EXHIBIT 10.1


 





 


SECOND
MODIFICATION TO BUSINESS LOAN AGREEMENT


AND ADDENDUM A


 


This Second  Modification to Business Loan Agreement
and Addendum A (this “Modification”) is entered into by and between OVERLAND
STORAGE, INC. (“Borrower”) and COMERICA BANK-CALIFORNIA (“Bank”) as of
this 10th day of September 2003, at San Jose, California.


 


RECITALS


 


This Modification is
entered into upon the basis of the following facts and understandings of the
parties, which facts and understandings are acknowledged by the parties to be
true and accurate:


 


Bank and Borrower previously entered into a Business Loan Agreement and
Addendum A dated November 28, 2001, which was subsequently amended
pursuant to  that certain Modification agreement dated August 13,
2002.  The Business Loan Agreement and
each modification shall collectively be referred to herein as the “Agreement.”


 


NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as set forth
below.


 


AGREEMENT


 


1.                                       Incorporation
by Reference. The Recitals and the documents referred to therein are
incorporated herein by this reference. 
Except as otherwise noted, the terms not defined herein shall have the
meaning set forth in the Agreement.


 


2.                                       Modification
to the Agreement. Subject to the satisfaction of the conditions precedent
as set forth in Section 3 hereof, the Agreement is hereby modified as set
forth below.


 


A.                                   Section 1 of
Addendum A to Business Loan Agreement is hereby deleted in its entirety and
replaced with the following:


 


1.                                       Definitions
Relating to Financial Covenants.


 


Cash Flow as used in
this Agreement means for any applicable period of determination, the net income
(as later defined) (after deduction for income taxes and other taxes of Borrower
or its subsidiaries, determined by reference to income or profits of Borrower
or its subsidiaries) for such period, plus, to the extent deducted in
computation of such net income, the amount of depreciation and amortization
expense and the amount of deferred tax liability during such period, all as
determined in accordance with GAAP.


 


Cash Flow Coverage Ratio as
used in this Agreement means, as of any applicable date of determination,
Earnings Before Interest Taxes Amortization Depreciation and Amortization
(EBITDA), minus unfunded capital expenditures, minus tax expense, divided
by current portion of long term debt, plus interest expense
calculated on an annualized basis.


 


Current Assets as
used in this Agreement means, as of any applicable date of determination, all
unrestricted cash, CD’s or marketable securities, non-affiliated accounts
receivable, United States Government securities and/or claims against the
United States Government, and inventories (held for sale in the ordinary course
of business) of Borrower and its subsidiaries.


 


Current Liabilities
as used in this Agreement means, as of any applicable date of
determination,   (i) all liabilities of
Borrower or its subsidiaries that should be classified as current in accordance
with GAAP, including, without limitation, any portion of the principal of the
Indebtedness under this Agreement, the Note and/or the Loan Documents
classified as current, plus (ii) to the extent not otherwise included, all
liabilities of Borrower to any of its affiliates (including officers,
directors, shareholders, subsidiaries and commonly held companies), whether or
not classified as current in accordance with GAAP unless same shall be the long
term portion of Subordinated Debt (as defined below).


 


Current Ratio as
used in this Agreement means, as of an applicable date of determination,
Current Assets divided by Current Liabilities.


 


Debt shall mean, as of any
applicable date of determination, all items of indebtedness, obligation or
liability of a person, whether matured or unmatured, liquidated or
unliquidated, direct or indirect, absolute or contingent, joint or several,
that should be classified as liabilities in accordance with GAAP excepting such
liabilities as shall be Subordinated Debt (as defined below).


 


Net Income shall
mean the net income (or loss) of a person for any period determined in
accordance with GAAP but, however, excluding:


 


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(a)                                  any gains or losses
on the sale or other disposition, not in the ordinary course of business, of
investments or fixed or capital assets, and any taxes on the excluded gains and
any tax deductions or credits on account on any excluded losses; and


 


(b)                                 in the case of the
Borrower, net earnings of any person in which Borrower has an ownership
interest, unless such net earnings shall have actually been received by
Borrower in the form of cash distributions.


 


Quick Assets as used
in this Agreement means, as of any applicable date of determination,
unrestricted cash, CD’s or marketable securities and net accounts receivable
arising from the sale of goods and services, and United States Government
securities and/or claims against the United States Government of Borrower and
its subsidiaries.


 


Quick Ratio as used
in this Agreement means, as of an applicable date of determination, Quick
Assets divided by Current Liabilities, excluding subordinated debt.


 


Tangible Effective Net Worth as used
in this Agreement means Tangible Net Worth as of any applicable date of
determination, increased by the long term portion of Subordinated Debt (as
defined below), if any, of Borrower or its subsidiaries and decreased by the
following:  Subscription lists,
organization expenses, trade accounts receivable converted to notes, and money
due to Borrower or its subsidiaries from affiliates (including officers,
directors, subsidiaries and commonly held companies).


 


Tangible Net Worth
as used in this Agreement means, as of any applicable date of determination,
the excess of:


 


(a)                                  the
net book value of all assets of Borrower and its subsidiaries (other than
patents, patent rights, trademarks, trade names, franchises, copyrights,
licenses, goodwill, and similar intangible assets) after all appropriate
deductions in accordance with GAAP (including, without limitation, reserves for
doubtful receivables, obsolescence, depreciation and amortization), minus


 


(b)                                 all Total Liabilities
of Borrower and its subsidiaries and any amounts due from the Borrower’s
stockholders, officers and affilates.


 


Total Liabilities as
used in this Agreement means, as of any applicable date, the total of all items
of indebtedness, obligation or liability which, in accordance with GAAP
consistently applied, would be included in determining the total liabilities of
Borrower or its subsidiaries, including, without limitation, (a) all
obligations secured by any mortgage, pledge, security interest or other lien on
property owned or acquired, whether or not the obligations secured thereby
shall have been assumed; (b) all obligations which are capitalized lease
obligations; and (c) all guaranties, endorsements or other contingent or surety
obligations with respect to the indebtedness of others, whether or not
reflected on the balance sheets of Borrower or its subsidiaries, including,
without limitation, any obligation to furnish funds, directly or indirectly
through the purchase of goods, supplies, services, or by way of stock purchase,
capital contribution, advance or loan or any obligation to enter into a
contract for any of the foregoing.


 


Total Liabilities to Tangible Effective Net
Worth Ratio means, as of any applicable date, Total
Liabilities divided by Tangible Effective Net Worth.


 


Subordinated Debt as
used in this Agreement means indebtedness of Borrower to third parties which
has been subordinated to all Indebtedness owing by Borrower to Bank pursuant to
a subordination agreement in form and content satisfactory to Bank.


 


3.                                       Legal
Effect.  Except as specifically set
forth in this Modification, all of the terms and conditions of the Agreement
remain in full force and effect.  The
effectiveness of this Modification is conditioned upon receipt by Bank of this
Modification, and any other documents which Bank may require to carry out the
terms hereof, including but not limited to the following:


 


4.                                       Integration.
This is an integrated Modification and supersedes all prior negotiations and
agreements regarding the subject matter hereof.  All amendments hereto must be in writing and signed by the
parties.


 


IN WITNESS WHEREOF, the parties have agreed as of the date first set
forth above.


 


	
  OVERLAND STORAGE, INC.

  	
   

  	
  COMERICA BANK-CALIFORNIA

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Richmond Boyce

  
	
   

  	
   

  	
   

  	
  Vice President-Western DIvision

  
							



 


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