Document:

<PAGE>

                                                                    EXHIBIT 10.5

                               [QUICKSILVER LOGO]

                         NOTICE OF GRANT OF STOCK OPTION

      Notice is hereby given of the following option grant (the "Option") to
purchase shares of the Common Stock of Quiksilver, Inc. (the "Corporation"):

<TABLE>
<S>                            <C>                         <C>
                 Optionee:                                          Grant Date:
Vesting Commencement Date:                                      Exercise Price:
 Number of Options Shares:                                     Expiration Date:
           Type of Option:     __Incentive Stock Option    [X] Non-Statutory Stock Option
</TABLE>

      Exercise Schedule: Subject to the limitations contained in this Option and
the Plan, this Option shall become exercisable in installments as follows:

<TABLE>
<CAPTION>
Number of Shares                                Date of Earliest Exercise
  (Installment)                                         (Vesting)
  -------------                                         ---------
<S>                                         <C>
     SHARE 1                                DATE 1 [1ST ANNIVERSARY OF GRANT]
     SHARE 2                                DATE 2 [2ND ANNIVERSARY OF GRANT]
     SHARE 3                                DATE 3 [3RD ANNIVERSARY OF GRANT]
</TABLE>

      In no event shall the Option become exercisable for any additional Option
Shares after Optionee's cessation of Service.

      Optionee understands and agrees that the Option is granted subject to and
in accordance with the terms of the Quiksilver, Inc. 2000 Stock Incentive Plan
(the "Plan"). Optionee further agrees to be bound by the terms of the Plan and
the terms of the Option as set forth in the Stock Option Agreement attached
hereto as Exhibit A. Optionee hereby acknowledges the receipt of a copy of the
official prospectus for the Plan in the form attached hereto as Exhibit B. A
copy of the Plan is available upon request made to the Corporate Secretary at
the Corporation's principal offices.

      Employment at Will. Nothing in this Notice or in the attached Stock Option
Agreement or in the Plan shall confer upon Optionee any right to continue in
Service for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Corporation (or any Parent or Subsidiary
employing or retaining Optionee) or of Optionee, which rights are hereby
expressly reserved by each, to terminate Optionee's Service at any time for any
reason, with or without cause.

      Definitions. All capitalized terms in this Notice shall have the meaning
assigned to them in this Notice or in the attached Stock Option Agreement.

                                      QUIKSILVER, INC.

                                      By:
_______________________________           ______________________________________
OPTIONEE                                     Robert B. McKnight, Jr.

                                      Title:  Chief Executive Officer
                                              __________________________________

Address: ______________________       ATTACHMENTS
_______________________________       Exhibit A - Stock Option Agreement
_______________________________       Exhibit B - Plan Summary and Prospectus

<PAGE>

                                    EXHIBIT A

                                QUIKSILVER, INC.
                             STOCK OPTION AGREEMENT

                                 R E C I T A L S

            A. The Board has adopted the Plan for the purpose of retaining the
services of selected Employees, non-employee members of the Board (or the board
of directors of any Parent or Subsidiary) and consultants and other independent
advisors who provide services to the Corporation (or any Parent or Subsidiary).

            B. Optionee is to render valuable services to the Corporation (or a
Parent or Subsidiary), and this Agreement is executed pursuant to, and is
intended to carry out the purposes of, the Plan in connection with the
Corporation's grant of an option to Optionee.

            C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.

            NOW, THEREFORE, it is hereby agreed as follows:

            1. GRANT OF OPTION. The Corporation hereby grants to Optionee, as of
the Grant Date, an option to purchase up to the number of Option Shares
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term specified in Paragraph 2 at the Exercise Price.

            2. OPTION TERM. This option shall have a maximum term of ten (10)
years measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5 or 6.

