UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934 (Amendment No.   )

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Seagate Technology

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SEAGATE TECHNOLOGY

 

NOTICE OF 2007 ANNUAL GENERAL MEETING OF SHAREHOLDERS
To Be Held On October 25, 2007

 

Notice is hereby given that the 2007 Annual General Meeting of Shareholders of Seagate Technology, an exempted company incorporated with limited liability under the laws of the Cayman Islands, will be held at the Hilton Santa Cruz/Scotts Valley, 6001 La Madrona Drive, Santa Cruz, California 95060 on Thursday, October 25, 2007 at 10:00 am Pacific Daylight Time, to consider and vote upon the following items:

 

(1) the election of 11 directors for terms expiring at the 2008 Annual General Meeting of Shareholders and until their successors are elected;

 

(2) the approval of amendments to the 2004 Stock Compensation Plan;

 

(3) the ratification of the appointment of Ernst & Young LLP as the independent registered public accounting firm of Seagate Technology for the fiscal year ending June 27, 2008; and

 

(4) the transaction of any other business that may properly come before the meeting and any adjournment or postponement of the meeting.

 

Seagate Technology’s Board of Directors has set August 31, 2007 as the record date for the 2007 Annual General Meeting. Only registered holders of Seagate Technology’s common shares at the close of business on that date are entitled to receive notice of the meeting and to attend and vote at the meeting.

 

Any shareholder entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote on such shareholder’s behalf. Such proxy need not be a holder of Seagate Technology’s common shares.

 

This Proxy Statement and the accompanying proxy card are first being mailed to shareholders on or about September 24, 2007.

 

THE PRESENCE AT THE MEETING, IN PERSON OR BY PROXY, OF ONE OR MORE SHAREHOLDERS WHO HOLD SHARES REPRESENTING NOT LESS THAN A MAJORITY OF THE ISSUED AND OUTSTANDING SHARES ENTITLED TO VOTE AT THE MEETING SHALL CONSTITUTE A QUORUM. A PROXY CARD ACCOMPANIES THIS PROXY STATEMENT. IT IS IMPORTANT THAT YOUR SHARES BE VOTED AT THE MEETING. EVEN IF YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN THE PROXY CARD IN THE ENCLOSED ENVELOPE.

 

 

By order of the Board of Directors,

 

William L. Hudson
Executive Vice President, General
Counsel and Corporate Secretary

 

September 21, 2007

TABLE OF CONTENTS

 

 

 

PROXY STATEMENT
FOR THE ANNUAL GENERAL MEETING OF SHAREHOLDERS
OCTOBER 25, 2007

 

 

GENERAL INFORMATION

 

The Board of Directors (or “Board”) of Seagate Technology, an exempted company incorporated with limited liability under the laws of the Cayman Islands, is soliciting your proxy for use at the 2007 Annual General Meeting of shareholders, which we refer to as the Annual General Meeting, to be held on October 25, 2007, and at any postponement or adjournment of the meeting. These proxy materials are first being mailed to shareholders on or about September 24, 2007. Our registered office is located in the Cayman Islands at P.O. Box 309GT, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands. Seagate Technology’s telephone number at that address is (345) 949-8066. Our U.S. executive offices are located at 920 Disc Drive, Scotts Valley, California 95066 and our telephone number at this address is (831) 438-6550. Our website address is www.seagate.com. Information contained on, or accessible through, our website is not a part of this Proxy Statement.

 

References in this Proxy Statement to “we”, “our”, “Seagate”, “us” and “the company” are to Seagate Technology.

 

Date, Time and Place.  We will hold the Annual General Meeting at the Hilton Santa Cruz/Scotts Valley, 6001 La Madrona Drive, Santa Cruz, California 95060, on Thursday, October 25, 2007 at 10:00 am Pacific Daylight Time, subject to any adjournments or postponements.

 

Who Can Vote; Votes Per Share.  Our only outstanding class of voting securities is our common shares, par value $0.00001 per share. All persons who are registered holders of our common shares at the close of business on August 31, 2007, the record date for the Annual General Meeting, will be entitled to notice of, and to vote at, the Annual General Meeting. As of the close of business on the record date there were 529,609,866 outstanding common shares held by 2,236 shareholders of record.

 

These shareholders will be entitled to one vote per common share on all matters submitted to a vote of shareholders, so long as those shares are represented at the Annual General Meeting in person or by proxy. Your shares will be represented if you attend and vote at the Annual General Meeting or if you submit a proxy. Under Cayman Islands law, holders of our common shares do not have appraisal rights with respect to matters to be voted on at the Annual General Meeting.

 

How to Vote; Submitting Your Proxy.  If you are a shareholder of record, you may vote your shares either by voting in person at the Annual General Meeting or by submitting a completed proxy. By completing and submitting the enclosed proxy, you are legally designating Donald E. Kiernan, Stephen J. Luczo and William D. Watkins to vote your shares in accordance with the instructions you have indicated on the proxy.

 

If you appoint the individuals named in the enclosed proxy card as your proxies but do not indicate how your shares are to be voted, then your shares will be voted “FOR” the election of all nominees for director named in Proposal 1, and “FOR” Proposals 2 and 3. In addition, if any matters other than the proposals contained in this Proxy Statement are properly brought up at the Annual General Meeting, then the proxies will have the authority to vote

your shares on those matters in accordance with their discretion and judgment if we did not receive notice of such matters by August 22, 2007. We do not presently know of any other business that may come before the Annual General Meeting.

 

Shares Registered Directly in the Name of the Shareholder

 

If you hold shares of our common stock registered directly in your name in our register of shareholders, you may submit your proxy by mailing your signed proxy card to us. Specific instructions to be followed by registered shareholders are set forth on the enclosed proxy card.

 

Shares Registered in the Name of a Nominee

 

If your shares are held not in your name but in the “street name” of a bank, broker or other holder of record (a “nominee”), then your name will not appear in our register of shareholders and the nominee will be entitled to vote your shares. In order to be admitted to the Annual General Meeting, you must bring a letter or account statement showing that you beneficially own the shares held by the nominee. Even if you attend the Annual General Meeting, you will not be able to vote the shares that you hold in street name. Rather, you should instruct your nominee how to vote those shares on your behalf. Most beneficial owners whose shares are held in the “street name” of a nominee receive instructions for granting proxies from their banks, brokers or other agents, rather than from a company’s proxy card.

