Exhibit 10.5






Exhibit 10.5




	 	 	 
	

	 	Western Digital
Corporation


ID: 95-2647125

20511 Lake Forest Drive

Lake Forest, CA 92630-7741
	 
	 	 
	Notice of Grant of Stock Option

and Option Agreement
	 	 






	 	 	 
	Name

	 	Option No.: #######
	Address Line 1

	 	Plan: 2004 Performance Incentive Plan
	City, State Zip

	 	ID: ####






Congratulations! Effective <<date>>, you have been granted a(n) <<option
type>> to buy <<number>> shares of Western Digital Corporation stock at <<$
option price>> per share. The option was granted under the Amended and Restated 2004
Performance Incentive Plan (the “Plan”).1



Vesting:




	 	 	 	 	 	 	 	 	 	 	 	 	 
	Shares1	 	Vest Type	 	 	Full Vesting	 	 	Expiration Date2	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 






Your option is subject to the terms and conditions of this Notice, the attached Terms and
Conditions for Stock Options (the “Terms”), and the Plan. By accepting the option, you are
agreeing to the terms of the option as set forth in those documents. You should read the Plan, the
Prospectus for the Plan, and the Terms. The Terms and the Plan are each incorporated into (made a
part of) this Notice by this reference. You do not have to accept your option. If you do not
agree to the terms of your option, you should promptly return this Notice to the Western Digital
Corporation Stock Plans Administrator.



A copy of the Plan, the Prospectus for the Plan, and the Terms have been provided to you. If you
need another copy of any of these documents, or if you would like to confirm that you have the most
recent version, you may obtain another copy in the Company Library on the E*TRADE web site. These
documents are also available on the Western Digital Intranet site under Legal.





	 	 	 
	1.	 	The number of shares subject to the option and the per-share exercise price of the option are
subject to adjustment under Section 7.1 of the Plan (for example, and without limitation, in
connection with stock splits).
	 
	2.	 	The option is subject to early termination under Section 5 of the attached Terms and
Conditions for Stock Options.





 












 













Western Digital Corporation 20511 Lake Forest Drive

Lake Forest, California 92630 Telephone 949 672-7000



TERMS AND CONDITIONS FOR STOCK OPTIONS

Amended and Restated 2004 Performance Incentive Plan




1. Option Subject to Amended and Restated 2004 Performance Incentive Plan.



The option (the “Option”) referred to in the attached Notice of Grant of Stock Option and Option
Agreement (the “Notice”) was issued under Western Digital Corporation’s (the “Corporation’s”)
Amended and Restated 2004 Performance Incentive Plan (the “Plan”). The Option is subject to the
terms and provisions of the Notice, these Terms and Conditions for Stock Options (these “Terms”),
and the Plan. To the extent any information in the Notice, the prospectus for the Plan, or other
information provided by the Corporation conflicts with the Plan and/or these Terms, the Plan or
these Terms, as applicable, shall control. To the extent any terms and provisions in these Terms
conflict with the terms and provisions of the Plan, the Plan shall control. The holder of the
Option is referred to herein as the “Participant.” Capitalized terms not defined herein have the
meanings set forth in the Plan.



Unless otherwise expressly provided in other sections of these Terms, provisions of the Plan that
confer discretionary authority on the Board or the Administrator do not and shall not be deemed to
create any rights in the Participant unless such rights are expressly set forth herein or are
otherwise in the sole discretion of the Board or the Administrator so conferred by appropriate
action of the Board or the Administrator under the Plan after the grant date of the Option.



2. Option Agreement.



The Notice and these Terms, together, constitute the Option Agreement with respect to the Option
pursuant to Section 5.3 of the Plan.



