WESTERN DIGITAL
CORPORATION
CHANGE OF CONTROL SEVERANCE
PLAN
1.
Purpose of Plan . The Executives have made and are expected
to make major contributions to the profitability, growth and
financial strength of the Company and its affiliates. In addition,
the Company considers the continued availability of the
Executives’ services, managerial skills and business
experience to be in the best interest of the Company and its
stockholders and desires to assure the continued services of the
Executives on behalf of the Company and/or its affiliates without
the distraction of the Executives occasioned by the possibility of
an abrupt change in control of the Company. This Plan was initially
approved by the Board on March 29, 2001 and subsequently
amended and restated on November 6, 2008.
2.
Definitions . Whenever the following terms are used in this
Plan, they shall have the meaning specified below unless the
context clearly indicates to the contrary:
2.01
“ Board ” shall mean the Board of Directors of
the Company.
2.02
“ Cause ” shall mean the occurrence or existence
of any of the following with respect to the Executive, as
determined by a majority of the disinterested directors of the
Board or the Committee:
(a) the
Executive’s conviction by, or entry of a plea of guilty or
nolo contendere in, a court of competent and final jurisdiction for
any crime involving moral turpitude or any felony punishable by
imprisonment in the jurisdiction involved;
(b) whether
prior or subsequent to the date hereof, the Executive’s
willful engaging in dishonest or fraudulent actions or omissions
which results directly or indirectly in any demonstrable material
financial or economic harm to the Company or any of its
subsidiaries or affiliates;
(c) the
Executive’s failure or refusal to perform his or her duties
as reasonably required by the Employer, provided that the Executive
shall have first received written notice from the Employer stating
with specificity the nature of such failure or refusal and
affording the Executive at least five (5) days to correct the
act or omission complained of;
(d) gross
negligence, insubordination, material violation by the Executive of
any duty of loyalty to the Company or any subsidiary or affiliate
of the Company, or any other material misconduct on the part of the
Executive, provided that the Executive shall have first received
written notice from the Company stating with specificity the nature
of such action or violation and affording the Executive at least
five (5) days to correct such action or violation;
(e) the
repeated non-prescription use of any controlled substance, or the
repeated use of alcohol or any other non-controlled substance which
in the Board’s reasonable determination renders the Executive
unfit to serve in his or her capacity as an officer or employee of
the Company or any of its subsidiaries or affiliates;
(f) sexual
harassment by the Executive that has been reasonably substantiated
and investigated;
(g) involvement
in activities representing conflicts of interest with the Company
or any of its subsidiaries or affiliates;
(h) improper
disclosure of confidential information;
(i) conduct
endangering, or likely to endanger, the health or safety of another
employee;
(j) falsifying
or misrepresenting information on the records of the Company or any
of its subsidiaries or affiliates; or
(k) the
Executive’s physical destruction or theft of substantial
property or assets of the Company or any of its subsidiaries or
affiliates.
2.03
“ Change in Control ” shall mean an occurrence
of any of the following events, unless the Board shall provide
otherwise:
(a) any
“person” (as such term is used in Sections 13(d) and
14(d) of the Exchange Act, a “Person”), alone or
together with its affiliates and associates, including any group of
persons which is deemed a “person” under
Section 13(d)(3) of the Exchange Act (other than the Company
or any subsidiary thereof or any employee benefit plan (or related
trust) of the Company or any subsidiary thereof, or any underwriter
in connection with a firm commitment public offering of the
Company’s capital stock), becomes the “beneficial
owner” (as such term is defined in Rule 13d-3 of the
Exchange Act, except that a person shall also be deemed the
beneficial owner of all securities which such person may have a
right to acquire, whether or not such right is presently
exercisable, referred to herein as “Beneficially Own”
or “Beneficial Owner” as the context may require) of
thirty-three and one third percent or more of (i) the then
outstanding shares of the Company’s common stock
(“Outstanding Company Common Stock”) or
(ii) securities representing thirty-three and one-third
percent or more of the combined voting power of the Company’s
then outstanding voting securities (“Outstanding Company
Voting Securities”) (in each case, other than an acquisition
in the context of a merger, consolidation, reorganization, asset
sale or other extraordinary transaction covered by, and which does
not constitute a Change in Control under, clause
(c) below);
(b) a
change, during any period of two consecutive years, of a majority
of the Board as constituted as of the beginning of such period,
unless the election, or nomination for election by the
Company’s stockholders, of each director who was not a
director at the beginning of such period was approved by vote of at
least two-thirds of the Incumbent Directors then in office (for
purposes hereof, “Incumbent Directors” shall consist of
the directors holding office as of the Effective Date and any
person becoming a director subsequent to such date whose
2
election, or
nomination for election by the Company’s stockholders, is
approved by a vote of at least a majority of the Incumbent
Directors then in office);
(c) consummation
