Document:

exv10w1

 

			
	WELLS FARGO	 	REVOLVING LINE OF CREDIT NOTE
	 	 	 
	$30,000,000.00
	 	San Diego, California

July 1, 2007

FOR VALUE RECEIVED, the undersigned Dot Hill Systems Corp. (“Borrower”) promises to pay to the
order of WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”) at its office at San Diego RCBO, 401 B
Street, Suite #2201, San Diego, CA 92101, or at such other place as the holder hereof may
designate, in lawful money of the United States of America and in immediately available funds, the
principal sum of $30,000,000.00, or so much thereof as may be advanced and be outstanding, with
interest thereon, to be computed on each advance from the date of its disbursement as set forth
herein.

1. DEFINITIONS:

     As used herein, the following terms shall have the meanings set forth after each, and any
other term defined in this Note shall have the meaning set forth at the place defined:

1.1 “Business Day” means any day except a Saturday, Sunday or any other day on which commercial
banks in California are authorized or required by law to close.

1.2 “Fixed Rate Term” means a period commencing on a Business Day and continuing for 1, 2, 3, 6 or
12- months, as designated by Borrower, during which all or a portion of the outstanding principal
balance of this Note bears interest determined in relation to LIBOR; provided however, that no
Fixed Rate Term may be selected for a principal amount less than
$100,000.00; and provided further,
that no Fixed Rate Term shall extend beyond the scheduled maturity date hereof. If any Fixed Rate
Term would end on a day which is not a Business Day, then such Fixed Rate Term shall be extended to
the next succeeding Business Day.

1.3 “LIBOR” means the rate per annum (rounded upward, if necessary, to the nearest whole 1/8 of 1%)
determined by dividing Base LIBOR by a percentage equal to 100% less any LIBOR Reserve Percentage.

(a) “Base LIBOR” means the rate per annum for United States dollar deposits quoted by Bank as
the Inter-Bank Market Offered Rate, with the understanding that such rate is quoted by Bank
for the purpose of calculating effective rates of interest for loans making reference thereto,
on the first day of a Fixed Rate Term for delivery of funds on said date for a period of time
approximately equal to the number of days in such Fixed Rate Term and in an amount
approximately equal to the principal amount to which such Fixed Rate Term applies. Borrower
understands and agrees that Bank may base its quotation of the Inter-Bank Market Offered Rate
upon such offers or other market indicators of the Inter-Bank Market as Bank in its discretion
deems appropriate including, but not limited to, the rate offered for U.S. dollar deposits on
the London Inter-Bank Market.

(b) “LIBOR Reserve Percentage” means the reserve percentage prescribed by the Board of
Governors of the Federal Reserve System (or any successor) for “Eurocurrency Liabilities” (as
defined in Regulation D of the Federal Reserve Board, as amended), adjusted by Bank for
expected changes in such reserve percentage during the applicable Fixed Rate Term.

1.4 “Prime Rate” means at any time the rate of interest most recently announced within Bank at its
principal office as its Prime Rate, with the understanding that the Prime Rate is one of Bank’s
base rates and serves as the basis upon which effective rates of interest are calculated for those
loans making reference thereto, and is evidenced by the recording thereof after its announcement in
such internal publication or publications as Bank may designate.

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2. INTEREST:

2.1 Interest. The outstanding principal balance of this Note shall bear interest (computed
on the basis of a 360-day year, actual days elapsed) either (a) at a fluctuating rate per annum
equal to the Prime Rate in effect from time to time, or (b) at a fixed rate per annum determined by
Bank to be 0.65000% above LIBOR in effect on the first day of the applicable Fixed Rate Term. When
interest is determined in relation to the Prime Rate, each change in the rate of interest hereunder
shall become effective on the date each Prime Rate change is announced within Bank. With respect
to each LIBOR selection option selected hereunder, Bank is hereby authorized to note the date,
principal amount, interest rate and Fixed Rate Term applicable thereto and any payments made
thereon on Bank’s books and records (either manually or by electronic entry) and/or on any schedule
attached to this Note, which notations shall be prima facie evidence of the accuracy of the
information noted.