3. Type of Stock Option



The Notice indicates whether the Option is intended to qualify as an incentive stock option (an
“ISO”) under the Internal Revenue Code of 1986, as amended (the “Code”), or is a nonqualified stock
option (an option that is not an ISO). ISOs are subject to additional requirements under the Code
as generally described in Section 5.1 of the Plan. If the aggregate fair market value of the
shares with respect to which ISOs (whether granted under the Option or otherwise) first become
exercisable by the Participant in any calendar year exceeds $100,000, as measured on the applicable
option grant dates and as determined in accordance with Code Section 422 and the regulations
promulgated thereunder, the limitations of Section 5.1.2 of the Plan shall apply and to such extent
the Option will be rendered a nonqualified stock option.



4. Vesting




The Option shall vest and become exercisable in percentage installments of the aggregate number of
shares subject to the Option as set forth in the Notice. The first vesting installment of the
Option shall be a fixed installment covering the number of shares, and vesting on the fixed vesting
date, set forth in the first line of the Notice under “Vesting.” In each case, the Option is
subject to earlier termination in accordance with Section 5.


 


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The Option may be exercised only to the extent it is vested and exercisable. To the extent that
the Option is vested and exercisable, the Participant has the right to exercise the Option (to the
extent not previously exercised), and such right shall continue, until the expiration or earlier
termination of the Option as provided in Section 5. Fractional share interests shall be
disregarded, but may be cumulated.



Except as expressly provided in Sections 6 and 7 below, the vesting schedule requires continued
employment or service through each applicable vesting date as a condition to the vesting of the
applicable installment of the Option and the rights and benefits under this Option Agreement.
Except as expressly provided in Sections 6 and 7 below, employment or service for only a portion of
the vesting period, even if a substantial portion, will not entitle the Participant to any
proportionate vesting or avoid or mitigate a termination of rights and benefits upon or following a
termination of employment or services as provided in Section 7 below or under the Plan.



5. Expiration of Option



The Option shall expire and the Participant shall have no further rights with respect
thereto upon the earliest to occur of (a) the termination of the Option as provided in
Section 7 below, (b) the termination of the Option as provided in Section 7.4 of the Plan,
or (c) the Expiration Date set forth in the Notice. The Option may not be exercised at any
time after a termination or expiration of the Option.



6. Change in Control Event Generally



Subject to Sections 7.5, 7.6 and 7.7 of the Plan, upon (or, as may be necessary to
effectuate the purposes of this acceleration, immediately prior to) the occurrence of a
Change in Control Event in which the Option is to terminate (i.e., the Administrator has
not made a provision for the substitution, assumption, exchange or other continuation of
the Option and the Option will not otherwise continue in accordance with its terms in the
circumstances), the portion of the Option that is outstanding and unvested immediately
prior to the Change in Control Event shall vest and become exercisable. In the event the
Option is to be terminated in connection with a Change in Control Event, the Participant
shall, unless the Administrator has made a provision for the settlement of the Option, be
given reasonable advance notice of the impending termination and a reasonable opportunity
to exercise the outstanding portion of the Option in accordance with its terms (subject to
Sections 7.5, 7.6 and 7.7 of the Plan, after giving effect to the acceleration of vesting)
before the termination of the Option in such circumstances (except that in no case shall
more than ten (10) days’ notice of accelerated vesting and the impending termination be
required and any acceleration may be made contingent upon the actual occurrence of the
event).



7. Termination of Employment, Total Disability or Death



The Option shall be exercisable by the Participant (or his or her permitted successor in interest)
following the Participant’s termination of employment only to the extent provided below in this
Section 7. Except as provided in Section 7(f) below, the last day that the Participant is employed
by the Corporation or a Subsidiary prior to a period of non-employment by any such entity is
referred to as the Participant’s “Severance Date.” In each case described below, the Option shall
be subject to earlier termination as contemplated by Section 5.



(a) Termination of Employment Generally. Except as expressly provided below in this
Section 7, in the event the Participant ceases to be an employee of the Corporation or any of its
Subsidiaries for any reason, the Option shall terminate on the Participant’s Severance Date to the
extent that it is not vested and exercisable on that date and, to the extent that the Option is
exercisable by the Participant on the Participant’s Severance Date, it may be exercised by the
Participant at any time within three months following the Participant’s Severance Date. The
Option, to the extent exercisable for the three-month period following the Participant’s Severance
Date and not exercised during such period, shall terminate at the close of business on the last day
of the three-month period.


