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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 8, 1999
REGISTRATION NO. 333-70785
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
WESTERN DIGITAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 95-264-7125
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
8105 IRVINE CENTER DRIVE
IRVINE, CALIFORNIA 92618
(949) 932-5000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MICHAEL A. CORNELIUS
WESTERN DIGITAL CORPORATION
8105 IRVINE CENTER DRIVE
IRVINE, CALIFORNIA 92618
(949) 932-5000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPY TO:
RONALD S. BEARD
GIBSON, DUNN & CRUTCHER LLP
333 S. GRAND AVENUE
LOS ANGELES, CA 90071
(213) 229-7000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO
PUBLIC: As soon as practicable after this registration
statement becomes effective.
If any of the securities being registered on this form are to be offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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PROSPECTUS
SUBJECT TO COMPLETION, DATED FEBRUARY 8, 1999
$190,000,000
[LOGO]
COMMON STOCK
This is a public offering of shares of Common Stock of Western Digital
Corporation, a Delaware corporation. Some of the shares may be sold to the
selling stockholder named on page 10 and offered for sale or sold by the selling
stockholder. We or the selling stockholder may offer for sale and sell shares in
varying amounts and at prices and on terms to be determined at the time of sale.
To the extent required, the number of shares of Common Stock to be sold by us or
the selling stockholder, the purchase price, the public offering price, if
applicable, the name of any agent or broker-dealer, and any applicable
commissions, discounts or other items constituting compensation with respect to
a particular offering will be stated in a supplement or supplements to this
prospectus.
We will receive proceeds from our sale of the Common Stock. In
addition, we may receive proceeds from the sale of Common Stock offered by the
selling stockholder, depending on the amount received by the selling
stockholder, as described in more detail on page 10 and as described in a
supplement to this prospectus.
The selling stockholder may be deemed to be an underwriter, as defined
in the Securities Act of 1933, as amended. If any broker-dealers are used to
effect sales, any commissions paid to the broker-dealers and, if broker-dealers
purchase any shares of Common Stock as principals, any profits received by the
broker-dealers on the resale of the shares of Common Stock, may be deemed to be
underwriting discounts or commissions under the Securities Act.
The Common Stock is traded on the New York Stock Exchange under the
symbol "WDC." On February 5, 1999, the last reported sale price of the Common
Stock was $12.875 per share.
INVESTING IN THE COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 3.
----------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The information in this prospectus is not complete and may be changed.
These securities will not be sold until the registration statement filed with
the Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
----------------
THE DATE OF THIS PROSPECTUS IS __________, 1999
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-732-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
from the SEC's web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information that we
file with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus and supplements to this prospectus. The
information filed by us with the SEC in the future will update and supersede
this information. We incorporate by reference the documents listed below and any
future filings made by us with the SEC under Section 13(a), 13(c) or 15(d) of
the Securities Exchange Act of 1934 after the initial filing of the registration
statement that contains this prospectus and prior to the time that all the
securities offered by this prospectus are sold by us, an underwriter or a
selling stockholder.
1. The Company's Annual Report on Form 10-K for the fiscal year
ended June 27, 1998;
2. The Company's Quarterly Report on Form 10-Q for the quarter
ended September 26, 1998;
3. The Company's Current Reports on Form 8-K filed August 10, 1998,
August 10, 1998, October 26, 1998, November 19, 1998 and January
19, 1999; and
4. The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-B, filed April 3,
1987, and any amendments or reports filed for the purpose of
updating such description.
We have also filed a registration statement on Form S-3 with the SEC
under the Securities Act. This prospectus does not contain all of the
information set forth in the registration statement. You should read the
registration statement for further information about our company and the Common
Stock. You may request a copy of these filings, at no cost, by writing or
calling us at the following address or telephone number:
Corporate Secretary
Western Digital Corporation
8105 Irvine Center Drive
Irvine, California 92618
(949) 932-5000
You should rely only on the information contained in this prospectus.
We have authorized no one to provide you with different information. We are not
making an offer of these securities in any state where the offer is not
permitted. You should not assume that the information in this prospectus is
accurate as of any date other than the date on the front of this prospectus.
FORWARD-LOOKING STATEMENTS
This prospectus contains or incorporates by reference forward-looking
statements, within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act, as amended, that involve risks and uncertainties.
Forward-looking statements can typically be identified by the use of
forward-looking words, such as "may," "will," "could," "project," "believe,"
"anticipate," "expect," "estimate," "continue," "potential," "plan,"
"forecasts," and the like. These statements appear in a number of places in this
prospectus and include statements regarding the intentions, plans, strategies,
beliefs or current expectations of the Company, its directors or its officers
with respect to, among other things:
- the financial prospects of the Company
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- the Company's financing plans
- trends affecting the Company's financial condition or operating
results
- the Company's strategies for growth, operations, and product
development and commercialization
- conditions or trends in or factors affecting the computer or
hard drive industry.
Forward-looking statements do not guarantee future performance and
involve risks and uncertainties that could cause actual results to differ
materially from those anticipated. The information contained in this prospectus,
or incorporated by reference, identifies important factors that could cause such
differences. Those factors include, among others, the highly competitive nature
of the computer hard drive industry, which is characterized by periods of severe
price competition and price erosion, which can result in shifting market share,
and rapid technological changes.
Within this prospectus, we sometimes refer to years without specifying
the month or day of that year. In all such cases, unless we specifically refer
to a calendar year, the reference is to our fiscal year ended on or about June
30 of such year.
THE COMPANY
We design, develop, manufacture and market a broad line of rigid
magnetic disk drives (often referred to as "hard drives") for use in desktop
personal computers and, since 1997, in high-performance workstations, local area
network ("LAN") servers and multi-user systems. We market our products worldwide
to computer manufacturers, distributors, resellers and retailers. Our goal is to
become a leading manufacturer of hard drives in the hard drive markets in which
we compete.
The Company is incorporated in the State of Delaware. Its principal
executive offices are located at 8105 Irvine Center Drive, Irvine, California
92618 and its telephone number is (949) 932-5000.
USE OF PROCEEDS
We will receive proceeds from our sale of the Common Stock registered
by the registration statement of which this prospectus is a part. We will
receive proceeds from our sale of Common Stock to IBM, in the sense that the
issuance to IBM will satisfy $40.0 million of our payment obligations to IBM
under a patent license agreement and a component supply and technology license
agreement. We also may receive proceeds from the sale of Common Stock by IBM,
depending on the amount received by IBM, as described in more detail on page 10
and as described in a supplement to this prospectus. Any proceeds we receive
will be used for general corporate purposes or as stated in a supplement or
supplements to this prospectus. We have agreed to bear all expenses in
connection with the registration of the Common Stock to be offered and sold by
IBM. You can find more information regarding how IBM will acquire its shares of
Common Stock in the section entitled "Selling Stockholder" beginning on page 10
or by referring to the Stock Purchase Agreement, dated as of January 29, 1999,
between IBM and us, attached as Exhibit 4.4 to the registration statement of
which this prospectus is a part.
RISK FACTORS
An investment in the Common Stock involves a high degree of risk. You
should carefully consider the following risk factors primarily related to the
Common Stock offered by this prospectus and to our business and operations. You
should also carefully consider the other information in this prospectus and in
the documents incorporated by reference. Some of these factors have affected our
financial condition or operating results in the past or are currently affecting
us. All of these factors could affect our future financial condition or
operating results. If any of the following risks actually occurs, our business,
financial condition or results of operations could
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be harmed. If that happens, the trading price of our Common Stock could decline,
and you may lose all or part of your investment.
Highly Competitive Industry.
The price of hard drives decreases over time due to increases in
supply, cost reductions and technological advances. This price erosion
accelerates when one or more competitors reduce prices to liquidate excess
inventories or attempt to gain market share. In addition, hard drive customers
consistently demand greater storage capacity and higher performance, which
requires us to continually develop products that incorporate new technology on a
timely and cost-effective basis. This in turn reduces the volume and
profitability of sales of existing products and increases the risk of inventory
obsolescence.
The desktop portion of the hard drive industry is intensely competitive
and characterized by periods of oversupply and severe price erosion. During 1996
and 1997, we significantly increased our share of the desktop market, but most
of these gains were lost during 1998 for the following reasons:
- our decision to reduce production in the face of industry
oversupply and rapidly declining prices
- our late transition to magneto-resistive ("MR") head technology
- manufacturing and performance issues encountered as we continued
to produce thin film head products at higher storage capacities
than our competitors.
The enterprise portion of the hard drive industry is more concentrated,
with Seagate Technology having the largest market share. Performance, quality,
and reliability are even more important to the users of high-end products than
to users in the desktop market. However, this market has recently become much
more price competitive, and we expect this trend to continue.
Data Storage Industry Risks.
Our hard drives are components in computer systems. Demand for our hard
drives depends on the demand for computer systems manufactured by our customers
and on storage upgrades to existing systems. The demand for computer systems has
been volatile in the past and often has had an exaggerated effect on the demand
for hard drives in any given period. In calendar 1998, for example, the growth
in desktop PC sales slowed significantly, causing a sharp decline in demand for
hard drives. When the supply of hard drives exceeds demand, as it did in
calendar 1998, the oversupply of available products causes higher than
anticipated inventory levels and intense price competition. We expect that this
situation will occur again in the future.
Fluctuations in Quarterly Results.
