering Period shall begin on each February 1 and August 1.
(p) "Participant" means an Eligible Employee who has elected to
participate in the Plan by filing an enrollment agreement with the Company as
provided in Section 7 below.
(q) "Participating Subsidiary" means any Subsidiary other than a
Subsidiary excluded from participation in the Plan by the Committee, in its
sole discretion.
(r) "Plan" means this Western Digital Corporation 1993 Employee
Stock Purchase Plan.
(s) "Subsidiary" means any corporation, domestic or foreign, of
which the Company owns, directly or indirectly, not less than 50% of the total
combined voting power of all classes of stock or other equity interests and
that otherwise qualifies as a "subsidiary corporation" within the meaning of
Section 424(f) of the Code or any successor thereto.
2. Purpose of the Plan
The purpose of the Plan is to provide an incentive for present and
future employees of the Company and its Participating Subsidiaries to acquire a
proprietary interest (or increase an existing proprietary interest) in the
Company through the purchase of Common Stock. It is the intention of the
Company that the Plan qualify as an "employee stock purchase plan" under
Section 423 of the Internal Revenue Code of 1986. Accordingly, the provisions
of the Plan shall be administered, interpreted and construed in a manner
consistent with the requirements of that section of the Code.
3. Shares Reserved for the Plan
There shall be reserved for issuance and purchase by Employees under
the Plan an aggregate of 2,500,000 shares of Common Stock, subject to
adjustment as provided in Section 15 below. Shares of Common Stock subject to
the Plan may be newly issued shares or shares reacquired in private
transactions or open market purchases. If and to the extent that any right to
purchase reserved shares shall not be exercised by any Employee for any reason
or if such right to purchase shall terminate as provided herein, shares that
have not been so purchased hereunder shall again become available for the
purposes of the Plan unless the Plan shall have been terminated, but all shares
sold under the Plan, regardless of source, shall be counted against the
limitation set forth above.
4. Administration of the Plan
(a) The Plan shall be administered by a Committee appointed by,
and which shall serve at the pleasure of, the Board. The Committee shall
consist of not less than 3 members of the Board who are not officers or
employees of the Company or of any of its Subsidiaries and who are
disinterested persons within the terms of Rule 16b-3 promulgated under the
Securities Exchange Act of 1934. The Committee shall have authority to
interpret the Plan, to prescribe, amend and rescind rules and regulations
relating to the Plan, and to make all other
2
3
determinations necessary or advisable for the administration of the Plan, all
of which actions and determinations shall be final, conclusive and binding on
all persons.
(b) The Committee may request advice or assistance or employ such
other persons as it in its absolute discretion deems necessary or appropriate
for the proper administration of the Plan, including, but not limited to
employing a brokerage firm, bank or other financial institution to assist in
the purchase of shares, delivery of reports or other administrative aspects of
the Plan.
5. Eligibility to Participate in the Plan
Subject to limitations imposed by Section 423(b) of the Code, any
Employee who is employed by the Company or a Participating Subsidiary on an
Enrollment Date shall be eligible to participate in the Plan for the Offering
Period beginning on that Enrollment Date.
6. Offering Periods
The Plan shall be implemented by consecutive Offering Periods with a
new Offering Period commencing on each February 1 and August 1 during the term
of the Plan. The first such Offering Period shall commence on February 1,
1994, or as otherwise determined by the Committee. The Committee shall have
the power to change the duration of Offering Periods with respect to future
offerings without shareholder approval if such change is announced at least
fifteen (15) days prior to the scheduled beginning of the first Offering Period
to be affected.
7. Election to Participate in the Plan
(a) Each Eligible Employee may elect to participate in the Plan by
completing an enrollment agreement in the form provided by the Company and
filing such enrollment agreement with the Company prior to the applicable
Enrollment Date, unless another time for filing the enrollment form is set by
the Committee for all eligible Employees with respect to a given Offering
Period. An Eligible Employee may participate in an Offering Period only if, as
of the Enrollment Date of such Offering Period, such Employee is not
participating in any prior Offering Period which is continuing at the time of
such proposed enrollment.