 

A number of brokerage firms and banks participate in a program that offers the ability to grant proxies to vote shares by means of the telephone and Internet. If your shares are held in an account at a brokerage firm or bank participating in such a program, you may grant a proxy to vote those shares by calling the telephone number that appears on the voting instruction form, or through the Internet in accordance with the instructions set forth on the voting instruction form, that you receive from your broker or bank. Votes submitted by telephone or Internet through such a program must be received by 11:59 p.m. Eastern Daylight Time on October 24, 2007.

 

Revoking Your Proxy.  You may revoke your proxy at any time before it is voted at the Annual General Meeting, by: (1) sending a signed revocation thereof to Seagate Technology at 920 Disc Drive, Scotts Valley, California 95066, Attention: Corporate Secretary, which we must receive at least one hour prior to the start of the Annual General Meeting; (2) signing, dating and mailing a new and different proxy card, which we must receive by 5:00 p.m., Pacific Daylight Time, on October 24, 2007; or (3) voting your shares in person at the meeting, if you are a shareholder of record. If your shares are registered in the name of a nominee and you submit your proxy by telephone or over the Internet, you may revoke your proxy only by submitting new voting instructions by telephone or Internet, as applicable, which must be received by 11:59 p.m. Eastern Daylight Time on October 24, 2007. Attending the Annual General Meeting alone will not revoke your proxy.

 

Proxy Solicitation.  We will bear all costs and expenses of soliciting proxies from shareholders. Following the original mailing of the proxies and other soliciting materials, directors, officers and selected other Seagate Technology employees and our agents, acting without special compensation, may also solicit proxies by telephone, facsimile, or e-mail or in person. We have retained a proxy solicitation firm, Morrow & Co., to aid us in the solicitation process. We will pay Marrow & Co. a fee of approximately $8,000 plus expenses. After the original mailing of the proxies and other soliciting materials, Seagate will request brokers, custodians, nominees, fiduciaries and other record holders to forward copies of the proxy and soliciting materials to beneficial owners and request authority for the exercise of proxies. In such cases, upon request, we will reimburse such holders for their reasonable out-of-pocket expenses incurred in connection with the solicitation. If you choose to access the proxy materials and/or vote over the Internet, you are responsible for any Internet access charges you may incur.

 

Quorum, Voting Requirements and Broker Non-Votes.  In order to establish a quorum at the Annual General Meeting, there must be one or more shareholders present at the meeting, either in person or by proxy, holding shares representing not less than a majority of our issued and outstanding shares entitled to vote at the meeting. For purposes of determining a quorum, abstentions and broker “non-votes” are counted as represented.

 

Under the rules that govern brokers who are record owners of shares that are held in brokerage accounts for the beneficial owners of the shares, brokers who do not receive voting instructions from their clients have the discretion

to vote uninstructed shares on routine matters but have no discretion to vote such uninstructed shares on non-routine matters. A “non-vote” occurs when a nominee (such as a broker) holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power for that proposal and has not received instructions from the beneficial owner on how to vote those shares. The proposals to be voted on at the Annual General Meeting are all considered routine matters and may be voted by nominees on behalf of a beneficial owner.

 

With respect to Proposal 1, the affirmative vote of a majority of all the votes cast by holders of common shares represented in person or by proxy at the Annual General Meeting is necessary to approve the election of each of the director nominees. Any incumbent director who is not elected by a majority of the votes cast will continue as a “holdover” director under our Third Amended and Restated Articles of Association until his or her successor has been elected. Proposals 2 and 3 require the affirmative vote of a majority of all the votes cast by holders of common shares represented in person or by proxy at the Annual General Meeting in order to be approved.

 

Abstentions are not counted (except for quorum purposes) and will have no effect on the result of the vote on any proposal.

 

Voting Procedures and Tabulation.  We have appointed a representative of Computershare Trust Company as the inspector of elections to act at the Annual General Meeting and to make a written report thereof. Prior to the Annual General Meeting, the inspector will sign an oath to perform his or her duties in an impartial manner and according to the best of his or her ability. The inspector will ascertain the number of common shares outstanding and the voting power of each, determine the common shares represented at the Annual General Meeting and the validity of proxies and ballots, count all votes and ballots, and perform certain other duties. The determination of the inspector as to the validity of proxies will be final and binding.

 

PROPOSAL 1 — ELECTION OF DIRECTORS

 

Upon the recommendation of the Nominating and Corporate Governance Committee, the Board has nominated 11 nominees for election at the 2007 Annual General Meeting. Our Board’s nominees are Messrs. Watkins, Luczo, Biondi, Bradley, Davidson, Kiernan, Marquardt, Ms. Marshall, Dr. Park, and Messrs. Reyes and Thompson.

 

Each of the Board’s nominees is currently serving as a director of Seagate Technology.

 

Under our Third Amended and Restated Articles of Association, the Board may have any number of members up to 15. However, the Board has determined that, for the time being, the number of directors constituting the full Board shall be 11 members. The holders of common shares, voting as a class, have the right to elect all 11 members to the Board to serve until the 2008 Annual General Meeting of Shareholders and until their respective successors are elected.

 

It is currently anticipated that each of the nominees will be willing and able to serve as directors. However, if any nominee becomes unwilling or unable to serve as a director, then the Board will either propose a substitute nominee, and the individuals designated as your proxies will vote on the appointment of the proposed nominee, or determine to reduce the size of the Board.

 

Director changes in fiscal year 2007

 

During fiscal year 2007, we had two changes to our Board. Glenn H. Hutchins did not stand for reelection at the Annual General Meeting of Shareholders in October 2006, and Michael R. Cannon resigned from the Board and the Nominating and Corporate Governance Committee effective February 22, 2007.

Nominees for Election as Directors

 

Detailed information about our director nominees is provided below. There is no family relationship between any of the nominees, directors or our executive officers nor are any of our directors party to any legal proceedings adverse to us.

