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                                                                   EXHIBIT 10.12

                           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.

     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 Executives' 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
Executives' 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 Executives' failure or refusal to perform his or her
duties as reasonably required by the Employer, provided that 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;

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               (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), 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 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) of thirty-three
and one third percent or more of (i) the then outstanding shares of the
Company's 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;

               (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 of this Plan and any person becoming a director
subsequent to such date whose 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 which results in the stockholders of the Company having power to
vote in the ordinary election of directors immediately prior to such transaction
(or series of related transactions) failing to beneficially

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own at least a majority of the securities of the Company (or any successor or
other person which issues securities in such transaction or transactions) having
the power to vote in the ordinary election of directors which are outstanding
after giving effect to such transaction (or series of related transactions); or

               (d) the stockholders of the Company approve a plan of complete
liquidation of the Company or the sale of all or substantially all of the assets
of the Company.

          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 12.03(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 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 onsent:

               (a) (i) the assignment to the Executive of any duties materially
and adversely inconsistent with the Executive's positions, duties,
responsibilities and status with the Employer immediately prior to a Change in
Control or with significantly less authority than immediately prior to the
Change in Control;

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                   (ii) a significant adverse alteration in the nature of the
Executive's reporting responsibilities, titles, or offices with the Employer
from those in effect immediately prior to a Change in Control, or

                   (iii) any removal of the Executive from, or any failure to
reelect the Executive to, any such positions, except in connection with a
termination of the employment of the Executive for Cause, Permanent Disability,
or as a result of the Executive's death or by the Executive other than for Good
Reason;

               (b) a reduction by the Employer in the Executive's base salary in
effect immediately prior to a Change in Control;

               (c) failure by the Employer to continue in effect any
compensation plan, bonus or incentive plan, stock purchase plan, stock option
plan, life insurance plan, health plan, disability plan or other benefit plan or
arrangement in which the Executive is participating at the time of a Change in
Control unless the Employer substitutes a plan or arrangement which, when viewed
in the totality of the benefits provided, does not adversely impact the
Executive in a material respect, or the taking of any action by the Employer
which would adversely affect, in a material respect, Executive's participation
in or materially reduce Executive's benefits under any of such plans;

               (d) any material breach by the Company or the Employer of any
provision of this Plan;

               (e) following a Change in Control, the Executive is excluded
(without substitution of a substantially equivalent plan) from participation in
any incentive, compensation, stock option, health, dental, insurance, pension or
other benefit plan generally made available to persons at Executive's level of
responsibility in the Company or the Employer;

               (f) 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 prior to a Change in Control, or that the Executive
must travel on the Employer's business to an extent materially greater than the
Executive's customary business travel obligations prior to a Change in Control;
or

               (g) 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 12.03(b) hereof.

          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.

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          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 "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.

          2.17 "Tier 1 Executive" shall mean those executive officers of the
Company who are subject to Section 16 of the Exchange Act.

          2.18 "Tier 2 Executive" shall mean those officers of the Company or
any of its subsidiaries who are designated as such by the Board or the
Committee.

     3. Term. This Plan shall be effective until the fifth anniversary of the
Effective Date and may be extended by the Board until no later than the tenth
anniversary of the Effective Date.

     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 this Plan and shall be
subject to regular withholding for federal, state and local taxes in accordance
with law.

          4.02 Other Benefits.

               (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
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, in accordance with the usual
practices of the Employer, 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.

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     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 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.

          5.02 Good Reason.

               (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, provided that the Executive gives
written notice to the Company and the Employer of his or her election to
terminate his or her employment for such reason within 180 days after the time
he or she becomes aware of the existence of facts or circumstances constituting
Good Reason or, if later, within ten (10) days of the time the claim is resolved
pursuant to Section 5.02(b).

               (b) If the Executive believes that he or she is entitled to
terminate his or her employment with the Employer for Good Reason, he or she may
apply in writing to the Company for confirmation of such entitlement prior to
the Executive's actual separation from employment, by following the claims
procedure set forth in Section 9. The submission of such a request by the
Executive shall not constitute "Cause" for the Company to terminate the
Executive's employment and the Executive shall continue to receive all
compensation and benefits he or she was receiving at the time of such submission
throughout the resolution of the matter pursuant to the procedures set forth in
Section 9. If the Executive's request for a termination of employment for Good
Reason is denied under both the request and appeal procedures set forth in
Sections 9.02 and 9.03, then the parties shall use their best efforts to resolve
the claim within ninety (90) days after the claim is submitted to binding
arbitration pursuant to Section 9.04.