 


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(b) Total Disability. In the event that the Participant ceases to be an employee of the
Corporation or any of its Subsidiaries at a time when the Participant is Totally Disabled and is
not eligible to Retire, the Option shall
terminate on the Participant’s Severance Date to the extent that it is not vested and exercisable
on that date. In such circumstances, or in the event that the Participant incurs such a Total
Disability within not more than three months of the Participant’s Severance Date if the termination
of the Participant’s employment was for any reason other than a termination of employment by the
Corporation or one of its Subsidiaries for Cause, the Option may, to the extent the Option was
exercisable by the Participant on the Participant’s Severance Date, be exercised by the Participant
(or, if the Participant is then incapacitated, by the Participant’s personal representatives,
heirs, or legatees) at any time during the one-year period following the Participant’s Severance
Date. The Option, to the extent exercisable for the one-year period following the Participant’s
Severance Date and not exercised during such period, shall terminate at the close of business on
the last day of the one-year period. For purposes of the Option, “Total Disability” (which term
shall include “Totally Disabled”) means a “permanent and total disability” within the meaning of
Section 22(e)(3) of the Code.



(c) Death. If the Participant dies while he or she is an employee of the Corporation or
any of its Subsidiaries, the Option (to the extent outstanding and not previously vested and
exercisable) shall vest and become exercisable on the Participant’s Severance Date and shall
continue to be exercisable by the Participant’s personal representatives, heirs or legatees, as
applicable, at any time during the three-year period following the Participant’s Severance Date.
The Option, to the extent exercisable for the three-year period following the Participant’s
Severance Date and not exercised during such period, shall terminate at the close of business on
the last day of the three-year period.



(d) Retirement. If the Participant Retires from the Corporation or one of its
Subsidiaries, the Option (to the extent outstanding and not previously vested and exercisable)
shall vest and become exercisable on the Participant’s Severance Date and shall continue to be
exercisable by the Participant (or if the Participant is then deceased, by the Participant’s
personal representatives, heirs or legatees, as applicable) at any time during the three-year
period following the Participant’s Severance Date. The Option, to the extent exercisable for the
three-year period following the Participant’s Severance Date and not exercised during such period,
shall terminate at the close of business on the last day of the three-year period. Notwithstanding
the foregoing, in the event a Retired Participant provides services to a competitor of the
Corporation or any of its Subsidiaries as an employee, consultant, director, officer,
representative, independent contractor or otherwise, or otherwise competes with the business of the
Corporation or its Subsidiaries (in each case as determined by the Administrator its sole
discretion), the Option, to the extent not previously exercised, shall immediately terminate. In
addition, in such event the Corporation shall have the right to recover any profits realized by
such Retired Participant as a result of any exercise of the Option during the six-month period
prior to the date such Retired Participant commenced providing such services to a competitor. For
this purpose, the Participant shall be deemed to have “Retired” (which term shall include
“Retirement,” “Retire” and “Retires”) if the Participant retires from employment with the
Corporation or one of its Subsidiaries for any reason other than Cause after satisfying all of the
following at the time of such retirement: (i) the Participant is at least 65 years of age, (ii) the
Participant’s age plus total years of continuous service with the Corporation or any of its
Subsidiaries (as determined by the Administrator in its sole discretion) totals at least 75, and
(iii) the Participant has five (5) or more years of continuous service with the Corporation or any
of its Subsidiaries (as determined by the Administrator in its sole discretion) ending on the date
of such retirement. For purposes of calculating “age plus total years of continuous service” under
clause (ii) above, fractional years shall be disregarded but may be cumulated (so that, by way of
example only, a Participant who is age 65 and 6 months with 9 years and 6 months of continuous
service would satisfy the requirements of clause (ii), while a Participant who is age 65 and 6
months with 9 years and 5 months of continuous service would not satisfy the requirements of clause
(ii)). For purposes of calculating the Participant’s “years of continuous service” under clause
(ii) or clause (iii) above, in no event shall the Participant accrue more than one year of service
with respect to any period of twelve consecutive months (that is, concurrent employment by both the
Corporation and one or more of its Subsidiaries, or by multiple Subsidiaries, for a month shall not
be counted as more than one month of service).



