Document:

exv10w1

 

Exhibit 10.1

FORM OF

STOCKHOLDER VOTING AGREEMENT

     STOCKHOLDER VOTING AGREEMENT, dated as of February 8, 2006 (the “Agreement”), among Midwest
Banc Holdings, Inc., a Delaware corporation (the “Company”) and the persons listed on Schedule I hereto (each a “Stockholder” and, collectively, the “Stockholders”).

R E C I T A L S

     WHEREAS, concurrently with the execution and delivery of this Agreement, the Company and Royal
American Corporation, a Delaware corporation (the “Seller”), are entering into an Agreement and
Plan of Merger (the “Merger Agreement”), which provides, among other things, for the merger of the
Seller with and into the Company (the “Merger”), all on the terms and subject to the conditions set
forth in the Merger Agreement; and

     WHEREAS, as an inducement and a condition to entering into the Merger Agreement, the Company
has required that the Stockholders agree, and each Stockholder has agreed, to enter into this
Agreement;

     NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements set
forth herein, the parties hereto agree as follows:

     1. Definitions. Terms used and not defined herein, but defined in the Merger
Agreement, shall have the respective meanings ascribed to them in the Merger Agreement.

     2. Voting.

     (a) Each Stockholder shall, at any meeting of the stockholders of the Seller, however
called, or in connection with any written consent of the stockholders of the Seller, vote
(or cause to be voted) all shares of Seller Common Stock (the “Shares”) then held of record
or beneficially owned by such Stockholder (to the extent the Stockholder has the sole right
to vote or direct the voting of such Shares) and use his reasonable best efforts to vote (or
cause to be voted) all Shares then held of record or beneficially owned by such Stockholder
(to the extent such Stockholder has the shared right to vote or direct the voting of such
Shares) (i) in favor of the Merger, the execution and delivery by the Seller of the Merger
Agreement and the approval of the terms thereof and each of the other actions contemplated
by the Merger Agreement and this Agreement and any actions required in furtherance thereof
and hereof, and (ii) against any proposal relating to an Acquisition Proposal and against
any action or agreement that would impede, frustrate, prevent or nullify this Agreement, or
result in a breach in any respect of any covenant, representation or warranty or any other
obligation or agreement of the Seller under the Merger Agreement or which would result in
any of the conditions set forth in Article VII
of the Merger Agreement not being fulfilled.

 

 

     (b) Each Stockholder hereby covenants and agrees that, except as contemplated by this
Agreement and the Merger Agreement, such Stockholder shall not (i) offer to transfer (which
term shall include, without limitation, any sale, tender, gift, pledge, assignment or other
disposition), transfer or consent to any transfer of, any or all of the Shares beneficially
owned by such Stockholder (to the extent the Stockholder has the right to dispose of or
direct the disposition of such Shares) or any interest therein, except for transfers by will
or by operation of law (in which case this Agreement shall bind the transferee) without the
prior written consent of the Company, such consent not to be unreasonably withheld (it being
understood that the Company may decline to consent to any such transfer if the Person
acquiring such Shares does not agree to take such Shares subject to the terms of this
Agreement but will consent to any such transfer if the Person acquiring such Shares agrees
to take such Shares subject to the terms of this Agreement), (ii) enter into any option or
other Contract with respect to any transfer of any or all of such Shares or any interest
therein except as permitted in clause (i), (iii) grant any proxy, power-of-attorney or other
authorization or consent in or with respect to such Shares except to vote the Shares in
accordance with the terms of this Agreement, (iv) deposit such Shares into a voting trust or
enter into a voting agreement or arrangement with respect to such Shares, or (v) subject to
Section 6 hereof, take any other action that would make any representation or warranty of
such Stockholder contained herein untrue or incorrect in any material respect or in any way
restrict, limit or interfere in any material respect with the performance of such
Stockholder’s obligations hereunder or the transactions contemplated hereby or by the Merger
Agreement