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          5.03 Permanent Disability. In the event of a Permanent Disability of
the Executive, the Executive shall be entitled to no further benefits under this
Plan, provided that the Employer shall have provided the Executive a Notice of
Termination and the Executive shall not have returned to the full-time
performance of the Executive's duties within thirty (30) days of such Notice of
Termination.

          5.04 Cause. The Employer may terminate the employment of the Executive
for Cause. The Executive shall not be deemed to have been terminated for Cause
unless and until there shall have been delivered to the Executive a Notice of
Termination and a certified copy of a resolution of the Board adopted by the
affirmative vote of not less than a majority of the entire membership of the
Board (other than the Executive if he or she is a member of the Board at such
time) at a meeting called and held for that purpose and at which the Executive
was given an opportunity to be heard, finding that the Executive was guilty of
conduct constituting Cause based on reasonable evidence, specifying the
particulars thereof in detail. For purposes of this Section 5.04, no act or
failure to act on the Executive's part shall be considered "willful" unless done
or omitted to be done by him or her not in good faith and without reasonable
belief that his or her action or omission was in the best interest of the
Company and the Employer.

          5.05 Notice of Termination. Any termination of the Executive's
employment by the Employer or by the Executive (other than termination based on
the Executive's death) following a Change in Control shall be communicated by
the terminating party in a Notice of Termination to the other party hereto.

     6. Compensation and Benefits Upon Termination of Employment.

          6.01 Severance Benefits. If the Executive shall be terminated from
employment with the Employer or shall terminate his or her employment with the
Employer as described in Section 5.01, then the Executive shall be entitled to
receive the following:

               (a) In lieu of any further payments to the Executive except as
expressly contemplated hereunder, the Employer shall pay as severance pay to the
Executive an amount equal to two times (in the case of a Tier 1 Executive) or
one times (in the case of a Tier 2 Executive) the Executive's annual base
compensation plus target bonus as in effect immediately prior to the Change in
Control or as in effect on the date of the Notice of Termination, whichever is
higher. Such cash payment shall be payable in a single sum, within ten (10)
business days following the Executive's Date of Termination.

               (b) Any non-vested stock options granted to the Executive by the
Company shall become 100% vested and may be exercised by the Executive for the
longer of (i) ninety (90) days after the Date of Termination or (ii) the period
specified in the plan or agreement governing such options.

               (c) For a period of twenty-four months (in the case of a Tier 1
Executive) or twelve months (in the case of a Tier 2 Executive) following the
Executive's Date of Termination (the "payment period"), the Executive shall be
entitled to the continuation of the same or

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equivalent life, health, hospitalization, dental and disability insurance
coverage and other employee insurance or welfare benefits (including equivalent
coverage for his or her spouse and dependent children) and car allowances as he
or she was receiving immediately prior to the Change in Control. In the event
that Executive is ineligible under the terms of such insurance to continue to be
so covered, the Employer shall provide Executive with a lump sum payment equal
to the cost of obtaining such coverage for the payment period. If the Executive,
prior to a Change in Control, was receiving any cash-in-lieu payments designed
to enable the Executive to obtain insurance coverage of his or her choosing, the
Employer shall, in addition to any other benefits to be provided under this
Section 6.01(d), provide Executive with a lump-sum payment equal to the amount
of such in-lieu payments that the Executive would have been entitled to receive
over the payment period. The benefits to be provided under this Section 6.01(d)
shall be reduced to the extent of the receipt of substantially equivalent
coverage by the Executive from any successor employer.

               (d) All awards under the Company's Executive Retention Plan
adopted in July, 1998 or any similar plan shall accelerate and be payable
fifteen (15) days after the Date of Termination.

               (e) If any payments received by a Tier 1 Executive pursuant to
this Plan will be subject to the excise tax imposed by Section 4999 of the Code,
or any successor or similar provision of the Code or any comparable provision of
state law (the "Excise Tax"), the Employer shall pay to the Tier 1 Executive
additional compensation such that the net amount received by the Tier 1
Executive after deduction of any Excise Tax (and taking into account any
federal, state and local income taxes payable by the Tier 1 Executive as a
result of the receipt of such gross-up compensation), shall be equal to the
total payments he or she would have received had no such Excise Tax (or any
interest or penalties thereon arising primarily from the acts or omissions of
the Employer) been paid or incurred. The Employer shall pay such additional
compensation at the time when the Employer withholds such Excise Tax from any
payments to the Tier 1 Executive. The calculation of the tax gross-up payment
shall be approved by the Company's independent certified public accounting firm
and the Tier 1 Executive's designated financial advisor.