 

 

Vote Required

 

The affirmative vote of a majority of all the votes cast by holders of common shares represented in person or by proxy at the Annual General Meeting is necessary to approve the election of each of the director nominees.

 

Recommendation of the Board of Directors

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “ FOR ” THE ELECTION OF EACH OF THE ELEVEN (11) NOMINEES LISTED ABOVE.

 

CORPORATE GOVERNANCE

 

Corporate Governance Guidelines.  Our Board is committed to using sound corporate governance practices to help fulfill its responsibilities to its shareholders. As such, the Board has adopted corporate governance guidelines to clarify how it exercises its responsibilities. A copy of our Corporate Governance Guidelines may be found on our website at http://www.seagate.com/newsinfo/invest/governance/index.html, or will be provided in writing to any shareholder who requests it from: Investor Relations, Seagate Technology, 920 Disc Drive, Scotts Valley, California, 95066. The Nominating and Corporate Governance Committee is responsible for overseeing the Corporate Governance Guidelines and reviews them at least annually and makes recommendations to the Board concerning corporate governance matters. The Board may amend, waive, suspend, or repeal any of the Corporate Governance Guidelines at any time, with or without public notice, as it determines necessary or appropriate in the exercise of the Board’s judgment or fiduciary duties.

 

Among other matters, the Corporate Governance Guidelines include the following items concerning the Board:

 

 

Our Board works with management to schedule orientation programs and continuing education programs for directors. The orientation programs are designed to familiarize new directors with our businesses, strategies, and challenges, and to assist directors in developing and maintaining the skills necessary or appropriate for the performance of their responsibilities. Continuing education programs for directors may include a mix of in-house and third-party presentations and programs.

 

Attendance at Meetings by Directors.  The Board held seven meetings in fiscal year 2007, including its annually held strategic planning meeting. All directors with the exception of Mr. Marquardt attended at least 75% of meetings of the Board and the committees on which they served in fiscal year 2007.

 

Mr. Marquardt attended 80% of the regularly scheduled meetings of the Board and the committees on which he served, but was unable to attend two of the six special meetings of the Board and Committees on which he served. The number of meetings held by each committee of the Board is set forth below, under the heading “Board Committees and Charters.”

 

We encourage and expect attendance by our directors at our annual general meetings. Each of our directors was present at the 2006 Annual General Meeting.

 

Executive Sessions of the Non-Management Directors.  Our non-management directors meet without management present each time the full Board convenes for a regularly scheduled meeting. If the Board convenes a special meeting, the non-management directors will meet in executive session if circumstances warrant. The presiding director at the executive sessions is the Lead Non-Management Director, the Chairman of the Nominating and Corporate Governance Committee, currently Ms. Marshall. At least one executive session per year will be attended by only our directors who are independent under the NYSE and the Securities and Exchange Commission (the “SEC”) requirements and the presiding director at each such session, if not the Chairman of the Nominating and Corporate Governance Committee, shall be elected by the directors in attendance at such sessions.

 

Board Committees and Charters.  To assist the Board in fulfilling its oversight responsibilities, the Board maintains a standing Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee and Strategic and Financial Transactions Committee. The functions of each are described below. The committees regularly report on their activities and actions to the full Board. Each committee has a written charter approved by the Board that is reviewed regularly by the respective committees, which may recommend appropriate changes for approval by the Board. Copies of the committee charters are available through our website at: http://www.seagate.com/newsinfo/invest/governance/board — structure/index.html, or in print to any shareholder who requests them from: Investor Relations, Seagate Technology, 920 Disc Drive, Scotts Valley, California 95066. The current members and the Chair of each of these committees are identified in the table below:

 

 

 

 

Audit Committee.  The Audit Committee consists of three of our independent directors. Each of these committee members meets the independence and experience requirements for membership of the Audit Committee under the existing rules of the New York Stock Exchange and Rule 10A-3(b)(1) promulgated by the SEC under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). Mr. Kiernan currently serves as the Chair of the Audit Committee. The Board has determined that Mr. Kiernan is an “audit committee financial expert” for purposes of the rules of the SEC, and that Mr. Kiernan, Ms. Marshall and Mr. Biondi are, in the business judgment of the Board, “financially literate.”

 

Mr. Kiernan currently serves on the audit committees of three other public companies, in addition to serving on our Audit Committee. The Board has determined that Mr. Kiernan’s simultaneous service on the three other audit committees does not impair his ability to serve effectively on our Audit Committee.

 

The Audit Committee held nine meetings during fiscal year 2007. As described in further detail in the written charter of the Audit Committee, the Audit Committee’s duties and responsibilities are to, among other things:

 

 

 

 

The Audit Committee operates pursuant to an Audit Committee Charter adopted by the Board, which satisfies the applicable requirements of the Sarbanes-Oxley Act of 2002 and the New York Stock Exchange. A copy of the Audit Committee Charter is available through our website at www.seagate.com/www/en-
us/about/investor_relations/corporate_governance/board_structure/audit_committee_charter, or in print to any shareholder who requests it from: Investor Relations, Seagate Technology, 920 Disc Drive, Scotts Valley, California 95066. The Report of the Audit Committee for fiscal year 2007 may be found on page 35 of this Proxy Statement.

 

Compensation Committee.  The Compensation Committee is currently comprised of three of our independent directors. The Compensation Committee held five meetings during fiscal year 2007. The Compensation Committee is responsible for, among other things:

 

 

For more information on the responsibilities and activities of the Compensation Committee, including the committee’s reliance on compensation consultants, see “Compensation Discussion and Analysis” elsewhere in this Proxy Statement. The Report of the Compensation Committee on Executive Compensation may be found on page 34 of this Proxy Statement.