            3. LIMITED TRANSFERABILITY.

                  (a)   This option shall be neither transferable nor assignable
by Optionee other than by will or the laws of inheritance following Optionee's
death and may be exercised, during Optionee's lifetime, only by Optionee.
However, Optionee may designate one or more persons as the beneficiary or
beneficiaries of this option, and this option shall, in accordance with such
designation, automatically be transferred to such beneficiary or beneficiaries
upon the Optionee's death while holding this option. Such beneficiary or
beneficiaries shall take the transferred option subject to all the terms and
conditions of this Agreement, including (without limitation) the limited time
period during which this option may, pursuant to Paragraph 5, be exercised
following Optionee's death.

                  (b)   If this option is designated a Non-Statutory Option in
the Grant Notice, then this option may be assigned in whole or in part during
Optionee's lifetime to one or more members of Optionee's family or to a trust
established for the exclusive benefit of one or more such family members or to
Optionee's former spouse, to the extent such assignment is in

                                       2
<PAGE>

connection with the Optionee's estate plan or pursuant to a domestic relations
order. The assigned portion shall be exercisable only by the person or persons
who acquire a proprietary interest in the option pursuant to such assignment.
The terms applicable to the assigned portion shall be the same as those in
effect for this option immediately prior to such assignment.

            4. DATES OF EXERCISE. This option shall become exercisable for the
Option Shares in one or more installments as specified in the Grant Notice. As
the option becomes exercisable for such installments, those installments shall
accumulate, and the option shall remain exercisable for the accumulated
installments until the Expiration Date or sooner termination of the option term
under Paragraph 5 or 6.

            5. CESSATION OF SERVICE. The option term specified in Paragraph 2
shall terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:

                  (a)   Should Optionee cease to remain in Service for any
reason (other than death, Permanent Disability or Misconduct) while holding this
option, then Optionee shall have a period of three (3) months (commencing with
the date of such cessation of Service) during which to exercise this option, but
in no event shall this option be exercisable at any time after the Expiration
Date.

                  (b)   Should Optionee die while holding this option, then the
personal representative of Optionee's estate or the person or persons to whom
the option is transferred pursuant to Optionee's will or the laws of inheritance
shall have the right to exercise this option. However, if Optionee has
designated one or more beneficiaries of this option, then those persons shall
have the exclusive right to exercise this option following Optionee's death. Any
such right to exercise this option shall lapse, and this option shall cease to
be outstanding, upon the earlier of (i) the expiration of the twelve (12)-month
period measured from the date of Optionee's death or (ii) the Expiration Date.

                  (c)   Should Optionee cease Service by reason of Permanent
Disability while holding this option, then Optionee shall have a period of
twelve (12) months (commencing with the date of such cessation of Service)
during which to exercise this option. In no event shall this option be
exercisable at any time after the Expiration Date.

                  (d)   During the limited period of post-Service
exercisability, this option may not be exercised in the aggregate for more than
the number of Option Shares for which the option is exercisable at the time of
Optionee's cessation of Service. Upon the expiration of such limited exercise
period or (if earlier) upon the Expiration Date, this option shall terminate and
cease to be outstanding for any exercisable Option Shares for which the option
has not been exercised. However, this option shall, immediately upon Optionee's
cessation of Service for any reason, terminate and cease to be outstanding with
respect to any Option Shares for which this option is not otherwise at that time
exercisable.

                  (e)   Should Optionee's Service be terminated for Misconduct
or should Optionee otherwise engage in any Misconduct while this option is
outstanding, then this option shall terminate immediately and cease to remain
outstanding.

                                       3
<PAGE>

            6. SPECIAL ACCELERATION OF OPTION.

                  (a)   This option, to the extent outstanding at the time of a
Corporate Transaction but not otherwise fully exercisable, shall automatically
accelerate so that this option shall, immediately prior to the effective date of
such Corporate Transaction, become exercisable for all of the Option Shares at
the time subject to this option and may be exercised for any or all of those
Option Shares as fully vested shares of Common Stock. No such acceleration of
this option shall occur, however, if and to the extent: (i) this option is, in
connection with the Corporate Transaction, to be assumed by the successor
corporation (or parent thereof) or (ii) this option is to be replaced with a
cash incentive program of the successor corporation which preserves the spread
existing at the time of the Corporate Transaction on any Option Shares for which
this option is not otherwise at that time exercisable (the excess of the Fair
Market Value of those Option Shares over the aggregate Exercise Price payable
for such shares) and provides for subsequent payout in accordance with the same
option exercise/vesting schedule for those Option Shares set forth in the Grant
Notice.

