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This excerpt taken from the WDC DEF 14A filed Sep 28, 2009. Post-Employment
Compensation
Retirement Benefits. We provide retirement
benefits to our executive officers and other eligible employees
under the terms of our tax-qualified 401(k) plan. Eligible
employees may contribute up to 30% of their annual cash
compensation up to a maximum amount allowed by the Internal
Revenue Code and are also eligible for matching contributions.
These matching contributions vest over a five-year service
period. Our executive officers participate in the 401(k) plan on
substantially the same terms as our other participating
employees. The 401(k) plan and our matching contributions are
designed to assist us in achieving our compensation objectives
of attracting and retaining talented individuals and ensuring
that our compensation programs are competitive and equitable. We
do not maintain any defined benefit or supplemental retirement
plans for our executive officers.
Deferred Compensation Opportunities. Our
executives and certain other key employees who are subject to
U.S. federal income taxes are eligible to participate in
our Deferred Compensation Plan. Participants in the Deferred
Compensation Plan can elect to defer certain compensation
without regard to the tax code limitations applicable to
tax-qualified plans. We did not make any company matching or
discretionary contributions to the plan on behalf of
participants in fiscal 2009. The Deferred Compensation Plan is
intended to promote retention by providing employees with an
opportunity to save for retirement in a tax-efficient manner.
Please see the “Fiscal 2009 Non-Qualified Deferred
Compensation Table” table and related narrative section,
“Non-Qualified Deferred Compensation Plan,” on
pages 41 below for a more detailed description of our
Deferred Compensation Plan and the deferred compensation amounts
that our executives have accumulated under the plan.
Severance and Change in Control Benefits. Our
executive officers are eligible to receive certain severance and
change in control benefits under various severance plans or
agreements with us. These severance and change in control
benefits are an important component of each executive’s
overall compensation as they help us to attract and retain our
key executives who could have other job alternatives that may
appear to them to be less risky absent these protections. In
separation circumstances not covered by our severance plans, the
Compensation Committee may consider separation agreements for
executive officers on a
case-by-case
basis.
Our philosophy is that, outside of a change in control context,
severance protections are only appropriate in the event an
executive is involuntarily terminated by us without
“cause.” In such circumstances, we provide severance
benefits to our named executive officers under our Executive
Severance Plan. Severance benefits in these circumstances
generally consist of two years’ base salary, a pro-rata
bonus for the bonus cycle in which the termination occurs
(assuming 100% achievement of performance targets),
six months’ accelerated vesting of equity awards and
certain continued health and welfare benefits. For a more
detailed description of the nature and amounts of severance
benefits payable under our Executive Severance Plan, see
“Potential Payments Upon Termination or Change in
Control” below.
We believe that the occurrence or potential occurrence of a
change of control transaction will create uncertainty regarding
the continued employment of our named executive officers. This
uncertainty results from the fact that many change of control
transactions result in significant organizational changes,
particular at the senior executive level. In order to encourage
named executive officers to remain employed with us during an
important time when their prospects for continued employment
following the transaction are often uncertain, we provide named
executive officers with additional severance protections under
our Change of Control Severance Plan. We also provide severance
protections under the plan to ensure that executive officers can
objectively evaluate change in control transactions that may be
in the best interests of stockholders despite the potential
negative consequences such transactions may have on them
personally. Under the Change of Control Severance Plan, all of
our executives are eligible to receive severance benefits if the
executive is terminated by us without “cause” as well
as if the executive voluntarily terminates his employment for
“good reason” within one year after a “change in
control” or prior to and in connection with, or in
anticipation of, a change of control transaction. In the context
of a change of control, we believe that severance is appropriate
if an executive voluntarily terminates employment with us for a
“good reason” because in these circumstances we
believe that a voluntary termination for good reason is
essentially equivalent to an involuntary termination by
Table of Contents
us without cause. Good reason generally includes certain
materially adverse changes in responsibilities, compensation,
benefits or location of work place. In such circumstances, we
provide severance benefits to our named executive officers under
our Change of Control Severance Plan generally consisting of two
years’ annual cash compensation, accelerated vesting of
certain equity awards and certain continued health and welfare
benefits. For a more detailed description of the nature and
amounts of severance benefits payable under our Change of
Control Severance Plan, see “Potential Payments Upon
Termination or Change in Control” below.