 

Under the terms of its charter, the Compensation Committee has the authority to delegate some or all of its authority to subcommittees or other committees or persons, in each case to the extent not in violation of applicable law or the rules and regulations of the NYSE or other applicable public securities trading market. The Committee has the authority to empower the CEO to sign all approved compensation changes for senior management whose compensation is reviewed by the Committee. In addition, the Committee has delegated authority to the CEO and the Senior Vice President of Human Resources to approve equity grants on behalf of the Committee in accordance with the Committee’s established guidelines (as such guidelines may change from time to time), for ongoing equity grants (the “Ongoing Grants”), which does not include grants to officers employed at the Senior Vice President level or above and/or grants for which Committee approval would be necessary for purposes of Rule 16b-3 under the Securities Exchange Act of 1934, as amended, or Section 162(m) of the Internal Revenue Code of 1986, as amended, or as otherwise specified by the Committee. A copy of the Compensation Committee charter is available through our website at: http://www.seagate.com/www/en-
us/about/investor_relations/corporate_governance/board_structure/compensation_committee_charter/, or in print to any shareholder who requests it from: Investor Relations, Seagate Technology, 920 Disc Drive, Scotts Valley, California 95066.

 

Nominating and Corporate Governance Committee.  The Nominating and Corporate Governance Committee is comprised of three of our independent directors. The Nominating and Corporate Governance Committee held five meetings during fiscal year 2007. The Nominating and Corporate Governance Committee is responsible for, among other things:

 

 

 

From time to time, the Nominating and Corporate Governance Committee may identify certain skills or attributes as being particularly desirable for specific director nominees. These skills or attributes may include, but are not limited to, strength of character, mature judgment, industry knowledge, business sophistication, career experience, relevant technical skills, financial expertise, diversity, ability to work collegially with others and the extent to which the candidate would fill a present need on the Board.

 

The Nominating and Corporate Governance Committee’s process for identifying and evaluating nominees for directors includes, but is not limited to, the following:

 

 

Based on its annual evaluation of the performance of the current directors in fiscal year 2007, the Nominating and Corporate Governance Committee determined to recommend each of the nominees for director named in Proposal 1 for election at the Annual General Meeting.

 

Shareholders wishing to recommend a candidate for consideration by the Nominating and Corporate Governance Committee may do so by writing to Seagate Technology at 920 Disc Drive, Scotts Valley, California 95066, Attention: William L. Hudson, Corporate Secretary. Recommendations submitted for consideration by the Nominating and Corporate Governance Committee in preparation for the 2008 annual meeting of shareholders must be received by July 1, 2008, and must contain the following information: (i) the name and address of the shareholder; (ii) the name and address of the person to be nominated; (iii) a representation that the shareholder is a holder of the company’s stock entitled to vote at the meeting; (iv) a statement in support of the shareholder’s recommendation, including a description of the candidate’s qualifications; (v) information regarding the candidate as would be required to be included in a proxy statement filed in accordance with the rules of the SEC; and (vi) the candidate’s written, signed consent to serve if elected. Shareholder nominees whose nominations comply with these procedures and who meet the criteria outlined above will be evaluated by the Nominating and Corporate Governance Committee in the same manner as the Committee’s nominees. The Nominating and Corporate Governance Committee has not received any nominations from shareholders for this Annual General Meeting.

 

A copy of the Nominating and Corporate Governance Committee charter is available through our website at: http://www.seagate.com/www/en-
us/about/investor_relations/corporate_governance/board_structure/nominating_and_corporate_governance_committee_charter/, or in print to any shareholder who requests it from: Investor Relations, Seagate Technology, 920 Disc Drive, Scotts Valley, California 95066.

 

Strategic and Financial Transactions Committee.  The Strategic and Financial Transactions Committee is currently comprised of five of our directors. The Strategic and Financial Transactions Committee held four

meetings during fiscal year 2007. The Strategic and Financial Transactions Committee is responsible for, among other things:

 

 

Director Independence.  The Board has reviewed the independence of each director and director nominee, and concluded that director nominees, who are currently serving as directors, Ms. Marshall, Dr. Park and Messrs. Biondi, Bradley, Davidson, Kiernan, Marquardt, Reyes and Thompson, have no material relationship with Seagate Technology or any of its subsidiaries and, therefore, are independent.

 

A director qualifies as independent from management for purposes of service on the Board and its committees if the Board has determined that the director has no material relationship with Seagate, either directly or as a partner, shareholder or officer of an organization that has a relationship with Seagate. “Material relationships” include those described in the standards below. In addition, if any relationship or transaction of a type not specifically mentioned in these standards exists, the Board, taking into account all relevant facts and circumstances, may determine that the existence of such other relationship or transaction is material and could impair the director’s exercise of independent judgment.

 

Directors must notify the Board of any change in circumstances that may place his or her independence at issue. If so notified, the Board will reevaluate, as promptly as practicable thereafter, such director’s independence.

 

Material Relationships:  Any transaction or relationship described below is presumed material for purposes of the Board’s determination of whether a director is independent:

 

 

 

Immaterial Relationships:  Any transaction or relationship described below is presumed immaterial for purposes of the Board’s determination of whether a Director is independent:

 

 

Consistent with these considerations, the Board has reviewed all relationships between the company and the members of the Board and has determined that all directors are independent directors except Mr. Watkins, who is Seagate’s current CEO, and Mr. Luczo, our Chairman of the Board and a former CEO of Seagate. In making its determinations of independence, the Board considered the following relationships and affirmatively determined that none of the relationships is of a material nature that would preclude the directors from being deemed independent:

 

 

 

Shareholder Communications with the Board of Directors.  The Annual General Meeting of Shareholders provides an opportunity each year for the shareholders to ask questions of, or otherwise communicate directly with, members of the Board on matters relevant to Seagate. In addition, shareholders and other interested parties may communicate with any or all of our directors, including the Lead Non-Management director and/or the non-management or independent directors as a group, by transmitting correspondence by mail or by facsimile as follows:

 

Board of Directors (or named Director)
c/o Corporate Secretary
Seagate Technology
920 Disc Drive
Scotts Valley, CA 95066
Fax: (831) 438-6675

 

The Corporate Secretary shall transmit as soon as practicable such communications to the identified director addressee(s), unless there are legal or other considerations that mitigate against further transmission of the communication, as determined by the Corporate Secretary. In that regard, certain items that are unrelated to the duties and responsibilities of the Board will not be forwarded by the Corporate Secretary, such as:

 

 

In addition, material that is unduly hostile, threatening, illegal or similarly unsuitable will be excluded, with the provision that the Board or individual directors so addressed shall be advised of any communication withheld for legal or other considerations as soon as practicable.

