Western Digital 2013 Annual Report Download - page 52

tain restricted payments, merge, consolidate or dispose of substantially all of our assets, enter into certain speculative
hedging arrangements and make any material change in the nature of our business. Upon the occurrence of an event of
default under the Credit Facility, the administrative agent at the request, or with the consent, of the Required Lenders
(as defined in the Credit Facility) may cease making loans, terminate the Credit Facility and declare all amounts out-
standing to be immediately due and payable, require the cash collateralization of letters of credit and/or exercise all
other rights and remedies available to it, the lenders and the letter of credit issuer. The Credit Facility specifies a
number of events of default (some of which are subject to applicable grace or cure periods), including, among other
things, non-payment defaults, covenant defaults, cross-defaults to other material indebtedness, bankruptcy and
insolvency defaults, material judgment defaults and a change of control default. As of June 28, 2013, we were in
compliance with all covenants under the Credit 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 gen-
erally 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, containing 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 commitments.
Foreign Exchange Contracts
We purchase short-term, foreign exchange contracts to hedge the impact of foreign currency fluctuations on cer-
tain 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 descrip-
tion of our current foreign exchange contract commitments and Part II, Item 8, Notes 1 and 11 in the Notes to Con-
solidated 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 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.
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