SEPARATION, TRANSITION AND GENERAL RELEASE AGREEMENT

Exhibit 10.1

SEPARATION, TRANSITION AND GENERAL RELEASE AGREEMENT

     This Separation, Transition and General Release Agreement (this “Separation Agreement”), is entered into this 31st day of July, 2007 (the “Effective Date”), by and between Stephen D. Milligan (“Milligan”) on the one hand, and Western Digital Corporation (“WDC”), on behalf of itself and all other corporations or other entities a majority of whose outstanding voting stock or voting power is beneficially owned directly or indirectly by WDC (each, a “WDC Subsidiary”), on the other hand. WDC and all WDC Subsidiaries are referred to collectively herein as “Western Digital.”

      WHEREAS , Milligan has been employed as Senior Vice President and Chief Financial Officer of WDC; and

      WHEREAS , Milligan and Western Digital have mutually agreed to terminate Milligan’s employment relationship with Western Digital upon the terms set forth herein.

      NOW, THEREFORE , in consideration of the covenants undertaken and the releases contained in this Separation Agreement, Milligan and Western Digital agree as follows:

      I.  Separation . Milligan and Western Digital hereby agree that Milligan’s employment with Western Digital and his service as Senior Vice President and Chief Financial Officer of Western Digital, or in any other capacity for Western Digital, shall terminate no later than August 31, 2007 (the “Outside Termination Date”). Between the Effective Date and the Outside Termination Date, (i) Milligan may resign his employment with Western Digital, (ii) Western Digital may release Milligan from further duty without Cause as defined in Section 3.3 of the Western Digital Corporation Executive Severance Plan (the “Executive Severance Plan”), or (iii) Western Digital may terminate Milligan’s employment for Cause as defined in Section 3.3 of the Executive Severance Plan. The specific date on which Milligan’s employment is terminated under the provisions of this Section I shall be referred to herein as the “Separation Date.”

      II.  Transition Services and Compensation .

      A. Transition Services . From and after the Effective Date through the Separation Date (the “Transition Period”), Milligan shall continue to perform his usual and customary duties as Senior Vice President and Chief Financial Officer and shall perform such other tasks and duties as requested by the Chief Executive Officer in order to transition the Chief Financial Officer role to Milligan’s successor (the “Transition Services”).

      B. Transition Services Compensation . During the Transition Period, Milligan shall (i) continue to receive the salary in effect as of the Effective Date, and (ii) be eligible for bonus compensation under the WDC Incentive Compensation Plan (the “ICP”) as set forth in Section III(B) below.

      C. Benefits . During the Transition Period, Milligan shall be eligible to receive employee health and welfare benefits accorded to employees generally and other executives in comparable pay grades. If, during the Transition Period, any such benefits are discontinued or adjustments are made to benefits of employees generally, then such discontinuation of or adjustments to benefits will apply equally to the benefits provided to Milligan hereunder.

      D. Vacation . Milligan will continue to accrue vacation during the Transition Period in accordance with Western Digital’s vacation accrual policies. All accrued and unused vacation earned prior to the Separation Date will be paid to Milligan on or before the Separation Date.

      III. Severance Benefits Upon Resignation . In the event that either (i) Milligan resigns from employment with Western Digital prior to the Outside Termination Date, or (ii) Milligan’s employment is terminated by Western Digital other than for Cause prior to the Outside Termination Date (as defined in the Executive Severance Plan), and provided that Milligan fully complies with all requirements under this Separation Agreement, Milligan shall be entitled to receive the benefits set forth below, in lieu of and not in addition to any benefits under any severance plan sponsored by Western Digital. Milligan understands and agrees that it is an express condition of the payment of any severance benefits under this Section III, that he execute, deliver, and not revoke a general release in the form attached hereto as Exhibit A .

      A. Severance Pay . Western Digital shall pay Milligan a lump sum payment of Nine Hundred Thousand Dollars and No Cents ($900,000.00), less standard withholding and authorized deductions. Such payment will be made within thirty (30) days after the Separation Date, provided that Milligan has signed, delivered and not revoked a general release in the form attached as Exhibit A .