(b) Payroll deductions for a Participant shall commence on the
first payroll date following the Enrollment Date and shall end on the last
payroll date in the Offering Period to which such authorization is applicable,
unless sooner terminated by the Participant as provided in Section 12.
(c) Unless a Participant elects otherwise prior to the Enrollment
Date of the immediately succeeding Offering Period, an Eligible Employee who is
participating in an Offering Period as of the last Exercise Date of such
Offering Period (the "Prior Offering Period") shall be deemed (i) to have
elected to participate in the immediately succeeding Offering Period and (ii)
to have authorized the same payroll deduction for such immediately succeeding
Offering Period as was in effect for such Participant immediately prior to the
expiration or termination of the Prior Offering Period.
(d) The Committee, in its discretion, may terminate the
participation of all Participants in any Offering Period as of the last day of
any Exercise Period (a "Termination Date") and enroll such Participants in the
new Offering Period commencing immediately following such Termination Date if
the Exercise Price determined as of the Enrollment Date for such new Offering
Period is lower than the Exercise Price determined as of the Enrollment Date of
the Offering Period for which the Participants' participation is being
terminated. In such event, each of such Participants shall be deemed for
purposes of this Plan (i) to have elected to participate in such new Offering
Period and (ii) to have authorized the same payroll deduction for such new
Offering Period as was in effect for such Participant immediately prior to the
Termination Date.
3
4
8. Payroll Deductions
(a) All Participant contributions to the Plan shall be made only
by payroll deductions. At the time a Participant files the enrollment agreement
with respect to an Offering Period, the Participant shall authorize payroll
deductions to be made on each payroll date during the Offering Period in an
amount of from 1% to 10% of the Eligible Compensation which the Participant
receives on each payroll date during such Offering Period. The amount of such
payroll deductions shall be a whole percentage (i.e., 1%, 2%, 3%, etc.) of the
Participant's Eligible Compensation.
(b) All payroll deductions made for a Participant shall be
deposited in the Company's general corporate account and shall be credited to
the Participant's account under the Plan. No interest shall accrue or be
credited with respect to the payroll deductions of a Participant under the
Plan. A Participant may not make any additional payments into such account.
All payroll deductions received or held by the Company under the Plan may be
used by the Company for any corporate purpose, and the Company shall not be
obligated to segregate such payroll deductions.
(c) A Participant may discontinue participation in the Plan as
provided in Section 12. A Participant may at any time during an Offering
Period (but no more than four times in any calendar year) reduce or increase
(subject to the limitations of Section 8(a) above) the rate of his or her
payroll deductions by completing and filing with the Company a change notice in
the form provided by the Company. Any such reduction in the rate of a
Participant's payroll deductions shall be effective as of the pay period
specified by the Participant in the Participant's change notice, but in no
event sooner than the first pay period ending more than fifteen (15) days after
the Participant files the change notice with the Company. Any such increase in
the rate of a Participant's payroll deductions shall be effective as of the
first date of the next Exercise Period within such Offering Period.
9. Grant of Options
(a) On the Enrollment Date of each Offering Period, subject to the
limitations set forth in Sections 3 and 9(b) hereof, each Eligible Employee
shall be granted an option to purchase on each Exercise Date during such
Offering Period (at the Exercise Price determined as provided in Section 10
below) up to a number of shares of the Company's Common Stock determined by
dividing such Employee's payroll deductions accumulated during the Exercise
Period ending on such Exercise Date by 85% of the fair market value of a share
of the Company's Common Stock on the Enrollment Date or on the Exercise Date,
whichever is lower, provided that the number of shares subject to the option
shall not exceed five (5) times the number of shares determined by dividing 10%
of the Employee's Eligible Compensation over the Offering Period (determined
based upon the Eligible Employee's rate of Eligible Compensation in effect as
of the Enrollment Date) by 85% of the Fair Market Value of a share of the
Company's Common Stock on the Enrollment Date.