We typically book and ship a high percentage of our total quarterly
sales in the third month of the quarter, which makes it difficult to match our
product build plans to customer demand for that quarter. If we do not forecast
total quarterly demand accurately, it can have a material adverse effect on our
quarterly results. Also, our operating results have been and may in the future
be subject to significant quarterly fluctuations as a result of a number of
other factors including:
- the timing of orders from and shipment of products to major
customers
- our product mix
- changes in the prices of our products
- manufacturing delays or interruptions
- acceptance by customers of competing products in lieu of our
products
- variations in the cost of components for our products
- limited access to components that we obtain from a single or a
limited number of suppliers
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- competition and consolidation in the data storage industry
- seasonal and other fluctuations in demand for computers
- general economic conditions.
Possible Price Volatility of Common Stock.
The market price of our Common Stock has been, and may continue to be,
extremely volatile. Factors such as the following may significantly affect the
market price of our Common Stock:
- actual or anticipated fluctuations in our operating results
- announcements of technological innovations by us or our
competitors
- new products introduced by us or our competitors
- periods of severe pricing pressures
- developments with respect to patents or proprietary rights
- conditions and trends in the hard drive industry
- changes in financial estimates by securities analysts
In addition, the stock market in recent months has experienced extreme
price and volume fluctuations that have particularly affected the stock price of
many high technology companies. These fluctuations are often unrelated to the
operating performance of the companies. As a result, the market price of our
Common Stock may decline below the price on the date of this prospectus or the
date of any purchase of the Common Stock offered by this prospectus.
Securities class action lawsuits are often brought against companies
after periods of volatility in the market price of their securities. A number of
such suits have been filed against us in the past, and any of these litigation
matters could result in substantial costs and a diversion of resources and
management's attention.
Rapid Technological Change and Product Development.
The hard drive industry is characterized by rapid technological
changes, particularly in recording head technology. MR heads, which enable
higher capacity per hard drive than conventional heads, became the leading
recording head technology during early 1998. Several of our major competitors
incorporated MR head technology into their products much earlier than we did and
achieved time-to-market leadership with some MR products. We completed our
transition of desktop hard drives to MR head technology by the end of 1998, and
we are now beginning our transition to giant magneto-resistive ("GMR") heads,
the next recording head technology. However, if we fail to:
- regain time-to-market leadership with products incorporating MR
and then GMR head technology
- qualify these products with key customers on a timely basis
- produce these products in sufficient volume
then our market share could continue to fall and harm our operating results. Our
transition to GMR recording technology is our next important challenge. We have
just begun manufacturing our first hard drives with GMR technology, and
therefore it is too early for us to know how successful we will be in making
this technology transition compared to our competitors.
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If we are to succeed in the enterprise hard drive portion of the market
we must successfully develop and timely introduce new products, and we must
increase the number of customers for our products. As we expand our product line
one of the many challenges we face is staffing. Hiring additional qualified
engineers is difficult because competition world wide for skilled hard drive
development engineers is intense. We also may encounter development delays or
quality issues which may adversely affect the introduction of new products. If
we experience any of these setbacks, we may miss crucial delivery time windows
on these new enterprise products, which would likely harm our operating results.
Due to short product life cycles, we must regularly engage in new
product qualification with our customers. This process is typically complicated
and lengthy, and any failure or delay in qualifying new products with a customer
can result in our losing sales to that customer until the next generation of
products is introduced. Most of our customers qualify only a few vendors for
each product. This issue is particularly acute in the enterprise portion of the
market because the product life cycles for enterprise hard drives are longer
than those for desktop drives.
With the continued pressures to shorten the time required to introduce
new products, we must reduce the time to achieve acceptable manufacturing yields
and costs. Our inability to do so has harmed our operating results in the past
and could do so again in the future.
Advances in magnetic, optical or other data storage technologies could
result in competitive products that have better performance or lower cost per
unit of capacity than our products. Some of our competitors are developing
optically assisted recording products, but we have decided not to pursue this
technology at this time. If optically assisted recording products prove to be
superior in performance or cost per unit of capacity, we could be at a
competitive disadvantage to the companies offering those products.
Component Supply and Technology License Agreement with IBM.
In June, 1998, we entered into a broad-based hard drive component
supply and technology licensing agreement with IBM. This agreement enables us to
incorporate IBM's technology, designs and hard drive components into our desktop
products. Implementation of this agreement presents several significant
challenges:
- most important, the need to adapt IBM's product designs and
manufacturing processes so that the hard drives with IBM
technology can be manufactured by us at a low enough cost to
compete in the high-volume desktop market
- our engineers must integrate IBM technology into our products
while continuing to conduct our own research and development
activities.
IBM will be our sole supplier of the head components for desktop hard
drives manufactured under this agreement. Our business and operating results
would be harmed if those heads fail to satisfy our quality requirements or if
IBM is unable to meet our volume or delivery requirements. While we believe that
IBM's current and planned manufacturing capacity will meet our projected
requirements, growth of our sales of hard drives with IBM technology is
dependent upon IBM continuing to devote substantial financial resources to
support the manufacture of the components.
We entered into the agreement expecting that IBM will continue to lead
the hard drive industry in storage capacity and performance. We also believed
that we could leverage that leadership into our own time-to-market and
time-to-volume advantage in the desktop portion of the market. If IBM does not
maintain that leadership, we may not realize the benefits we had anticipated.
Although the agreement contains restrictions on IBM's ability to
license its technology to other companies, it is not exclusive, and competitors
may have access to both the products and the underlying technology. The
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agreement continues until 2001, subject to several conditions including our
commitment to purchase specified quantities of components from IBM.
Customer Concentration and Changing Customer Models.
High volume customers for hard drives are concentrated among a small
number of computer manufacturers, distributors and retailers. We believe our
relationships with key customers are generally good. However, if we were to lose
one or more accounts, it could harm our operating results. Our customers are
generally not obligated to purchase any minimum volume and are generally able to
terminate their relationship with us at will. We have experienced reductions in
our business, with resulting loss of revenue, with several customers largely as
a result of delays and difficulties encountered in our transition to MR head
technology. Future changes in purchase volume or customer relationships
resulting in decreased demand for our hard drives, whether by loss of or delays
in orders, could harm our operating results.
The bottom line in our industry is that we must adapt to the ever
changing needs and desires of our customers. The trend among our customers is to
hold smaller inventories of components such as hard drives. This forces us to
maintain a base stock of product in locations adjacent to our customers'
manufacturing facilities and also complicates management of our inventory.
Some of our customers are considering or have already implemented a
"channel assembly" model in which the customer ships a minimal computer system
to a dealer or other assembler. We then ship parts directly to the assembler for
installation at its location. This exposes us to risk of inventory mismanagement
by both the customer and the assembler. Furthermore, if the assemblers are not
properly trained in manufacturing processes, it could increase the number of
product returns resulting from damage during assembly or improper installation.
The channel assembly model requires proper alignment between the customer and us
and requires us to retain more of our product in inventory. We are therefore
exposed to increased risk of inventory obsolescence.
Dependence on Suppliers of Components.
We depend on qualified suppliers for components. We qualify suppliers
much as customers qualify us, and it is an arduous process. A number of the
components used by us are available from a single or limited number of outside
suppliers. If a component is in short supply or a supplier fails to qualify a
component, we may experience delays or increased costs in obtaining that
component. To reduce this risk, we attempt to provide significant lead times
when buying these components. We may have to pay significant cancellation
charges to suppliers if we cancel orders, whether because of market oversupply
or transition to new products or technologies. This occurred in 1998 when we
accelerated our transition to MR recording head technology. Because we
manufacture fewer of our components than our competitors, an extended shortage
of required components or the failure of key suppliers to remain in business,
adjust to market conditions, or to meet our quality, yield or production
requirements could harm us more severely than our competitors.
Limitations on Protection and Use of Intellectual Property.
The hard drive industry has been characterized by significant
litigation, including, but not limited to, litigation relating to patent and
other intellectual property rights as well as products liability claims. From
time to time, we receive notices of alleged patent infringement or notice of
patents from patent holders. If we receive a valid claim of infringement we may
be required to obtain a license or cross license from the patent holder or we
may have to modify our existing technology or design new non-infringing
technology. Either of these solutions can increase our costs and harm our
operating results. We may also be liable for any past infringement. We are
currently evaluating several such notices of infringement. One of them involves
a company called Papst Licensing, which is asserting claims relating to several
motor patents. In 1994 Papst Licensing brought suit against us in federal court
in California alleging infringement by us of five of these motor patents. The
patents relate to disk drive motors that we purchase from motor vendors. Later
that year Papst dismissed its case without prejudice, but it has notified us
that it intends to reinstate the suit if we do not agree to enter into a license
agreement with Papst. Papst has also put us on notice with respect to several
additional patents. Although we do not believe that the outcome of this matter
will
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materially harm our operating results, loss of any intellectual property
litigation could force us to pay a large amount of money and/or prohibit us from
manufacturing products affected by the litigation. In addition, the costs of
defending such litigation may be high, regardless of the outcome.
Our success depends in significant part on the proprietary nature of
our technology. Our patents may not provide us with meaningful advantages and
may be challenged. In addition to patent protection of intellectual property
rights, we consider elements of our product designs and processes to be
proprietary and confidential. We also believe that our non-patentable
intellectual property, particularly some of our process technology, is an
important factor in our success. We rely upon employee, consultant and vendor
non-disclosure agreements and a system of internal safeguards to protect our
proprietary information. Despite these safeguards, to the extent that a
competitor is able to reproduce or otherwise capitalize on our technology, it
may be difficult, expensive or impossible for us to obtain necessary legal
protection. Also, the laws of some foreign countries may not protect our
intellectual property to the same extent as do the laws of the United States.