               (f) In the event that the amount of payments or other benefits
payable to a Tier 2 Executive under this Plan, together with any payments or
benefits payable under any other plan, program, arrangement or agreement
maintained by the Employer or one of its affiliates, would constitute an 'excess
parachute payment' (within the meaning of Section 280G of the Code), the
payments under this Plan shall be reduced (by the minimum possible amounts)
until no amount payable to the Tier 2 Executive under this Plan constitutes an
'excess parachute payment' (within the meaning of Section 280G of the Code);
provided, however, that no such reduction shall be made if the net after-tax
payment (after taking into account Federal, state, local or other income and
excise taxes) to which the Tier 2 Executive would otherwise be entitled without
such reduction would be greater than the net after-tax payment (after taking
into account Federal, state, local or other income and excise taxes) to the Tier
2 Executive resulting from the receipt of such payments with such reduction. If,
as a result of subsequent events or conditions (including a subsequent payment
or absence of a subsequent payment under this Plan or other plans, programs,
arrangements or agreements maintained by the Employer or one of its affiliates),
it is determined that payments hereunder have been reduced by more than the

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minimum amount required under this Section 6.01(f), then an additional payment
shall be promptly made to the Tier 2 Executive in an amount equal to the excess
reduction. All determinations required to be made under this Section 6.01(f),
including whether a payment would result in an 'excess parachute payment' and
the assumptions to be utilized in arriving at such determination, shall be made
and approved by the Company's independent certified public accounting firm and
the Tier 2 Executive's designated financial advisor.

          6.02 Accrued Benefits. Upon termination of the employment of Executive
for any reason, any accumulated but unused vacation shall be paid through the
Date of Termination. Upon termination of the employment of Executive as set
forth in Section 5.01, any accrued but unpaid bonus shall be paid through the
Date of Termination. Unless otherwise specifically provided in this Plan, any
payments or benefits payable to the Executive hereunder, including without
limitation any bonus, in respect of any calendar year during which the Executive
is employed by the Employer for less than the entire such year shall be prorated
in accordance with the number of days in such calendar year during which he or
she is so employed.

     7. No Mitigation. The Executive shall not be required to mitigate the
amount of any payments provided for by this Plan by seeking employment or
otherwise, nor shall the amount of any cash payments or benefits provided under
this Plan be reduced by any compensation or benefits earned by the Executive
after his or her Date of Termination (except as provided in the last sentence of
Section 6.01(d) above). Notwithstanding the foregoing, if the Executive is
entitled, by operation of any applicable law, to unemployment compensation
benefits or benefits under the Worker Adjustment and Retraining Act of 1988
(known as the "WARN" Act) in connection with the termination of his or her
employment in addition to amounts required to be paid to him or her under this
Plan, then to the extent permitted by applicable statutory law governing
severance payments or notice of termination of employment, the Company shall be
entitled to offset the amounts payable hereunder by the amounts of any such
statutorily mandated payments.

     8. Limitation on Rights.

          8.01 No Employment Contract. This Plan shall not be deemed to create a
contract of employment between the Employer and the Executive and shall create
no right in the Executive to continue in the Employer's employment for any
specific period of time, or to create any other rights in the Executive or
obligations on the part of the Company or its subsidiaries, except as set forth
herein. Except as set forth herein, this Plan shall not restrict the right of
the Employer to terminate the employment of Executive, or restrict the right of
the Executive to terminate his or her employment.

          8.02 No Other Exclusions. This Plan shall not be construed to exclude
the Executive from participation in any other compensation or benefit programs
in which he or she is specifically eligible to participate either prior to or
following the Effective Date of this Plan, or any such programs that generally
are available to other executive personnel of the Company, nor shall it affect
the kind and amount of other compensation to which the Executive is entitled.

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     9. Administrator and Claims Procedure.

          9.01 Administrator. Except as set forth herein, the administrator (the
"Administrator") for purposes of this Plan shall be the Company. The Company
shall have the right to designate one or more of the Company's or the Employer's
employees as the Administrator at any time. The Company shall give the Executive
written notice of any change in the Administrator, or in the address or
telephone number of the same.