 

Code of Business Conduct and Ethics.  The Board has adopted a Code of Business Conduct and Ethics that is applicable to all of our directors, officers and employees, including our CEO, CFO, and Principal Accounting Officer. Our Code of Business Conduct and Ethics is available through our website at www.seagate.com, or in print to any shareholder who requests it from: Investor Relations, Seagate Technology, 920 Disc Drive, Scotts Valley, California 95066.

 

Compensation of Directors.  For fiscal year 2007, we compensated our non-management directors with an annual retainer of $50,000. On October 26, 2006, upon recommendation by our Compensation Committee, the Board approved an annual cash retainer of $150,000 for our non-employee Chairman of the Board. Members of our

Board of Director committees are compensated with an annual retainer in lieu of meeting payments. These retainer amounts are as follows:

 

 

Members of the Strategic and Financial Transactions Committee do not receive any additional retainers or compensation for participation on this committee. All retainer fees are paid in quarterly installments.

 

Historically, each non-management director was granted options to purchase up to 100,000 of our common shares at fair market value as of the date of grant, upon his or her joining the Board. However, if the new director was, prior to the commencement of Board service, an officer or member of the Board of an entity the stock, assets and/or business of which has been acquired by Seagate, the number of shares of the initial grant would have been determined by the existing members of the Board, but would not exceed 100,000 shares. These options vested over a period of four years from the date of grant. Upon re-election to the Board each year, each non-management director who had been a director for at least six months prior to his or her re-election was granted options to purchase 25,000 of our common shares at fair market value as of the date of grant. These options vested over a period of four years from the date of grant. If the shareholders approve Proposal 2, amending the 2004 Stock Compensation Plan, the initial and annual grants to non-management directors may change from the historical practice described above. For a description of the proposed amendments, see “Proposal 2 — Amendment to 2004 Stock Compensation Plan” elsewhere in this Proxy Statement.

 

On September 27, 2006, the Board approved director share ownership guidelines to increase the directors’ equity in the company and to more closely link their interests with those of all shareholders. Under the guidelines, each non-management director as of September 27, 2006 must establish, and maintain during Board service, ownership of at least 10,000 shares of Seagate Technology stock by July 1, 2008. On September 11, 2007, the Compensation Committee, after review with the independent members of the Board, extended the compliance date to December 31, 2008. Non-management directors elected or appointed after September 27, 2006 have three years from the date of election or appointment to reach the ownership requirement. Exceptions may be requested in the event of hardship.

 

All members of our Board are reimbursed for their reasonable out-of-pocket travel expenses incurred in attending meetings of the Board and its committees; no additional compensation is provided for attendance at Board or committee meetings. Also, Board members can participate in the company’s Nonqualified Deferred Compensation Program. For a description of the plan, see “Compensation Discussion and Analysis — Benefits and Other Perquisites — Nonqualified Deferred Compensation Plan” elsewhere in this Proxy Statement.

Director Compensation for Fiscal Year Ended 2007

 

 

 

 

 

SECURITY OWNERSHIP OF DIRECTORS, DIRECTOR NOMINEES, EXECUTIVE OFFICERS
AND CERTAIN BENEFICIAL OWNERS

 

The following table sets forth information regarding the beneficial ownership of our outstanding common shares on September 10, 2007 by (1) each person who is known by us to own beneficially more than 5% of our outstanding voting power, (2) each director, director nominee, and NEO, and (3) all of our directors, director nominees and executive officers as a group. To our knowledge, unless it is otherwise stated in the footnotes, each person listed below has sole voting and investment power with respect to his or her shares beneficially owned. For purposes of the tables below, a person or group of persons is deemed to have “beneficial ownership” of any shares that such person has the right to acquire within 60 days after September 10, 2007. For purposes of computing the percentage of outstanding common shares held by each person or group of persons, any shares that such person or group has the right to acquire within 60 days after September 10, 2007 are deemed to be outstanding, but they are not included as outstanding for the purpose of computing the percentage ownership of any other person or group.

 

 

 

 

 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

Our Board has adopted a written policy for approval of transactions between the company and its directors, director nominees, executive officers, greater-than-5% beneficial owners and their respective family members, where the amount involved in the transaction exceeds or is expected to exceed $100,000 in a single calendar year.

 

The policy provides that the Nominating and Corporate Governance Committee reviews certain transactions subject to the policy, and determines whether or not to approve or ratify those transactions. In doing so, the Nominating and Corporate Governance Committee takes into account, among other factors it deems to be appropriate, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances, and the extent of the related person’s interest in the transaction. In addition, the Board has delegated authority to the Chair of the Nominating and Corporate Governance Committee to pre-approve or ratify transactions where the aggregate amount is expected to be less than $1 million. A summary of any new transactions pre-approved by the Chair is provided to the full Nominating and Corporate Governance Committee for its review at each, regularly scheduled Committee meeting.

 

The Nominating and Corporate Governance Committee has considered and adopted standing pre-approvals under the policy for limited transactions with related persons. Pre-approved transactions include:

 

 

 

 

As described in the Form 8-K we filed with the SEC on December 6, 2006, upon the consummation of our acquisition of Maxtor Corporation, Dr. C.S. Park, the former Chairman and Chief Executive Officer of Maxtor and current member of our Board, became eligible to receive certain cash severance benefits payable under Maxtor’s Executive Retention and Severance Plan. Dr. Park received a severance payment (including basic severance, supplemental severance, and a pro-rated bonus) in the amount of $4,466,575.34, which amount was paid in accordance with the terms of the Executive Retention and Severance Plan to Dr. Park on December 1, 2006. In lieu of providing the health, life insurance and long-term disability benefits continuation that Dr. Park would otherwise have been entitled to under the Executive Retention and Severance Plan, we made an additional lump-sum payment to Dr. Park in December 2006 in an amount equal to $78,405, our estimated value of those benefits. In addition, we determined that Dr. Park was entitled to a “gross-up” payment under the Executive Retention and Severance Plan of $1,620,000 which we paid on Dr. Park’s behalf to the relevant tax authorities in December 2006. Together, the severance payment, the payment in lieu of benefits continuation and the “gross-up” payment yield a total severance payout to Dr. Park of approximately $6,165,000.