     (c) Subject to Section 6 hereof, each Stockholder hereby agrees that such Stockholder
(i) shall not, directly or indirectly, encourage, solicit, initiate or participate in any
way in any discussions or negotiations with, or provide any information to, or afford any
access to the properties, books or records of the Seller or any Seller Subsidiaries to, or
otherwise take any other action to assist or facilitate, any Person or group (other than the
Company or any affiliate or associate of the Company) concerning any Acquisition Proposal,
(ii) upon execution of this Agreement, will immediately cease any existing activities,
discussions or negotiations conducted heretofore with respect to any Acquisition Proposal,
and (iii) will immediately communicate to the Company the terms of any Acquisition Proposal
(or any discussion, negotiation or inquiry with respect thereto) and the identity of the
Person making such Acquisition Proposal or inquiry which such Stockholder may receive.

     (d) Subject to the terms and conditions of this Agreement, each of the parties hereto
agrees to use all reasonable efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, all things necessary, proper or advisable under applicable Laws to
consummate and make effective the transactions contemplated by this Agreement and
the Merger Agreement. Each party shall promptly consult with the other and provide any
necessary information and material with respect to all filings made by such party with any
Governmental Authority in connection with this Agreement and the transactions contemplated
hereby and by the Merger Agreement.

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     (e) To the fullest extent permitted by applicable Law, each Stockholder hereby waives
any rights of appraisal or rights to dissent from the Merger that such Stockholder may have.

     3. Representations and Warranties of Each Stockholder. Each Stockholder hereby
represents and warrants, severally and not jointly, to the Company as follows:

     (a) Such Stockholder is the record and beneficial owner of the Shares set forth
opposite such Stockholder’s name on Schedule I. Such Shares constitute all of the
shares owned of record and beneficially owned by such Stockholder on the date hereof. Such
Stockholder has sole voting power and sole power to issue instructions with respect to the
matters set forth in Section 2 hereof, sole power of disposition, sole power to demand and
waive appraisal rights and sole power to agree to all of the matters set forth in this
Agreement, in each case with respect to all of such Shares listed in Schedule I with
no limitations, qualifications or restrictions on such rights, subject to applicable
securities laws and the terms of this Agreement.

     (b) Such Stockholder has the power and authority to enter into and perform all of such
Stockholder’s obligations under this Agreement. This Agreement has been duly and validly
executed and delivered by such Stockholder and constitutes a legal, valid and binding
agreement of such Stockholder, enforceable against such Stockholder in accordance with its
terms, except in each case as enforcement may be limited by general principles of equity,
whether applied in a court of law or a court of equity, and by bankruptcy, insolvency and
similar Laws affecting creditor’s rights and remedies generally. There is no beneficiary or
holder of a voting trust certificate or other interest of any trust of which such
Stockholder is a trustee, or any party to any other agreement or arrangement, whose consent
is required for the execution and delivery of this Agreement or the consummation by such
Stockholder of the transactions contemplated thereby.

     (c) (i) To the Knowledge of such Stockholder, no filing with, and no permit,
authorization, consent or approval of, any Governmental Authority is necessary for the
execution and delivery of this Agreement by such Stockholder, the consummation by such
Stockholder of the transactions contemplated hereby and the compliance by such Stockholder
with the provisions hereof, and (ii) none of the execution and delivery of this Agreement by
such Stockholder, the consummation by such Stockholder of the transactions contemplated
hereby or compliance by such Stockholder with any of the provisions hereof, except in cases
in which any conflict, breach, default or violation described below would not interfere with
the ability of such Stockholder to perform such Stockholder’s obligations hereunder, shall
(A) conflict with or result in any breach of any organizational documents applicable to such
Stockholder, (B) result in a violation or
breach of, or constitute (with or without notice or lapse of time or both) a default
(or give rise to any third party right of termination, cancellation, modification or
acceleration) under, any of the terms, conditions or provisions of any note, loan agreement,
bond, mortgage, indenture, license or other Contract of any kind, including, without
limitation, any voting agreement, proxy arrangement, pledge agreement, stockholders
agreement or voting trust, to which such Stockholder is a party or by which such Stockholder
or any of

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such Stockholder’s properties or assets may be bound, or (C) violate any Order or
Law applicable to such Stockholder or any of such Stockholder’s properties or assets.

