President of our WD Subsidiary) that became effective upon the closing of the transaction. These
employment agreements do not provide for any guaranteed bonuses or long-term incentive compensation,
other than the grant of a two-year performance stock unit award granted in May 2012, as explained in
more detail below. The agreements also do not contain any severance protection, although these
executives participate in our severance plans applicable to all executive officers, and they do not include
any tax gross-up provisions. The Compensation Committee determined that these employment agreements
were appropriate and advisable in order to help maintain a consistent executive leadership team following
the acquisition.
For fiscal 2012, the Compensation Committee maintained base salary levels for all executive officers
other than Mr. Nickl for whom the Compensation Committee approved an increase from $350,000 to
$400,000, as explained in more detail below. As indicated above, in March 2012, in connection with the
closing of our acquisition of HGST, the employment agreements we entered into with Messrs. Milligan
and Leyden became effective. The employment agreement with Mr. Milligan established his initial annual
base salary at $800,000. The employment agreement with Mr. Leyden included an increase in his annual
base salary from $600,000 to $700,000. After these changes, we believe the base salary levels for our
executive officers were within a reasonable range of our stated pay positioning strategy except as
described below for Mr. Nickl whose base salary was below the range.
employment agreement with Mr. Milligan established his initial annual target bonus opportunity at 125%
of annual base salary. The employment agreement with Mr. Leyden included an increase to his annual
target bonus opportunity from 100% to 110% of annual base salary. After these changes, target bonus
opportunities for our executive officers were generally below our stated pay positioning strategy. For
fiscal 2012, these bonus opportunities were earned based on achievement against pre-established adjusted
earnings per share goals. Based on our adjusted earnings per share of $2.61 for the first half of fiscal 2012,
the Compensation Committee approved payouts under our semi-annual bonus plan of 100% of target for
Messrs. Coyne and Leyden, and 130% of target for Messrs. Nickl and Murphy. Based on our adjusted
earnings per share of $5.87 for the second half of fiscal 2012, the Compensation Committee approved
payouts under our semi-annual bonus plan of 195% of target for all named executive officers. (Please see
page 35 for an explanation of adjusted earnings per share for fiscal 2012 to earnings per share under
generally accepted accounting principles.)
awards and restricted stock units for executive officers other than Mr. Milligan, who did not join us until
March 2012. These awards had a grant date value at the mid-point of pre-established grant guidelines for
each such officer other than Mr. Nickl for whom the Compensation Committee approved a grant at the
high end of the pre-established grant guidelines. These grants resulted in total direct compensation for our
executive officers at or below our stated pay positioning strategy (other than for Mr. Murphy, as explained
in more detail below). The Compensation Committee also approved payouts under the two-year
performance cash awards granted in September 2010. These awards were earned based on achievement
against pre-established cumulative revenue and operating income goals over fiscal 2011 and 2012. Based
on our cumulative revenue and operating income performance over fiscal 2011 and 2012 of $22.0 billion
and $2.55 billion, respectively, payouts were approved at 228% of target. For Mr. Milligan, in accordance
with his employment agreement, in March 2012 the Compensation Committee approved an annual long-
term incentive award with a grant date value at the mid-point of pre-established grant guidelines, split
equally between stock options and restricted stock units.