                  (b)   Immediately following the Corporate Transaction, this
option shall terminate and cease to be outstanding, except to the extent assumed
by the successor corporation (or parent thereof) in connection with the
Corporate Transaction.

                  (c)   If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise
Price, provided the aggregate Exercise Price shall remain the same. To the
extent the actual holders of the Corporation's outstanding Common Stock receive
cash consideration for their Common Stock in consummation of the Corporate
Transaction, the successor corporation may, in connection with the assumption of
this option, substitute one or more shares of its own common stock with a fair
market value equivalent to the cash consideration paid per share of Common Stock
in such Corporate Transaction.

                  (d)   This Agreement shall not in any way affect the right of
the Corporation to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.

            7. ADJUSTMENT IN OPTION SHARES. Should any change be made to the
      Common Stock by reason of any stock split, stock dividend,
      recapitalization, combination of shares, exchange of shares or other
      change affecting the outstanding Common Stock as a class without the
      Corporation's receipt of consideration, appropriate adjustments shall be
      made to (i) the total number and/or class of securities subject to this
      option and (ii) the Exercise Price in order to reflect such change and
      thereby preclude a dilution or enlargement of benefits hereunder.

            8. STOCKHOLDER RIGHTS. The holder of this option shall not have any
      stockholder rights with respect to the Option Shares until such person
      shall have exercised the option, paid the Exercise Price and become a
      holder of record of the purchased shares.

                                       4
<PAGE>

            9. MANNER OF EXERCISING OPTION.

                  (a)   In order to exercise this option with respect to all or
any part of the Option Shares for which this option is at the time exercisable,
Optionee (or any other person or persons exercising the option) must take the
following actions:

                        (i)   Execute and deliver to the Corporation a Notice of
Exercise for the Option Shares for which the option is exercised.

                        (ii)  Pay the aggregate Exercise Price for the purchased
shares in one or more of the following forms:

                              (A)   cash or check made payable to the
Corporation;

                              (B)   a promissory note payable to the
Corporation, but only to the extent authorized by the Plan Administrator in
accordance with Paragraph 13;

                              (C)   shares of Common Stock held by Optionee (or
any other person or persons exercising the option) for the requisite period
necessary to avoid a charge to the Corporation's earnings for financial
reporting purposes and valued at Fair Market Value on the Exercise Date; or

                              (D)   through a special sale and remittance
procedure pursuant to which Optionee (or any other person or persons exercising
the option) shall concurrently provide irrevocable instructions (i) to a
Corporation-designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
Exercise Price payable for the purchased shares plus all applicable Federal,
state and local income and employment taxes required to be withheld by the
Corporation by reason of such exercise and (ii) to the Corporation to deliver
the certificates for the purchased shares directly to such brokerage firm in
order to complete the sale.

                  Except to the extent the sale and remittance procedure is
utilized in connection with the option exercise, payment of the Exercise Price
must accompany the Notice of Exercise delivered to the Corporation in connection
with the option exercise.

                        (iii) Furnish to the Corporation appropriate
documentation that the person or persons exercising the option (if other than
Optionee) have the right to exercise this option.

                        (iv)  Make appropriate arrangements with the Corporation
(or Parent or Subsidiary employing or retaining Optionee) for the satisfaction
of all Federal, state and local income and employment tax withholding
requirements applicable to the option exercise.

                  (b)   As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option Shares,
with the appropriate legends affixed thereto.

                                       5
<PAGE>

                  (c)   In no event may this option be exercised for any
fractional shares.