          9.02 Claims Procedure. The Executive, or other person claiming through
the Executive, must file a written claim for benefits with the Administrator as
a prerequisite to the payment of benefits under this Plan. The Administrator
shall make all determinations as to the right of any person to receive benefits
under Sections 9.02 and 9.03. The decision by the Administrator of a claim for
benefits by the Executive, his or her heirs or personal representative (the
"claimant") shall be stated in writing by the Administrator and delivered or
mailed to the claimant with thirty (30) days after receipt of the claim, unless
special circumstances require an extension of time for processing the claim. If
such an extension is required, written notice of the extension shall be
furnished to the claimant prior to the termination of the initial thirty-day
period. In no event shall such extension exceed a period of thirty (30) days
from the end of the initial period. Any notice of denial shall set forth the
specific reasons for the denial, specific reference to pertinent provisions of
this Plan upon which the denial is based, a description of any additional
material or information necessary for the claimant to perfect his or her claim,
with an explanation of why such material or information is necessary, and a
description of claim review procedures, written to the best of the
Administrator's ability in a manner that may be understood without legal or
actuarial counsel.

          9.03 Appeals. A claimant whose claim for benefits has been wholly or
partially denied by the Administrator may request, within sixty (60) days
following the date of such denial, in a writing addressed to the Administrator,
a review of such denial. The claimant shall be entitled to submit written
comments, documents, records and other information he or she shall consider
relevant to a determination of his or her claim, and he or she may include a
request for a hearing in person before the Administrator. Prior to submitting
his or her request, the claimant shall be entitled to review such documents,
records, and other information as the Administrator shall reasonably agree are
pertinent to his or her claim. The claimant may, at all stages of the review, be
represented by counsel, legal or otherwise, of his or her choice, provided that
the fees and expenses of such counsel shall be borne by the claimant, unless the
claimant is successful, in which case, such costs shall be borne by the Company.
The review of the claim shall take into account all information submitted by
claimant relating to the claim, without regard to whether such information was
submitted in the initial benefit determination. All requests for review shall be
promptly resolved. The Administrator's decision with respect to any such review
shall be set forth in writing and shall be mailed to the claimant not later than
sixty (60) days following receipt by the Administrator of the claimant's request
unless special circumstances, such as the need to hold a hearing, require an
extension of time for processing, in which case the Administrator's decision
shall be so mailed not later than one hundred and twenty (120) days after
receipt of such request or, if later, ten (10) days after the hearing. The time
and place of any hearing shall be as mutually agreed by the parties. If the
claimant is dissatisfied with the Administrator's decision on review, the
claimant may then either, at his or her option, invoke the arbitration
procedures described in Section 9.04 or pursue a remedy in a judicial forum. No
legal action may be commenced prior to the completion of the claims and appeals
procedures described in the foregoing provisions of Section 9.02 and 9.03.
Notwithstanding the foregoing, no legal action may be commenced after ninety
(90) days after the date upon which the Administrator's written decision on
appeal was sent to claimant.

          9.04 Arbitration. A claimant who has followed the procedure in
Sections 9.02 and 9.03, but who has not obtained full relief on his or her claim
for benefits, may, within sixty (60) days following his or her receipt of the
Administrator's written decision on review pursuant to Section 9.03, apply in
writing to the Administrator for expedited and binding arbitration of his or her
claim before an arbitrator in Orange County, California in accordance with the
commercial arbitration rules of the American Arbitration Association, as then in
effect,

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or pursuant to such other form of alternative dispute resolution as the parties
may agree (collectively, the "arbitration"). Subject to Section 10, the Company
or the Employer shall pay filing fees and other costs required to initiate the
arbitration. The arbitrator's sole authority shall be to interpret and apply the
provisions of this Plan; and except as set forth herein he or she shall not
change, add to, or subtract from, any of its provisions. The arbitrator shall
have the power to compel attendance of witnesses at the hearing. Any court
having jurisdiction may enter a judgment based upon such arbitration. The
arbitrator shall be appointed by mutual agreement of the Company and the
claimant; provided that if the Company and the claimant cannot agree, the
arbitrator shall be appointed pursuant to the applicable commercial arbitration
rules. The arbitrator shall be a professional person with a reputation in the
community for expertise in employee benefit matters and who is unrelated to the
claimant, the Company or its subsidiaries or any employees of the Company or its
subsidiaries. All decisions of the arbitrator shall be final and binding on the
claimant and the Company.