2.2 Selection of Interest Rate Options. At any time any portion of this Note bears
interest determined in relation to LIBOR, it may be continued by Borrower at the end of the Fixed
Rate Term applicable thereto so that all or a portion thereof bears interest determined in relation
to the Prime Rate or to LIBOR for a new Fixed Rate Term designated by Borrower. At any time any
portion of this Note bears interest determined in relation to the Prime Rate, Borrower may convert
all or a portion thereof so that it bears interest determined in relation to LIBOR for a Fixed Rate
Term designated by Borrower. At such time as Borrower requests an advance hereunder or wishes to
select a LIBOR option for all or a portion of the outstanding principal balance hereof, and at the
end of each Fixed Rate Term, Borrower shall give Bank notice specifying: (a) the interest rate
option selected by Borrower; (b) the principal amount subject thereto; and (c) for each LIBOR
selection, the length of the applicable Fixed Rate Term. Any such notice may be given by telephone
(or such other electronic method as Bank may permit) so long as, with respect to each LIBOR
selection, (i) if requested by Bank, Borrower provides to Bank written confirmation thereof not
later than 3 Business Days after such notice is given, and (ii) such notice is given to Bank prior
to 10:00 a.m. on the first day of the Fixed Rate Term, or at a later time during any Business Day
if Bank, at it’s sole option but without obligation to do so, accepts Borrower’s notice and quotes
a fixed rate to Borrower. If Borrower does not immediately accept a fixed rate when quoted by
Bank, the quoted rate shall expire and any subsequent LIBOR request from Borrower shall be subject
to a redetermination by Bank of the applicable fixed rate. If no specific designation of
interest is made at the time any advance is requested hereunder or at the end of any Fixed Rate
Term, Borrower shall be deemed to have made a Prime Rate interest selection for such advance or the
principal amount to which such Fixed Rate Term applied.

2.3 Taxes and Regulatory Costs. Borrower shall pay to Bank immediately upon demand, in
addition to any other amounts due or to become due hereunder, any and all (a) withholdings,
interest equalization taxes, stamp taxes or other taxes (except income and franchise taxes) imposed
by any domestic or foreign governmental authority and related in any manner to LIBOR, and (b)
future, supplemental, emergency or other changes in the LIBOR Reserve Percentage, assessment rates
imposed by the Federal Deposit Insurance Corporation, or similar requirements or costs imposed by
any domestic or foreign governmental authority or resulting from compliance by Bank with any
request or directive (whether or not having the force of law) from any central bank or other
governmental authority and related in any manner to LIBOR to the extent they are not included in
the calculation of LIBOR. In determining which of the foregoing are attributable to any LIBOR
option available to Borrower hereunder, any reasonable allocation made by Bank among its operations
shall be conclusive and binding upon Borrower.

2.4 Payment of Interest. Interest accrued on this Note shall be payable on the 1st day of
each month, commencing August 1, 2007.

2.5 Default Interest. From and after the maturity date of this Note, or such earlier date
as all principal owing hereunder becomes due and payable by acceleration or otherwise, the
outstanding principal balance of this Note shall bear interest until paid in full at an increased
rate per annum (computed on the basis of a 360-day year, actual days elapsed) equal to 4% above the
rate of interest from time to time applicable to this Note.

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3. BORROWING AND REPAYMENT:

3.1 Borrowing and Repayment. Borrower may from time to time during the term of this Note
borrow, partially or wholly repay its outstanding borrowings, and reborrow, subject to all of the
limitations, terms and conditions of this Note and of the Credit Agreement between Borrower and
Bank defined below; provided however, that the total outstanding borrowings under this Note shall
not at any time exceed the principal amount stated above. The unpaid principal balance of this
obligation at any time shall be the total amounts advanced hereunder by the holder hereof less the
amount of principal payments made hereon by or for Borrower, which balance may be endorsed hereon
from time to time by the holder. The outstanding principal balance of this Note shall be due and
payable in full on July 1, 2009.

3.2 Advances. Advances hereunder, to the total amount of the principal sum available
hereunder, may be made by the holder at the oral or written request of (a) Dana Kammersgard or
Hanif Jamal or Shad Burke, any one acting alone, who are authorized to request advances and direct
the disposition of any advances until written notice of the revocation of such authority is
received by the holder at the office designated above, or (b) any person, with respect to advances
deposited to the credit of any deposit account of Borrower, which advances, when so deposited,
shall be conclusively presumed to have been made to or for the benefit of Borrower regardless of
the fact that persons other than those authorized to request advances may have authority to draw
against such account. The holder shall have no obligation to determine whether any person
requesting an advance is or has been authorized by Borrower.

3.3 Application of Payments. Each payment made on this Note shall be credited first, to any
interest then due and second, to the outstanding principal balance hereof. All payments credited to
principal shall be applied first, to the outstanding principal balance of this Note which bears
interest determined in relation to the Prime Rate, if any, and second, to the outstanding principal
balance of this Note which bears interest determined in relation to LIBOR, with such payments
applied to the oldest Fixed Rate Term first.

4. PREPAYMENT:

4.1 Prime Rate. Borrower may prepay principal on any portion of this Note which bears
interest determined in relation to the Prime Rate at any time, in any amount and without penalty.