(b) Notwithstanding any provision of the Plan to the contrary, no
Employee shall be granted an option under the Plan (i) if, immediately after
the grant, such Employee (or any other person whose stock would be attributed
to such Employee pursuant to Section 424(d) of the Code) would own stock and/or
hold outstanding options to purchase stock possessing 5% or more of the total
combined voting power or value of all classes of stock of the Company or of any
Subsidiary of the Company, or (ii) which permits such Employee's rights to
purchase stock under all employee stock purchase plans of the Company and its
Subsidiaries to accrue at a rate which exceeds $25,000 of fair market value of
such stock (determined at the time such option is granted) for each calendar
year in which such option is outstanding at any time.
10. Exercise Price
The Exercise Price of each of the shares offered in a given Offering
Period shall be the lower of: (i) 85% of the Fair Market Value of a share of
the Common Stock of the Company on the Enrollment Date; or (ii) 85% of the Fair
Market Value of a share of the Common Stock of the Company on the applicable
Exercise Date.
4
5
11. Exercise of Options
Unless a Participant withdraws from the Plan as provided in Section
12, the Participant's option for the purchase of shares will be exercised
automatically on each Exercise Date of the Offering Period, and the maximum
number of full shares subject to option will be purchased for the Participant
at the applicable Exercise Price with the accumulated payroll deductions in the
Participant's account. Any amount remaining in the Participant's account after
an Exercise Date shall be held in the account until the next Exercise Date in
such Offering Period, unless the Offering Period has been over-subscribed or
has terminated with such Exercise Date, in which event such amount shall be
refunded to the Participant.
12. Withdrawal; Termination of Employment
(a) A Participant may withdraw all but not less than all of the
payroll deductions credited to the Participant's account under the Plan at any
time by giving written notice to the Company. All of the Participant's payroll
deductions credited to the Participant's account will be paid to him promptly
after receipt of the Participant's notice of withdrawal, the Participant's
participation in the Plan will be automatically terminated, and no further
payroll deductions for the purchase of shares will be made. Payroll deductions
will not resume on behalf of a Participant who has withdrawn from the Plan
unless written notice is delivered to the Company within the open enrollment
period preceding the commencement of an Exercise Period directing the Company
to resume payroll deductions.
(b) Upon termination of the Participant's Continuous Employment
prior to the Exercise Date of an Offering Period for any reason, including
retirement or death, the payroll deductions credited to the Participant's
account will be returned to the Participant or, in the case of death, to the
Participant's estate, and the Participant's options to purchase shares under
the Plan will be automatically terminated.
(c) In the event an Employee fails to maintain Continuous
Employment for at least twenty (20) hours per week during an Offering Period in
which the Employee is a Participant, the Employee will be deemed to have
elected to withdraw from the Plan, the payroll deductions credited to the
Employee's account will be returned to the Employee, and the Employee's options
to purchase shares under the Plan will be terminated.
(d) A Participant's withdrawal from an Offering Period will not
have any effect upon the Participant's eligibility to participate in a
succeeding Offering Period or in any similar plan which may hereafter be
adopted by the Company.
13. Transferability
Options to purchase Common Stock granted under the Plan are not
transferable by a Participant other than by will or the laws of descent and
distribution and are exercisable during a Participant's lifetime only by the
Participant.
14. Reports
Individual accounts will be maintained for each Participant in the
Plan. Statements of account will be given to participating Employees
semi-annually promptly following each Exercise Date, which statements will set
forth the amounts of payroll deductions, the per share purchase price, the
number of shares purchased and the remaining cash balance, if any.
15. Adjustments Upon Changes in Capitalization
(a) If the outstanding shares of Common Stock are increased or
decreased, or are changed into or are exchanged for a different number or kind
of shares, as a result of one or more reorganizations, restructurings,
recapitalizations, reclassifications, stock splits, reverse stock splits, stock
dividends or the like, upon authorization of the Committee, appropriate
adjustments shall be made in the number and/or kind of shares, and the
per-share
5
6
option price thereof, which may be issued in the aggregate and to any
Participant upon exercise of options granted under the Plan.
