Document:

Exhibit
10.3

 

 

[ * ] = Certain confidential information contained in this
document, marked by brackets, has been omitted and filed separately with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934, as amended.

 

Agreement No. AR-63645-04

 

PRODUCT SUPPLEMENT/AWARD LETTER
(SATA)

 

This Product Supplement/Award Letter (this “Award
Letter”) is made on and as of the        
day of March, 2004 (“Effective Date”) by and between Sun Microsystems, Inc.
(“Sun”) and Dot Hill Systems Corporation (“Supplier”), pursuant to the Product
Purchase Agreement, dated as of May 22, 2002, Agreement No. AR-63645, as
amended, made between the parties (the “Agreement”).  Capitalized terms not defined in this Award Letter have the meanings
set forth in the Agreement.  The parties
agree as follows:

 

1 
SCOPE:  Neither this
Award Letter nor the Agreement constitutes a commitment by Sun to purchase
Products unless Sun, in its sole discretion, issues one or more P.O.’s in the
manner described in the Agreement.  The
terms and conditions of the Agreement are incorporated herein by reference as
if set forth in full.

 

2 
PRODUCT DESCRIPTIONS AND PRICING/COST REDUCTIONS:  Product descriptions and pricing are set
forth in Exhibit A to this Award Letter.

 

3 
MINIMUM PURCHASE RIGHTS PERIOD:  Pursuant to the terms of Section 2.1 of the Agreement, the
Minimum Purchase Rights Period (as defined therein) is [ * ].

 

4 
UPSIDE SUPPORT:  Sun
may request all or any part of Upside Support quantities at  anytime during the
applicable quarter  up to the maximum amount indicated
beginning with Sun’s GA of the Sun product or system that incorporates the
Product(s).  Requests for Upside
Support, above the percentages listed below or within less Days Advance Notice
for the listed percentage below, may be subject to additional charges actually
incurred by Supplier and other requirements related to manufacturing and
materials cycle lead time, availability of personnel and manufacturing
capacity.  Supplier will inform Sun in
writing of any additional charges and requirements that apply to delivery of
Product for this additional Upside Support and obtain approval from Sun to such
additional charges and requirements prior to implementing such Upside Support.
Supplier shall use commercially reasonable efforts to sell,  manufacture and ship such
Upside Support quantities  to Sun on a “first-in, first-out” basis
within five (5) business days after Sun’s written request.

 

	
  Timeframe

  	
   

  	
  Days
  Advance Notice

  	
   

  	
  Upside
  Max. Percentage Increase

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [
  * ]

  	
   

  	
   

  	
   

  	
   

  

 

Supplier shall  use
reasonable efforts to accommodate any request from Sun  to accelerate delivery of
Upside quantities of Products  within  the timeframes indicated above.  With respect to any request for quantities
in excess of Upside Support described above, the parties shall  negotiate
in good faith acceptable  delivery dates.

 

5    SUN-UNIQUE
COMPONENTS:  The
initial List of Sun-unique Components, Leadtimes and MOQs is set forth as
Exhibit B.

 

6  SPECIFICATION:  The Product Specification is set
forth as Exhibit C.

 

7 
EXTERNAL MANUFACTURERS: 
The list of External Manufacturers, if any, is set forth in Exhibit D.

 

8 BUSINESS CONTINUITY PLAN:
Supplier’s business continuity plan for the Product is set forth in Exhibit E.

 

9 LICENSED SOFTWARE: The
Licensed Software shall mean the most current version of [ * ].

 

10 QUALITY:  In addition to the quality requirements in
Exhibit C of the Agreement, Exhibit F of this Award Letter, which is attached
hereto and incorporated by reference, contains component-specific requirements.

 

11 
AWARD LETTER COMPONENTS: 
The parties agree to be bound by these terms and conditions which
consists of the Award Letter and the Exhibits indicated below:

 

	
  ý

  	
   

  	
  Exhibit A (Product
  Descriptions and Pricing)

  
	
  ý

  	
   

  	
  Exhibit B (Sun-unique
  Components, Leadtimes and MOQs)

  
	
  ý

  	
   

  	
  Exhibit C (Specification)

  

 

1

 

	
  ý

  	
   

  	
  Exhibit D (External Manufacturers)

  
	
  ý

  	
   

  	
  Exhibit E (Business Continuity Plan)

  
	
  ý

  	
   

  	
  Exhibit F (Component Quality Requirements)

  

 

The undersigned duly authorized representatives of the
parties have executed and delivered this Award Letter as of the Effective Date.

 

	
  Sun Microsystems, Inc.