      B. ICP Bonus . For the bonus cycle ending June 29, 2007, Milligan shall receive his full bonus under the ICP, at the level actually funded by Western Digital with respect to the ICP, but in no event shall such bonus be less than 100% of the performance target. This payment shall be made at the same time payments are made to peer employees under the ICP. In addition, Milligan shall receive a payment equal to a pro-rata portion of Milligan’s bonus opportunity under the ICP for the bonus cycle in which the Separation Date occurs, with such pro-rata portion based on the number of days in the applicable bonus cycle during which Milligan was employed and assuming 100% of the performance targets are met regardless of the actual funding by Western Digital. This payment shall be paid in one lump-sum payment within thirty (30) days after the Separation Date, provided that Milligan has signed, delivered and not revoked a general release in the form attached as Exhibit A .

      C. Options . During the Transition Period, Milligan’s stock options shall continue to vest in accordance with their terms and conditions. On the Separation Date, Milligan’s then outstanding stock options will vest and become exercisable as if Milligan had remained employed with Western Digital through February 29, 2008. Notwithstanding anything to the contrary herein, the exercisability of Milligan’s

outstanding stock options shall continue to be governed by the stock incentive plan and stock option agreement applicable to such options.

      D. Restricted Stock . During the Transition Period, Milligan’s unvested shares of restricted stock shall continue to vest in accordance with their terms and conditions. On the Separation Date, Milligan’s then unvested shares of restricted stock will vest as if Milligan had remained employed with Western Digital through February 29, 2008.

      E. Benefit Continuation. Provided Milligan timely elects COBRA continuation of his medical, dental, and/or vision coverage existing as of the Separation Date, Western Digital shall pay to Milligan a lump sum payment equal to the applicable COBRA premium payments for such coverage for a period of eighteen (18) months, less standard withholding and authorized deductions.

      F. Executive Outplacement . Western Digital shall pay for Milligan to receive outplacement services provided by a vendor chosen by Western Digital for a period of up to twelve (12) months following the Separation Date, subject to a maximum cost to Western Digital of $15,000.

      IV.  Additional Cash Severance . In the event that Milligan performs his usual and customary duties as Chief Financial Officer with respect to the filing of Western Digital’s Form 10-K with respect to the fiscal year ending June 29, 2007, does not resign prior to the Outside Termination Date, and is not terminated for Cause (as defined in the Executive Severance Plan) by Western Digital prior to the Outside Termination Date, Milligan, in lieu of and not in addition to any compensation and benefits under any severance plan sponsored by Western Digital, shall be entitled to receive, in addition to the benefits set forth in Section III(A)-(F) above, additional lump sum cash severance in the amount of $500,000, less standard withholding and authorized deductions. Such payment shall be made within thirty (30) days after the Separation Date, provided that Milligan has signed, delivered and not revoked a general release in the form attached as Exhibit A .

      V.  Confidential Information .

      A. Confidential Material . Milligan, in the performance of Milligan’s services on behalf of Western Digital, has had access to, received and been entrusted with confidential information, including but in no way limited to development, marketing, organizational, financial, management, administrative, production, distribution and sales information, data, specifications and processes presently owned or at any time in the future developed by Western Digital or its agents or consultants, or used presently or at any time in the future in the course of its business that is not otherwise part of the public domain (collectively, the “Confidential Material”). All such Confidential Material is considered secret and was made available to Milligan in confidence. Milligan represents that he has held all such information confidential and will continue to do so.

      B. Use and Return of Confidential Material . Milligan shall not, directly or indirectly for any reason whatsoever, disclose or use any such Confidential

Material except in the course and scope of his employment with Western Digital, unless such Confidential Material ceases (through no fault of Milligan’s) to be confidential because it has become part of the public domain or he is otherwise obligated to disclose such information by the lawful order of any competent jurisdiction. All records, files, drawings, documents, equipment and other tangible items, wherever located, relating in any way to the Confidential Material or otherwise to the business of Western Digital which Milligan prepares, uses or encounters, shall be and remain the sole and exclusive property of Western Digital and shall be included in the Confidential Material. On or before the Separation Date, Milligan shall promptly deliver to Western Digital any and all of the Confidential Material, not previously delivered to Western Digital, which may be or at any previous time has been in Milligan’s possession or under Milligan’s control.

      C. Unfair Competition . Milligan hereby acknowledges that the sale or unauthorized use or disclosure of any of the Confidential Material by any means whatsoever shall constitute “Unfair Competition.” Milligan agrees that M