4.2 LIBOR. Borrower may prepay principal on any portion of this Note which bears interest
determined in relation to LIBOR at any time and in the minimum amount of $100,000.00; provided
however, that if the outstanding principal balance of such portion of this Note is less than said
amount, the minimum prepayment amount shall be the entire outstanding principal balance thereof.
In consideration of Bank providing this prepayment option to Borrower, or if any such portion of
this Note shall become due and payable at any time prior to the last day of the Fixed Rate Term
applicable thereto by acceleration or otherwise, Borrower shall pay to Bank immediately upon demand
a fee which is the sum of the discounted monthly differences for each month from the month of
prepayment through the month in which such Fixed Rate Term matures, calculated as follows for each
such month:

(a) Determine the amount of interest which would have accrued each month on the amount
prepaid at the interest rate applicable to such amount had it remained outstanding until the
last day of the ‘Fixed Rate Term applicable thereto.

(b) Subtract from the amount determined in (a) above the amount of interest which
would have accrued for the same month on the amount prepaid for the remaining term of such
Fixed Rate Term at LIBOR in effect on the date of prepayment for new loans made for such term
and in a principal amount equal to the amount prepaid.

(c) If
the result obtained in (b) for any month is greater than zero, discount that
difference by LIBOR used in (b) above.

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Borrower acknowledges that prepayment of such amount may result in Bank incurring additional
costs, expenses and/or liabilities, and that it is difficult to ascertain the full extent of such
costs, expenses and/or liabilities. Borrower, therefore, agrees to pay the above-described
prepayment fee and agrees that said amount represents a reasonable estimate of the prepayment
costs, expenses and/or liabilities of Bank. If Borrower fails to pay any prepayment fee when due,
the amount of such prepayment fee shall thereafter bear interest until paid at a rate per annum
2,000% above the Prime Rate in effect from time to time (computed on the basis of a 360-day year,
actual days elapsed).

5. EVENTS OF DEFAULT:

     This Note is made pursuant to and is subject to the terms and conditions of that certain
Credit Agreement between Borrower and Bank dated as of July 1, 2004, as amended from time to time
(the “Credit Agreement”). Any default in the payment or performance of any obligation under this
Note, or any defined event of default under the Credit Agreement, shall constitute an “Event of
Default” under this Note.

6. MISCELLANEOUS:

6.1 Remedies. Upon the occurrence of any Event of Default, the holder of this Note, at
the holder’s option, may declare all sums of principal and interest outstanding hereunder to be
immediately due and payable without presentment, demand, notice of nonperformance, notice of
protest, protest or notice of dishonor, all of which are expressly waived by Borrower, and the
obligation, if any, of the holder to extend any further credit hereunder shall immediately cease
and terminate. Borrower shall pay to the holder immediately upon demand the full amount of all
payments, advances, charges, costs and expenses, including reasonable attorneys’ fees (to include
outside counsel fees and all allocated costs of the holder’s in-house counsel), expended or
incurred by the holder in connection with the enforcement of the holder’s rights and/or the
collection of any amounts which become due to the holder under this Note, and the prosecution or
defense of any action in any way related to this Note, including without limitation, any action for
declaratory relief, whether incurred at the trial or appellate level, in an arbitration proceeding
or otherwise, and including any of the foregoing incurred in connection with any bankruptcy
proceeding (including without limitation, any adversary proceeding, contested matter or motion
brought by Bank or any other person) relating to Borrower or any other person or entity.

6.2 Obligations Joint and Several. Should more than one person or entity sign this Note as
a Borrower, the obligations of each such Borrower shall be joint and several.

6.3 Governing Law. This Note shall be governed by and construed in accordance with the laws
of the State of California.

IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first written above.

	 	 	 	 	 
	Dot Hill Systems Corp.	 	 
	 
	 	 	 	 
	By:

	 	/s/ Hanif I. Jamal	 	 
	 

	 	 	 	 
	Title:

	 	CFO	 	 
	 
	 	 	 	 
	By:

	 	/s/ Dana W. Kammersgard	 	 
	 

	 	 	 	 
	Title:

	 	CEO	 	 

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THIRD AMENDMENT TO CREDIT AGREEMENT

          THIS AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) is entered into as of July 1, 2007,
by and between DOT HILL SYSTEMS CORP., a Delaware corporation (“Borrower”), and WELLS FARGO
BANK, NATIONAL ASSOCIATION (“Bank”).

RECITALS

          WHEREAS, Borrower is currently indebted to Bank pursuant to the terms and conditions of
that certain Credit Agreement between Borrower and Bank dated as of July 1, 2004, as amended
from time to time (“Credit Agreement”).

          WHEREAS, Bank and Borrower have agreed to certain changes in the terms and conditions set
forth in the Credit Agreement and have agreed to amend the Credit Agreement to reflect said
changes.

          NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree that the Credit Agreement shall be amended as
follows:

          1. Section 1.1. (a) is hereby amended by deleting “July 1, 2007” as the last day on which
Bank will make advances under the Line of Credit, and by substituting for said date “July 1,
2009,” with such change to be effective upon the execution and delivery to Bank of a promissory
note dated as of July 1, 2007 (which promissory note shall replace and be deemed the Line of
Credit Note defined in and made pursuant to the Credit Agreement) and all other contracts,
instruments and documents required by Bank to evidence such change.