(e) Termination for Cause. Notwithstanding the foregoing provisions of this Section 7, if
the Participant’s employment with the Corporation or any of its Subsidiaries is terminated by the
Corporation or one of its Subsidiaries for Cause (as such term is defined in that certain
Employment Agreement, dated as of March 7, 2011, by and between the Participant and the Corporation
(the “Employment Agreement”)), the Option (whether or not all or any portion of such Option is then
vested and exercisable) shall immediately terminate on the Participant’s Severance Date.


 


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(f) Termination of Employment in Connection with a Change in Control Event. In the event
the Participant ceases to be employed by the Corporation or any of its Subsidiaries as a result of
either a termination of employment by the Corporation or one of its Subsidiaries without Cause or
the resignation of the Participant for “Good Reason” (as defined below), in either case upon or
within the one (1) year period following the occurrence of a Change in Control Event and the
Participant is not eligible to Retire at the time of such termination (i.e., Section 7(d) does not
apply), the Option (to the extent outstanding and not previously vested and exercisable) shall vest
and become exercisable on the Participant’s Severance Date and shall continue to be exercisable by
the Participant at any time within three months following the Participant’s Severance Date. The
Option, to the extent exercisable for the three-month period following the Participant’s Severance
Date and not exercised during such period, shall terminate at the close of business on the last day
of the three-month period.



For purposes of this Section 7, the term “Good Reason” shall mean any of the following without the
Participant’s express written consent:




(i) a material diminution in the Participant’s authority, duties or responsibilities in
effect immediately prior to the Change in Control Event;




(ii) a material diminution by the Employer (as defined below) in the Participant’s base
compensation in effect immediately prior to a Change in Control Event;




(iii) any material breach by the Corporation or the Employer of any right that the
Participant has under a written severance plan of the Corporation or the Employer in which
the Participant participates or by the Corporation or the Employer of any written employment
agreement either of them may be a party to with the Participant; or




(iv) the requirement by the Employer that the Participant’s principal place of
employment be relocated more than fifty (50) miles from his or her place of employment
immediately prior to a Change in Control Event;




provided, however, that any such condition shall not constitute “Good Reason” unless both
(i) the Participant provides written notice to the Corporation of the condition claimed to
constitute Good Reason within ninety (90) days of the initial existence of such condition,
and (ii) the Corporation fails to remedy such condition within thirty (30) days of receiving
such written notice thereof; and provided, further, that in all events the termination of
the Participant’s employment with the Corporation shall not be treated as a termination for
“Good Reason” unless such termination occurs not more than one (1) year following the
initial existence of the condition claimed to constitute “Good Reason.”



For purposes of this Option Agreement, “Employer” shall mean the Corporation or its Subsidiary
employing the Participant; provided however, that nothing contained herein shall prohibit the
Corporation or another of its Subsidiaries fulfilling any obligation of the employing entity to the
Participant and for such purposes will be deemed the act of the Employer.



(g) Special Incentive Vesting and Exercisability. In the event the Participant remains
employed by the Corporation as its Chief Executive Officer through January 1, 2012, thereafter upon
the termination of the Participant’s employment with the Corporation or any of its Subsidiaries
(for any reason other than a termination by the Corporation or any of its Subsidiaries for Cause),
the Option (and any other stock options granted to the Participant during the Employment Period (as
defined in the Employment Agreement)) shall become fully vested as of the Participant’s Severance
Date, and it may be exercised by the Participant at any time within three years following the
Participant’s Severance Date. The Option, to the extent exercisable for the three-year period
following the Participant’s Severance Date and not exercised during such period, shall terminate at
the close of business on the last day of the three-year period.