            10. COMPLIANCE WITH LAWS AND REGULATIONs.

                  (a)   The exercise of this option and the issuance of the
Option Shares upon such exercise shall be subject to compliance by the
Corporation and Optionee with all applicable requirements of law relating
thereto and with all applicable regulations of any stock exchange (or the Nasdaq
National Market, if applicable) on which the Common Stock may be listed for
trading at the time of such exercise and issuance.

                  (b)   The inability of the Corporation to obtain approval from
any regulatory body having authority deemed by the Corporation to be necessary
to the lawful issuance and sale of any Common Stock pursuant to this option
shall relieve the Corporation of any liability with respect to the non-issuance
or sale of the Common Stock as to which such approval shall not have been
obtained. The Corporation, however, shall use its best efforts to obtain all
such approvals.

            11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided
in Paragraphs 3 and 6, the provisions of this Agreement shall inure to the
benefit of, and be binding upon, the Corporation and its successors and assigns
and Optionee, Optionee's assigns, the legal representatives, heirs and legatees
of Optionee's estate and any beneficiaries of this option designated by
Optionee.

            12. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.

            13. FINANCING. The Plan Administrator may, in its absolute
discretion and without any obligation to do so, permit Optionee to pay the
Exercise Price for the purchased Option Shares by delivering a full-recourse
promissory note payable to the Corporation. The terms of any such promissory
note (including the interest rate, the requirements for collateral and the terms
of repayment) shall be established by the Plan Administrator in its sole
discretion.

            14. CONSTRUCTION. This Agreement and the option evidenced hereby are
made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan. All decisions of the Plan Administrator with
respect to any question or issue arising under the Plan or this Agreement shall
be conclusive and binding on all persons having an interest in this option.

            15. GOVERNING LAW. The interpretation, performance and enforcement
of this Agreement shall be governed by the laws of the State of California
without resort to that State's conflict-of-laws rules.

            16. EXCESS SHARES. If the Option Shares covered by this Agreement
exceed, as of the Grant Date, the number of shares of Common Stock which may
without stockholder approval

                                       6
<PAGE>

be issued under the Plan, then this option shall be void with respect to those
excess shares, unless stockholder approval of an amendment sufficiently
increasing the number of shares of Common Stock issuable under the Plan is
obtained in accordance with the provisions of the Plan.

            17. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE OPTION. In the event
this option is designated an Incentive Option in the Grant Notice, the following
terms and conditions shall also apply to the grant:

                  (a)   This option shall cease to qualify for favorable tax
treatment as an Incentive Option if (and to the extent) this option is exercised
for one or more Option Shares: (A) more than three (3) months after the date
Optionee ceases to be an Employee for any reason other than death or Permanent
Disability or (B) more than twelve (12) months after the date Optionee ceases to
be an Employee by reason of Permanent Disability.

                  (b)   No installment under this option shall qualify for
favorable tax treatment as an Incentive Option if (and to the extent) the
aggregate Fair Market Value (determined at the Grant Date) of the Common Stock
for which such installment first becomes exercisable hereunder would, when added
to the aggregate value (determined as of the respective date or dates of grant)
of the Common Stock or other securities for which this option or any other
Incentive Options granted to Optionee prior to the Grant Date (whether under the
Plan or any other option plan of the Corporation or any Parent or Subsidiary)
first become exercisable during the same calendar year, exceed One Hundred
Thousand Dollars ($100,000) in the aggregate. Should such One Hundred Thousand
Dollar ($100,000) limitation be exceeded in any calendar year, this option shall
nevertheless become exercisable for the excess shares in such calendar year as a
Non-Statutory Option.

                  (c)   Should the exercisability of this option be accelerated
upon a Corporate Transaction, then this option shall qualify for favorable tax
treatment as an Incentive Option only to the extent the aggregate Fair Market
Value (determined at the Grant Date) of the Common Stock for which this option
first becomes exercisable in the calendar year in which the Corporate
Transaction occurs does not, when added to the aggregate value (determined as of
the respective date or dates of grant) of the Common Stock or other securities
for which this option or one or more other Incentive Options granted to Optionee
prior to the Grant Date (whether under the Plan or any other option plan of the
Corporation or any Parent or Subsidiary) first become exercisable during the
same calendar year, exceed One Hundred Thousand Dollars ($100,000) in the
aggregate. Should the applicable One Hundred Thousand Dollar ($100,000)
limitation be exceeded in the calendar year of such Corporate Transaction, the
option may nevertheless be exercised for the excess shares in such calendar year
as a Non-Statutory Option.