     (d) Except as permitted by this Agreement, the Shares beneficially owned by such
Stockholder and the certificates representing such Shares are now, and at all times during
the term hereof will be, held by such Stockholder, or by a nominee or custodian for the
benefit of such Stockholder, free and clear of all Liens, proxies, voting trusts or
agreements, understandings or arrangements or any other rights whatsoever, except for any
such Liens or proxies arising hereunder and except for Liens created prior to the date
hereof with respect to which the obligations secured thereby are not currently in default.

     4. Stop Transfer. Each Stockholder shall request that the Seller not register the
transfer (book-entry or otherwise) of any certificate or uncertificated interest representing any
of the Shares beneficially owned by such Stockholder, unless such transfer is made in compliance
with this Agreement.

     5. Termination. This Agreement shall terminate, and none of the Stockholders or the
Company shall have any further rights or obligations hereunder, upon the earliest of (a) the
Effective Time or (b) the termination of the Merger Agreement. The representations and warranties
of the Stockholders shall not survive the termination of this Agreement.

     6. No Limitation. Notwithstanding any other provision hereof, the parties acknowledge
that each Stockholder is entering into this Agreement solely in his or her capacity as a
Stockholder, and nothing in this Agreement shall be construed to prohibit a Stockholder, or any
officer or affiliate of a Stockholder who is or has been designated a member of the Board of
Directors of the Seller, from taking any action solely in his or her capacity as a member of the
Board of Directors of the Seller or from exercising his or her fiduciary duties as a member of such
Board of Directors to the extent specifically permitted by the Merger Agreement.

     7. Miscellaneous.

     (a) This Agreement constitutes the entire agreement between the parties with respect to
the subject matter hereof and supersedes all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof.

     (b) This Agreement shall not be assigned by operation of Law or otherwise without the
prior written consent of each Stockholder (in the case of any assignment by the Company) or
the Company (in the case of an assignment by a Stockholder), provided that the Company may
assign its rights and obligations hereunder to any Company Subsidiary, but no such
assignment shall relieve the Company of its obligations hereunder.

     (c) Without limiting any other rights the Company may have hereunder in respect of any
transfer of Shares, each Stockholder agrees that this Agreement and the obligations
hereunder shall attach to the Shares owned of record and beneficially owned by such
Stockholder and shall be binding upon any Person to which legal or beneficial ownership of
such Shares shall pass, whether by operation of Law or otherwise, including, without
limitation, such Stockholder’s heirs, guardians, administrators or successors.

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     (d) This Agreement may not be amended, changed, supplemented or otherwise modified with
respect to a Stockholder except by an instrument in writing signed on behalf of such
Stockholder and the Company.

     (e) All notices, requests, claims, demands and other communications hereunder shall be
in writing and shall be given (and shall be deemed to have been duly received if given) by
hand delivery or by facsimile transmission with confirmation of receipt, as follows:

     If to a Stockholder:

     To such Stockholder in care of the Seller at the address for notices to the Seller set
forth in Section 9.06 of the Merger Agreement or to such other address as a Stockholder may
hereafter request by delivery of written notice to the Company.

With a copy to:

Barack Ferrazzano Kirschbaum Perlman & Nagelberg LLP

333 West Wacker Drive, Suite 2700

Chicago, Illinois 60606

Attention: Dennis Wendte, Esq.

Facsimile: 312-984-3220

If to the Company:

Midwest Banc Holdings, Inc.

501 W. North Avenue

Melrose Park, Illinois 60160

Attention: James J. Giancola

Facsimile: 708-865-7013

With a copy to:

Lewis, Rice & Fingersh, L.C.

500 N. Broadway, Suite 2000

St. Louis, Missouri 63102

Attention: Tom W. Zook, Esq.

Facsimile: 314-612-7671

or to such other address or facsimile number as the Person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.