of any merger, consolidation, reorganization or other extraordinary
transaction (or series of related transactions) involving the
Company, a sale or other disposition of all or substantially all of
the assets of the Company, or the acquisition of assets or stock of
another entity by the Company or any of its subsidiaries (each, a
“Business Combination”), in each case unless, following
such Business Combination, (1) all or substantially all of the
individuals and entities that were the Beneficial Owners of the
Outstanding Company Common Stock and the Outstanding Company Voting
Securities immediately prior to such Business Combination
Beneficially Own, directly or indirectly, more than 50% of the
then-outstanding shares of common stock and the combined voting
power of the then-outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the
entity resulting from such Business Combination (including, without
limitation, an entity that, as a result of such transaction, owns
the Company or all or substantially all of the Company’s
assets directly or through one or more subsidiaries (a
“Parent”)), (2) no Person (excluding any entity
resulting from such Business Combination or a Parent or any
employee benefit plan (or related trust) of the Company or such
entity resulting from such Business Combination or Parent, and
excluding any underwriter in connection with a firm commitment
public offering of the Company’s capital stock) Beneficially
Owns, directly or indirectly, more than thirty-three and one third
percent of, respectively, the then-outstanding shares of common
stock of the entity resulting from such Business Combination or the
combined voting power of the then-outstanding voting securities of
such entity, and (3) at least a majority of the members of the
board of directors or trustees of the entity resulting from such
Business Combination or a Parent were Incumbent Directors at the
time of execution of the initial agreement or of the action of the
Board providing for such Business Combination; or
(d) the
stockholders of the Company approve a plan of complete liquidation
or dissolution of the Company (other than in the context of a
merger, consolidation, reorganization, asset sale or other
extraordinary transaction covered by, and which does not constitute
a Change in Control under, clause (c) above).
2.04
“ Code ” shall mean the Internal Revenue Code of
1986, as amended.
2.05
“ Committee ” shall mean the Compensation
Committee of the Board.
2.06
“ Company ” shall mean Western Digital
Corporation, a Delaware corporation, and, as permitted by
Section 13.03(b) , its successors and
assigns.
2.07
“ Date of Termination ” following a Change in
Control shall mean the dates, as the case may be, for the following
events: (a) if the Executive’s employment is terminated
by death, the date of death, (b) if the Executive’s
employment is terminated due to a Permanent Disability, thirty
(30) days after the Notice of Termination is given (provided
that the Executive shall not have returned to the performance of
his or her duties on a full-time basis during such period), (c) if
the Executive’s employment is terminated pursuant to a
termination for Cause, the date specified in the Notice of
Termination, and (d) if the Executive’s employment
is
3
terminated for
any other reason, fifteen (15) days after delivery of the
Notice of Termination unless otherwise agreed by the Executive and
the Company.
2.08
“ Disability ” shall mean that the Executive is
unable, by reason of injury, illness or other physical or mental
impairment, to perform each and every task of the position for
which the Executive is employed, which inability is certified by a
licensed physician reasonably selected by the Employer.
2.09
“ Effective Date ” shall mean March 29,
2001.
2.10
“ Employer ” shall mean the Company or its
subsidiary employing Executive, provided however , that
nothing contained herein shall prohibit the Company or another of
its subsidiaries fulfilling any obligation of the employing entity
to the Executive and for such purposes will be deemed the act of
the Employer.
2.11
“ Exchange Act ” shall mean the Securities
Exchange Act of 1934, as amended.
2.12
“ Executive ” shall mean any Tier 1
Executive or Tier 2 Executive.
2.13
“ Good Reason ” shall mean any of the following
without the Executive’s express written consent:
(a) a
material diminution in the Executive’s authority, duties or
responsibilities in effect immediately prior to the Change in
Control;
(b) a
material diminution by the Employer in the Executive’s base
compensation in effect immediately prior to a Change in
Control;
(c) any
material breach by the Company or the Employer of any provision of
this Plan;
(d) the
requirement by the Employer that the Executive’s principal
place of employment be relocated more than fifty (50) miles
from his or her place of employment immediately prior to a Change
in Control; or
(e) the
Company’s failure to obtain a satisfactory agreement from any
successor to assume and agree to perform the Company’s
obligations under this Plan, as contemplated in Section
13.03(b) hereof;
provided,
however, that any such condition shall not constitute “Good
Reason” unless both (i) the Executive provides written
notice to the Company of the condition claimed to constitute Good
Reason within ninety (90) days of the initial existence of
such condition, and (ii) the Company fails to remedy such
condition within thirty (30) days of receiving such written
notice thereof; and provided, further, that in all events the
termination of the Executive’s employment with the Company
shall not be treated as a termination for “Good Reason”
unless such termination occurs not more than one (1) year
following the initial existence of the condition claimed to
constitute “Good Reason.”