Estimates May be Changed or May be Different than Actual Results.
We have made and continue to make a number of estimates and assumptions
relating to the reporting of assets and liabilities. These estimates include,
but are not limited to:
- accruals for warranty against product defects
- price adjustment reserves on products sold to resellers and
distributors
- reserves for excess, obsolete and slow moving inventories
- reserves for accounts receivable
- estimates of product returns.
The rapidly changing market conditions in the hard drive industry make it
difficult to estimate such accruals, and reserves and actual results may differ
significantly from our estimates and assumptions.
Potential Harm from Changing Market Demands.
Over the past two years the consumer market for desktop computers has
shifted significantly towards lower priced systems, especially those systems
priced below $1,000. These computers typically have hard drives with lower
capacity and performance than those which we produce. We currently participate
in this market only to a limited extent. If the market for those lower price
systems continues to grow and we do not develop lower cost hard drives that can
successfully compete in this market, our market share could continue to fall.
The market for hard drives is becoming more complex and fragmented. As
broadcasting and communications are increasingly digitized, industry analysts
expect that the technology of computers and consumer electronics and
communication devices will converge, and hard drives will be found in many
consumer products other than computers. We have recently entered into an
agreement with Sony Corporation to develop a new hard drive for consumer audio
and video applications. Some of our competitors have announced the development
of similar products. It is much too early to assess the impact, if any, of these
new developments or forecast any future market demands.
Foreign Manufacturing Risks.
Our products are currently manufactured in Singapore and Malaysia. We
are subject to risks associated with foreign manufacturing, including, but not
limited to:
- obtaining requisite United States and foreign governmental
permits and approvals
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- currency exchange rate fluctuations or restrictions
- political instability and civil unrest
- transportation delays or higher freight rates
- labor problems
- trade restrictions or higher tariffs
- exchange, currency and tax controls and reallocations
- loss or non-renewal of favorable tax treatment under agreements
or treaties with foreign tax authorities.
We attempt to manage the impact of foreign currency exchange rate
changes by, among other things, entering into short-term, forward exchange
contracts. However, those contracts do not cover our full exposure and can be
canceled by the issuer if currency controls are put in place, as recently
occurred in Malaysia.
Inability to Meet Future Capital Needs.
In order to remain competitive, we will need to maintain adequate
financial resources for capital expenditures, working capital and research and
development. If we decide to increase or accelerate our capital expenditures or
research and development efforts, or if results of operations do not meet our
expectations, we could require additional debt or equity financing. However, we
cannot insure that additional financing will be available to us or available on
favorable terms. An equity financing could also be dilutive to our existing
stockholders.
Anti-Takeover Features.
Our certificate of incorporation and bylaws contain provisions that
could have the effect of deterring or preventing some takeover attempts. We have
also adopted a shareholders rights plan that may have a similar effect.
Year 2000 Issue.
The Year 2000 issue is the result of computer programs,
microprocessors, and embedded date reliant systems using two digits rather than
four to define the applicable year. We consider a product to be "Year 2000
compliant" if the product's performance and functionality are unaffected by
processing of dates prior to, during and after the Year 2000, but only if all
products (for example hardware, software and firmware) used with the product
properly exchange accurate date data with it. We believe our hard drive products
are Year 2000 compliant, although some older, non-hard drive products previously
sold by us may not be Year 2000 compliant. Litigation may be brought against
makers of all component products of systems that are not Year 2000 compliant.
Our agreements with customers typically contain provisions designed to limit our
liability for such claims. These provisions may not provide protection from
liability, however, because of existing or future federal, state or local laws
or ordinances or unfavorable judicial decisions. Any such claims, with or
without merit, could materially harm our business.
We have committed people and resources to resolve potential Year 2000
issues, both internally and externally (with respect to our suppliers and
customers) for both information technology assets and non-information technology
assets. We are identifying Year 2000 dependencies in our systems, equipment and
processes and we are implementing changes to such systems, updating or replacing
such equipment, and modifying such processes to make them Year 2000 compliant.
Each of our business sites has identified critical systems for which contingency
plans are being developed in the event of any disruption caused by Year 2000
problems. Testing of our primary business transaction application has been
completed and all remaining testing is scheduled for completion by the end of
July 1999.
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We are vulnerable to the failure of any of our key suppliers to remedy
their Year 2000 issues. Such failure could delay shipment of essential
components and disrupt or even halt our manufacturing operations. While all
suppliers are being notified of our Year 2000 compliance requirements, we have
established specific reviews with our critical suppliers, and they are requested
to report their progress to us on a quarterly basis. We regularly monitor this
progress and are actively involved with a few suppliers which are behind
schedule.
We are also communicating with our large customers to determine the
extent to which we are vulnerable to their failure to remedy their own Year 2000
issues. We also rely, both domestically and internationally, upon governmental
agencies, utility companies, telecommunication service companies and other
service providers outside of our control. We cannot insure that these third
parties will not suffer business disruption caused by a Year 2000 issue, which,
in turn, could materially harm our business.
We anticipate that our systems, equipment and processes will be
substantially Year 2000 compliant by the end of July 1999. Expenditures related
to our Year 2000 project, which includes normal replacement of existing capital
assets, were approximately $7.5 million through December 1998 and are expected
to amount to approximately $35.0 million in total. Based on work to date, we
believe that the Year 2000 issue will not pose significant operational problems
for us. However, if we don't complete our remediation efforts on time, or if we
fail to identify all Year 2000 dependencies in our systems, equipment or
processes or those of our suppliers, customers or other organizations on which
we rely, it could have material adverse consequences for our business, including
delays in the manufacture or delivery of our products. As a result, we are
developing contingency plans in the event such problems arise. We expect to
complete the development of our contingency plans by the end of September, 1999.
SELLING STOCKHOLDER
As of January 29, 1999, we signed a Stock Purchase Agreement with IBM,
which is attached as Exhibit 4.4 to the registration statement of which this
prospectus is a part. Under the stock purchase agreement, we agreed to issue $40
million worth of shares of Common Stock to IBM on the day after the registration
statement becomes effective under the Securities Act, if the conditions stated
in the stock purchase agreement are met. The number of shares we would issue to
IBM on that date will equal $40 million divided by the average closing price of
our Common Stock on the NYSE for the five trading days before the effective date
of the registration statement. The $40 million represents an amount we now owe
IBM and an amount we expect to owe IBM on or about April 15, 1999, under a
patent license agreement and a component supply and technology license
agreement. IBM has agreed to sell the shares as soon as practicable after we
issue them. The stock purchase agreement defines "practicable" as meaning that,
except for the normal activities of IBM's employee benefit plans, IBM will not,
unless we approve, sell Common Stock on any trading day representing more than
10% of the average daily trading volume of our Common Stock on the NYSE during
the previous week. Even if we approve, IBM is not obligated to sell above the
10% threshold.
The stock purchase agreement defines the "Adjustment Date" as the later
to occur of either the last trade settlement date of IBM's sale of all of the
Common Stock we may issue to IBM under the stock purchase agreement, or the
beginning date, estimated to occur in the Spring of 1999, of the next phase
under the component supply and technology license agreement. If one of those two
dates has not occurred by June 30, 1999, then June 30, 1999 will be deemed to be
the Adjustment Date. Within 20 days after the Adjustment Date, we and IBM will
have a reconciliation so that IBM will receive, on net, neither more nor less
than $40 million plus an interest amount designed to approximate the interest
IBM would have earned on the amounts we now owe IBM minus the interest we would
have earned on the amount we are, in effect, pre-paying if we issue to IBM the
Common Stock on the day after the effectiveness of the registration statement,
with our interest starting to accrue on the date on which IBM obtains a surplus
(over the amount we then owe to IBM) in net proceeds from its sale of our Common
Stock. If IBM has received, on net, more than $40 million plus the net interest
amount from sale of the Common Stock, then IBM will pay us the difference in
cash. If IBM has received, on net, less than that sum from sale of the Common
Stock, then we either will pay IBM the difference in cash or, prior to June 1,
1999, issue additional shares of Common Stock having an estimated value equal to
the difference. If we issue the additional shares, IBM will sell them as soon as
practicable, which has the same meaning regarding volume limitations as is
described in the paragraph above.
10
<PAGE> 12
The stock purchase agreement contains some additional limitations on IBM's
ability to sell the Common Stock, which are described in Section 9 of the stock
purchase agreement.
When IBM has received, on net, from sales of the Common Stock or
reconciliation payments, an amount in cash equal to $40 million plus the net
interest amount, IBM will acknowledge the extinguishment of our obligation to
pay that sum under the patent license agreement, the component supply and
technology license agreement and, as to the net interest amount, the stock
purchase agreement. The stock purchase agreement ends automatically if the
registration statement is not effective under the Securities Act before March 1,
1999. If that happens, we and IBM return to our preexisting contractual
relationship under the patent license agreement and the component supply and
technology license agreement. In addition, we are not required to sell the
Common Stock to IBM if the average trading price of our Common Stock on the NYSE
is less than $10 per share for the five trading days before the registration
statement first becomes effective. This discussion of the stock purchase
agreement is qualified in its entirety by the specific terms of the stock
purchase agreement, which we encourage you to read.
In addition to the patent license agreement and the component supply
and technology license agreement, IBM and Western Digital have, within the past
three years, engaged in purchase and sale transactions, involving our products
and theirs, in the ordinary course of business. Beyond these relationships, to
our knowledge and based on representations made by IBM, IBM does not have, and
within the past three years has not had, any position, office or other material
relationship with us or any of our predecessors or affiliates.