     (f) Whenever possible, each provision or portion of any provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable Law but if
any provision or portion of any provision of this Agreement is held

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to be invalid, illegal
or unenforceable in any respect under any applicable Law in any jurisdiction such
invalidity, illegality or unenforceability will not affect any other provision or portion of
any provision in such jurisdiction, and this Agreement will be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or
portion of any provision had never been contained herein.

     (g) All rights, powers and remedies provided under this Agreement or otherwise
available in respect hereof at law or in equity shall be cumulative and not alternative, and
the exercise of any thereof by any party shall not preclude the simultaneous or later
exercise of any other such right, power or remedy by such party.

     (h) The failure of any party hereto to exercise any right, power or remedy provided
under this Agreement or otherwise available in respect hereof at law or in equity, or to
insist upon compliance by any other party hereto with its obligations hereunder, and any
custom or practice of the parties at variance with the terms hereof, shall not constitute a
waiver by such party of its right to exercise any such or other right, power or remedy or to
demand such compliance.

     (i) This Agreement shall be binding upon and inure solely to the benefit of each party
hereto, and nothing in this Agreement, express or implied, is intended to confer upon any
other Person any rights or remedies of any nature whatsoever under or by reason of this
Agreement.

     (j) This Agreement shall be governed by, and construed in accordance with, the Laws of
the State of Illinois.

     (k) The parties agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any Illinois state court located in the County
of Cook or any Federal court located in the Northern District of Illinois, this being in
addition to any other remedy to which they are entitled at law or in equity. In addition,
each of the parties hereto (A) consents to submit itself to the personal
jurisdiction of any Illinois state court located in the County of Cook or any Federal
court located in the Northern District of Illinois in the event any dispute arises out of
this Agreement or any transaction contemplated by this Agreement, (B) agrees that it will
not attempt to deny or defeat such personal jurisdiction by motion or other request for
leave from any such court and (C) agrees that it will not bring any action relating to this
Agreement or any transaction contemplated by this Agreement in any court other than any such
court. The parties irrevocably and unconditionally waive any objection to the laying of
venue of any Proceeding arising out of this Agreement or the transactions contemplated
hereby in the courts of the State of Illinois located in the County of Cook or in any
Federal court located in the Northern District of Illinois, and hereby further irrevocably
and unconditionally waive and agree not to plead or claim in any such court that any such
Proceeding brought in any such court has been brought in a inconvenient forum.

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     (l) The descriptive headings used herein are inserted for convenience of reference only
and are not intended to be part of or to affect the meaning or interpretation of this
Agreement.

     (m) This Agreement may be executed in counterparts (by fax or otherwise), each of which
shall be deemed to be an original, but all of which, taken together, shall constitute one
and the same agreement.

     (n) All representations, warranties, covenants, agreements, liabilities and obligations
of each Stockholder hereunder or in connection with the transactions contemplated hereby
shall be several and not joint.

     (o) Except as otherwise provided herein, each party shall pay its, his or her own
expenses incurred in connection with this Agreement.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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     IN WITNESS WHEREOF, the Company and the Stockholders have caused this Stockholder Voting
Agreement to be duly executed in multiple counterparts as of the day and year first above written.

	 	 	 	 	 
	 	COMPANY:

MIDWEST BANC HOLDINGS, INC.

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 
	 

	 	 	 	 	 
	 	STOCKHOLDERS:

 	 
	 	 	 
	 	 	 
	 	 	 
	 