          2. The first sentence of Section 1.2. (a) is hereby deleted in its entirety, and the
following substituted therefor:

     “Subject to the terms and conditions of this Agreement, Bank
hereby agrees to make available to Borrower a facility (the
“Foreign Exchange Facility”) under which Bank, from time to time
up to and including July 1, 2009, will enter into foreign exchange
contracts for the account of Borrower for the purchase and/or sale
by Borrower in United States dollars of foreign currencies
designated by Borrower; provided however, that the maximum amount
of all outstanding foreign exchange contracts shall not at any
time exceed an aggregate of Five Million United States Dollars
(US$5,000,000.00).”

          3. Except as specifically provided herein, all terms and conditions of the Credit Agreement
remain in full force and effect, without waiver or modification. All terms defined in the Credit
Agreement shall have the same meaning when used in this Amendment. This Amendment and the Credit
Agreement shall be read together, as one document.

          4. Borrower hereby remakes all representations and warranties contained in the
Credit Agreement and reaffirms all covenants set forth therein. Borrower further certifies
that as of the date of this Amendment there exists no Event of Default as defined in the
Credit

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Agreement, nor any condition, act or event which with the giving of notice or the passage of time
or both would constitute any such Event of Default.

          IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of
the day and year first written above.

	 	 	 	 	 	 	 
	 	 	 	 	WELLS FARGO BANK,
	DOT HILL SYSTEMS CORP.	 	NATIONAL ASSOCIATION
	 
	 	 	 	 	 	 
	By:

	 	/s/ Hanif I. Jamal
	 	By:
	 	/s/ Brian P. Chambers
	 

	 	 
	 	 	 	 
	Title:

	 	CFO
	 	 	 	Brian P. Chambers
	 

	 	 	 	 	 	Vice President
	 
	 	 	 	 	 	 
	By:

	 	/s/ Dana W. Kammersgard	 	 	 	 
	 

	 	 	 	 	 	 
	Title:

	 	CEO	 	 	 	 

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CERTIFICATION

     I, HANIF JAMAL Secretary of Dot Hill Systems Corp., a corporation created and
existing under the laws of Delaware, do hereby certify and declare that the foregoing is a full,
true and correct copy of the resolutions duly passed and adopted by the Board of Directors of said
corporation, by written consent of all Directors of said corporation or at a meeting of said Board
duly and regularly called, noticed and held on July 30, 2007, at which meeting a quorum of the Board of Directors was present and voted in
favor of said resolutions; that said resolutions are now in full force and effect; that there is
no provision in the Articles of incorporation or Bylaws of said corporation, or any shareholder
agreement, limiting the power of the Board of Directors of said corporation to pass the foregoing
resolutions and that such resolutions are in conformity with the provisions of such Articles of
Incorporation and Bylaws; and that no approval by the shareholders of, or of the outstanding
shares of, said corporation is required with respect to the matters which are the subject of the
foregoing resolutions.

     IN WITNESS WHEREOF, I have hereunto set my hand, and if required by Bank affixed the corporate
seal of said corporation, as of 

July 31, 2007

	 	 	 	 	 
	 	 	 
	 	                              /s/ Hanif I. Jamal
 	 
	 	HANIF JAMAL, Secretary	 
	 

(SEAL)

 

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	WELLS FARGO
	 	CORPORATE RESOLUTION: BORROWING

TO: WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”)

     RESOLVED: That this corporation, Dot Hill Systems Corp., proposes to obtain credit from time
to time, or has obtained credit, from Bank.

     BE IT FURTHER RESOLVED, that any two of the following officers (use titles
only):

     President and CEO, Vice President Finance, CFO and Treasurer

of this corporation be and they are hereby authorized and empowered for and on behalf of and in the
name of this corporation and as its corporate act and deed:

     (a) To borrow money from Bank and to assume any liabilities of any other person or entity to
Bank, in such form and on such terms and conditions as shall be agreed upon by those authorized
above and Bank, and to sign and deliver to Bank such promissory notes and other evidences of
indebtedness for money borrowed or advanced and/or for indebtedness assumed as Bank shall require;
such promissory notes or other evidences of indebtedness may provide that advances be requested by
telephone communication and by any officer, employee or agent of this corporation so long as the
advances are deposited into any deposit account of this corporation with Bank; this corporation
shall be bound to Bank by, and Bank may rely upon, any communication or act, including telephone
communications, purporting to be done by any officer, employee or agent of this corporation
provided that Bank believes, in good faith, that the same is done by such person.

     (b) To contract for the issuance by Bank of letters of credit, to discount with Bank notes,
acceptances and evidences of indebtedness payable to or due this corporation, to endorse the same
and execute such contracts and instruments for repayment thereof to Bank as Bank shall require, and
to enter into any swap, derivative, foreign exchange, hedge or other similar transaction or
arrangement with or through Bank.