The following table states, as of February __, 1999 or a subsequent
date if amended or supplemented, information furnished by IBM, including:
- the number of shares of Common Stock IBM beneficially owns prior
to this offering
- the percentage of the outstanding shares of Common Stock
represented by those shares as of February __, 1999
- the number of shares of Common Stock that may be offered under
this prospectus by IBM
- the number of shares of Common Stock IBM is expected to
beneficially own after this offering.
Except as described in this paragraph, beneficial ownership for
purposes of the table is determined in accordance with Sections 13(d) and 13(g)
of the Exchange Act and generally includes voting or investment power with
respect to securities. Except as otherwise stated in this prospectus, IBM has
sole voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by it. As of the date of this prospectus, IBM
beneficially owns ___________ shares of our Common Stock. The table also
includes as "beneficially owned," solely for purposes of this prospectus, an
additional ___________ shares of Common Stock that may be acquired by IBM under
the stock purchase agreement on the day after the effective date of the
registration statement of which this prospectus is a part. These additional
shares would not be deemed to be beneficially owned by IBM as of February ___,
1999 within the meaning of Sections 13(d) and 13(g) of the Exchange Act, before
the date on which all of our conditions of closing the sale of the Common Stock
to IBM are satisfied. The percentage shown in the table is based on an aggregate
of _____________ shares of Common Stock issued and outstanding as of February 1,
1999.
In addition, IBM may have sold, transferred or otherwise disposed of
all or a portion of its shares of our Common Stock since the date on which it
provided the information regarding its ownership of our Common Stock in
transactions exempt from the registration requirements of the Securities Act.
The information contained in the following table may be amended or supplemented
from time to time.
SHARES OF COMMON STOCK BENEFICIALLY OWNED AS OF FEBRUARY __, 1999
<TABLE>
<CAPTION>
SHARES SHARES
BENEFICIALLY SHARES WHICH MAY BENEFICIALLY
OWNED PRIOR TO BE OFFERED HEREBY OWNED AFTER THIS
SELLING STOCKHOLDER THIS OFFERING PERCENTAGE OFFERING
International Business Machines ______________ ___ ____________ ____________
Corporation
<S> <C> <C> <C> <C>
</TABLE>
11
<PAGE> 13
PLAN OF DISTRIBUTION
The Common Stock may be offered for sale and sold by IBM (or any donee
or pledgee of IBM), by us, or by other selling stockholders named in a
prospectus supplement in one or more transactions, including block transactions,
at a fixed price or prices (which may be changed), at market prices prevailing
at the time of sale, at prices related to such prevailing market prices or at
prices determined on a negotiated or competitive bid basis. Shares of Common
Stock may be sold directly, through agents designated from time to time or to or
through broker-dealers designated from time to time, or by such other means as
may be specified in the supplement to this prospectus. We may receive proceeds
from the sale by IBM of its shares of Common Stock, depending on the amount
received by IBM, as described in the section entitled "Selling Stockholder," and
as described in a prospectus supplement. We will bear all fees and expenses
incident to the registration of the Common Stock that is offered and sold by
IBM.
Shares of Common Stock may be sold through a broker-dealer acting as
agent or broker or to a broker-dealer acting as principal. In the latter case,
the broker-dealer may then resell such shares of Common Stock to the public at
varying prices to be determined by the broker-dealer at the time of resale.
We intend to offer up to $150 million of our Common Stock to HSBC James
Capel Canada, Inc. under an equity draw down facility to be negotiated by us and
them. A typical equity draw down facility is a contract under which the buyer
agrees to buy up to some maximum dollar value of the selling corporation's stock
in each of some set number of periods, for example, once per month over the
course of one year. The selling corporation determines each month the dollar
value, if any, of the stock that the buyer is required to buy from the selling
corporation for that month, subject to the maximum stated in the contract. The
price per share paid by the buyer in a particular month typically reflects a
discount, fixed in the contract, from some average measure of the selling
corporation's stock price during a measurement period. The contract may protect
the selling corporation, in some manner, from downward fluctuations in its stock
price during the measurement period. The buyer then holds the purchased shares
or sells some or all of them, at times, in quantities and by means the buyer
determines, subject to any restrictions stated in the contract. The selling
corporation typically receives none of the proceeds of those sales by the buyer.
To our knowledge, HSBC James Capel Canada, Inc. does not have, and within the
past three years has not had, any position, office or other material
relationship with us or any of our predecessors or affiliates.
IBM and any participating agents or broker-dealers in the distribution
of any of the shares of Common Stock may be deemed to be "underwriters" within
the meaning of the Securities Act. Any discount or commission received by any
underwriter and any participating agents or broker-dealers, and any profit on
the resale of the shares of Common Stock purchased by any of them may be deemed
to be underwriting discounts or commissions under the Securities Act.
To the extent required, the number of shares of Common Stock to be
sold, information relating to the underwriters, the purchase price, the public
offering price, if applicable, the name of any underwriter, agent or
broker-dealer, and any applicable commissions, discounts or other items
constituting compensation to such underwriters, agents or broker-dealers with
respect to a particular offering will be set forth in an accompanying supplement
to this prospectus.
If underwriters are used in a sale, shares of Common Stock will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of sale.
Shares of Common Stock may be offered to the public either through underwriting
syndicates represented by one or more managing underwriters or directly by one
or more firms acting as underwriters. The underwriter or underwriters with
respect to a particular
12
<PAGE> 14
underwritten offering of shares of Common Stock will be named in the supplement
to this prospectus relating to that offering and, if an underwriting syndicate
is used, the managing underwriter or underwriters will be stated on the cover of
the prospectus supplement.
Under the securities laws of some states, the shares of Common Stock
registered by the registration statement may be sold in those states only
through registered or licensed brokers or dealers.
To our knowledge, IBM has made no arrangement with any brokerage firm
for the resale of the Common Stock. IBM has advised us that they presently
intend to dispose of the Common Stock through broker-dealers in ordinary
brokerage transactions at market prices prevailing at the time of the sale.
However, depending on market conditions and other factors, IBM may also dispose
of the Common Stock through one or more of the other methods described above.
Concurrently with sales under this prospectus, IBM may effect other sales of
Common Stock under Rule 144 or other exempt resale transactions. There can be no
assurance that IBM will sell any or all of the Common Stock offered hereunder.
IBM and any other person participating in the distribution of Common
Stock registered under the registration statement that includes this prospectus
will be subject to applicable provisions of the Exchange Act and the applicable
SEC rules and regulations, including, among others, Regulation M, which may
limit the timing of purchases and sales of any of the Common Stock by IBM and
any other such person. Furthermore, Regulation M may restrict the ability of any
person engaged in the distribution of the Common Stock to engage in
market-making activities with respect to the Common Stock. These restrictions
may affect the marketability of the Common Stock and the ability of any person
or entity to engage in market-making activities with respect to the Common
Stock.
Upon sale under the registration statement that includes this
prospectus, the shares of Common Stock registered by the registration statement
will be freely tradable in the hands of persons other than affiliates of the
Company.
LEGAL MATTERS
The validity of the shares of Common Stock covered by this prospectus
was passed upon by Gibson, Dunn & Crutcher LLP, Los Angeles, California.
INDEPENDENT AUDITORS
The consolidated financial statements of Western Digital Corporation as
of June 27, 1998 and June 28, 1997 and for each of the years in the three-year
period ended June 27, 1998, have been incorporated by reference in this
prospectus and in the registration statement, of which this prospectus forms a
part, in reliance upon the report of KPMG LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of KPMG
LLP as experts in accounting and auditing.
13
<PAGE> 15
================================================================================
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE SELLING
STOCKHOLDER. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, IMPLY THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY OR THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE AS OF WHICH SUCH INFORMATION IS GIVEN. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY TO ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Where You Can Find More Information ..................................... 2
Forward-Looking Statements .............................................. 2
The Company ............................................................. 3
Use of Proceeds ......................................................... 3
Risk Factors ............................................................ 3
Selling Stockholder ..................................................... 10
Plan of Distribution .................................................... 12
Legal Matters ........................................................... 13
Independent Auditors .................................................... 13
</TABLE>
$190,000,000
[LOGO]
COMMON STOCK
----------------
PROSPECTUS
----------------
FEBRUARY __, 1999
================================================================================
<PAGE> 16
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses payable by us in connection
with the offering of the Common Stock being registered hereby. All amounts are
estimated except the SEC registration fee.
<TABLE>
<S> <C>
SEC Registration Fee.................................. $52,820
Printing Expenses.....................................
Legal Fees and Expenses...............................
Accounting Fees and Expenses..........................
Miscellaneous......................................... _______
Total....................................... $
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 145(a) of the General Corporation Law of the State of Delaware
(the "DGCL") provides that a Delaware corporation may indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation) by
reason of the fact that such person is or was a director, officer, employee or
agent of the corporation or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or enterprise,
against expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding if he or she acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had no cause to believe his
or her conduct was unlawful.
Section 145(b) of the DGCL provides that a Delaware corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses actually
and reasonably incurred by such person in connection with the defense or
settlement of such action or suit if he or she acted under similar standards to
those set forth above, except that no indemnification may be made in respect to
any claim, issue or matter as to which such person shall have been adjudged to
be liable to the corporation unless and only to the extent that the court in
which such action or suit was brought shall determine that despite the
adjudication of liability, but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to be indemnified for such
expenses which the court shall deem proper.