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SCHEDULE I

	 	 	 	 	 
	 	 	Number of Shares of
	Name of Stockholder	 	Seller Common Stock
	William H. Clarkin, Jr.
	 	 	1,040	 
	William H. Clarkin, Jr. Revocable Trust
	 	 	11,117	 
	J.J. Fritz
	 	 	51,035	 
	Pershing LLC Cust FBO IRA, Karen L. Fritz
	 	 	1,025	 
	Robert J. Hubeny, Trustee, HHHC Trust
	 	 	2,000	 
	Robert J. Hubeny, Trustee, Hubeny XI Trust
	 	 	2,200	 
	Linda G. Hubeny, Trustee
	 	 	1,702	 
	Robert J. Hubeny, Trustee
	 	 	26,365	 
	Robert J. Hubeny, Partner, Elmhurst Mgmt
	 	 	28,344	 
	Mary King Wilson
	 	 	202	 
	Roayl American Bank Custodian for benefit of
Mary King Wilson
	 	 	6,836	 
	Carol McCarthy 2000 Irrevocable Trust
	 	 	19,409	 
	Carol McCarthy
	 	 	1,040	 
	Carol McCarthy, Trustee
	 	 	5,106	 
	Arlington Electrical Const. Co. (Lawrence Moats)
	 	 	8,589	 
	UGMA C.M. Moats, L. Moats C/F
	 	 	967	 
	Lawrence R. Moats
	 	 	45,102	 
	UGMA L.R. Moats, Lawrence Moats C/F
	 	 	967	 
	Anton & Anne Mueller
	 	 	45,058	 
	Anton Mueller
	 	 	7,590	 
	Anton Mueller Trust 1
	 	 	3,229	 
	Anton Mueller Trust 2
	 	 	3,229	 

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	 	 	Number of Shares of
	Name of Stockholder	 	Seller Common Stock
	Anton Mueller Trust 3
	 	 	3,229	 
	Anton Mueller, Brittany Moore Trust
	 	 	505	 
	Anton Mueller, Cassandra Moore Trust
	 	 	505	 
	Kelly J. O’Keeffe
	 	 	34,947	 
	Kelly J. O’Keeffe, IRA
	 	 	1,938	 
	Brogan M. Ptacin
	 	 	4,522	 
	Brogan M. Ptacin
	 	 	202	 
	Brogan M. Ptacin, Under B.M. Ptacin Trust Agmt
	 	 	14,102	 
	Frances R. Tsolinas
	 	 	4,762	 
	Peter M. Tsolinas and Frances R. Tsolinas
	 	 	42,555	 
	Thomas A. Rosenquist
	 	 	28,143	 
	Thomas A. Rosenquist Trust
	 	 	4,301	 
	Thomas A. Rosenquist Smith Barney Rollover Cust
IRA
	 	 	64,612	 
	Doris J. Weber
	 	 	16,962	 
	Joseph A. Weber
	 	 	16,962	 
	Joseph A. Weber Jr. ITF
	 	 	72,253	 
	David Weisberg Trust
	 	 	12,686	 
	David R. Weisberg
	 	 	1,040	 
	Peter M. Tsolinas
	 	 	18,053	 
	James J. Roberts
	 	 	8,328	 
	James J. Roberts, Jr. Trust
	 	 	50,949	 
	Total
	 	 	673,708	 

10exv10w1w3

 

EXHIBIT 10.1.3

WESTERN DIGITAL CORPORATION

AMENDED AND RESTATED 2004 PERFORMANCE INCENTIVE PLAN

NON-EMPLOYEE DIRECTOR OPTION GRANT PROGRAM

1. Establishment; Purpose. This Non-Employee Director Option Grant Program (this
“Program”) is adopted under the Western Digital Corporation Amended and Restated 2004 Performance
Incentive Plan (the “Plan”). The purpose of this Program is to promote the success of the
Corporation and the interests of its stockholders by providing members of the Board who are not
officers or employees of the Corporation or one of its Subsidiaries (“Non-Employee Directors”) an
opportunity to acquire an ownership interest in the Corporation and more closely aligning the
interests of Non-Employee Directors and stockholders. Except as otherwise expressly provided
herein, the provisions of the Plan shall govern all awards made pursuant to this Program.
Capitalized terms are defined in the Plan if not defined herein.

2. Participation. Awards under this Program shall be made only to Non-Employee Directors,
shall be evidenced by award agreements substantially in the form of Exhibit 1 hereto and shall be
further subject to such other terms and conditions set forth therein.

