Western Digital 2011 Annual Report Download - page 45

On March 7, 2011, in connection with the planned acquisition of HGST, WD, WDTI and WDI entered into a
commitment letter for the Senior Facility. Since entering into the commitment letter, Bank of America N.A. and Merrill
Lynch, Pierce, Fenner & Smith Incorporated led the effort to syndicate the Senior Facility for an amount of up to
$3.0 billion, consisting of a $500 million revolving credit facility and up to $2.5 billion in term loans. As a result of such
effort, WD, WDTI and WDI have fully negotiated definitive loan documents for the Senior Facility with the syndicate
members and, subject to customary closing conditions, including completion of the acquisition in accordance with the
terms, WD, WDTI and WDI fully expect all of these syndicate members to be part of the final lender group. We are
required to pay a commitment fee at the rate of 0.35%, per annum, of the aggregate unfunded amount committed to be
borrowed under the Senior Facility.
Purchase Orders
In the normal course of business, we enter into purchase orders with suppliers for the purchase of hard drive
components used to manufacture our products. These purchase orders generally cover forecasted component supplies
needed for production during the next quarter, are recorded as a liability upon receipt of the components, and generally
may be changed or canceled at any time prior to shipment of the components. We also enter into purchase orders with
suppliers for capital equipment that are recorded as a liability upon receipt of the equipment. Our ability to change or
cancel a capital equipment purchase order without penalty depends on the nature of the equipment being ordered. In
some cases, we may be obligated to pay for certain costs related to changes to, or cancellation of, a purchase order, such as
costs incurred for raw materials or work in process of components or capital equipment.
We have entered into long-term purchase agreements with various component suppliers, which contain minimum
quantity requirements. However, the dollar amount of the purchases may depend on the specific products ordered,
achievement of pre-defined quantity or quality specifications or future price negotiations. The estimated related
minimum purchase requirements are included in “Purchase obligations” in the table above. We have also entered into
long-term purchase agreements with various component suppliers that carry fixed volumes and pricing which obligate us
to make certain future purchases, contingent on certain conditions of performance, quality and technology of the vendor’s
components. These arrangements are included under “Purchase obligations” in the table above.
We enter into, from time to time, other long-term purchase agreements for components with certain vendors.
Generally, future purchases under these agreements are not fixed and determinable as they depend on our overall unit
volume requirements and are contingent upon the prices, technology and quality of the supplier’s products remaining
competitive. These arrangements are not included under “Purchase obligations” in the table above. Please see Item 1A of
this Annual Report on Form 10-K for a discussion of risks related to these commitments.
Foreign Exchange Contracts
We purchase short-term, foreign exchange contracts to hedge the impact of foreign currency fluctuations on certain
underlying assets, revenue, liabilities and commitments for operating expenses and product costs denominated in foreign
currencies. See Part II, Item 7A, under the heading “Disclosure About Foreign Currency Risk,” for a description of our
current foreign exchange contract commitments and Part II, Item 8, Notes 1 and 11 in the Notes to Consolidated
Financial Statements, included in this Annual Report on Form 10-K.
Indemnifications
In the ordinary course of business, we may provide indemnifications of varying scope and terms to customers,
vendors, lessors, business partners and other parties with respect to certain matters, including, but not limited to, losses
arising out of our breach of such agreements, products or services to be provided by us, or from intellectual property
infringement claims made by third parties. In addition, we have entered into indemnification agreements with our
directors and certain of our officers that will require us, among other things, to indemnify them against certain liabilities
that may arise by reason of their status or service as directors or officers. We maintain director and officer insurance, which
may cover certain liabilities arising from our obligation to indemnify our directors and officers in certain circumstances.
It is not possible to determine the maximum potential amount under these indemnification agreements due to the
limited history of prior indemnification claims and the unique facts and circumstances involved in each particular
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