Section 145 of the DGCL further provides that to the extent a director
or officer of a corporation has been successful in the defense of any action,
suit or proceeding referred to in subsection (a) and (b) of Section 145 or in
the defense of any claim, issue or matter therein, he or she shall be
indemnified against expenses actually and reasonably incurred by him or her in
connection therewith; that indemnification provided for by Section 145 shall not
be deemed exclusive of any other rights to which the indemnified party may be
entitled; and that the corporation may purchase and maintain insurance on behalf
of a director or officer of the corporation against any liability asserted
against such officer or director and incurred by him or her in any such capacity
or arising out of his or her status as such, whether or not the corporation
would have the power to indemnify him or her against such liabilities under
Section 145.
As permitted by Section 102(b)(7) of the DGCL our certificate of
incorporation provides that a director shall not be liable to the company or its
stockholders for monetary damages for breach of fiduciary duty as a director.
However, such provision does not eliminate or limit the liability of a director
for acts or omissions not in good faith or for breaching his or her duty of
loyalty, engaging in intentional misconduct or knowingly violating the law,
paying a dividend or approving a stock repurchase which was illegal, or
obtaining an improper personal benefit. A provision of this type has no effect
on the availability of equitable remedies, such as injunction or rescission, for
breach of fiduciary duty.
II-1
<PAGE> 17
Our bylaws require that directors and officers be indemnified to the
maximum extent permitted by Delaware law. We may, from time to time, enter into
indemnity agreements with each of our directors and officers requiring that we
pay on behalf of each director and officer party thereto any amount that he or
she is or becomes legally obligated to pay because of any claim or claims made
against him or her because of any act or omission or neglect or breach of duty
including any actual or alleged error or misstatement or misleading statement,
which he or she commits or suffers while acting in his or her capacity as a
director and/or officer of the company and solely because of his or her being a
director and/or officer. Under the DGCL, absent such an indemnity agreement,
indemnification of a director or officer is discretionary rather than mandatory
(except in the case of a proceeding in which a director or officer is successful
on the merits). Consistent with our bylaw provision on the subject, the
indemnity agreements require us to make prompt payment of defense and
investigation costs and expenses at the request of the director or officer in
advance of indemnification, provided that the recipient undertakes to repay the
amounts if it is ultimately determined that he or she is not entitled to
indemnification for such expense and provided further that such advance shall
not be made if it is determined that the director or officer acted in bad faith
or deliberately breached his or her duty to the company or its stockholders and,
as a result, it is more likely than not that it will ultimately be determined
that he or she is not entitled to indemnification under the terms of the
indemnity agreement. The indemnity agreements make the advance of litigation
expenses mandatory absent a special determination to the contrary. Under the
DGCL absent such an indemnity agreement, such advance would be discretionary.
Under the indemnity agreement, we would not be required to pay or reimburse the
director or officer for his or her expenses in seeking indemnification recovery
against us. By the terms of the indemnity agreement, its benefits are not
available if the director or officer has other indemnification or insurance
coverage for the subject claim or, with respect to the matters giving rise to
the claim, the director or officer:
(1) received a personal benefit,
(2) violated Section 16(b) of the Exchange Act or analogous
provisions of law, or
(3) committed enumerated acts of dishonesty. Absent the
indemnity agreement, indemnification that might be made available to
directors and officers could be changed by amendments to the Company's
Certificate of Incorporation or Bylaws.
Our directors' liability insurance policy insures our directors and
officers against the cost of defense, settlement or payment of a judgment under
some circumstances stated in the policy. The selling stockholder and the Company
each have agreed to indemnify the other and their respective officers, directors
and other controlling persons against liabilities, stated in the stock purchase
agreement, in connection with this registration, including liabilities under the
Securities Act.
ITEM 16. EXHIBITS
The following exhibits are filed herewith or incorporated by reference:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
<S> <C>
4.1* Amended and Restated Certificate of Incorporation.
4.2** Bylaws of the Company.
4.3*** Form of Common Stock Certificate.
4.4**** Stock Purchase Agreement, dated as of January 29, 1999, between
the Company and IBM.
5.1 Opinion of Gibson, Dunn & Crutcher LLP as to legality of the
securities registered hereby.
23.1 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit 5.1).
23.3 Consent of KPMG LLP, independent public accountants.
24***** Power of Attorney.
</TABLE>
- -------
* Incorporated by reference to the Company's Quarterly Report on Form
10-Q, Exhibit 3.4.1, filed May 9, 1997.
** Incorporated by reference to the Company's Quarterly Report on Form
10-Q, Exhibit 3.2.2, filed May 9, 1997.
*** Incorporated by reference to the Company's Registration Statement on
Form 8-B, filed April 3, 1987.
II-2
<PAGE> 18
**** Some information in Exhibit 4.4 has been redacted and is the subject of
a Request For Confidential Treatment we submitted to the SEC on February
8, 1999.
***** Previously filed.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the
registration statement (or the most recent
post-effective amendment thereof) which,
individually or in the aggregate, represent a
fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect
to the plan of distribution not previously
disclosed in the registration statement or any
material change to such information in the
registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Securities Exchange Commission by the registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act that are incorporated by reference
in the registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act, each post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered herein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-3
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Company certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Irvine, State of California, on February 8,
1999.
WESTERN DIGITAL CORPORATION
By: /s/ MICHAEL A. CORNELIUS
--------------------------------------
Michael A. Cornelius
Vice President, Law and Administration
and Secretary
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on February 8, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
* Chairman of the Board, President and Chief
- ------------------------------------------------
Charles A. Haggerty Executive Officer (Principal Executive Officer)
* Senior Vice President, and Chief Financial
- ------------------------------------------------
Duston M. Williams Officer (Principal Financial and Accounting
Officer)
* Director
- ------------------------------------------------
James A. Abrahamson
* Director
- ------------------------------------------------
Peter D. Behrendt
* Director
- ------------------------------------------------
I.M. Booth
* Director
- ------------------------------------------------
Irwin Federman
* Director
- ------------------------------------------------
Andre R. Horn
* Director
- ------------------------------------------------
Anne O. Krueger
</TABLE>
II-4
<PAGE> 20
<TABLE>
<S> <C>
* Director
- ------------------------------------------------
Thomas E. Pardun
*By /s/ Michael A. Cornelius Attorney-in-fact
- ------------------------------------------------
Michael A. Cornelius
</TABLE>
II-5
<PAGE> 21
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------
<S> <C>
4.1* Amended and Restated Certificate of Incorporation.
4.2** Bylaws of the Company.
4.3*** Form of Common Stock Certificate.
4.4**** Stock Purchase Agreement, dated as of January 29, 1999, between the
Company and IBM.
5.1 Opinion of Gibson, Dunn & Crutcher LLP as to legality of the securities
registered hereby.
23.1 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit 5.1).
23.3 Consent of KPMG LLP, independent public accountants.
24.***** Power of Attorney.
</TABLE>
- ----------
* Incorporated by reference to the Company's Quarterly Report on Form
10-Q, Exhibit 3.4.1, filed May 9, 1997.
** Incorporated by reference to the Company's Quarterly Report on Form
10-Q, Exhibit 3.2.2, filed May 9, 1997.
*** Incorporated by reference to the Company's Registration Statement on
Form 8-B, filed April 3, 1987.
**** Some information in Exhibit 4.4 has been redacted and is the subject of
a Request For Confidential Treatment we submitted to the SEC on February
8, 1999.
***** Previously filed.
<PAGE> 1
EXHIBIT 4.4
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is made and entered
into as of January 29, 1999 between Western Digital Corporation, a Delaware
corporation (the "Company"), and International Business Machines Corporation, a
New York corporation (the "Purchaser").
WHEREAS, the Company and the Purchaser intend to achieve the same
result as if the Company had paid cash, upon the dates due, under the two below
referenced pre-existing agreements between the parties, including the accrual of
any interest from the relevant contractual due dates to the date the Purchaser
actually receives cash from the sale of the shares of the Company to be provided
under this Agreement.
NOW, THEREFORE, the Company and the Purchaser agree as follows:
1. Definitions. As used in this Agreement, the following terms
shall have the following meanings:
Additional Shares: See Section 8 hereof.
Additional Shares Date: the date on which the additional
shares, if any, become registered under the securities act for resale by the
purchaser.
Adjustment Date: the later of (i) the last trade settlement
date from the sale of all of the Registrable Securities under this Agreement or
(ii) the commencement date of [*] pursuant to the Technology License (estimated
currently to be [*]); but in any event no later than June 30, 1999.
Additional Shares Average Closing Price: The average of the
closing prices of the Common Stock on the NYSE for the five (5) Business Days
immediately preceding the Additional Shares Date.
Base Amount: Forty Million Dollars ($40,000,000.00).
Business Day: Each week day that is not a day on which banking
institutions in the City of New York are authorized or obligated by law or
executive order to close.
Closing: See Section 2.1.
Common Stock: The shares of common stock, $.01 par value,
of the Company with all the rights attendant to any shares of common stock of
the Company.
* Portions of this document have been omitted pursuant to a confidential
treatment request filed with the Securities and Exchange Commission. Such
portions have been provided separately to the Commission.
<PAGE> 2
Deferral Notice: See section 9.2(h) hereof.
Effective Date: The date on which the Registration Statement
covering the resale by the Purchaser of the Initial Shares is declared effective
by the SEC.
Effective Date Average Closing Price: The average of the
closing prices of the Common Stock on the NYSE for the five (5) Business Days
immediately preceding the Effective Date.