 

Michael R. Cannon was a member of our board from October 26, 2006 until February 22, 2007. During that time, Mr. Cannon was also the chief executive officer and a member of the board of directors of Solectron Corporation (“Solectron”). During the four-month period that Mr. Cannon served on our board, we recorded net

revenue of approximately $22 million from sales to Solectron and made purchases from Solectron of approximately $2 million. The relationship between Seagate and Solectron existed prior to Mr. Cannon joining our board, and is currently in effect.

 

COMPENSATION DISCUSSION AND ANALYSIS

 

Overview.  The Compensation Committee, composed of three independent directors, reviews and approves our compensation practices for attracting, retaining, developing and motivating executives for senior management positions (senior and executive vice president levels; including the NEOs). Acting on behalf of the Board, the Compensation Committee is authorized to develop and approve all compensation and equity programs for each of our NEOs and for members of the Board. For NEOs other than the CEO, the CEO makes recommendations to the Compensation Committee for annual changes to base salary, variable pay and long-term equity compensation. The Compensation Committee reviews these recommendations with the CEO and may approve, alter or reject the recommendations. With respect to compensation and equity program proposals for the CEO and the Board, the Compensation Committee provides details of same to the independent directors of the Board for their review.

 

The following Compensation Discussion and Analysis details the executive compensation strategy and practices for compensating our NEOs. The term ‘executive’ will refer to all of our NEOs. The NEOs for fiscal year 2007 were:

 

 

Objectives of the Executive Compensation Program

 

 

Competitive Market, Peer Groups and Market Positioning.  The Compensation Committee relies on extensive labor market analyses, using published surveys and public disclosures for executives in similar roles within the Peer Group companies listed below. Peer Group data is gathered annually to the extent available with respect to base salary, variable pay and long-term equity (including stock options, performance shares, restricted stock and long-term, cash-based awards) for similar positions. Benefit programs, including deferred compensation and generally available benefits, such as 401(k) plans and health care coverage, are also reviewed annually. In determining total compensation levels, the Compensation Committee considers external business conditions, financial and operational performance as measured by adjusted non-GAAP earnings per share (EPS), stock price, total shareholder return, potential costs, and the company’s ability to retain and motivate executives.

To make certain that compensation programs meet the objectives described above, the Compensation Committee reviews executive assignments and establishes target compensation (base salary, variable pay, and long-term equity) levels after reviewing similar compensation information for a defined group of companies competing in the labor market for similar executive talent (Peer Group). The Peer Group was determined by selecting companies which are similar in size, in the high technology computer hardware and equipment industry and/or companies that are key partners or Original Equipment Manufacturers (OEMs). For fiscal year 2007, the Compensation Committee approved the following 39 companies to comprise the Peer Group:

 

 

The Compensation Committee targets each element of the executive’s total compensation generally at the 75th percentile of market, subject to the cost of the programs. However, individual compensation can vary for a variety of reasons, such as the strategic impact of the position, ability to attract new executives, experience of the incumbent, past performance, expected future contributions, and overall ability to achieve Seagate’s business objectives.

 

Total compensation is reviewed annually for each of the company’s executives. The Compensation Committee reviews and considers all elements of compensation as part of the total compensation package when approving a compensation program or specific change to any one element. The Compensation Committee reviews the total compensation package for the CEO with the Board, excluding the CEO.

 

Role of Compensation Consultant.  The Compensation Committee has authority to retain consultants and advisors and to approve related fees and other retention terms for these advisors. From time to time, the Compensation Committee has retained such consultants and advisors. While the Compensation Committee had the authority to retain such a consultant or advisor, they did not do so in fiscal 2007.

 

Elements of Executive Compensation.  Seagate’s executive compensation program is comprised of five elements:

 

 

What Each Compensation Element is Designed to Reward and How It Relates to the Objectives.  Each pay element is designed to reward different results as shown below:

 

 

How the Company Determined Amounts and/or Formulas for Each Element of Compensation.  For fiscal year 2007, the value of each compensation element, base salary, variable pay and long-term equity incentives, for the executives varied based on the level of each executive’s responsibility within the organization. For example, executives with higher levels of responsibility and a greater ability to influence strategic results had a greater percentage of total compensation in variable pay and long term equity.

 

The elements of compensation are determined using Peer Group market data as a guideline reflecting Seagate’s executive compensation objectives and business needs. The fiscal year 2007 total target compensation mix for the NEOs ranges from the following: 12% — 28% base salary, 18% — 28% variable pay and 50% — 69% long-term equity incentives. For actual total compensation amounts, refer to “Compensation of the Named Executive Officers” in this Compensation Discussion and Analysis.

 

Base Salary.  Base salary is paid for on-going employment throughout the year. The base salary element of each executive’s total compensation is designed to be competitive at the market 75th percentile to the Peer Group. Base salary for each executive was reviewed in January of 2007 and approved at the February 2007 Compensation Committee meeting.

 

As part of the annual executive base salary review program, the Compensation Committee determined that all of the NEOs except for Mr. Wickersham and Mr. Dexheimer base salaries were competitive at the market 75th percentile to the Peer Group. As a result, effective February 5, 2007 both Mr. Wickersham and Mr. Dexheimer received salary increases. Mr. Wickersham’s salary increased to $775,008, a 6.9% salary increase. Mr. Dexheimer’s salary increased to $640,016, a 6.67% salary increase. The salaries of the other NEOs were not increased.

Variable Pay.  All executives participate in the shareholder-approved annual incentive bonus plan, which we refer to as the Executive Bonus Plan. Awards under the Executive Bonus Plan are based upon the Compensation Committee’s belief that a significant portion of the annual compensation of each executive should be contingent upon the annual financial and operational performance goals of the company. The Executive Bonus Plan is funded based upon the company’s financial metric, adjusted non-GAAP earnings per share (EPS), with individual target awards subject to reduction by the Compensation Committee depending upon the executive’s performance. Adjusted non-GAAP EPS measure generally excludes the impact of nonoperating activities on the diluted EPS under GAAP, such as merger or acquisition related costs, restructuring, legal settlements, and tax related adjustments.