3. Option Grants.

3.1 Initial Award for New Directors. Upon first being appointed or elected to the Board and
subject to approval by the Board, a Non-Employee Director who has not previously served on
the Board shall be granted a nonqualified stock option to purchase a number of shares of
Common Stock that produces an approximate value for the option grant equal to $300,000
(using a Black-Scholes valuation as of the time of grant as determined in consultation with
Company Management); provided, however, that the Board, in its discretion, may increase or
decrease the number of shares of Common Stock subject to the stock option. The date of
grant of each such stock option will be the date on which such stock option is approved by
the Board, which date shall coincide to the extent practicable with the date such
Non-Employee Director is first appointed or elected to the Board.

3.2 Subsequent Awards. Immediately following the Corporation’s regular annual meeting of
stockholders in each year during the term of the Plan commencing in 2005 and subject to
approval by the Board, each Non-Employee Director then in office shall be granted a
nonqualified stock option to purchase a number of shares of Common Stock that produces an
approximate value for the option grant equal to $100,000 (using a Black-Scholes valuation as
of the time of grant as determined in consultation with Company Management); provided,
however, that the Board, in its discretion, may increase or decrease the number of shares of
Common Stock subject to the stock option. The date of grant of each such stock option will
be the date on which such stock option is approved by the Board, which date shall coincide
to the extent practicable with the date of the annual meeting of stockholders. An
individual who was previously a member of the Board, who then ceased to be a member of the
Board for any reason, and who then again becomes a Non-Employee Director shall thereupon
again become eligible to be granted stock options under this Section 3.2.

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3.3 Option Price. The purchase price per share of the Common Stock covered by each option
granted pursuant to this Section 3 shall be 100 percent of the Fair Market Value of a share
of Common Stock on the date of grant of the option (the “Award Date”). The exercise price
of any option granted under this Section 3 shall be paid in full at the time of each
purchase in cash or by check, in shares of Common Stock valued at their fair market value on
the date of exercise of the option, or partly in such shares and partly in cash, or in any
other manner authorized by the Administrator pursuant to Section 5.5 of the Plan; provided
that any shares used in payment shall have been owned by the Non-Employee Director for at
least six months prior to the date of exercise.

3.4 Transfer Restrictions. Options granted pursuant to this Section 3 shall be subject to
the transfer restrictions set forth in Section 5.7 of the Plan. For purposes of clarity,
the Administrator has not approved any transfer exceptions with respect to the options in
accordance with Section 5.7.2 of the Plan.

4. Option Period and Exercisability. Each option granted under Section 3 above and all
rights or obligations under this Program with respect to a particular option shall expire ten years
after the date of grant of such option and shall be subject to earlier termination as provided
below. Subject to Sections 5, 6 and 7 hereof, each option granted under Section 3 shall become
exercisable as to 25% of the total number of shares subject thereto on the first anniversary of the
date of grant of the option and as to an additional 6.25% of the total number of shares subject
thereto at the end of each of the next 12 three-month periods thereafter.

5. Termination of Directorship. Subject to the maximum ten-year term of the option and
subject to earlier termination pursuant to Section 7 below, if a Non-Employee Director ceases to be
a member of the Board for any reason, the following rules shall apply with respect to any option
granted to the Non-Employee Director pursuant to Section 3 above (the last day that the Director is
a member of the Board is, except as otherwise provided below, referred to as the Director’s
“Severance Date”):

	 	•	 	other than as expressly provided below in this Section 5, (a) the Non-Employee
Director will have until the date that is one (1) year after his or her Severance Date
to exercise such option (or portion thereof) to the extent that it was vested on the
Severance Date, (b) such option, to the extent not vested on the Severance Date, shall
terminate on the Severance Date, and (c) such option, to the extent exercisable for the
one-year period following the Severance Date and not exercised during such period,
shall terminate at the close of business on the last day of the one-year period;
	 
	 	•	 	if the Non-Employee Director ceases to be a member of the Board due to his or her
Retirement (as defined below), (a) the Non-Employee Director will have until the date
that is three (3) years after his or her Severance Date to exercise such option, (b)
such option, to the extent not otherwise vested on the Severance Date, shall
automatically become fully vested as of the Severance Date, and (c) such option, to the
extent exercisable for the three-year period following the Severance Date and not
exercised during such period, shall terminate at the close of business on the last day
of the three-year period;