4
2.14
“ Notice of Termination ” shall mean a written
notice which shall indicate the specific termination provision in
this Plan relied upon and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination
of the Executive’s employment under the provision so
indicated.
2.15
“ Permanent Disability ” shall mean if, as a
result of the Executive’s Disability, the Executive shall
have been absent from his or her duties with the Employer on a
full-time basis for six (6) months of any consecutive eight
(8) month period.
2.16
“ Separation from Service ,” with respect to an
Executive, shall mean that the Executive dies, retires, or
otherwise has a termination of employment with the Company that
constitutes a “separation from service” within the
meaning of Treasury Regulation Section 1.409A-1(h)(1), without
regard to the optional alternative definitions available
thereunder.
2.17
“ Termination of Employment ” shall mean the
time when the employee-employer relationship between the Executive
and the Employer is terminated for any reason, voluntarily or
involuntarily, with or without Cause, including, without
limitation, a termination by reason of resignation, discharge (with
or without Cause), Permanent Disability, death or retirement, but
excluding terminations where there is a simultaneous re-employment
of the Executive by the Company or a subsidiary of the
Company.
2.18
“ Tier 1 Executive ” shall mean an officer of
the Company who is elected or appointed by the Board of Directors
and is subject to Section 16 of the Exchange Act.
2.19
“ Tier 2 Executive ” shall mean an employee who
is appointed as an officer of the Company by the President of the
Company pursuant to the Company’s Bylaws and such other
employee of the Company or any of its subsidiaries who is
designated as a Tier 2 Executive by the Board or the
Committee.
3.
Term . This Plan shall be effective until March 29,
2011.
4.
Compensation Upon A Change In Control .
4.01
Salary . Commencing on the date a Change in Control shall
occur, the Employer shall pay a salary to the Executive at an
annual rate at least equal to the annual salary payable to the
Executive immediately prior to such date. The salary, as it may be
changed from time to time by mutual agreement between the Executive
and the Employer, shall be paid in equal installments on each
regular payroll payment date after the date of the Change in
Control and shall be subject to regular withholding for federal,
state and local taxes in accordance with law.
(a) Commencing
on the date a Change in Control shall occur, the Executive shall be
entitled to participate in and to receive benefits under those
employee benefit plans or arrangements (including, without
limitation, any pension or welfare plan, life, health,
hospitalization and other forms of insurance and all other
“fringe” benefits or perquisites) made available to
executives of the Company or the Employer, or any successor
thereto. The
5
Executive’s level of participation in, or
entitlements under, any such employee benefit plan or arrangement
of any successor to the Company shall be calculated as if the
Executive had been an employee of such successor to the Company
from the date of the Executive’s employment by the
Employer.
(b) Commencing
on the date a Change in Control shall occur, the Executive shall be
entitled to reimbursement for all reasonable travel and other
business expenses incurred by the Executive in the performance of
his or her duties on behalf of the Employer. Any such reimbursement
shall be paid in accordance with the usual practices of the
Employer and in all events not later than the end of the
Executive’s taxable year following the Executive’s
taxable year in which the related expense was incurred.
5.
Termination of Employment of Executive .
5.01
Payment of Severance Benefits Upon Change of Control . In
the event of a Change in Control of the Company, Executive shall be
entitled to the severance benefits set forth in
Section 6 , but only if during the term of this
Plan:
(a) the
Executive’s employment by the Employer is terminated by the
Employer without Cause within one (1) year after the date of
the Change in Control;
(b) the
Executive terminates his or her employment with the Employer for
Good Reason within one (1) year after the date of the Change
in Control and complies with the procedures set forth in
Section 5.02 ;
(c) the
Executive’s employment by the Employer is terminated by the
Employer without Cause prior to the Change in Control and such
termination arose in connection with or in anticipation of the
Change in Control (for purposes of this Plan, meaning that at the
time of such termination the Company had entered into an agreement,
the consummation of which would result in a Change in Control, or
any person had publicly announced its intent to take or consider
actions that would constitute a Change in Control, and in each case
such Change in Control is consummated, or the Board adopts a
resolution to the effect that a potential Change in Control for
purposes of this Plan has occurred); or
(d) the
Executive terminates his or her employment with the Employer for
Good Reason prior to the Change in Control, the event constituting
Good Reason arose in connection with or in anticipation of the
Change in Control and the Executive complies with the procedures
set forth in Section 5.02 .
(a) Notwithstanding
anything contained in any employment agreement between the
Executive and the Employer to the contrary, during the term of this
Plan the Executive may terminate his or her employment with the
Employer for Good Reason as set forth in
Section 5.01(b)
or (d) and be entitled to the benefits set forth in
Section 6 .
|