(b) In the event of the proposed dissolution or liquidation of the
Company, each Offering Period will terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the
Committee. In the event of a proposed sale of all or substantially all of the
assets of the Company, or the merger of the Company with or into another
corporation, each option under the Plan shall be assumed or an equivalent
option shall be substituted by such successor corporation or a parent or
subsidiary of such successor corporation, unless the Committee determines, in
the exercise of its sole discretion and in lieu of such assumption or
substitution, that the Participant shall have the right to exercise the option
as to all of the optioned stock, including shares as to which the option would
not otherwise be exercisable. If the Committee makes an option fully
exercisable in lieu of assumption or substitution in the event of a merger or
sale of assets, the Committee shall notify the Participant that the option
shall be fully exercisable for a period of thirty (30) days from the date of
such notice, and the option will terminate upon the expiration of such period.
(c) In all cases, the Committee shall have full discretion to
exercise any of the powers and authority provided under this Section 15, and
the Committee's actions hereunder shall be final and binding on all
Participants. No fractional shares of stock shall be issued under the Plan
pursuant to any adjustment authorized under the provisions of this Section 15.
16. Amendment of the Plan
The Board may at any time, or from time to time, amend the Plan in any
respect; provided, however, that the Plan may not be amended in any way that
will cause rights issued under the Plan to fail to meet the requirements for
employee stock purchase plans as defined in Section 423 of the Code or any
successor thereto, including, without limitation, shareholder approval if
required.
17. Termination of the Plan
The Plan and all rights of Employees hereunder shall terminate:
(a) on the Exercise Date that Participants become entitled to
purchase a number of shares greater than the number of reserved shares
remaining available for purchase under the Plan; or
(b) at any time, at the discretion of the Board.
In the event that the Plan terminates under circumstances described in
Section 17(a) above, reserved shares remaining as of the termination date shall
be sold to Participants on a pro rata basis.
18. Notices
All notices or other communications by a Participant to the Company
under or in connection with the Plan shall be deemed to have been duly given
when received in the form specified by the Company at the location, or by the
person, designated by the Company for the receipt thereof.
19. Shareholder Approval
Continuance of the Plan shall be subject to approval by the
shareholders of the Company within twelve months before or after the date the
Plan is adopted. If such shareholder approval is obtained at a duly held
shareholders' meeting, it may be obtained by the affirmative vote of the
holders of a majority of the outstanding shares of the Company present or
represented and entitled to vote thereon.
6
7
20. Conditions Upon Issuance of Shares
(a) The Plan, the grant and exercise of options to purchase shares
of Common Stock under the Plan, and the Company's obligation to sell and
deliver shares upon the exercise of options to purchase shares shall be subject
to all applicable federal, state and foreign laws, rules and regulations, and
to such approvals by any regulatory or governmental agency as may, in the
opinion of counsel for the Company, be required.
(b) The Company may make such provisions as it deems appropriate
for withholding by the Company pursuant to federal or state income tax laws of
such amounts as the Company determines it is required to withhold in connection
with the purchase or sale by a Participant of any Common Stock acquired
pursuant to the Plan. The Company may require a Participant to satisfy any
relevant tax requirements before authorizing any issuance of Common Stock to
such Participant.
7
1
EXHIBIT 10.32.1
THIRD AMENDMENT TO THE
WESTERN DIGITAL CORPORATION
SAVINGS AND PROFIT SHARING PLAN
This Third Amendment (the "Amendment") to the Western Digital
Corporation Savings and Profit Sharing Plan (the "Plan") made this 9th day of
January 1997 by Western Digital Corporation (the "Company"), the sponsoring
employer of the Plan.
WHEREAS, the terms of the Plan are set forth in an amended and
restated Plan document, dated June 23, 1995, as thereafter amended by the First
amendment dated June 30, 1995, and by the Second amendment dated March 27,
1996; and
WHEREAS, the Company has reserved the right to amend the Plan by
action of its Board of Directors; and
WHEREAS, the Company desires to amend the Plan in certain respects.
NOW, THEREFORE, the Plan is amended as follows:
1. Section 2.9 is amended to read in its entirety as follows:
2.9 Compensation. "Compensation" for purposes of this
Plan shall be determined in accordance with the provisions of this
Section 2.9.