                  (d)   Should Optionee hold, in addition to this option, one or
more other options to purchase Common Stock which become exercisable for the
first time in the same calendar year as this option, then the foregoing
limitations on the exercisability of such options as Incentive Options shall be
applied on the basis of the order in which such options are granted.

                                       7
<PAGE>

                                   EXHIBIT A-1

                               NOTICE OF EXERCISE

            I hereby notify Quiksilver, Inc. (the "Corporation") that I elect to
purchase ______________ shares of the Corporation's Common Stock (the "Purchased
Shares") at the option exercise price of $__________ per share (the "Exercise
Price") pursuant to that certain option (the "Option") granted to me under the
Corporation's 2000 Stock Incentive Plan on _______________, _____

            Concurrently with the delivery of this Exercise Notice to the
Corporation, I shall hereby pay to the Corporation the Exercise Price for the
Purchased Shares in accordance with the provisions of my agreement with the
Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a condition
for exercise. Alternatively, I may utilize the special broker-dealer sale and
remittance procedure specified in my agreement to effect payment of the Exercise
Price.

__________________, ________
Date

                                    ____________________________________________
                                    Optionee

                                    Address: ___________________________________
                                             ___________________________________
                                             ___________________________________

Print name in exact manner
it is to appear on the stock
certificate:                        ____________________________________________

Address to which certificate
is to be sent, if different         ____________________________________________
from address above:                 ____________________________________________
                                    ____________________________________________

Social Security Number:             ____________________________________________

                                       8
<PAGE>

                                    APPENDIX

            The following definitions shall be in effect under the Agreement:

      A.    AGREEMENT shall mean this Stock Option Agreement.

      B.    BOARD shall mean the Corporation's Board of Directors.

      C.    COMMON STOCK shall mean shares of the Corporation's common stock.

      D.    CODE shall mean the Internal Revenue Code of 1986, as amended.

      E.    CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:

            (i)   a merger or consolidation in which securities possessing more
      than fifty percent (50%) of the total combined voting power of the
      Corporation's outstanding securities are transferred to a person or
      persons different from the persons holding those securities immediately
      prior to such transaction, or

            (ii)  the sale, transfer or other disposition of all or
      substantially all of the Corporation's assets in complete liquidation or
      dissolution of the Corporation.

      F.    CORPORATION shall mean Quiksilver, Inc., a Delaware corporation, and
any successor corporation to all or substantially all of the assets or voting
stock of Quiksilver, Inc. which shall by appropriate action adopt the Plan.

      G.    EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.

      H.    EXERCISE DATE shall mean the date on which the option shall have
been exercised in accordance with Paragraph 9 of the Agreement.

      I.    EXERCISE PRICE shall mean the exercise price per Option Share as
specified in the Grant Notice.

      J.    EXPIRATION DATE shall mean the date on which the option expires as
specified in the Grant Notice.

      K.    FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:

            (i)   If the Common Stock is at the time traded on the Nasdaq
      National Market, then the Fair Market Value shall be deemed equal to the
      closing selling price per share of Common Stock on the date in question,
      as the price is reported by the National Association of Securities Dealers
      on the Nasdaq National Market. If there is no closing selling price for
      the Common Stock on the date in question, then the Fair Market Value

                                       9
<PAGE>

      shall be the closing selling price on the last preceding date for which
      such quotation exists, or

            (ii)  If the Common Stock is at the time listed on any Stock
      Exchange, then the Fair Market Value shall be deemed equal to the closing
      selling price per share of Common Stock on the date in question on the
      Stock Exchange determined by the Plan Administrator to be the primary
      market for the Common Stock, as such price is officially quoted in the
      composite tape of transactions on such exchange. If there is no closing
      selling price for the Common Stock on the date in question, then the Fair
      Market Value shall be the closing selling price on the last preceding date
      for which such quotation exists.