 

For fiscal year 2007 the Executive Bonus Plan was to be funded as follows: if the adjusted non-GAAP EPS met the plan performance threshold of $1.51, then the bonus program would be funded at 50% of target awards; and, if the adjusted non-GAAP EPS target goal of $2.01 was met, then the bonus program would be funded at 100% of target awards. For adjusted non-GAAP EPS of $2.81 the bonus program would be funded at 200% of the target awards. In addition, the funding level could be increased by an additional 10% if we achieved certain corporate quality goals including minimizing defective parts and product returns. The Executive Bonus Plan had a maximum plan funding of approximately 220% of target award amounts. The Compensation Committee also had a small discretionary budget which could be allocated to any executive if the threshold funding was met.

 

Seagate did not achieve any of the foregoing fiscal year 2007 adjusted non-GAAP EPS measurement thresholds to fund the Executive Bonus Plan. Therefore, no executive received variable pay for the fiscal year 2007 performance period.

 

Stock Options and Restricted Share Awards.  The Compensation Committee believes that the granting of stock options and restricted shares to executives creates a direct link between executive rewards and potential long-term increases in shareholder value. The Compensation Committee believes that stock options and restricted share grants provide incentives for the executives to manage the company as shareholders. Stock options and restricted shares are subject to periodic vesting provisions to encourage executives to remain in our employ. The Compensation Committee approves stock option and restricted share grant guidelines which determines the size and timing of the grants for executive officers (other than the CEO). The Compensation Committee approves awards for the CEO after discussing the recommendations with the Board, excluding the CEO Director. The guidelines take into account grant values for similar positions in the Peer Group. In determining the grant type and amounts for a specific executive, the Compensation Committee also considers the following: potential future contributions to the company’s overall success, past option grant history, the number of unvested options, the potential future impact on shareholder value and retention purposes.

 

As a result of recent changes to financial accounting rules and an analysis of the equity compensation practices of Peer Group companies, the Compensation Committee determined that equity awards granted to executives in fiscal year 2007 would be composed of a combination of stock options and restricted share awards, generally subject to vesting over a four or five year period and, with respect to stock options, have a seven year term.

 

Pursuant to our equity stock plan, the “Equity Stock Plan — eQ Policy,” we do not backdate the pricing of stock options or grant options retroactively. In addition, we do not coordinate grants of options before announcement of favorable information, or after announcement of unfavorable information. The options are granted with an exercise price at the fair market value on the date of grant with all required approvals obtained in advance of or on the actual grant date. The fair market value is calculated using the average of the high and low trading price on the New York Stock Exchange on the grant date. We granted options and restricted share awards to executives on the same grant date used for employees who received grants as part of the fiscal year 2007 stock program. Grants made in fiscal year 2007 are shown in the “Grants of Plan-Based Awards in Fiscal Year 2007” table in this Proxy Statement.

Benefits and Other Perquisites

 

Nonqualified Deferred Compensation Plan

 

A select group of executives based in the United States are eligible to participate in the nonqualified deferred compensation program, the Seagate Deferred Compensation Plan. We maintain the Deferred Compensation Plan for the purposes of providing a competitive benefit and allowing executives and other employees an opportunity to defer income tax payments on their cash compensation within the restrictions imposed by the Internal Revenue Code of 1986, as amended (the “Code”). The Deferred Compensation Plan allows executives to voluntarily defer up to 70% of base salary and/or up to 100% of paid bonus or commissions credited to selected investment funds and is intended to assist executives in their retirement planning. We do not provide any matching or other contributions. Earnings on deferrals are based on the performance of the funds selected by the participants. Contribution and year-end balances for the NEOs can be found in the “Fiscal Year 2007 Nonqualified Deferred Compensation” table of this Proxy Statement.

 

Executive Physical Program

 

Executive physicals are offered to Seagate’s executives to ensure leadership continuity and to provide competitive benefits in relation to the Peer Group. The program provides a comprehensive evaluation emphasizing all aspects of preventative care by physicians on a bi-annual basis.

 

Officer Disability Plan

 

The Officer Disability Plan is provided to executives who are based in the United States. The plan replaces the Seagate Supplemental short-term disability program and coordinates with the Long Term Disability plan after 180 days of disability. The plan provides 100% income replacement for the first year of disability, 80% income replacement for the second year to the fifth year and 60% income replacement thereafter.

 

Automobile Program

 

We offer executives an automobile benefit that is competitive with automobile benefits in the Peer Group for comparable positions. Executives have the option of receiving a cash allowance or an automobile provided by the company and are reimbursed for operating expenses related to the automobile.

 

Separation Arrangements.  As described in detail below, employment agreements for the NEOs specify certain severance benefits to be paid in the event of an involuntary termination of such executive’s employment. We provide separation benefits in order to remain competitive in attracting and retaining executives, and to support organizational changes which may be necessary to support Seagate’s business strategy.

 

For further details, please refer to the section “Potential Payments Upon Termination” elsewhere in this Proxy Statement.

 

Impact of Section 162(m) of the Internal Revenue Code.  In general, it is our policy to qualify our executives’ compensation for deductibility under applicable tax laws to the greatest extent possible. The Compensation Committee has considered the potential impact of Section 162(m) of the Code on the compensation paid to our executive officers. In general, Section 162(m) disallows a tax deduction for any publicly held corporation or its subsidiaries for individual compensation exceeding $1 million in any taxable year, unless compensation is considered “performance-based” under the Code. Amounts realized from options granted under our 2001 Share Option Plan (except for options granted after October 27, 2004) are exempt from Section 162(m) under a transition rule applicable for up to three years after our initial public offering in December 2002.