     (c) To mortgage, encumber, pledge, convey, grant, assign or otherwise transfer all or any
part of this corporation’s real or personal property for the purpose of securing the payment of
any of the promissory notes, contracts, instruments and other evidences of indebtedness authorized
hereby, and to execute and deliver to Bank such deeds of trust, mortgages, pledge agreements,
security agreements and/or other related documents as Bank shall
require.

     (d) To perform all acts and to execute and deliver all documents described above and all other
contracts and instruments which Bank deems necessary or convenient to accomplish the purposes of
this resolution and/or to perfect or continue the rights, remedies and security interests to be
given to Bank pursuant hereto, including without limitation, any modifications, renewals and/or
extensions of any of this corporation’s obligations to Bank, however evidenced; provided that the
aggregate principal amount of all sums borrowed and credits established pursuant to this resolution
shall not at any time exceed the sum of $30,000,000.00 outstanding and unpaid.

     Loans made pursuant to a special resolution and loans made by offices of Bank other than the
office to which this resolution is delivered shall be in addition to foregoing limitation.

     BE IT FURTHER RESOLVED, that the authority hereby conferred is in addition to that conferred
by any other resolution heretofore or hereafter delivered by this corporation to Bank and shall
continue in full force and effect until Bank shall have received notice in writing, certified by
the Secretary of this corporation, of the revocation hereof by a resolution duly adopted by the
Board of Directors of this corporation. Any such revocation shall be effective only as to credit
which is extended or committed by Bank, or actions which are taken by this corporation pursuant to
the resolutions contained herein, subsequent to Bank’s receipt of such notice. The authority
hereby conferred shall be deemed retroactive, and any and all acts authorized herein which were
performed prior to the passage of this resolution are hereby approved and ratified.

SEE FOLLOWING PAGE FOR CERTIFICATION

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	WELLS FARGO
	 	CERTIFICATE OF INCUMBENCY

TO: WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”)

     The undersigned, HANIF JAMAL, Secretary of Dot Hill Systems Corp., a corporation
created and existing under the laws of Delaware, hereby certifies to Bank that: (a) the following
named persons are duly elected officers of this corporation and presently hold the titles
specified below; (b) said officers are authorized to act on behalf of this Corporation in
transactions with Bank; and (c) the signature opposite each officer’s name is his or her true
signature:

	 	 	 	 	 
	TITLE	 	NAME	 	SIGNATURE
	 
	 	 	 	 
	President and CEO

	 	Dana W. Kammersgard
	 	/s/ Dana W. Kammersgard
	 
	 	 	 	 
	CFO and Treasurer

	 	Hanif I. Jamal
	 	/s/ Hanif I. Jamal
	 
	 	 	 	 
	Vice President Finance

	 	Shad Burke
	 	/s/ Shad Burke

     The undersigned further certifies that if any of the above-named officers change, or if, at
any time, any of said officers are no longer authorized to act on behalf of this corporation in
transactions with Bank, this corporation shall immediately provide to Bank a new Certificate of
incumbency. Bank is hereby authorized to rely on this Certificate of Incumbency until a new
Certificate of Incumbency certified by the Secretary of this corporation is received by Bank.

     IN TESTIMONY WHEREOF, I have hereunto set my hand, and if required by Bank affixed the
corporate seal of said corporation, as of July 31, 2007

	 	 	 	 	 
	 	 	 
	 	
/s/  Hanif I. Jamal
 	 
	 	Secretary 	 
	 	 	 
	 

(SEAL)

	 	 	 	 	 
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AUTHORIZATION FOR

FOREIGN EXCHANGE TRANSACTIONS

          Effective as of July 1, 2007, WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”) is authorized to
act on the telephone orders for foreign exchange transactions initiated by, and to accept
confirmations for foreign exchange transactions from, the following individuals on behalf of DOT
HILL SYSTEMS CORP. (the “Company”).

	A.	 	Individuals authorized to execute foreign exchange transactions:

	 	 	 	 	 	 	 
	 	 	Name (print or type)	 	Signature	 	 
	 
	 	 	 	 	 	 
	1.

	 	Dana W. Kammersgard
	 	/s/ Dana W. Kammersgard	 	 
	 
	 	 	 	 	 	 
	2.

	 	Hanif I. Jamal
	 	/s/ Hanif I. Jamal	 	 
	 
	 	 	 	 	 	 
	3.

	 	 

	 	 

	 	 
	 

	 	 

	 	 

	 	 
	 
	 	 	 	 	 	 
	4.
	 	 	 	 	 	 
	 

	 	 
	 	 	 	 

	B.	 	Individuals authorized to sign foreign exchange confirmations:

	 	 	 	 	 	 	 
	 	 	Name (print or type)	 	Signature	 	 
	 
	 	 	 	 	 	 
	1.