Effectiveness Period: The Effective Date until the first to
occur of (A) June 30, 1999 or (B) the sale of all the Registrable Securities by
the Purchaser.
Exchange Act: The Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
Initial Shares: The number of shares of Common Stock
determined by dividing the Base Amount by the Effective Date Average Closing
Price.
Losses: See Section 9.5(a) hereof
Material Event: See Section 9.2(h) hereof.
Net Proceeds: The gross proceeds received by the Purchaser
from the sale of the registrable Securities on or prior to the Adjustment Date,
less all applicable commissions, discounts and other expenses incurred with
respect thereto, including any taxes concerning such transactions which the
Purchaser would not have incurred if the payment amounts specified in Section
2.2 of this Agreement had been paid by the Company to the Purchaser in cash
pursuant to the Patent License and Technology License.
NYSE: The New York Stock Exchange, Inc.
Patent License: The Patent License Agreement dated November 8,
1994 between the Company and the Purchaser, as amended on June 7, 1998.
Prospectus: The prospectus included in the Registration
Statement, as amended or supplemented by any amendment or prospectus supplement,
including post-effective amendments, and all materials incorporated by reference
or deemed to be incorporated by reference in such prospectus.
Registration Statement: The registration statement of the
Company that covers the resale by Purchaser of the Initial Shares and is
declared effective by the SEC on the Effective Date, including the Prospectus,
amendments and supplements to such registration statement, including
post-effective amendments, all exhibits, and all materials incorporated by
reference or deemed to be incorporated by reference in such registration
statement.
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<PAGE> 3
Registrable Securities: The Initial Shares and the Additional
Shares SEC: The Securities and Exchange Commission.
SEC Documents: All documents filed by the Company with the SEC
(including all exhibits and schedules thereto and documents incorporated by
reference therein, but not including any portion of any document which is not
deemed to be filed under applicable SEC rules and regulations).
Securities Act: The Securities Act of 1933, as amended, and
the rules and regulations promulgated by the SEC thereunder.
Technology License: The OEM Component Supply and Technology
License Agreement dated June 7, 1998 between the Company and the Purchaser.
2. The Closing.
2.1 Time and Place of the Closing. Subject to the terms and
conditions hereof, the closing of the sale and purchase of the Initial Shares
contemplated hereby (the "Closing") shall take place at the offices of Gibson,
Dunn & Crutcher, LLP, 333 South Grand Avenue, Los Angeles, California 90071, at
10:00 a.m., Los Angeles time, on a date which shall be no later than the first
Business Day after the Effective Date, or shall be handled by overnight mail as
agreed between the parties. Any closing of the sale and purchase of the
Additional Shares contemplated hereby shall be handled by overnight mail.
2.2 The Closing. At the Closing, the Company shall issue the
Initial Shares to the Purchaser. When the Purchaser is in receipt of Net
Proceeds in cash in an amount equal to a total sum of the Base Amount plus
applicable interest as set forth herein, the Purchaser will acknowledge the
extinguishment of the obligation of the Company to make payments to the
Purchaser in the aggregate equaling (i) the payment of [*] due on or before [*]
pursuant to [*] of the Patent License, (ii) the payments of (x) [*] due [*] days
after the commencement date of [*], which due date is [*] and (y) [*] due upon
the commencement date of [*], estimated to become due on [*] pursuant to [*] of
the Technology License) and (iii) applicable interest due as set forth in this
Agreement. No fractional shares of Common Stock shall be issued.
3. Conditions.
3.1 Company's Conditions. The obligations of the Company
hereunder are subject to the waiver or satisfaction of the following conditions:
3.1.1 The Effective Date shall have occurred prior to
March 1 1999.
* Portions of this document have been omitted pursuant to a confidential
treatment request filed with the Securities and Exchange Commission. Such
portions have been provided separately to the Commission.
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<PAGE> 4
3.1.2 The Effective Date Average Closing Price shall
be at least ten dollars ($10.00).
3.2 Purchaser's Condition. The obligations of the Purchaser
hereunder are subject to the condition that the Effective Date shall have
occurred prior to March 1,1999 and that the Registration Statement shall remain
effective from the initial Effective Date through March 1, 1999.
4. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Purchaser as follows:
4.1 Power and Authority. The Company has the full corporate
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. This Agreement has been duly executed and delivered by
the Company and is a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms.
4.2 Validity of Registrable Securities. All of the Registrable
Securities have been duly authorized and, if and when issued in accordance with
this Agreement, will be validly issued, fully paid and nonassessable.
4.3 SEC Documents. As of its filing date, each SEC Document
filed, and each SEC Document that will be filed by the Company pursuant hereto,
as amended or supplemented, (i) complied or will comply in all material respects
with the applicable requirements of the Exchange Act, and (ii) did not or will
not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
5. Representations and Warranties of the Purchaser. The Purchaser
hereby represents and warrants to the Company that:
5.1 Power and Authority. The Purchaser has the full corporate
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. This Agreement has been duly executed and delivered by
the Purchaser and is a valid and binding agreement of the Purchaser, enforceable
against the Purchaser in accordance with its terms.
5.2 Ownership of Common Stock. Except as otherwise disclosed
in writing to the Company prior to the execution of this Agreement, and except
for the normal activities of Purchaser's employee benefit plans funds, the
Purchaser owns beneficially (within the meaning of Rule 13d-3 of the Exchange
Act) no shares of Common Stock.
6. Covenants of the Purchaser. The Purchaser hereby covenants to and
with the Company as follows:
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<PAGE> 5
6.1 Disposition of the Initial Shares and Additional Shares.
The Purchaser will dispose of the Initial Shares, and later, the Additional
Shares, if any, as soon as practicable following the Effective Date in the
following manner: Except for the normal activities of Purchaser's employee
benefit plans, without the Company's approval, on any trading day the Purchaser
will not sell shares of Common Stock in excess of ten percent (10%) of the
average daily trading volume of the Common Stock on the NYSE during the
immediately preceding week ("Plan of Distribution"). Any Registrable Securities
that remain unsold by the Adjustment Date shall be returned to the Company by
the Purchaser once any adjustment payment due the Purchaser is received, or with
the reconciliation from the Purchaser if an adjustment payment is due to the
Company from the Purchaser.
6.2 Voting and Participation. The Purchaser agrees that it
will not vote any of the Registrable Securities during the time it holds the
Registrable Securities. The Purchaser has no intention of participating in the
formulation, determination or direction of the basic business decisions of the
Company, as evidenced by its agreement not to vote the registrable securities.
6.3 No breach or default. Unless this agreement terminates
pursuant to section 7.1, or the company otherwise breaches this Agreement, the
Purchaser will not declare any breach or default under either the patent license
or the technology license due to the failure of the Company to make the payments
to be satisfied as set forth in section 2.2. hereof.
7. Effective Date and Interest Payments.
7.1 Delay in Registration. If the Registration Statement
covering the Initial Shares is not declared effective by March 1, 1999, then
this Agreement will automatically end and the Parties will return to their
pre-existing contractual arrangements concerning the payments to IBM that are
the subject of this Agreement.
7.2 A daily balance of moneys owed the Purchaser by the
Company will be maintained by the Purchaser, based upon the sums being due in
the amounts and on the dates set forth in Section 2.2 of this Agreement. The
balance will be reduced (and can result in a negative balance) by immediately
available funds the Purchaser receives on any given day (trade settlement date)
from the sale of the Registrable Securities. Any interest due IBM will be
calculated daily, based on each closing daily balance. A balance in the
Company's favor will similarly accrue interest until IBM pays such balance to
the Company or another sum becomes due from the Company and the balance is
appropriately adjusted. The interest rate in both cases will be an annual rate
of 9.75%, which is two percentage points above the prime interest rate as quoted
by the New York office of Citigroup as of January 5, 1999. Expenses incurred by
the Purchaser above those normally incurred with a cash payment will be included
in the final reconciliation as deductions. For the purpose of estimating any
applicable Federal Income Tax above that that would have been incurred by the
Purchaser if the payments had been made in cash, the Federal Tax rate published
in
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<PAGE> 6
IBM's upcoming 1998 Annual Report shall be used. Any other applicable taxes
would be at the maximum statutory rates.
8. Reconciliation of Payments. A final reconciliation together with
documentation supporting a calculation of the Net Proceeds in accordance with
Section 7 and closing daily balances will be delivered to the Company by the
Purchaser within 10 days following the Adjustment Date. Any balance resulting
from the reconciliation shall be due immediately and paid by electronic funds
transfer in immediately available funds, within 10 days after delivery of the
reconciliation by the Purchaser to the Company. If the final payment described
in this paragraph due to either party is less than $10,000 in total, it is
hereby waived by the party to whom such payment would be made.
If the Net Proceeds are in excess of the Base Amount plus interest as
set forth in Section 7.2 above, such excess shall be paid by the Purchaser to
the Company by wire transfer in immediately available funds. If the Net Proceeds
are less than the Base Amount plus interest as set forth in Section 7.2 above,
the shortfall shall be paid by the Company to the Purchaser by wire transfer in
immediately available funds. Prior to June 1, 1999, at the Company's option, a
reasonably estimated shortfall payment by the Company may be made once with
additional Common Stock. If the Company elects to make such estimated payment
with Common Stock, the number of shares to be issued to the Purchaser (the
"Additional Shares") shall equal the estimated shortfall divided by the
Additional Shares Average Closing Price.