 

The Executive Bonus Plan and the 2004 Stock Compensation Plan have both been approved by shareholders and are administered by the Compensation Committee. Each plan has been structured with the intention that compensation paid under those plans generally be qualified as “performance-based” and not subject to 162(m). Nevertheless, Restricted Shares granted in fiscal year 2007 to executives subject to 162(m) did in some cases exceed the 162(m) limit. In order to maintain flexibility in compensating our executive officers in a manner designed to

promote varying corporate goals, it is not a policy of the Compensation Committee that all executive compensation must be tax-deductible.

 

Securities Trading.  We believe that short-term investment activity in our securities, such as trading in or writing options, arbitrage trading or “day trading,” is not appropriate under any circumstances, and accordingly such activity is prohibited by Seagate’s Securities Trading Policy. In addition, employees and Board members are prohibited from taking “short” positions in Seagate Technology’s securities. Holding and exercising options or other derivative securities granted under the employee stock option or equity incentive plans is not prohibited by the policy.

 

Compensation of the Named Executive Officers.  The following tables show, for fiscal year 2007, compensation awarded or paid to, or earned by, Seagate’s CEO, CFO, and three most highly compensated executive officers other than the CEO and CFO, as well as one of our officers who acted as an executive officer during but not at the end of our fiscal year. We refer to these executives collectively herein as the Named Executive Officers (NEOs).

 

Summary Compensation Table for Fiscal Year 2007

 

 

 

Stock and Option Awards

 

 

All Other Compensation

 

 

 

Miscellaneous

 

 

Grants of Plan-Based Awards for Fiscal Year 2007

 

 

 

 

Outstanding Equity for Fiscal Year 2007

 

 

 

 

 

Option Exercises and Stock Vested for Fiscal Year 2007

 

 

 

 

Nonqualified Deferred Compensation for Fiscal Year 2007

 

 

 

 

Information included in the table above includes contributions, earnings, withdrawals, and balances with respect to the Seagate Deferred Compensation Plan (referred to as the Plan). The Plan is an unfunded deferred compensation plan established for a select group of management or highly compensated employees under ERISA. To preserve the tax-deferred status of our plan by the IRS, highly compensated employees can select from a variety of “deemed investment” options that are linked to the gains and losses of externally managed mutual funds. The investment crediting choices are not publicly traded mutual funds and are only available through variable insurance products. The deferrals and any earnings attributed to those deferrals are reflected on the company’s books, but the participant deferral balance remains a general asset of the company. All payments pursuant to the Plan are made from the general assets of the company and no special or separate fund is established, or segregation of assets made to assure payment. Participants do not own any interest in the assets of the company as a result of participating in the plans. The company has established a grantor trust (a “rabbi” trust) for the purpose of accumulating funds to satisfy our obligations under the Plan.

 

The material terms of the Seagate Deferred Compensation Plan are summarized below:

 

 

Potential Payments upon Termination

 

Involuntary Termination Without Cause or For Good Reason

 

We have entered into employment agreements with each of our NEOs which specify certain severance benefits to be paid in the event of an involuntary termination. In the event that the executive’s employment is terminated by us without “cause” (as defined below) or by the executive with “good reason” (as defined below), the NEO will receive the value of continued payment of his base salary and target bonus for one year following termination and he will be entitled to continue to participate in our health, dental and life insurance programs for one year following termination. Severance payments in connection with a termination by us without cause or by the NEO for good

reason are conditioned upon the executive’s compliance with restrictive covenants regarding non-competition, confidentiality and invention assignment for 12 months following termination.

 

“Cause” is defined in the employment agreements to mean (A) the NEO’s continued failure to substantially perform the material duties of his office (other than as a result of total or partial incapacity due to physical or mental illness), (B) embezzlement or theft by the NEO of the company’s property, (C) the commission of any act or acts on NEO’s part resulting in the conviction of such NEO of a felony under the laws of the United States or any state, (D) the NEO’s willful malfeasance or willful misconduct in connection with the NEO’s duties to the company or any other act or omission which is materially injurious to the financial condition or business reputation of the company or any of its subsidiaries or affiliates, or (E) a material breach by the NEO of the material terms of the employment agreement, the Management Stockholders Agreement dated as of November 22, 2000, or any non-compete, non-solicitation or confidentiality provisions to which the NEO is subject. However, no termination shall be deemed for Cause under clause (A), (D) or (E) unless the NEO is first given written notice by the company of the specific acts or omissions which the company deems constitute grounds for a termination for Cause and is provided with at least 30 days after such notice to cure the specified deficiency.

 

“Good Reason” is defined in the employment agreements to mean the NEO’s resignation of his employment with the company as a result of the following actions, which actions remain uncured for at least 30 days following written notice from the NEO to the company describing the occurrence of such events and asserting that such events constitute grounds for a Good Reason resignation, provided notice of such resignation is given to the company within 60 days after the expiration of the cure period: (A) without the NEO’s express written consent, any material reduction in the level of the NEO’s authority or duties from those set forth in the employment agreement; (B) without the NEO’s express written consent, a reduction of 10% or more in the level of the base salary, target annual bonus or employee benefits to be provided to the NEO under the employment agreement, other than a reduction implemented with the consent of the NEO or a reduction that is equivalent to reductions in base salaries, bonus opportunities and/or employee benefits, as applicable, imposed on all other senior executives of the company at a similar level within the company (provided that the use of private aircraft shall not be deemed an employee benefit for these purposes); or (C) the relocation of the NEO to a principal place of employment more than 50 miles from the NEO’s current principal place of employment, without the NEO’s express written consent.

 

Each of the restricted stock bonus agreements that we have entered into with our NEOs provides that upon a termination of continuous service for any reason, vesting will cease and the company shall automatically reacquire all of the unvested restricted stock without payment of consideration. The grant agreements related to issuance of stock options provide that upon termination, other than on account of death or disability, there is no acceleration of unvested options and unvested options are cancelled effective as of the termination date. However, with the exception of a termination by the company for cause, each NEO will have an additional period of time to exercise options that were vested as of the date of termination.

 

The following table sets forth the estimated value of the potential payments to each NEO, assuming termination of the executive by us without cause or by the executive with good reason on June 29, 2007.

 

Severance Payments upon Involuntary Termination