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provided, however, that if the Board determines that any such Non-Employee Director who has Retired
renders services as an employee, director, consultant, contractor or otherwise to a competitor of
the Corporation or one of its Subsidiaries at any time during such three-year period, then any such
option shall immediately terminate to the extent not exercised as of the date the Board makes such
determination. In addition, in such event the Corporation shall have the right to recover any
profits realized by such Retired Non-Employee Director as a result of any exercise of such option
during the six-month period prior to the date such Non-Employee Director commenced providing such
services to a competitor.

     For purposes of this Section 5, the term “Retirement” (which term shall include “Retired”)
shall mean the cessation of a director’s services as a member of the Board due to his or her
voluntary resignation at any time after such director has served as a member of the Board for at
least forty-eight (48) months and has attained at least age 55.

     Notwithstanding any other provision of this Section 5, if a Non-Employee Director ceases to be
a member of the Board (regardless of the reason) but, immediately thereafter, is employed by the
Corporation or one of its Subsidiaries, such director’s Severance Date shall not be the date the
director ceases to be a member of the Board but instead shall be the last day that the director is
either or both (1) a member of the Board and/or (2) employed by the Corporation or a Subsidiary.

6. Adjustments. Options granted under this Program shall be subject to adjustment as
provided in Section 7.1 of the Plan, but only to the extent that such adjustment is consistent with
adjustments to options held by persons other than executive officers or directors of the
Corporation (to the extent that persons other than executive officers or directors of the
Corporation then hold options). The grant levels reflected in Section 3 above shall be
automatically adjusted upon the record date for any stock split, reverse stock split, or stock
dividend to give effect to such change in capitalization unless otherwise provided by the Board in
the circumstances, and may be adjusted in the discretion of the Board in any other circumstances
contemplated by Section 7.1.

7. Acceleration and Possible Early Termination. If a Change in Control Event (as such term
is defined in the Plan) occurs and in connection with such Change in Control Event a Non-Employee
Director ceases to be a member of the Board, each option granted under Section 3 above to such
Non-Employee Director, to the extent such option is then outstanding, shall become immediately
exercisable and vested in full. For purposes of this Section 7, but without limitation, a director
will be deemed to have ceased to be a member of the Board in connection with a Change in Control
Event if such director (a) is removed by or resigns upon the request of any Person exercising
practical voting control over the Corporation following such Change in Control Event or a person
acting upon authority or at the instruction of such Person, or (b) is willing or able to continue
as a member of the Board but is not re-elected to or retained as a member of the Board by the
Corporation’s stockholders at the stockholder vote or consent action for the election of directors
that precedes and is taken in connection with, or next follows, such Change in Control Event.

     Each option granted under this Program shall be subject to adjustment and termination pursuant
to Section 7 of the Plan.

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8. Maximum Number of Shares; Amendment; Administration. If option grants otherwise
required pursuant to this Program would otherwise exceed any applicable share limit under Section
4.2 of the Plan, such grants shall be made pro-rata to directors entitled to such grants. The
Board may from time to time amend this Program without stockholder approval; provided that no such
amendment shall materially and adversely affect the rights of a Non-Employee Director as to an
option granted under this Program before the adoption of such amendment. This Program does not
limit the Board’s authority to make other, discretionary award grants to Non-Employee Directors
pursuant to the Plan. The Plan Administrator’s power and authority to construe and interpret the
Plan and awards thereunder pursuant to Section 3.1 of the Plan shall extend to this Program and
awards granted hereunder. As provided in Section 3.2 of the Plan, any action taken by, or inaction
of, the Administrator relating or pursuant to this Program and within its authority or under
applicable law shall be within the absolute discretion of that entity or body and shall be
conclusive and binding upon all persons.