We believe that the level of severance benefits provided to
named executive officers under the Executive Severance Plan and
the Change of Control Severance Plan is appropriate in light of
severance protections available to executives at our peer group
companies and is intended to provide named executive officers
with financial and personal security during the period of time
they are likely to be seeking subsequent employment.
We are also required under our Change of Control Severance Plan
to reimburse our executives for any excise taxes imposed by
Section 4999 of the Internal Revenue Code in the event any
severance benefits constitute “excess parachute
payments” under Section 280G of the Internal Revenue
Code. This excise tax
gross-up
provision is intended to preserve the level of change of control
severance protections that we have determined to be appropriate
and to eliminate bias against a change in control transaction
that may be beneficial to stockholders. We believe this
protection is an appropriate and reasonable part of the
compensation package for these executives and generally
consistent with industry practice.
We generally do not believe that severance benefits should be
paid unless there is an actual or, in the context of a change of
control, constructive termination of an executive’s
employment without cause. However, under our standard terms and
conditions for stock options, restricted stock and restricted
stock unit awards to our executive officers, such awards
generally will immediately vest upon the occurrence of a change
in control as defined in our 2004 Performance Incentive Plan. In
addition, the standard terms and conditions of long-term
performance cash awards to our executive officers provide that
the long-term performance cash award will become immediately
payable at its target level in the event of a change in control.
We believe it is appropriate to fully vest equity and other
long-term incentive awards in these change in control situations
because such a transaction may effectively end the
executive’s ability to realize any further value with
respect to the awards.
Please see the “Potential Payments Upon Termination or
Change in Control” section beginning on page 42 below
for a description and quantification of the potential payments
that may be made to the executive officers in connection with
their termination of employment or a change in control.
This excerpt taken from the WDC DEF 14A filed Sep 23, 2008. Post-Employment
Compensation
Retirement Benefits. We provide retirement
benefits to our executive officers and other eligible employees
under the terms of our tax-qualified 401(k) plan. Eligible
employees may contribute up to 30% of their annual cash
compensation up to a maximum amount allowed by the Internal
Revenue Code and are also eligible for matching contributions.
These matching contributions vest over a five-year service
period. Our executive officers participate in the 401(k) plan on
substantially the same terms as our other participating
employees. The 401(k) plan and our matching contributions are
designed to assist us in achieving our compensation objectives
of attracting and retaining talented individuals and ensuring
that our compensation programs are competitive and equitable. We
do not maintain any defined benefit or supplemental retirement
plans for our executive officers.
Deferred Compensation Opportunities. Our
executives and certain other key employees who are subject to
U.S. federal income taxes are eligible to participate in
our Deferred Compensation Plan. Participants in the Deferred
Compensation Plan can elect to defer certain compensation
without regard to the tax code limitations applicable to
tax-qualified plans. We did not make any company matching or
discretionary contributions to the plan on behalf of
participants in fiscal 2008. The Deferred Compensation Plan is
intended to promote retention by providing employees with an
opportunity to save for retirement in a tax-efficient manner.
Please see the “Fiscal 2008 Non-Qualified Deferred
Compensation Table” table and related narrative section,
“Non-Qualified
Deferred Compensation Plan,” on pages 40 and 41 below
for a more detailed description of our Deferred Compensation
Plan and the deferred compensation amounts that our executives
have accumulated under the plan.
Severance and Change in Control Benefits. Our
executive officers are eligible to receive certain severance and
change in control benefits under various severance plans or
agreements with us. These severance and change in control
benefits are an important component of each executive’s
overall compensation as they help us to attract and retain our
key executives who could have other job alternatives that may
appear to them to be less risky absent these protections. In
separation circumstances not covered by our severance plans, the
Compensation Committee may consider separation agreements for
executive officers on a
case-by-case
basis.