2.9.1. For purposes of Section 4.2 relating to a
Participant's Pre-Tax Contribution amounts and Sections 5.3
and 5.4 and relating to certain limitations on Matching
Contributions, "Compensation" shall mean the full salary and
wages paid by the Employer to an Employee, including
commissions, bonuses (to the extent not excluded under 2.9.3
below), tips, overtime pay, severance pay, and amounts of
Pre-Tax Contributions elected pursuant to Section 3.2 of this
Plan and/or a benefit plan sponsored by an Employer and
qualified under Code Section 125.
2.9.2. For purposes of Section 5.5 relating to the
allocation of any Profit Sharing Contributions, "Compensation"
shall mean Compensation as defined in 2.9.1 above, except that
any non-draw commissions or bonuses payable by the Employer to
an Employee shall be excluded.
2.9.3. "Compensation" as defined in 2.9.1 or 2.9.2
shall exclude the following:
2.9.3.1. any amounts contributed by the
Employer, other than Pre-Tax Contributions, pursuant
to Section 4.1, to any pension plan or plan of
deferred compensation (including this Plan),
2
2.9.3.2. any automobile and relocation
allowances (or reimbursement for any such expenses),
2.9.3.3. any amounts paid as a starting
bonus or finder's fee,
2.9.3.4. amounts realized from the exercise
of non-qualified stock options,
2.9.3.5. any amounts paid by the Employer
(other than Pre-Tax Contributions described above)
for other fringe benefits, such as health and
welfare, hospitalization, and group life insurance
benefits, or perquisites, or paid in lieu of such
benefits, such as cash-out of credits generated under
a plan qualified under Code Section 125; provided,
however, that payments to an Eligible Employee from a
non-qualified plan of deferred compensation shall not
be excluded to the extent that (i) such payments
consist of amounts voluntarily deferred upon written
election of the Eligible Employee in accordance with
the terms of such plan (exclusive of earnings thereon
and exclusive of any other additions by the
Employer), (ii) such payments consist of amounts
that, but for such deferral in accordance with the
terms of such plan, would have constituted
"Compensation" as defined in this Section 2.9 in the
year that such amounts would have been paid
(determined without application of any limit
prescribed under Section 401(a)(17) of the Code),
(iii) such payments were not previously considered as
"Compensation" for purposes of this Section 2.9, and
(iv) such payments are (subject to deferral under
this Plan) includable in the gross income of the
Eligible Employee for federal income tax purposes in
the year of payment.
2.9.4. Except as provided in Exhibit A, Compensation
shall include only the amounts determined in accordance with
2.9.1, 2.9.2 and 2.9.3 above that are paid to an individual
while he is an Active Participant.
2.9.5. Solely for purposes of Article 15 (relating
to certain limitations on annual additions to or benefits from
qualified plans) and Article 19 (relating to top-heavy plans),
the term "Compensation" shall mean wages within the meaning of
Section 3401(a) of the Code and any other payments of
compensation to the Employee by the Employer (in the course of
the Employer's trade or business) for which the Employer is
required to furnish the Employee a written statement under
Sections 6041(d) and 6051(a)(3) of the Code; provided,
however, that such "Compensation" shall not include any
amounts paid or reimbursed by the Employer for moving expenses
incurred by the Employee, but only to the extent that at the
time of payment it is reasonable to believe that these amounts
are deductible by the Employee under Section 217 of the Code.
For Limitation Years beginning after December 31, 1991, for
purposes of applying the limitations of Article 15,
Compensation for a Limitation Year, as defined in Subsection
15.1.2,
3
is the Compensation actually paid or includable in gross
income during such Limitation Year.
2.9.6. Except to the extent otherwise permitted by
law, "Compensation" for any Plan Year that begins on or after
July 1, 1989 shall not exceed the annual compensation limit in
effect under Section 401(a)(17) of the Code on the January 1
coinciding with or immediately preceding the first day of such
Plan Year, as provided in this Subsection.
2.9.6.1. For any Plan Year that begins on or
after January 1, 1994 such limit shall be $150,000,
as that amount is adjusted in accordance with Section
401(a)(17)(B) of the Code.
2.9.6.2. For any Plan Year that begins on or
after July 1, 1989 and before January 1, 1994, such
limit shall be $200,000, as that amount is adjusted
at the same time and in the same manner as under
Section 415(d) of the Code.