9. Registration Agreements.
9.1 Registration.
(a) The Company shall prepare and file or cause to be
prepared and filed with the SEC, as soon as practicable after the date hereof, a
Registration Statement registering the resale from time to time by the Purchaser
of all of the Initial Shares. The Registration Statement, and any post effective
amendment to cover Additional Shares, if any, shall be on Form S-3 or another
appropriate form permitting registration of the Registrable Securities for
resale by the Purchaser through brokers on the open market without the delivery
of a Prospectus to purchasers. The Company shall use its reasonable best efforts
to cause the Registration Statement to be declared effective under the
Securities Act as promptly as practicable but in any event by March 1, 1999, and
to keep the Registration Statement continuously effective under the Securities
Act until the end of the Effectiveness Period. The Purchaser shall be named as a
selling security holder in the Registration Statement.
(b) The Company shall supplement and amend the
Registration Statement if required by the rules, regulations or instructions
applicable to the registration form used by the Company for such Registration
Statement, if required by the Securities Act or, to the extent to which the
Company does not reasonably object, as reasonably requested by the Purchaser.
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<PAGE> 7
9.2 Registration Procedures. In connection with the
registration obligations of the Company under Section 9.1 hereof, the Company
shall:
(a) Prepare and file with the SEC such
amendments and post-effective amendments to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective during the
Effectiveness Period (including a post-effective amendment to cover the
Additional Shares, if issued); cause the related Prospectus to be supplemented
by any required Prospectus supplement and, as so supplemented, to be filed
pursuant Rule 424 (or any similar provision then in force) under the Securities
Act; and use its reasonable best efforts to comply with the provisions of the
Securities Act applicable to it with respect to the disposition of all
Registrable Securities during the Effectiveness Period in accordance with the
intended methods of disposition by the Purchaser set forth in the Registration
Statement as so amended or the Prospectus as so supplemented.
(b) As promptly as practicable give notice to
the Purchaser (i) when any Prospectus, Prospectus supplement, Registration
Statement or post-effective amendment to a Registration Statement has been filed
with the SEC and, with respect to a Registration Statement or any post-effective
amendment, when the same has been declared effective, (ii) of any request,
following the effectiveness of the Registration Statement under the Securities
Act, by the SEC or any other federal or state or governmental authority for
amendments or supplements to any Registration Statement or related Prospectus or
for additional information, (iii) of the issuance by the SEC or any other
federal or state governmental authority of any stop order suspending the
effectiveness of the Registration Statement or the initiation or threatening of
any proceedings for that purpose, and (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose.
(c) Use its reasonable best efforts to obtain
the withdrawal of any order suspending the effectiveness of the Registration
Statement or the lifting of any suspension of the qualification (or exemption
from qualification) of any of the Registrable Securities for sale in any
jurisdiction in which they have been qualified for sale, in either case at the
earliest practicable time.
(d) If reasonably requested by the Purchaser, as
promptly as practicable incorporate in a Prospectus supplement or post-effective
amendment to the Registration Statement such information as the Purchaser shall,
on the basis of an opinion of nationally-recognized counsel experienced in such
matters, determine to be required to be included therein by applicable law and
make any required filings of such Prospectus supplement or such post-effective
amendment; provided, that the Company shall not be required to take any actions
under this Section 9.2(d) that are not, in the opinion of nationally recognized
counsel experienced in such matters for the Company, in compliance with
applicable law.
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<PAGE> 8
(e) As promptly as practicable furnish to the
Purchaser, without charge, at least three (3) conformed copies of the
Registration Statement and any amendment thereto, including financial statements
and including schedules, all documents incorporated or deemed to be incorporated
therein by reference and all exhibits.
(f) During the Effectiveness Period, deliver to
the Purchaser in connection with any sale of Registrable Securities pursuant to
the Registration Statement, without charge, as many copies of the Prospectus or
Prospectuses relating to such Registrable Securities (including each preliminary
prospectus) and any amendment or supplement thereto as the Purchaser may
reasonably request; and the Company hereby consents (except while a Deferral
Notice is outstanding) to the use of such Prospectus or each amendment or
supplement thereto by the Purchaser in connection with any offering and sale of
the Registrable Securities covered by such Prospectus or any amendment or
supplement thereto in the manner set forth therein.
(g) Prior to any public offering of the
Registrable Securities pursuant to the Registration Statement, register or
qualify or cooperate with the Purchaser in connection with the registration or
qualification (or exemption from such registration or qualification) of the
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as the Purchaser reasonably
requests in writing; keep each such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period in connection with the
Purchaser's offer and sale of Registrable Securities pursuant to such
registration or qualification (or exemption therefrom) and do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of such Registrable Securities in the manner set forth in the
Registration Statement and the related Prospectus; provided, that the Company
will not be required to (i) qualify as a foreign corporation or as a dealer in
securities in any jurisdiction where it would not otherwise be required to
qualify but for this Agreement or (ii) take any action that would subject it to
general service of process in suits or to taxation in any such jurisdiction
where it is not then so subject.
(h) Upon (A) the issuance by the SEC of a stop
order suspending the effectiveness of the Registration Statement or the
initiation of proceedings with respect to the Registration Statement under
Section 8(d) or 8(e) of the Securities Act, (B) the occurrence of any event or
the existence of any fact (a "Material Event") as a result of which the
Registration Statement shall contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, or any Prospectus shall contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, or (C) the
occurrence or existence of any pending corporate development that, in the
discretion of the Company, makes it appropriate to suspend the availability of
the Registration Statement and the related Prospectus, (i) in the case of clause
(B) above, as promptly as practicable prepare and file, if necessary pursuant to
applicable law, a post-effective amendment to the Registration Statement or a
supplement to the related Prospectus or
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<PAGE> 9
any document incorporated therein by reference or file any other required
document that would be incorporated by reference into the Registration Statement
and Prospectus so that the Registration Statement does not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
the Prospectus does not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, as thereafter delivered to the purchasers of the
Registrable Securities being sold thereunder, and, in the case of a
post-effective amendment to a Registration Statement, use its reasonable best
efforts to cause it to be declared effective as promptly as is practicable, and
(ii) give notice to the Purchaser that the availability of the Registration
Statement is suspended (a "Deferral Notice") and, upon receipt of any Deferral
Notice, the Purchaser agrees not to sell any Registrable Securities pursuant to
the Registration Statement until the Purchaser's receipt of copies of the
supplemented or amended Prospectus provided for in clause (i) above, or until it
is advised in writing by the Company that the Prospectus may be used, and has
received copies of any additional or supplemental filings that are incorporated
or deemed incorporated by reference in such Prospectus. The Company will use its
reasonable best efforts to ensure that the use of the Prospectus may be resumed
(x) in the case of clause (A) above, as promptly as is practicable, (y) in the
case of clause (B) above, as soon as, in the sole judgment of the Company,
public disclosure of such Material Event would not be prejudicial or contrary to
the interests of the Company or, if necessary to avoid unreasonable burden or
expense, as soon as practicable thereafter, and (z) in the case of clause (C)
above, as soon as, in the discretion of the Company, such suspension is no
longer appropriate.
(i) If requested in writing in connection with a
disposition of Registrable Securities pursuant to the Registration Statement,
make reasonably available for inspection during normal business hours by a
representative for the Purchaser and any broker-dealers, attorneys and
accountants retained by the Purchaser, all relevant financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries, and cause the appropriate executive officers, directors and
designated employees of the Company and its subsidiaries to make reasonably
available for inspection during normal business hours all relevant information
reasonably requested by such representative for the Purchaser or any such
broker-dealers, attorneys or accountants in connection with such disposition, in
each case as is customary for similar "due diligence" examinations; provided,
however, that such persons shall first agree in writing with the Company that
any information that is reasonably and in good faith designated by the Company
in writing as confidential at the time of delivery of such information shall be
kept confidential by such persons and shall be used solely for the purposes of
exercising rights under this Agreement, unless (i) disclosure of such
information is required by court or administrative order or is necessary to
respond to inquiries of regulatory authorities, (ii) such information becomes
generally available to the public other than as a result of a disclosure or
failure to safeguard by any such person or (iii) such information becomes
available to any such person from a source other than the Company and such
source is not bound by a confidentiality agreement.
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<PAGE> 10
9.3 Purchaser's Obligations. The Purchaser agrees promptly to
furnish the Company all information required to be disclosed in order to make
the information furnished to the Company by the Purchaser not misleading and any
other information regarding the Purchaser and the Plan of Distribution that is
required to be disclosed in the Registration Statement pursuant to federal
securities law. Any sale of any Registrable Securities by the Purchaser shall
constitute a representation and warranty by the Purchaser that the information
provided by the Purchaser with respect to itself and its Plan of Distribution
does not as of the time of such sale contain any untrue statement of a material
fact provided by the Purchaser with respect to itself or its Plan of
Distribution.
9.4 Registration Expenses. The Company shall bear all fees and
expenses incurred in connection with the performance by the Company of its
obligations under Sections 9.1 and 9.2 of this Agreement whether or not the
Registration Statement is declared effective. Such fees and expenses shall
include, without limitation, (i) all registration and filing fees (including,
without limitation, fees and expenses with respect to (x) filings required to be
made with the National Association of Securities Dealers, Inc. and (y)
compliance with federal and state securities or Blue Sky laws), (ii) printing
expenses, (iii) duplication expenses relating to copies of any Registration
Statement or Prospectus delivered to the Purchaser hereunder, and (iv) fees and
disbursements of counsel for the Company in connection with the Registration
Statement. Notwithstanding the provisions of this Section 9.4, the Purchaser
shall pay all registration expenses to the extent required by applicable law and
shall bear (A) the fees and expenses of its own counsel and other consultants
and (B) all commissions, discounts and other costs of sale with respect to the
Registrable Securities; provided, however, that all such expenses incurred by
the Purchaser shall be included in the expenses which reduce the Net Proceeds
received by the Purchaser.