  	
  Dot Hill Systems Corporation

  
	
   

  	
   

  
	
  By:

  	
  /s/ Marcy Alstott

  	
   

  	
  By:

  	
  /s/ Jim Lambert

  	
   

  
	
   

  	
   

  
	
  Name:

  	
  Marcy Alstott

  	
   

  	
  Name:

  	
  Jim Lambert

  	
   

  
	
   

  	
   

  
	
  Title:

  	
  VP, Worldwide Operations

  	
   

  	
  Title:

  	
  President & CEO

  	
   

  
	
   

  	
   

  
	
  Date:

  	
  19 March 2004

  	
   

  	
  Date:

  	
  17 Mar 2004

  	
   

  
																	

 

	
  Sun Microsystems International B.V.

  	
  Dot Hill Systems BV

  
	
   

  	
   

  
	
  By:

  	
  /s/ Tymen Kos

  	
   

  	
  By:

  	
  /s/ BHM van der Woning

  	
   

  
	
   

  	
   

  
	
  Name:

  	
  Tymen Kos

  	
   

  	
  Name:

  	
  BHM van der Woning

  	
   

  
	
   

  	
   

  
	
  Title:

  	
  Director 

  	
   

  	
  Title:

  	
  Managing
  Director 

  	
   

  
	
   

  	
   

  
	
  Date:

  	
  22 March 2004

  	
   

  	
  Date:

  	
  14 March 2004

  	
   

  
																

 

[ * ] = Certain confidential information contained in this
document, marked by brackets, has been omitted and filed separately with the Securities
and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act
of 1934, as amended.

 

2

 

EXHIBIT A

 

PRODUCT DESCRIPTIONS AND
PRICING

 

[ * ]

 

[ * ] = Certain confidential information contained in this
document, marked by brackets, has been omitted and filed separately with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934, as amended.

 

3

 

EXHIBIT B

SUN-UNIQUE COMPONENTS,
LEADTIMES AND MOQs

 

[ * ]

 

[ * ] = Certain confidential information contained in this
document, marked by brackets, has been omitted and filed separately with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934, as amended.

 

4

 

EXHIBIT C

SPECIFICATION

 

(To be attached)

 

5

 

EXHIBIT D

 

EXTERNAL MANUFACTURERS

Solectron Corporation

847 Gibraltar Drive

Building 5

Milpitas, CA 95035

 

Solectron Technology Sdn. Blvd.

Plot 13 Phase IV

Prai Industrial Estate

13600 Prai

Penang.  Malaysia

 

Solectron Hungary
 Hangár Utca 5-37

H-1183 Budapest

 Hungary

6

 

[ * ] = Certain confidential information contained in this
document, marked by brackets, has been omitted and filed separately with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934, as amended.

 

EXHIBIT E

 

BUSINESS CONTINUITY PLAN

 

DOT HILL
SYSTEMS CORP.

DISASTER
RECOVERY AN BUSINESS CONTINUITY PLAN

 

January 19, 2004

 

This package is to document Dot Hill’s current disaster recovery and
business continuity plan.  This package
will be updated periodically on an as needed basis.  This package contemplates that products will be manufactured at
Solectron Corporation, and therefore, includes Solectron’s Corporate Disaster
Response and Recovery Document as part of the overall plan.

 

[ * ]

 

 

[ * ] = Certain confidential information contained in this
document, marked by brackets, has been omitted and filed separately with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934, as amended.

 

7

 

[ * ] = Certain confidential information contained in this
document, marked by brackets, has been omitted and filed separately with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934, as amended.

 

EXHIBIT F

 

[ * ]

 

8Exhibit 10.4

 

Execution Copy

 

THE SECURITIES REPRESENTED HEREBY
HAVE NOT BEEN REGISTERED UNDER  THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED
UNLESS AND UNTIL REGISTERED UNDER THE SECURITIES ACT OR UNLESS THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY AND ITS
COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED. THE TERMS AND CONDITIONS OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE, INCLUDING THE TRANSFER OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE, ARE SUBJECT TO THE PROVISIONS OF
THAT CERTAIN SECURITIES PURCHASE AGREEMENT, DATED AS OF JANUARY 17, 2002, BY
AND BETWEEN THE COMPANY (AS DEFINED THEREIN) AND THE PURCHASER (AS DEFINED
THEREIN), AS AMENDED AND MODIFIED FROM TIME TO TIME. A COPY OF SUCH CONDITIONS
SHALL BE FURNISHED BY THE COMPANY UPON WRITTEN REQUEST AND WITHOUT CHARGE.