2.9.6.3. In no event shall this Plan be
deemed to violate the annual limitation on
Compensation under this Subsection solely because
such limitation is applied separately to Compensation
taken into account for a Plan Year for purposes of
Section 4.2.1, 4.2.2, 4.4 and 5.9.
2.9.6.4. If Compensation for a period of
less than twelve (12) months is taken into account
for any Plan Year, then, to the extent required by
regulations under Section 401(a)(17) of the Code, the
otherwise applicable annual Compensation limit
provided under this Subsection 2.9.6 is reduced in
the same proportion as the reduction in the
twelve-month period. However, no proration shall be
required solely because Compensation taken into
account for a Plan Year includes only Compensation
paid for periods during which the Employee is an
Active Participant (including a portion of a
Compensation year corresponding to a period of Active
Participation).
2.9.6.5. For purposes of the annual
Compensation limit provided under this Subsection,
the family aggregation rules of Section 414(q)(6) of
the Code shall apply to an Employee who is a five
percent (5%) owner or one of the top-ten highest paid
Employees, except in applying such rules, the term
"family member" shall include only the Spouse and any
of the Employee's lineal descendants who have not
attained age 19 before the close of the year. If, as
a result of the application of such rules the limit
is exceeded, then, the limit shall be prorated among
the affected individuals in proportion to each such
individual's Compensation as determined under this
Subsection prior to the application of this limit.
This amendment shall be effective as of January 1, 1997.
4
2. The name of the Plan shall be changed to Western Digital
Corporation Retirement Savings and Profit Sharing Plan.
This amendment shall be effective as of January 1, 1997.
3. Except as expressly provided herein above, the provisions of
the Plan shall continue in full force and effect as set forth herein.
IN WITNESS WHEREOF, the Company has caused this Third Amendment to the
Plan to be executed by its duly authorized officer on this 9th day of January
1997.
WESTERN DIGITAL CORPORATION
By: /s/ Michael A. Cornelius
--------------------------
Name: Michael A. Cornelius
Title: Vice President
1
EXHIBIT 11
WESTERN DIGITAL CORPORATION
COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE-MONTH PERIOD ENDED SIX-MONTH PERIOD ENDED
--------------------------- -----------------------------
DEC. 28, DEC. 30, DEC. 28, DEC. 30,
1996 1995 1996 1995
----------- ----------- ------------ -----------
PRIMARY
Net income . . . . . . . . . . . . . . . $ 64,229 $ 36,393 $ 97,107 $ 44,720
=========== =========== ============ ===========
Weighted average number of common
shares outstanding during the period . . 43,975 46,941 43,860 48,257
Incremental common shares attributable
to exercise of outstanding options,
warrants, put options and ESPP
contributions . . . . . . . . . . . . . . 3,405 1,497 2,981 1,782
----------- ----------- ------------ -----------
Total shares . . . . . . . . . . . . . . 47,380 48,438 46,841 50,039
=========== =========== ============ ===========
Net income per share . . . . . . . . . . $ 1.36 $ .75 $ 2.07 $ .89
=========== =========== ============ ===========
FULLY DILUTED
Net income . . . . . . . . . . . . . . . $ 64,229 $ 36,393 $ 97,107 $ 44,720
=========== =========== ============ ===========
Weighted average number of common
shares outstanding during the period . . 43,975 46,941 43,860 48,257
Incremental common shares attributable
to exercise of outstanding options,
warrants, put options and ESPP
contributions . . . . . . . . . . . . . 3,568 1,747 3,324 1,909
----------- ----------- ------------ -----------
Total shares . . . . . . . . . . . . . . 47,543 48,688 47,184 50,166
=========== =========== ============ ===========
Net income per share . . . . . . . . . . $ 1.35 $ .75 $ 2.06 $ .89
=========== =========== ============ ===========
5
1,000
6-MOS
JUN-28-1997
JUN-30-1996
DEC-28-1996
273,969
0
504,123
9,929
155,740
951,572
341,856
148,873
1,177,691
650,380
0
0
0
4,351
506,944
1,177,691
2,001,762
2,001,762
1,725,484
1,725,484
168,674
2,000
6,640
114,244
17,137
97,107
0
0
0
97,107
2.07
2.06