	 	 Dana W. Kammersgard
	 	/s/ Dana W. Kammersgard	 	 
	 
	 	 	 	 	 	 
	2.

	 	 Hanif I. Jamal
	 	/s/ Hanif I. Jamal	 	 
	 
	 	 	 	 	 	 
	3.
	 	 	 	 	 	 
	 

	 	 

	 	 

	 	 
	 
	 	 	 	 	 	 
	4.
	 	 	 	 	 	 
	 

	 	 
	 	 	 	 

               Should any designation set forth above change, the Company shall provide Bank immediately with a
new Authorization. Bank is hereby authorized to rely on the designations set forth in this
Authorization until a new Authorization from the Company, duly executed, is received by Bank.

	 	 	 	 	 
	DOT HILL SYSTEMS CORP.	 	 
	 
	 	 	 	 
	By:

	 	/s/ Hanif I. Jamal
 

	 	 
	Title:

	 	CFO	 	 
	 
	 	 	 	 
	By:

	 	/s/ Dana W. Kammersgard
 

	 	 
	Title:

	 	CEO	 	 

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C-004, DOC (Rev. 03/00)exhibit101_palkovicagreement.htm

                                                                            EXHIBIT
      10.1

     

    As of October 5, 2007

     

     

    Mr. Michael Palkovic

     

     

     

     

    Dear Mike:

     

     

     

               
This letter agreement (“Agreement”) provides the terms of your employment with
      The DIRECTV Group, Inc. (the “Company”) and replaces the letter agreement
      between us dated as of March 19, 2005 and the Change in Control Agreement (as
      defined in such letter agreement) (the “Prior Agreements”).

     

     

     

    1.           
      (a) The Company hereby employs you for a period commencing as of the date hereof
      and ending on December 31, 2010 (the “Term”).

     

     

     

    (b) If you
      continue in the employ of the Company after the end of the Term and an extension
      of your employment has not been negotiated, your employment shall be on an
      at-will basis at the weekly salary rate paid during your last regular pay period
      hereunder and shall otherwise be in accordance with this Agreement and the
      provisions of such policies of the Company as are then in effect for comparable
      executives of the Company.

     

    2.           
            (a) For your services hereunder the Company will,
      on regular pay dates as then in effect under applicable Company policy, pay
      you
      a base salary at the rate of $800,000 per annum, subject to annual increase
      for
      each calendar year beginning on or after January 1, 2009, such annual increase
      to be generally commensurate with other senior executives of the Company, with
      the actual salary increase for any year to be subject to the approval of the
      Compensation Committee of the Board of Directors of the Company (“Committee”) if
      required under applicable Company policies. 

     

     

     

    (b) Subject to approval by the Committee
      if required under applicable Company policies, for each calendar year during
      the
      Term, (i) an annual target cash bonus (“Target Bonus”), set as a percentage of
      your then current salary, will be established and provided to you in writing
      prior to the end of the first quarter of such year, and (ii) you shall receive
      at the time annual bonuses are paid for the prior year pursuant to applicable
      Company policy, payment of your annual cash bonus based on your Target Bonus
      for
      such prior year and your achievement of certain targets established by the
      Chief
      Executive Officer of the Company.  The Target Bonus shall be appropriate to
      your position in the Company and generally commensurate with the target bonus
      of
      other senior executives of the Company, taking into account your role in the
      Company as compared to such other senior executives.  Your initial Target
      Bonus shall be 80% of your base salary.

     

    
(c) Subject to approval by the
      Committee if required under applicable Company policies, you shall also receive
      equity compensation, (e.g., options or restricted stock units) appropriate
      to
      your position in the Company and generally commensurate with grants to other
      senior executives of the Company, taking into account your role in the Company
      as compared to such other senior executives.  In any event, under current
      circumstances, your annual grant of equity compensation is expected to have
      a
      fair market value at least equal to your base salary.

     

     

     

    (d) You shall receive vacation and other
      perquisites and all other benefits generally commensurate with comparable
      executives of the Company. 

     

    3.           
      (a) You shall serve as Executive Vice President--Operations, reporting directly
      to the President and Chief Executive Officer of the Company.  You shall be
      based in El Segundo, California, subject to such travel as the rendering of
      services hereunder may require.

     

     

     

    (b) If you are elected a member of the
      Board of Directors or to any other office of the Company or any of its
      affiliates, you agree to serve in such capacity or capacities without additional
      compensation, unless additional compensation or benefits are paid to comparable
      executives.

     

     

     

    (c) You hereby accept such employment
      and agree to devote your full time and attention as necessary to fulfill all
      of
      the duties of your employment hereunder.