     10. Legal Fees and Expenses. If any dispute arises between the parties with
respect to the interpretation or performance of this Plan, the prevailing party
in any arbitration or proceeding shall be entitled to recover from the other
party its attorneys fees, arbitration or court costs and other expenses incurred
in connection with any such proceeding. Amounts, if any, paid to the Executive
under this Section 10 shall be in addition to all other amounts due to the
Executive pursuant to this Plan.

     11. ERISA. This Plan is an unfunded compensation arrangement for a member
of a select group of the Company's management or that of its subsidiaries and
any exemptions under the Employee Retirement Income Security Act of 1974, as
amended, as applicable to such an arrangement shall be applicable to this Plan.

     12. Miscellaneous.

          12.01 Administration. This Plan may be administered by the Board or
the Committee. When this Plan refers to any action by the Board, the Committee
may take such action with the same effect as if it had been taken by the Board.

          12.02 Amendments. This Plan may be changed, amended or modified by
resolution of the Board or the Committee.

          12.03 Assignment and Binding Effect.

               (a) Neither this Plan nor the rights or obligations hereunder
shall be assignable by the Executive or the Company except that this Plan shall
be assignable to, binding upon and inure to the benefit of any successor of the
Company, and any successor shall be deemed substituted for the Company upon the
terms and subject to the conditions hereof'.

               (b) The Company will require any successor (whether by purchase
of assets, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company to expressly assume and agree to
perform all of the obligations of the Company under this Plan (including the
obligation to cause any subsequent successor to also assume the obligations of
this Plan) unless such assumption occurs by operation of law. Nothing in this
Section 12.03 is intended, however, to require that a person or group referred
to in Section 2.03(a) as being the beneficial owner of shares of stock of the
Company must assume the obligations under this Plan as a result of such stock
ownership.

                                       11

<PAGE>   12

          12.04 No Waiver. No waiver of any term, provision or condition of this
Plan, whether by conduct or otherwise, in any one or more instances shall be
deemed or be construed as a further or continuing waiver of any such term,
provision or condition or as a waiver of any other term, provision or condition
of this Plan.

          12.05 Rules of Construction.

               (a) This Plan has been executed in, and shall be governed by and
construed in accordance with the laws of, the State of California. Captions
contained in this Plan are for convenience of reference only and shall not be
considered or referred to in resolving questions of interpretation with respect
to this Plan.

               (b) If any provision of this Plan is held to be illegal, invalid
or unenforceable under any present or future law, and if the rights or
obligations of any party hereto under this Plan will not be materially and
adversely affected thereby, (i) such provision will be fully severable, (ii)
this Plan will be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof, (iii) the remaining
provisions of this Plan will remain in full force and effect and will not be
affected by the illegal, invalid or unenforceable provision or by its severance
herefrom and (iv) in lieu of such illegal, invalid or unenforceable provision,
there will be added automatically as a part of this Plan a legal, valid and
enforceable provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible.

          12.06 Notices. Any notice required or permitted by this Plan shall be
in writing, delivered by hand, or sent by registered or certified mail, return
receipt requested, or by recognized courier service (regularly providing proof
of delivery), addressed to the Board and the Company and where applicable, the
Administrator, at the Company's then principal office, or to the Executive at
the address set forth in the records of the Employer, as the case may be, or to
such other address or addresses the Company or the Executive may from time to
time specify in writing. Notices shall be deemed given when received.

                                       12HARLEY-DAVIDSON, INC.

                         2001 YORK HOURLY-PAID EMPLOYEES

                                STOCK OPTION PLAN

                                   ARTICLE I

                                     PURPOSE
                                     -------

          The purpose of the Harley-Davidson, Inc. 2001 York Hourly-Paid
Employees Stock Option Plan is to provide favorable opportunities for non-exempt
employees at the Harley-Davidson Motor Company York, Pennsylvania facility to
purchase shares of Common Stock of Harley-Davidson, Inc. Such opportunities
should provide an increased incentive for these employees to contribute to the
future success and prosperity of Harley-Davidson, Inc., thus enhancing the value
of the stock for the benefit of the shareholders, and increase the ability of
Harley-Davidson, Inc. to attract and retain individuals of exceptional skill
upon whom, in large measure, its sustained progress, growth and profitability
depend.