(h) Continuation of Services. If the Participant’s employment with the Corporation or any
of its Subsidiaries terminates (regardless of the reason) but, immediately thereafter, the
Participant continues to render services to the Corporation or any of its Subsidiaries as an
employee, director or consultant, such Participant’s Severance Date for
purposes of the Option shall not be the date such Participant’s employment terminates, but instead
shall be the last day that the Participant either is employed by or actually renders services to
the Corporation or any of its Subsidiaries. As provided in Section 6.1 of the Plan, the
Administrator shall be the sole judge for purposes of the Option of whether the Participant
continues to render services the Corporation or its Subsidiaries and the date, if any, upon which
such services shall be deemed to have terminated.


 


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(i) Exercise Period for ISOs. Notwithstanding any post-termination exercise period
provided for herein or in the Plan, the Option will qualify as an ISO only if it is exercised
within the applicable exercise periods for ISOs under, and meets all of the other requirements of,
the Code. If the Option is not exercised within the applicable exercise periods for ISOs or does
not meet such other requirements, the Option will be rendered a nonqualified stock option.



8. Exercise of Option



The Option shall be exercisable by the delivery to the Secretary of the Corporation (or such other
person as the Administrator may require pursuant to such administrative exercise procedures as the
Administrator may implement from time to time) of:




	 	•	 	a written notice stating the number of shares of Common Stock to be purchased
pursuant to the Option or by the completion of such other administrative exercise
procedures as the Administrator may require from time to time;






	 	•	 	payment in full for the purchase price (the per-share exercise price of the Option
multiplied by the number of shares to be purchased) in cash, check or by electronic
funds transfer to the Corporation, or (subject to compliance with all applicable laws,
rules, regulations and listing requirements and further subject to such rules as the
Administrator may adopt as to any non-cash payment) in shares of Common Stock already
owned by the Participant, valued at their fair market value on the exercise date,
provided, however, that any shares initially acquired upon exercise of
a stock option or otherwise from the Corporation must have been owned by the
Participant for at least six (6) months before the date of such exercise;






	 	•	 	any written statements or agreements required by the Administrator pursuant to
Section 8.1 of the Plan; and






	 	•	 	satisfaction of the tax withholding provisions of Section 8.5 of the Plan.





The Administrator also may, but is not required to, authorize a non-cash payment alternative by
notice and third party payment in such manner as may be authorized by the Administrator.



The Option will qualify as an ISO only if it meets all of the applicable requirements of the Code.



9. Nontransferability



The Option and any other rights of the Participant under this Option Agreement or the Plan are
nontransferable and exercisable only by the Participant, except as set forth in Section 5.7 of the
Plan. For purposes of clarity, the Administrator has not authorized any transfer exceptions as
contemplated by Section 5.7.2 of the Plan.



10. No Right to Employment



Nothing contained in this Option Agreement or the Plan constitutes a continued employment or
service commitment by the Corporation or any of its Subsidiaries, affects the Participant’s status,
if he or she is an employee, as an employee at will who is subject to termination without cause,
confers upon the Participant any right to remain employed by or in service to the Corporation or
any Subsidiary, interferes in any way with the right of the
Corporation or any Subsidiary at any time to terminate such employment or service, or affects the
right of the Corporation or any Subsidiary to increase or decrease the Participant’s other
compensation.


 


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11. Rights as a Stockholder



Neither the Participant nor any beneficiary or other person claiming under or through the
Participant shall have any right, title, interest or privilege in or to any shares of Common Stock
subject to the Option except as to such shares, if any, as shall have been actually issued to such
person and recorded in such person’s name following the exercise of the Option or any portion
thereof.



12. Notices



Any notice to be given under the terms of this Option Agreement shall be in writing and addressed
to the Corporation at its principal office to the attention of the Secretary, and to the
Participant at the address last reflected on the Corporation’s payroll records, or at such other
address as either party may hereafter designate in writing to the other. Any such notice shall be
delivered in person or shall be enclosed in a properly sealed envelope addressed as aforesaid,
registered or certified, and deposited (postage and registry or certification fee prepaid) in a
post office or branch post office regularly maintained by the United States Government. Any such
notice shall be given only when received, but if the Participant is no longer employed by the
Corporation or a Subsidiary, shall be deemed to have been duly given five business days after the
date mailed in accordance with the foregoing provisions of this Section 12.