     

     

     

    4.
     (a) Notwithstanding
      anything to the contrary contained
      in paragraph 1 (a) above, this Agreement may be terminated by the Company for
      cause if: 

     

    (i)                
      you are convicted of, or plead guilty or nolo contendere to a
      felony;

     

    (ii)              
      you engage in conduct that constitutes continued willful neglect or willful
      misconduct in carrying out your duties under this Agreement, resulting, in
      either case, in economic harm to or damage to the reputation of the Company
      or
      any of its affiliates; or

     

    (iii)            
      you breach any material affirmative or negative covenant or undertaking
      hereunder, which breach is not substantially cured within fifteen days after
      written notice to you specifying such breach.

     

    If you are terminated for cause, you
      shall be entitled only to payment of your base salary and accrued vacation
      pay
      (if any) through the date of termination of your employment for
      cause.

     

    (b) If your employment is terminated
      due
      to death, your estate or beneficiaries, as the case may be, shall be entitled
      to: 

     

     

     

    (i)                
      payment of base salary through the date of termination;

     

    (ii)              
      payment of the pro-rated portion of the annual bonus that you received for
      the
      fiscal year immediately preceding the date of termination; and 

     

    (iii)            
      other or additional benefits in accordance with applicable plans and programs
      of
      the Company.

     

    (c) If your employment is terminated
      due
      to disability (as defined below), you shall be entitled to the following (but
      in
      no event less than the benefits due to you under the then current disability
      program of the Company):

     

    (i)                
      payment of base salary through the date of termination; 

     

    (ii)              
      payment of the pro-rated portion of the annual bonus that you received for
      the
      fiscal year immediately preceding the date of termination; 

     

    (iii)            
      until the earlier of the end of such disability and the end of the Term,
      continued participation in medical, dental, hospitalization and life insurance
      coverage and in all other employee plans and programs in which you were
      participating on the date of termination; and 

     

    (iv)            
      other or additional benefits in accordance with applicable plans and programs
      of
      the Company.

     

    For purposes of this Agreement,
“disability” shall mean your inability to substantially
      perform your duties and
      responsibilities under this Agreement for a period of 120 consecutive
      days.

     

     

     

    (d) If the Company terminates your
      employment for any reason other than those defined in paragraphs 4 (a), (b)
      or
      (c) above, or if you terminate your employment by reason of the Company’s breach
      of paragraph 3 (a) above, then you shall be entitled to:

     

     

     

    (i)                
      payment of your then current base salary through the date of termination;

     

    (ii)              
      payment of your pro-rated Target Bonus for the calendar year in which your
      employment is terminated; 

     

    (iii)            
      payment of an amount equal to one (1) times your then current base salary and
      Target Bonus, if your employment is terminated under this paragraph 4(d) at
      any
      time prior to the expiration of the Term;

     

    (iv)            
      vesting of equity awards as if you had remained employed through the end of
      the
      calendar year in which your employment is terminated or, if your employment
      is
      terminated in December of a year, for one additional calendar year, subject
      to
      the other terms and conditions of the applicable equity awards;
      and

     

    (v)              
      continued participation in Company-sponsored medical plans in which you were
      participating on the date of termination, through either (a) the longer of
      the
      end of the Term or 12 months from the date of termination of your employment,
      or
      (b) until you receive coverage through another employer, whichever first
      occurs.

     

    Any change of your principal place of
      employment (base location) from El Segundo, California, or any adverse change
      in
      the scope of your job responsibilities or reporting relationship, in any case
      without your consent, shall be deemed a constructive termination of your
      employment by the Company for purposes of, and upon such termination of
      employment (by you or by the Company) you shall be entitled to, the payments
      and
      benefits provided for above.  All payments under this paragraph 4(d) shall
      be conditioned upon your execution of a release agreement in the Company’s
      customary form or otherwise acceptable to the Company.

     

     

     

    (e) Notwithstanding anything in this
      Agreement to the contrary, in the event that the Company adopts a severance
      plan
      applicable to comparable executives which provides for payments or benefits
      which are more favorable to executives than the provisions of this Agreement,
      then you shall automatically be entitled to such more favorable payments or
      benefits, subject to the terms and conditions of such plan, unless you otherwise
      agree in writing after adoption of any such plan.

     

     

     

    5.
     (a) You have previously
      received a copy of the
      Company’s Code of Ethics and Business Conduct.  You agree to abide by the
      provisions of this Code (as amended and posted on the Company’s website from
      time to time) at all times during your employment by the Company.

(b)
      During the term of your employment and for a period of one year thereafter,
      you
      will not, directly or indirectly, (i) induce or attempt to induce any
      managerial, legal, human resources, sales or supervising employee of the Company
      or its affiliates to render services to any other person, firm or corporation,
      and (ii) engage in any business which competes with the Company or any of its
      affiliates and will not directly or indirectly own, manage, operate, join,
      control or participate in the ownership, management, operation or control of,
      or
      be employed by, or connected in any manner with any corporation, firm or
      business that is so engaged.  The foregoing does not prohibit you from
      owning less than five percent (5%) of the outstanding common stock of any
      company whose shares are publicly traded.