                                   ARTICLE II

                                   DEFINITIONS
                                   -----------

          The following capitalized terms used in the Plan shall have the
respective meanings set forth in this Article:

          2.1. Board: The Board of Directors of Harley-Davidson, Inc.

          2.2. Code: The Internal Revenue Code of 1986, as amended.

          2.3. Committee: The Human Resources Committee of the Board.

          2.4. Common Stock: The common stock of Harley-Davidson, Inc.

          2.5. Company: Harley-Davidson, Inc. and any of its Subsidiaries.

          2.6. Disability: Disability retirement under the Retirement Annuity
Plan for York Hourly-Paid Employees of Harley-Davidson.

          2.7. Fair Market Value: The average of the high and low reported sales
prices of Common Stock on the New York Stock Exchange Composite Tape on the date
for which fair market value is being determined.

          2.8. Non-ISO: A stock option which is not an incentive stock option
within the meaning of Section 422 of the Code.

<PAGE>

          2.9. Option: A stock option granted under the Plan.

          2.10. Option Price: The purchase price of a share of Common Stock
under an Option.

          2.11. Optionee: A person who has been granted one or more Options.

          2.12. Parent Corporation: The parent corporation, as defined in
Section 424(e) of the Code.

          2.13. Plan: The Harley-Davidson, Inc. 2001 York Hourly-Paid Employees
Stock Option Plan.

          2.14. Retirement: Normal, deferred, early, or thirty and out
retirement under the terms of the Retirement Annuity Plan for York Hourly-Paid
Employees of Harley-Davidson.

          2.15. Subsidiary: A corporation, limited partnership, general
partnership, limited liability company, business trust or other entity of which
more than fifty percent (50%) of the voting power or ownership interest is
directly and/or indirectly held by Harley-Davidson, Inc.

          2.16. Termination Date: A date fixed by the Committee but not later
than the day preceding the tenth anniversary of the date on which the Option is
granted.

                                  ARTICLE III

                                 ADMINISTRATION
                                 --------------

          3.1. The Committee shall administer the Plan and shall have full power
to grant Options, construe and interpret the Plan, establish and amend rules and
regulations for its administration, and perform all other acts relating to the
Plan, including the delegation of administrative responsibilities, which it
believes reasonable and proper.

          3.2. Subject to the provisions of the Plan, the Committee shall, in
its discretion, determine who shall be granted Options, the number of shares
subject to option under any such Options, the dates after which Options may be
exercised, in whole or in part, and the terms and conditions of the Options.

          3.3. Any decision made, or action taken, by the Committee arising out
of or in connection with the interpretation and administration of the Plan shall
be final and conclusive.

                                       2
<PAGE>

                                   ARTICLE IV

                           SHARES SUBJECT TO THE PLAN
                           --------------------------

          4.1. The total number of shares of Common Stock available for grants
of Options under the Plan shall be three hundred thousand (300,000) shares.

                                   ARTICLE V

                                   ELIGIBILITY
                                   -----------

          5.1. Options may be granted to all full time, regular, production and
maintenance employees of the Company covered by the collective bargaining
agreement in effect between the Company and Tyson Lodge 175, District 98, of the
International Association of Machinists & Aerospace Workers, AFL/CIO (or any
successor thereto).

                                   ARTICLE VI

                                 TERM OF OPTIONS
                                 ---------------

          6.1. Option Agreements: All Options shall be evidenced by written
agreements executed by the Company. Such Options shall be subject to the
applicable provisions of the Plan, and shall contain such provisions as are
required by the Plan and any other provisions the Committee may prescribe. All
agreements evidencing Options shall specify the total number of shares subject
to each grant, the date of the grant, the Option Price and the Termination Date.
All Options shall be Non-ISOs.

          6.2. Option Price: The Option Price shall be set by the Committee;
provided, however, that the price per share shall not be less than the Fair
Market Value of a share of Common Stock as of the date the Option is granted.

          6.3. Period of Exercise: The Committee shall determine the dates after
which Options may be exercised in whole or in part. If Options are exercisable
in installments, installments or portions thereof that are exercisable and not
exercised shall accumulate and remain exercisable. The Committee may also amend
an Option to accelerate the dates after which Options may be exercised in whole
or in part. However, no Option or portion thereof shall be exercisable after the
Termination Date.