###

As amended (Sections 3.1 and 3.2) and restated November 17, 2005

4

 

EXHIBIT 1

Western Digital Corporation 20511 Lake Forest Drive

Lake Forest, California 92630 Telephone 949-672-7000

Notice Of Grant Of Stock Option

and Option Agreement — Non-Employee Directors

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Western Digital Corporation (the “Corporation”) has granted to you (the “Participant”),
effective on the Date of Grant set forth below, a nonqualified option to purchase shares of the
Corporation’s Common Stock (the “Option”) as follows:

	 	 	 	 	 
	 	Grant Number

	 	 	«nbr»
	 	Date of Grant

	 		«optdt»
	 	Option Price per Share 1

	 		$«optprc»
	 	Number of Shares Granted1

	 		«shgtd»
	 	Expiration Date2
	 		 

1. Option Subject to Amended and Restated 2004 Performance Incentive Plan. The Option was granted
pursuant to the Non-Employee Director Option Grant Program (the “Program”), adopted under the
Western Digital Corporation Amended and Restated 2004 Performance Incentive Plan (the “Plan”). The
Option is subject to the terms and conditions of this Notice, the Program and the Plan. By
accepting the Option, you are agreeing to the terms of the Option as set forth in these documents.
A copy of each of these documents has 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 Stock Plans web site. The documents are
also available on the Western Digital Intranet site under Legal.

You should read the Program, the Plan, the Prospectus for the Plan and this Notice. The Program
and the Plan are each incorporated into (made a part of) this Notice by this reference. To the
extent any information in this Notice, the Prospectus for the Plan, or other information provided
by the Corporation conflicts with the Program and/or the Plan, the Program or the Plan, as
applicable, shall control. Capitalized terms not defined herein have the meanings set forth in the
Plan.

You do not have to accept the Option. If you do not agree to the terms of the Option, you should
promptly return this Notice to the Western Digital Corporation Stock Plans Administrator.

 

			
	1	 	The number of shares subject to the Option
and the per-share exercise price of the Option are subject to adjustment under
Section 6 of the Program and 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 Sections 5 and 7 of the Program.

 

 

Unless otherwise expressly provided in other sections of this Notice, 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. This Notice constitutes the Option Agreement with respect to the
Option pursuant to Section 5.3 of the Plan.

3. Type of Stock Option. The Option is not intended to qualify as an incentive stock
option under Section 422 of the Internal Revenue Code of 1986, as amended.

4. Vesting. Subject to earlier termination in accordance with Section 5, the Option shall
vest and become exercisable in percentage installments of the aggregate number of shares
subject to the Option as set forth in this Notice and Section 4 of the Program. 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.

The vesting schedule requires continued 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. Service for only a portion of the vesting period with respect to a vesting
installment, even if services are provided for a substantial portion of that period, 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 services as provided under Section 5 of the Program
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 in connection
with a termination of the director’s services as provided in Section 5 of the Program, (b) the
termination of the Option as provided in Section 7.4 of the Plan, or (c) the Expiration Date set
forth in this Notice. The Option may not be exercised at any time after a termination or
expiration of the Option.

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

7. Nontransferability. The Option and any other rights of the Participant under this
Option Agreement, the Program 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.

8. No Service Commitment. Nothing contained in this Option Agreement, the Program or the
Plan constitutes an employment or service commitment by the Corporation or any of its Subsidiaries,
confers upon the Participant any right to remain 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 service, or affects the right of the Corporation or any Subsidiary to increase or decrease the
Participant’s other compensation.

9. 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.

10. 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 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 a member of the Board
of Directors, shall be deemed to have been duly given five business days after the date mailed in
accordance with the foregoing provisions of this Section 10.

11. Arbitration. Any controversy arising out of or relating to this Option Agreement, the Program
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 11).

12. Governing Law. This Option Agreement 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.

13. Severability. If the arbitrator selected in accordance with Section 11 or a court of competent
jurisdiction determines that any portion of this Option Agreement, the Program or the Plan is in
violation of any statute or public policy, then only the portions of this Option Agreement, the
Program 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, the Program 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, the Program 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.

14. Entire Agreement. This Option Agreement, the Program and the Plan 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, the Program 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.

15. 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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