 

SECURED
CONVERTIBLE PROMISSORY NOTE

 

	
  US $6,000,000

  	
  Longmont,
  Colorado

  
	
   

  	
  January
  17, 2002

  

 

FOR
VALUE RECEIVED, the undersigned, CHAPARRAL NETWORK STORAGE, INC., a Delaware corporation (the “Company”), hereby promises to pay
to the order of XYRATEX TECHNOLOGY LIMITED,
a corporation organized under the laws of England and Wales (the “Purchaser”), at the offices of the
Purchaser, the principal sum of up to Six Million Dollars (US$6,000,000) (the “Principal Amount”) or such lesser
Principal Amount thereof as may remain outstanding (“Principal”) in lawful money of the United States of
America in immediately available funds, and to pay interest from the date
hereof on the Principal Amount hereof from time to time outstanding (“Interest”), in like funds, at said
office, at a rate of 8% simple per annum, calculated on the basis of the number
of days elapsed in a 365-day year and payable on such dates as determined
pursuant to the terms of the Securities Purchase Agreement dated as of the
Effective Date, by and between the Company and Purchaser, as the same may be
amended, modified, restated or supplemented from time to time (the “Securities Purchase Agreement”)
Purchaser has agreed, subject to the terms of, and satisfaction of the
conditions set forth in the Securities Purchase Agreement, to advance the
Principal Amount to the Company as follows: Two Million United States Dollars
(US $2,000,000) to be advanced at Closing and the remaining Four Million United
States Dollars (US $4,000,000) to be advanced in four tranches of One Million
United States Dollars (US$1,000,000), on the 15th of each month commencing in
February 2002, until the total Principal has been paid to the Company. The
Company promises to pay Interest and Principal in accordance with the terms of
the Securities Purchase Agreement. This Note is issued to and is subject to and
the Purchaser or any subsequent holder or assignee is entitled to the benefits
of the Securities

 

 

Purchase
Agreement and the Security Agreement by and between the Company and the
Purchaser dated the Effective Date (the “Security Agreement”). The terms
and conditions contained in the Securities Purchase Agreement and the Security
Agreement that relate to the Note are incorporated herein by reference.

 

Capitalized terms used herein and not otherwise
defined shall have the meanings assigned to them in the Securities Purchase
Agreement or the Security Agreement.

 

The “Maturity
Date”  of the Note
shall be the date that is exactly six years after the disbursement of the last
Advance of the Financing Amount (as such amount is adjusted pursuant to Section
3 of the Securities Purchase Agreement). The Principal shall be due and payable
as follows: one half, together with accrued and unpaid Interest on the entire
Principal (not just one half thereof) shall be due and payable on the date that
is exactly three years after the disbursement of the last Advance of the
Financing Amount (as such amount is adjusted pursuant to Section 3 of the
Securities Purchase Agreement); and the remaining Principal, together with
accrued and unpaid Interest on such amount, shall be due and payable on the
Maturity Date.

 

The Company hereby waives diligence, presentment, demand, protest and
notice of any kind whatsoever, other than as expressly required by the
Securities Purchase Agreement. The non-exercise by the Purchaser of any of its
rights hereunder or under the Securities Purchase Agreement in any particular
instance shall not constitute a waiver thereof in that or any subsequent
instance.

 

This Note is
referred to in the Securities Purchase Agreement. The Securities Purchase
Agreement provides that (1) the occurrence of certain events (as specified
therein) shall constitute Events of Default by the Company hereunder and  thereunder and (2) upon the occurrence of
any such Event of Default and at any time thereafter during the continuation of
such Event of Default, the Purchaser may take the actions set forth in Section
9.2 of the Securities Purchase Agreement.

 

With
reference to the Technology Cross-License Agreement described in the Assignment
Agreement (Appendix XI to the Master Alliance Agreement), if (i) the Company
tenders repayment of the final amount(s) due under this Note, or (ii) an Event
of Default by the Company under the Securities Purchase Agreement occurs, and
Purchaser does not make the election referred to in Section 9.2.2 of the Securities
Purchase Agreement within the time available for making such election, or (iii)
an Event of Default by the Purchaser under Section 9.3.1 of the Securities
Purchase Agreement occurs and the Company elects to terminate the related
agreements referenced in and pursuant to Section 13.4(a)(iv) of the Master
Alliance Agreement (other than the Appendix VII Agreements), then the Purchaser
shall thereupon tender to the Company an executed assignment of the Technology
Cross-License Agreement in the form of Exhibit D to the Securities Purchase
Agreement. Purchaser hereby acknowledges that money damages would not be an
adequate remedy at law if it fails to perform its obligation to re-assign the
Technology Cross-License Agreement as provided in this paragraph of the Note
and accordingly agrees that the Company, in addition to any other remedy to
which it may be entitled at law or in equity, shall be entitled to seek to
compel specific performance of such obligation, without the posting of any
bond, in the court having jurisdiction under the terms hereof, and if any
action should be brought in equity to enforce such

 

2

 

obligation
Purchaser shall not raise the defense that there is an adequate remedy at law.
The provisions of this paragraph shall not limit any other rights and remedies
of Purchaser provided under the Securities Purchase Agreement upon the
occurrence of an Event of Default under this Note.

