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In addition to these elements of our direct compensation program, we also provide executives with relatively
minimal perquisites and certain other indirect benefits, including participation in certain post-employment
compensation arrangements. For an analysis of these other features of our compensation program, please refer to
the section below entitled "Other Features of our Executive Compensation Program."
The following sections describe each element of our direct compensation program in more detail and the
process for determining the amount of compensation to be paid with respect to each element for fiscal 2012.
Base Salary
Executive officers are paid a base salary that the Compensation Committee believes is sufficient to attract
highly-qualified executive talent and to maintain a stable management team. Base salaries are generally reviewed
by the Compensation Committee as part of its annual compensation review and at the time of hiring, a promotion
or other change in responsibilities. Base salary levels for our executive officers are determined by the
Compensation Committee after considering our pay positioning strategy and a subjective evaluation of such
factors as the competitive environment, our financial performance, the executive's experience level and scope of
responsibility, and the overall need and desire to retain the executive in light of current performance, future
performance, future potential and the overall contribution of the executive. The Compensation Committee
exercises its judgment based on all of these factors in making its decisions. No specific formula is applied to
determine the weight of each criterion.
For fiscal 2012, the Compensation Committee reviewed the base salaries paid to all our executive officers
during its annual review in August and September 2011 (other than Mr. Milligan, who joined us in March 2012).
In its fiscal 2012 review, the Compensation Committee concluded that base salary levels were within a
reasonable range of our stated pay positioning strategy other than for Mr. Nickl, whose base salary level was
significantly below our target pay positioning strategy due to his short tenure as our Chief Financial Officer.
After a subjective evaluation of the factors listed above under the heading "Role of the Compensation
Committee," and in light of our pay positioning strategy, the Compensation Committee determined not to make
any changes to the base salary levels for any executive officer other than Mr. Nickl. For Mr. Nickl, the
Compensation Committee approved an increase in his annual base salary from $350,000 to $400,000. After this
increase, Mr. Nickl's base salary remained below our stated pay positioning strategy, but the Compensation
Committee determined that it was nonetheless appropriate in light of the factors described above.
As indicated above, in connection with the closing of the HGST acquisition, the employment agreements we
entered into with each of Mr. Milligan and Mr. Leyden became effective in March 2012. The agreement with
Mr. Milligan was negotiated with him and established his initial annual base salary at $800,000. While
Mr. Milligan's base salary was above our stated pay positioning strategy, the Compensation Committee
determined that it was nonetheless appropriate in light of Mr. Milligan's base salary at HGST, a subjective
evaluation of his expected contributions to the company and the other factors listed above under the heading
"Role of the Compensation Committee." The agreement with Mr. Leyden was negotiated with him and provided
for an increase in his annual base salary from $600,000 to $700,000. After this increase, Mr. Leyden's base
salary was slightly above our stated pay positioning strategy but was determined by the Compensation
Committee to be appropriate in light of the expected increase in Mr. Leyden's role following the acquisition.
Semi-Annual Incentive Compensation
Our Incentive Compensation Program, or ICP, formally links cash bonuses for executive officers and other
participating employees to our semi-annual financial performance. We believe that the ICP is a valuable
component of our overall compensation program because it assists us in achieving our compensation objective of
motivating our executives to achieve specified financial and non-financial goals that help to drive our overall
financial performance. The ICP also encourages accountability by rewarding executives based both on the actual
financial performance achieved as well as a subjective evaluation by the Compensation Committee of other
discretionary factors such as individual and business group performance.
Target Awards.
The Compensation Committee establishes target bonus opportunities under the ICP for
each executive officer that are expressed as a percentage of the executive's actual base salary earned for the
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