13. Arbitration



Any controversy arising out of or relating to this Option Agreement (including these Terms) and/or
the Plan, their enforcement or interpretation, or because of an alleged breach, default, or
misrepresentation in connection with any of their provisions, or any other controversy or claim
arising out of or related to the Option or the Participant’s employment, including, but not limited
to, any state or federal statutory claims, shall be submitted to arbitration in Orange County,
California, before a sole arbitrator selected from Judicial Arbitration and Mediation Services,
Inc., Orange, California, or its successor (“JAMS”), or if JAMS is no longer able to supply the
arbitrator, such arbitrator shall be selected from the American Arbitration Association, and shall
be conducted in accordance with the provisions of California Code of Civil Procedure §§ 1280 et
seq. as the exclusive forum for the resolution of such dispute; provided, however, that provisional
injunctive relief may, but need not, be sought by either party to this Option Agreement in a court
of law while arbitration proceedings are pending, and any provisional injunctive relief granted by
such court shall remain effective until the matter is finally determined by the arbitrator. Final
resolution of any dispute through arbitration may include any remedy or relief which the arbitrator
deems just and equitable, including any and all remedies provided by applicable state or federal
statutes. At the conclusion of the arbitration, the arbitrator shall issue a written decision that
sets forth the essential findings and conclusions upon which the arbitrator’s award or decision is
based. Any award or relief granted by the arbitrator hereunder shall be final and binding on the
parties hereto and may be enforced by any court of competent jurisdiction. The parties acknowledge
and agree that they are hereby waiving any rights to trial by jury in any action, proceeding or
counterclaim brought by either of the parties against the other in connection with any matter
whatsoever arising out of or in any way connected with any of the matters referenced in the first
sentence above. The parties agree that Corporation shall be responsible for payment of the forum
costs of any arbitration hereunder, including the arbitrator’s fee. The parties further agree that
in any proceeding with respect to such matters, each party shall bear its own attorney’s fees and
costs (other than forum costs associated with the arbitration) incurred by it or him or her in
connection with the resolution of the dispute. By accepting the Option, the Participant consents
to all of the terms and conditions of this Option Agreement (including, without limitation, this
Section 13).


 


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14. Governing Law



This Option Agreement, including these Terms, shall be interpreted and construed in accordance with
the laws of the State of Delaware (without regard to conflict of law principles thereunder) and
applicable federal law.



15. Severability




If the arbitrator selected in accordance with Section 13 or a court of competent jurisdiction
determines that any portion of this Option Agreement (including these Terms) or the Plan is in
violation of any statute or public policy, then only the portions of this Option Agreement or the
Plan, as applicable, which are found to violate such statute or public policy shall be stricken,
and all portions of this Option Agreement and the Plan which are not found to violate any statute
or public policy shall continue in full force and effect. Furthermore, it is the parties’ intent
that any order striking any portion of this Option Agreement and/or the Plan should modify the
stricken terms as narrowly as possible to give as much effect as possible to the intentions of the
parties hereunder.



16. Entire Agreement



This Option Agreement (including these Terms), the Plan and the Employment Agreement together
constitute the entire agreement and supersede all prior understandings and agreements, written or
oral, of the parties hereto with respect to the subject matter hereof. The Plan and this Option
Agreement may be amended pursuant to Section 8.6 of the Plan. Such amendment must be in writing
and signed by the Corporation. The Corporation may, however, unilaterally waive any provision
hereof in writing to the extent such waiver does not adversely affect the interests of the
Participant hereunder, but no such waiver shall operate as or be construed to be a subsequent
waiver of the same provision or a waiver of any other provision hereof.



17. Section Headings




The section headings of this Option Agreement are for convenience of reference only and shall not
be deemed to alter or affect any provision hereof.


 


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