9.5 Indemnification.
(a) Indemnification by the Company. The Company shall
indemnify and hold harmless the Purchaser and any person or entity acting for
the Purchaser, and each person, if any, who controls the Purchaser (within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act) from and against all losses, liabilities, claims, damages and expenses
(including, without limitation, any legal or other expenses reasonably incurred
in connection with defending or investigating any such action or claim)
(collectively, "Losses"), arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or Prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however, that
the Company shall not be liable in any such case to the extent that any such
Losses arise out of or are based upon an untrue statement contained in or
omission or alleged omission from any of such documents in reliance upon and
conformity with any of the information relating to the Purchaser or its Plan of
Distribution furnished to the Company in writing by the Purchaser expressly for
use therein.
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<PAGE> 11
(b) Indemnification by the Purchaser. The Purchaser shall
indemnify and hold harmless the Company and its respective directors and
officers, and each person, if any, who controls the Company (within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act),
from and against all Losses arising out of or based upon any untrue statement of
a material fact contained in the Registration Statement or the Prospectus or in
any amendment or supplement thereto or in any preliminary prospectus, or arising
out of or based upon any omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading, to
the extent, but only to the extent, that such untrue statement or omission was
made in reliance upon and in conformity with information furnished to the
Company by the Purchaser expressly for use in such Registration Statement or
Prospectus.
(c) Conduct of Indemnification Proceedings. In case any
proceeding (including any governmental investigation) shall be instituted
involving any person in respect of which indemnity may be sought pursuant to
either of the two preceding paragraphs, such person (the "indemnified party")
shall promptly notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing and the indemnifying party, upon request of the
indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to representee indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the reasonable
fees and disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retrain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all indemnified parties, and that all such fees and
expenses shall be reimbursed as they are incurred. The indemnifying party shall
not be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any Losses by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel, and the indemnified party would be entitled
thereto pursuant to the second and third sentences of this paragraph, the
indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of such
settlement.
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<PAGE> 12
(d) Contribution. To the extent that the indemnification
provided for in this Section 9.5 is unavailable to an indemnified party under
Section 9.5(a) or 9.5(b) hereof in respect of any Losses or is insufficient to
hold such indemnified party harmless, then each applicable indemnifying party,
in lieu of indemnifying such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of such Losses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
indemnifying party or parties on the one hand and the indemnified party or
parties on the other hand or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the indemnifying party or parties on the one hand and of
the indemnified party or parties on the other hand in connection with the
statements or omissions that resulted in such Losses, as well as any other
relevant equitable considerations. Benefits received by the Company shall be
deemed to be equal to the Base Amount. Benefits received by the Purchaser shall
deemed to be equal to ten dollars. The relative fault of the Purchaser on the
one hand and the Company on the other hand shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Purchaser or by the Company. The parties hereto
agree that it would not be just and equitable if contribution pursuant to this
Section 9.5(d) were determined by pro rata allocation or by any other method or
allocation that does not take into account the equitable considerations referred
to in this paragraph. The amount paid or payable by an indemnified party as a
result of the Losses referred to in this paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim.
(e) The indemnity and contribution provisions contained
in this Section 9.5 shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement, (ii) any investigation made
by or on behalf of the Purchaser or any person controlling the Purchaser, or the
Company, or the Company's officers or directors or any person controlling the
Company and (iii) the sale of any Registrable Securities by the Purchaser.
10. Miscellaneous.
10.1 Performance; Waiver. The provisions of this Agreement may be
modified or amended, and waivers and consents to the performance and observance
of the terms hereof may be given, only by written instrument executed and
delivered by the Company and the Purchaser.
10.2 Successors and Assigns. All covenants and agreements contained in
this Agreement by on or behalf of the parties hereto shall bind, and inure to
the benefit of, the respective successors and assigns of the parties hereto;
provided, however, that the rights and obligations of either party hereto may
not be assigned without the prior written consent of the other party.
12
<PAGE> 13
10.3 Notices. All notices or other communications given or made
hereunder shall be validly given or made in writing and delivered by facsimile
transmission, or sent by overnight courier, to the following addresses (and
shall be deemed effective at the time of receipt thereof)
If to the Company: Western Digital Corporation
8105 Irvine Center Drive
Irvine, California 92618
Attention: Michael A. Cornelius
Vice President, Law and Administration
Telecopy No.: 949-932-7837
If to the Purchaser: International Business Machines Corporation
5600 Cottle Drive
San Jose, California
Attention: .Sharon W. Blasgen
Telecopy No.: 408-256-2138
or to such other address as the party to whom notice is to be given may have
previously furnished in writing to the other in the manner set forth above.
10.4 Governing Law and Waiver of Jury Trial. This Agreement
shall be governed by and construed in accordance with the laws of the State of
New York applicable to agreements made and performed entirely within such State.
Each party hereby waives its rights to a trial by jury.
10.5 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a Court of competent jurisdiction to be
invalid, void or unenforceable, this agreement shall be considered inoperable in
terms of the flow of the funds set forth in Section 2.2, and the payments will
be due as set forth in the Patent License and Technology License between the
parties.
10.6 Headings; Interpretation. The section headings herein are
for convenience only and shall not affect the construction hereof.
10.7 Entire Agreement. This Agreement embodies the entire
understanding between the parties relating to the subject matter hereof and
supersedes any and all prior oral or written agreements, representations or
warranties, contracts, understandings, correspondence, conversations and
memoranda between the Company and the Purchaser with respect to the subject
matter hereof.
10.8 No Third Party Rights. Except for the indemnified
parties, directors and officers described in Section 9 hereof, this Agreement is
intended solely for the benefit of the parties hereto and is not intended to
confer any benefits upon, or create any rights in favor of, any person other
than the parties hereto.
13
<PAGE> 14
10.9 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original and both of which
together shall be deemed to be one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
WESTERN DIGITAL CORPORATION
By: /s/ DUSTON M. WILLIAMS
_________________________
Name: Duston M. Williams
_______________________
Title: Senior Vice President & CFO
____________________________
INTERNATIONAL BUSINESS MACHINES CORPORATION
By: /s/ DAVID L. JOHNSON
_________________________
Name: David L. Johnson
______________________
Title: Vice President Finance & Strategy,
Technology Group
_______________________
14
<PAGE> 1
EXHIBIT 5.1
[Letterhead of Gibson, Dunn & Crutcher LLP]
February 8, 1999
(213) 229-7000 C96182-00132
Western Digital Corporation
8105 Irvine Center Drive
Irvine, California 92618
Re: Registration Statement on Form S-3 of Western Digital Corporation
Ladies and Gentlemen:
We refer to the registration statement on Form S-3 (the "Registration
Statement"), under the Securities Act of 1933, as amended (the "Securities
Act"), filed by Western Digital Corporation, a Delaware corporation (the
"Corporation"), with respect to the sale by the Corporation of the
Corporation's common stock, par value $0.01 per share ("Common Stock"), in
varying amounts and on terms to be determined at the time of sale, and the
resale by International Business Machines Corporation ("IBM") of shares of
Common Stock that may be issued and sold by the Corporation to IBM
(collectively, the "Shares"). The aggregate value of the Shares that may be
sold by the Corporation as described in the Registration Statement will not
exceed $190,000,000.
We have examined the originals or certified copies of such corporate
records, certificates of officers of the Corporation and/or public officials
and such other documents, and have made such other factual and legal
investigations, as we have deemed relevant and necessary as the basis for the
opinions set forth below. In such examination, we have assumed the genuineness
of all signatures, the authenticity of all documents submitted to us as
originals, the conformity to original documents of all documents submitted to
us as conformed or photostatic copies and the authenticity of the originals of
such copies.
<PAGE> 2
Western Digital Corporation
February 8, 1999
Page 2
Based on our examination described above, subject to the assumptions stated
above and relying on the statements of fact contained in the documents that we
have examined, we are of the opinion that when the Corporation receives
consideration per share for the Shares in such an amount (not less than the
par value per share) as has been or may be determined by the Board of Directors
of the Corporation, the Shares will have been duly authorized by all necessary
corporate action on the part of the Corporation, and, when issued and sold as
contemplated in the Registration Statement, the Shares will be validly issued,
fully paid and non-assessable.
This opinion is limited to the General Corporation Law of the State of
Delaware and United States federal law.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our name under the caption
"Legal Matters" in the Prospectus which forms a part of the Registration
Statement. In giving this consent, we do not admit that we are within the
category of persons whose consent is required under Section 7 of the Securities
Act or the General Rules and Regulations of the Securities and Exchange
Commission.
Very truly yours,
/s/ Gibson, Dunn & Crutcher LLP
-------------------------------
GIBSON, DUNN & CRUTCHER LLP
RSB/JBC/RAS
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-3 as amended and related prospectus of Western Digital
Corporation of our report dated July 27, 1998, with respect to the consolidated
balance sheets of Western Digital Corporation as of June 27, 1998 and June 28,
1997, and the related consolidated statements of operations, shareholders'
equity and cash flows for each of the years in the three-year period ended
June 27, 1998, and the related schedule, all of which are included in the
Company's Annual Report on Form 10-K for the year ended June 27, 1998 and to
the reference to our firm under the heading "Independent Auditors."
KPMG LLP
Orange County, California
February 8, 1999