Our philosophy is that, outside of a change in control context,
severance protections are only appropriate in the event an
executive is involuntarily terminated by us without
“cause.” In such circumstances, we provide severance
benefits to our named executive officers under our Executive
Severance Plan. Severance benefits in these circumstances
generally consist of two years’ base salary, a pro-rata
bonus for the bonus cycle in which the termination occurs
(assuming 100% achievement of performance targets), accelerated
vesting of certain equity awards and certain continued health
and welfare benefits. For a more detailed description of the
nature and amounts of severance benefits payable under our
Executive Severance Plan, see “Potential Payments Upon
Termination or Change in Control” below.
We believe that the occurrence or potential occurrence of a
change of control transaction will create uncertainty regarding
the continued employment of our named executive officers. This
uncertainty results from the fact that many change of control
transactions result in significant organizational changes,
particular at the senior executive level. In order to encourage
named executive officers to remain employed with us during an
important time when their prospects for continued employment
following the transaction are often uncertain, we provide named
executive officers with additional severance protections under
our Change of Control Severance Plan. We also provide severance
protections under the plan to ensure that executive officers can
objectively evaluate change in control transactions that may be
in the best interests of stockholders despite the potential
negative consequences such transactions may have on them
personally. Under the Change of Control Severance Plan, all of
our executives are eligible to receive severance benefits if the
executive is terminated by us without “cause” as well
as if the executive voluntarily terminates his employment for
“good reason” within
one year after a “change in control” or prior to and
in connection with, or in anticipation of, a change of control
transaction. In the context of a change of control, we believe
that severance is appropriate if an executive voluntarily
terminates employment with us for a “good reason”
because in these circumstances we believe that a voluntary
termination for good reason is essentially equivalent to an
involuntary termination by us without cause. Good reason
generally includes certain materially adverse changes in
responsibilities, compensation, benefits or location of work
place. In such circumstances, we provide severance benefits to
our named executive officers under our Change of Control
Severance Plan generally consisting of two years’ annual
cash compensation, accelerated vesting of certain equity awards
and certain continued health and welfare benefits. For a more
detailed description of the nature and amounts of severance
benefits payable under our Change of Control Severance Plan, see
“Potential Payments Upon Termination or Change in
Control” below.
We believe that the level of severance benefits provided to
named executive officers under the Executive Severance Plan and
the Change of Control Severance Plan is appropriate in light of
severance protections available to executives at our peer group
companies and is intended to provide named executive officers
with financial and personal security during the period of time
they are likely to be seeking subsequent employment.
We are also required under our Change of Control Severance Plan
to reimburse our executives for any excise taxes imposed by
Section 4999 of the Internal Revenue Code in the event any
severance benefits constitute “excess parachute
payments” under Section 280G of the Internal Revenue
Code. This excise tax
gross-up
provision is intended to preserve the level of change of control
severance protections that we have determined to be appropriate
and to eliminate bias against a change in control transaction
that may be beneficial to stockholders. We believe this
protection is an appropriate and reasonable part of the
compensation package for these executives and generally
consistent with industry practice.
We generally do not believe that severance benefits should be
paid unless there is an actual or, in the context of a change of
control, constructive termination of an executive’s
employment without cause. However, under our standard terms and
conditions for stock options, restricted stock and restricted
stock unit awards to our executive officers, such awards
generally will immediately vest upon the occurrence of a change
in control as defined in our 2004 Performance Incentive Plan. In
addition, the standard terms and conditions of long-term
performance cash awards to our executive officers provide that
the long-term performance cash award will become immediately
payable at its target level in the event of a change in control.
We believe it is appropriate to fully vest equity and other
long-term incentive awards in these change in control situations
because such a transaction may effectively end the
executive’s ability to realize any further value with
respect to the awards.
Please see the “Potential Payments Upon Termination or
Change in Control” section beginning on page 41 below
for a description and quantification of the potential payments
that may be made to the executive officers in connection with
their termination of employment or a change in control.
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