          6.4. Manner of Exercise and Payment: An Option, or portion thereof,
shall be exercised by delivery of a written notice of exercise to the Company
and payment of the full price of the shares being purchased pursuant to the
Option. An Optionee may exercise an Option with respect to less than the full
number of shares for which the Option may then be exercised, but an Optionee
must exercise the Option in full shares of Common Stock. The price of Common
Stock purchased pursuant to an Option, or portion thereof, may be paid:

                                       3
<PAGE>

               a. in United States dollars in cash or by check, bank draft or
     money order payable to the order of the Company.

               b. through the delivery of shares of Common Stock with an
     aggregate Fair Market Value on the date of exercise equal to the Option
     Price, or

               c. by any combination of the above methods of payment.

The Committee shall determine acceptable methods for tendering Common Stock as
payment upon exercise of an Option and may impose such limitations and
prohibitions on the use of Common Stock to exercise an Option as it deems
appropriate, including, without limitation, any limitation or prohibition
designed to avoid certain accounting consequences which may result from the use
of Common Stock as payment upon exercise of an Option.

          6.5. Withholding Taxes: The Company may, in its discretion, require an
Optionee to pay to the Company at the time of exercise the amount that the
Company deems necessary to satisfy its obligation to withhold Federal, state or
local income or other taxes incurred by reason of the exercise. Upon or prior to
the exercise of an Option requiring tax withholding, an Optionee may make a
written election to have shares of Common Stock withheld by the Company from the
shares otherwise to be received. The number of shares so withheld shall have an
aggregate Fair Market Value on the date of exercise sufficient to satisfy the
applicable withholding taxes. The acceptance of any such election by an Optionee
shall be at the sole discretion of the Committee.

          6.6. Nontransferability of Options: Each Option shall, during the
Optionee's lifetime, be exercisable only by the Optionee and neither it nor any
right hereunder shall be transferable otherwise than by will or the laws of
descent and distribution or be subject to attachment, execution or other similar
process. In the event of any attempt by the Optionee to alienate, assign,
pledge, hypothecate or otherwise dispose of an Option or of any right hereunder,
except as provided for herein, or in the event of any levy or any attachment,
execution or similar process upon the rights or interest hereby conferred, the
Company may terminate the Option by notice to the Optionee and the Option shall
thereupon become null and void.

          6.7. Cessation of Employment of Optionee:

                    a. Cessation of Employment other than by Reason of
          Retirement, Disability or Death. . Except as may be otherwise provided
          by the Committee, if an Optionee shall cease to be employed by the
          Company otherwise than by reason of Retirement, Disability, or death,
          (i) each Option held by the Optionee, together with all rights
          thereunder, that is not vested shall terminate on the date of
          cessation of employment, to the extent not previously exercised and
          (ii) the Optionee shall have a period of 90 days from the date of
          cessation of employment to exercise each Option held by the Optionee
          that is vested on the date of cessation of employment. At the end of
          such 90-day period, each such

                                       4
<PAGE>

          Option that has not been exercised, together with all rights
          thereunder, shall terminate, to the extent not previously exercised."

                    b. Cessation of Employment by Reason of Retirement or
          Disability. If an Optionee shall cease to be employed by the Company
          by reason of Retirement or Disability, each Option held by the
          Optionee shall remain exercisable, to the extent it was exercisable at
          the time of cessation of employment, until the earliest of:

                         i. the Termination Date,

                         ii. the death of the Optionee, or such later date not
          more than one year after the death of the Optionee as the Committee,
          in its discretion, may provide pursuant to Section 6.7(c) of the Plan,

                         iii. the third anniversary of the date of the cessation
          of the Optionee's employment, if employment ceased by reason of
          Retirement, or

                         iv. the first anniversary of the date of the cessation
          of the Optionee's employment by reason of Disability;

          and thereafter all such Options shall terminate together with all
          rights hereunder, to the extent not previously exercised.

                    c. Cessation of Employment by Reason of Death. In the event
          of the death of the Optionee while employed by the Company, an Option
          may be exercised at any time or from time to time prior to the earlier
          of the Termination Date or the first anniversary of the date of the
          Optionee's death, by the person or persons to whom the Optionee's
          rights under each Option shall pass by will or by the applicable laws
          of descent and distribution, to the extent that the Optionee was
          entitled to exercise such Option on the Optionee's date of death. In
          the event of the death of the Optionee while entitled to exercise an
          Option pursuant to Section 6.7(b), the Committee, in its discretion,
          may permit such Option to be exercised at any time or from time to
          time prior to the Termination Date during a period of up to one year
          from the death of the Optionee, as determined by the Committee, by the
          person or persons to whom the Optionee's rights under each Option
          shall pass by will or by the applicable laws of descent and
          distribution, to the extent that the Option was exercisable at the
          time of cessation of the Optionee's employment. Any person or persons
          to whom an Optionee's rights under an Option have passed by will or by
          the applicable laws of descent and distribution shall be subject to
          all terms and conditions of the Plan and the Option applicable to the
          Optionee.

