Document:

exv10w3

 

EXHIBIT 10.3

FIRST AMENDMENT TO CREDIT AGREEMENT

     THIS AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) is entered into as of July 1, 2006, 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, 2006” as the last day on which Bank
will make advances under the Line of Credit, and by substituting for said date “July 1, 2007,” with
such change to be effective upon the execution and delivery to Bank of a promissory note dated as
of July 1, 2006 (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, 2007, 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. The following is hereby added to the Credit Agreement as Section 5.4:

     “SECTION 5.4. CAPITAL EXPENDITURES. Make any additional
investment in fixed assets in any fiscal year in excess of an
aggregate of $1,000,000.00.”

     4. Section 7.2 is hereby amended by deleting the reference to “6305 El Camino Real, Carlsbad,
CA 92009” as the Borrowers address, and by substituting in its place “2200 Faraday, Suite 100,
Carlsbad, CA 92008.”

1.

 

     5. 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.

     6. 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 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/ Dana Kammersgard
	 	By:
	 	/s/ Brian P. Chambers
	 	 
	 

	 	 
	 	 	 	 	 	 
	 

	 	Dana Kammersgard
	 	 	 	Brian P. Chambers	 	 
	 

	 	Chief Executive Officer
	 	 	 	Vice President	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Shad Burke	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	Shad Burke	 	 	 	 	 	 
	 

	 	Chief Financial Officer	 	 	 	 	 	 

2.exv10w4

 

EXHIBIT 10.4

SECOND AMENDMENT TO CREDIT AGREEMENT

     THIS AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) is entered into as of September 14,
2006, 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 5.4. is hereby deleted in its entirety, and the following substituted therefor:

     “SECTION 5.4. CAPITAL EXPENDITURES. Make any
additional investment in fixed assets in any fiscal year in
excess of an aggregate of $10,000,000.00.”

     2. 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.

     3. 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 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.

1.

 

     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/ Dana Kammersgard
	 	By:
	 	/s/ Brian P. Chambers
	 	 
	 

	 	 
	 	 	 	 	 	 
	 

	 	Dana Kammersgard
	 	 	 	Brian P. Chambers	 	 
	 

	 	Chief Executive Officer
	 	 	 	Vice President	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Shad Burke	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	Shad Burke	 	 	 	 	 	 
	 

	 	Chief Financial Officer	 	 	 	 	 	 

2.exv10w5

 

EXHIBIT 10.5

			
	WELLS FARGO
	 	REVOLVING LINE OF CREDIT NOTE
	 
	 	 	 
	$30,000,000.00
	 	San Diego, California
	 
	 	July 1, 2006

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.

 

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.

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

 2.

 

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, 2006.

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.

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, 2007.

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 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

 3.

 

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.

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.

 4.

 

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/ Dana Kammersgard
	 	 
	 

	 	 	 	 
	 

	 	Dana Kammersgard, Chief Executive Officer	 	 
	 
	 	 	 	 
	By:

	 	/s/ Shad Burke	 	 
	 

	 	 	 	 
	 

	 	Shad Burke, Chief Financial Officer	 	 

 5.

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