 

Pursuant to, and in accordance with, the terms of
the Securities Purchase Agreement, the Principal and Interest are convertible
into shares of Common Stock of the Company. Pursuant to the terms the
Securities Purchase Agreement, any payment, redemption, conversion or other
adjustment of the Principal and Interest shall be reflected in an amendment to
Schedule I hereto and shall become effective upon the earlier of (a) notation
in Schedule I attached to the Note or (B) confirmation by the Company to the
Purchaser of such payment (through satisfactory evidence of wire transfers),
redemption, conversion or other adjustment. Following the payment, redemption,
conversion or other adjustment of the entire Principal, together with accrued
and unpaid Interest thereon, this Note shall be canceled and shall no longer
evidence an indebtedness for borrowed money.

 

The Company shall have the right to prepay this Note at any time prior
to the Maturity Date without penalty, in whole or in part, upon 20 Business
Days’ prior written notice to Purchaser.

 

This Note and Purchaser’s rights hereunder may not be transferred or
assigned except in accordance with the requirements of the Securities Purchase
Agreement and subject to applicable securities laws or regulations. In any
dispute, contest, suit, action, or proceeding by a party to this Note to
enforce its rights under this Note (whether arising in contract, tort, or
both), or seeking a declaration of any rights or obligations under this Note,
against any other party to this Note, including any litigation, arbitration,
mediation, contested matter, dispute, suit, action, or adversary proceeding,
and any appeal or review thereof, in connection with a case, action, or
proceeding commenced in any state or federal court or agency, or before an
arbitration panel or mediator, or under the United States Bankruptcy Code, or
any other applicable federal, state, or foreign bankruptcy or other similar
law, the prevailing party shall be awarded its reasonable attorneys’ fees,
together with any costs and expenses (including the cost of employing expert
witnesses). The Company and the Purchaser intend that the preceding sentence be
severable from the other provisions of this Note, survive any judgment and, to
the maximum extent permitted by law, not be deemed merged into such judgment.

 

This Note shall be governed by and construed under the laws of the
State of California, without giving effect to the conflicts of laws provisions
thereof.

 

In
any dispute, contest, suit, action, or proceeding by a party to this Note to
enforce its rights under this Note (whether arising in contract, tort, or
both), or seeking a declaration of any rights or obligations under this Note,
against any other party to this Note, including any litigation, arbitration,
mediation, contested matter, dispute, suit, action, or adversary proceeding,
and any appeal or review thereof, in connection with a case, action, or
proceeding commenced in any state or federal court or agency, or before an
arbitration panel or mediator, or under the Bankruptcy Code, or any other
applicable federal, state, or foreign bankruptcy or other similar law, the
prevailing party shall be

 

3

 

awarded
its reasonable attorneys’ fees, together with any costs and expenses (including
the cost of employing expert witnesses).

 

THE
PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS
AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA. 
EACH OF THE COMPANY AND PURCHASER WAIVES, TO THE EXTENT PERMITTED UNDER
APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION. THE COMPANY AND PURCHASER HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
OUT OF THE TRANSACTION DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW OR STATUTORY CLAIMS. THE COMPANY AND PURCHASER REPRESENT THAT
EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS
JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL BY THE COURT.

 

	
   

  	
  CHAPARRAL NETWORK STORAGE, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Victor M. Perez

  
	
   

  	
  Name:

  	
  Victor M. Perez

  
	
   

  	
  Title:

  	
  Chief Executive Officer and

  President

  
				

 

4

 

SCHEDULE I

 

to Secured Convertible Note dated January 17, 2002

 

	
  Date

  	
   

  	
  Principal

  Amount

  Advanced

  	
   

  	
  Repayment,

  Redemption,

  Conversion or

  Adjustment of

  Principal Amount

  	
   

  	
  Aggregate

  Outstanding

  Principal

  Amount

  	
   

  	
  Company

  Initials

  	
   

  
	
   

  	
   

  	
  $

  	
   

  	
  $

  	
   

  	
  $

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Jan. 17-2002

  	
   

  	
  $

  	
  2,000,000.00

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