                                       5
<PAGE>

                                  ARTICLE VII

                                   ADJUSTMENTS
                                   -----------

          7.1. If (a) the Company shall at any time be involved in a transaction
to which Section 424(a) of the Code is applicable; (b) the Company shall declare
a dividend payable in, or shall subdivide or combine, its Common Stock, or (c)
any other event shall occur which in the judgment of the Committee necessitates
an adjustment to prevent dilution or enlargement of the benefits or potential
benefits intended to be made available under the Plan, then the Committee may,
in such manner as it may deem equitable, adjust any or all of (i) the number and
type of securities subject to the Plan and which thereafter may be the subject
of Options; (ii) the number and type of securities subject to outstanding
Options; (iii) the Option Price with respect to any Option; and (iv) the number
of shares of Common Stock that may be issued pursuant to Options granted to an
Optionee in any calendar year. The judgment of the Committee with respect to any
matter referred to in this Article shall be conclusive and binding upon each
Optionee.

                                  ARTICLE VIII

                        AMENDMENT AND TERMINATION OF PLAN
                        ---------------------------------

          8.1. The Board may at any time, or from time to time, suspend or
terminate the Plan in whole or in part or amend it in such respects as the Board
may deem appropriate.

          8.2. No amendment, suspension or termination of this Plan shall,
without the Optionee's consent, alter or impair any of the rights or obligations
under any Option theretofore granted to an Optionee under the Plan.

          8.3. The Board may amend this Plan, without the limitation, in such
manner as it deems necessary to permit the granting of Options meeting the
requirements of future amendments or issued regulations, if any, to the Code.

                                   ARTICLE IX

                        GOVERNMENT AND OTHER REGULATIONS
                        --------------------------------

          9.1. The obligation of the Company to issue or transfer and deliver
shares for Options exercised under the Plan shall be subject to all applicable
laws, regulations, rules, orders and approvals which shall then be in effect and
required by governmental entities and the stock exchanges on which Common Stock
is traded.

                                       6
<PAGE>

                                   ARTICLE X

                            MISCELLANEOUS PROVISIONS
                            ------------------------

          10.1. Plan Does Not Confer Employment or Shareholder Rights: The right
of the Company to terminate (whether by dismissal, discharge, retirement or
otherwise) the Optionee's employment with it at any time at will, or as
otherwise provided by any agreement between the Company and the Optionee, is
specifically reserved. Neither the Optionee nor any person entitled to exercise
the Optionee's rights in the event of the Optionee's death shall have any rights
of a shareholder with respect to the shares subject to each Option, except to
the extent that, and until, such shares shall have been issued upon the exercise
of each Option.

          10.2. Plan Expenses: Any expenses of administering this Plan shall be
borne by the Company.

          10.3. Use of Exercise Proceeds: Payments received from Optionees upon
the exercise of Options shall be used for the general corporate purposes of the
Company, except that any stock received in payment may be retired, or retained
in the Company's treasury and reissued.

          10.4. Indemnification: In addition to such other rights of
indemnification as they may have as members of the Board or the Committee of the
Company, the members of the Board and the Committee shall be indemnified by the
Company against all costs and expenses reasonably incurred by them in connection
with any action, suit or proceeding to which they or any of them may be party by
reason of any action taken or failure to act under or in connection with the
Plan or any Option granted thereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by independent legal
counsel selected by the Company) or paid by them in satisfaction of a judgment
in any such action, suit or proceeding, except a judgment based upon a finding
of bad faith; provided that upon the institution of any such action, suit or
proceeding a Board member or the Committee shall, in writing, give the Company
notice thereof and an opportunity, at its own expense, to handle and defend the
same before such Board member or Committee undertakes to handle and defend it on
such member's own behalf.

                                   ARTICLE XI

                                 EFFECTIVE DATE
                                 --------------

          11.1. The Plan shall become effective when it is approved by the
Board.

                                       7

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