      L.    GRANT DATE shall mean the date of grant of the option as specified
in the Grant Notice.

      M.    GRANT NOTICE shall mean the Notice of Grant of Stock Option
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.

      N.    INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.

      O.    MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by Optionee, any unauthorized use or disclosure by
Optionee of confidential information or trade secrets of the Corporation (or any
Parent or Subsidiary), or any other intentional misconduct by Optionee adversely
affecting the business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner. The foregoing definition shall not be deemed
to be inclusive of all the acts or omissions which the Corporation (or any
Parent or Subsidiary) may consider as grounds for the dismissal or discharge of
Optionee or any other individual in the Service of the Corporation (or any
Parent or Subsidiary).

      P.    NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.

      Q.    NOTICE OF EXERCISE shall mean the notice of exercise in the form
attached hereto as Exhibit I.

      R.    OPTION SHARES shall mean the number of shares of Common Stock
subject to the option as specified in the Grant Notice.

      S.    OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.

      T.    PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

                                       10
<PAGE>

      U.    PERMANENT DISABILITY shall mean the inability of Optionee to engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment which is expected to result in death or has lasted
or can be expected to last for a continuous period of twelve (12) months or
more.

      V.    PLAN shall mean the Corporation's 2000 Stock Incentive Plan.

      W.    PLAN ADMINISTRATOR shall mean either the Board or a committee of the
Board acting in its capacity as administrator of the Plan.

      X.    SERVICE shall mean the Optionee's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor.

      Y.    STOCK EXCHANGE shall mean the American Stock Exchange or the New
York Stock Exchange.

SUBSIDIARY shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.

                                       11<PAGE>

                                                                   EXHIBIT 10.17

                                                     Western Digital Corporation
                                                         20511 Lake Forest Drive
                                                  Lake Forest, California  92630

                                                              Tel:  510.683.7387
                                                              FAX:  510.683.7141

                                                                  DAVID C. FETAH
                                                                  Vice President
                                                Human Resources & Administration

September 10, 2004

Mr. Steve Milligan
BY HAND DELIVERY

Dear Steve:

      In connection with your employment by Western Digital Technologies, Inc.
(the "Company"), which became effective on September 23, 2002, you became
eligible for a payment of $35,000.00 to be paid upon completion of twenty-four
(24) months of employment ("Payment Date") at the Company. This payment is
considered taxable income to you. Your eligibility for this payment requires you
to have full-time employee status on the Payment Date. If you either voluntarily
terminate or are terminated by the Company for Good Cause prior to the Payment
Date, you will not be eligible to receive the payment. Additionally, if you
either voluntarily terminate or are terminated by the Company for Good Cause six
(6) months after the Payment Date, this payment shall be repaid by you to the
Company. For purposes hereof, "Good Cause" means (i) theft or damage of Western
Digital property, (ii) possession, sale or distribution of illegal drugs, (iii)
being under the influence of alcohol or drugs (except to the extent medically
prescribed) while on duty or on Company premises, (iv) involvement in activities
representing conflicts of interest, (v) improper disclosure of confidential
information, (vi) conduct endangering, or likely to endanger, the health or
safety of another employee, (vii) conviction of a felony, or (viii) falsifying
or misrepresenting information on Company records.

      This letter supersedes and replaces in its entirety all prior agreements
and understandings between you and the Company relating to the subject matter
hereof.

      Please return the signed and dated original indicating your acceptance of
this letter. A copy has been enclosed for your records. If you have any
questions, please do not hesitate to call.

Sincerely,

/s/ David C. Fetah
--------------------------
David C. Fetah
Vice President
Human Resources and Administration

ACCEPTANCE: /s/ Stephen D. Milligan                     9/10/04
            ----------------------------                ----------------------
            Signature                                   Date

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