In consideration of the
      foregoing agreements, and in addition to any severance benefits provided to
      you
      under this Agreement, if your employment is terminated by the Company for any
      reason other than those defined in paragraphs 4(a), (b) or (c) above, or if
      you
      terminate your employment, whether during or after expiration of the Term,
      the
      Company shall pay you an amount equal to the sum of your base salary and Target
      Bonus at the date termination of your employment, less applicable tax
      withholdings, such payment to be made on the first anniversary after the date
      of
      your employment termination, provided that you have complied with your
      obligations set forth above in this paragraph 5(b).

     

            
      (c) You acknowledge that the relationship between the parties hereto is
      exclusively that of employer and employee and that the Company’s obligations to
      you are exclusively contractual in nature.  The Company shall be the sole
      owner of all the fruits and proceeds of your services hereunder, including,
      but
      not limited to, all ideas, concepts, formats, suggestions, developments,
      arrangements, designs, packages, programs, promotions and other intellectual
      properties which you may create in connection with and during your term of
      your
      employment hereunder, free and clear of any claims by you (or anyone claiming
      under you) of any kind or character whatsoever (other than your right to
      compensation hereunder).  You shall, at the request of the Company, execute
      such assignments, certificates or other instruments as the Company may from
      time
      to time deem necessary or desirable to evidence, establish, maintain, perfect,
      protect, enforce or defend its right, title and interest in or to any such
      properties.

     

            
      (d) All memoranda, notes, records and other documents made or compiled by you,
      or made available to you during the term of this Agreement concerning the
      business of the Company or it affiliates shall be the Company’s property and
      shall be delivered to the Company on the termination of this Agreement or at
      any
      other time on request.  You shall keep in confidence and shall not use for
      yourself or others, or divulge to others, any information concerning the
      business not publicly available and which is obtained by you as a result of
      your
      employment, including but not limited to, trade secrets or processes and
      information deemed by the Company to be proprietary in nature, unless disclosure
      is permitted by the Company or required by law.

(e) The Company shall
      have the right to use your name, biography and likeness in connection with
      its
      business, including in advertising its products and services, and may grant
      this
      right to others, but not for use as a direct endorsement.

(f) The
      covenants set forth in sub paragraphs (b), (c) and (d) above shall survive
      the
      termination of this Agreement.

     

    6.     
      The services to be furnished by you hereunder and the rights and privileges
      granted to the Company by you are of a special, unique, unusual, extraordinary,
      and intellectual character which gives them a peculiar value, the loss of which
      cannot be reasonably or adequately compensated in damages in any action or
      law,
      and a breach by you of any of the provisions contained herein will cause the
      Company irreparable injury and damage.  You expressly agree that the
      Company shall be entitled to seek injunctive and other equitable relief, to
      prevent a breach of this Agreement by you.  Resort to equitable relief
      however, shall not be construed as a waiver of any preceding or succeeding
      breach of the same or any other term or provision.  The various rights and
      remedies of the Company hereunder shall be construed to be cumulative and no
      one
      of them shall be exclusive to any other or of any other or of any right or
      remedy allowed by law.

     

     

     

    7.  
   In consideration
      of the making of the Agreement, as well as of the
      other consideration stated herein, you expressly agree that (a) the Company’s
      Employee Statements and Agreements and Mutual Agreement to Arbitrate Claims
      (copies of which you have received and which are incorporated herein by
      reference) shall apply to this Agreement; and (b) if you continue in the employ
      of the Company after the end of the Term, your employment shall be at-will
      and
      shall otherwise be in accordance with the provisions of this Agreement and
      such
      then existing Company policies as may then be in effect applicable to comparable
      executives of the Company.

     

    8.     
This Agreement shall
      be governed by the laws of the State of California
      applicable to contracts performed entirely therein.  This Agreement
      supersedes all prior agreements and understandings (including verbal agreements)
      between Executive and the Company and/or its affiliates regarding the terms
      and
      conditions of Executive’s employment with the Company and/or its affiliates
      including, without limitation, the Prior Agreements.

     

    9.
     This Agreement shall
      inure to the benefit of the
      successors and general assigns of the Company and to the benefit of any other
      corporation or entity which is a parent, subsidiary or affiliate of the Company
      to which this Agreement is assigned, and any other corporation or entity into
      which the Company may be merged or with which it may be consolidated. 
Except as herein provided, this Agreement shall be nonassignable.

     

     

     

    Sincerely,

     

     

     

    The DIRECTV Group,
      Inc.

     

     

     

     

     

    By:   
      /s/ Chase
      Carey             

                                                                                    
Chase Carey

                                                                                    
President and CEO

     

     

     

    THE FOREGOING IS AGREED TO:

     

     

     

    /s/ Michael
      Palkovic        
               
 

    Michael Palkovic

     

     

     

    November 6,
      2007                             

    Date

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