Document:

Exhibit
10.9

 

ABC TV Network

 

October 22, 2004

 

Ms. Deb McDermott

President

Young Broadcasting. Inc. 

441 Murfreesboro Road 

Nashville, TN 
37210

 

Re:                               Primary
Television Affiliation Agreements (the “Agreements”) between WKRN, WATE, WBAY,
WRIC, WTEN and American Broadcasting Companies, Inc.

 

Dear Deb:

 

As you are aware, the Agreements for WKRN,
WATE, WBAY. WRIC and WTEN expired by their own terms on September 30, 2004.
Despite our best efforts to come to terms for new affiliation agreements with
you to become effective after this date, we have failed to reach agreement.

 

Notwithstanding the termination of the
Agreements, ABC is willing to continue its affiliation arrangements with you
after September 30, 2004 and hereby agrees to again extend the termination date
for each of the Agreements until November 5, 2004.  This offer to extend the Agreements is
conditioned upon your agreement to continue to clear the weekend edition of
Good Morning America on an interim basis during this extended term.  Also, we are agreed that the compensation
arrangements that we establish for these stations in the new agreements will be
retroactive to October 1, 2004.  All
other terms of the Agreements shall remain unchanged.

 

If you are in agreement with the foregoing,
please promptly sign the enclosed extra copy of this letter and return it to me
at your earliest convenience, at which time the Agreements shall be so amended
and extended.

 

We look forward to continuing to work with
you to reach a mutually acceptable affiliation agreement.

 

Very truly yours,

 

 

John L. Rouse

 

The foregoing is hereby acknowledged and
agreed:

 

Young Broadcasting, Inc.

 

	
  By

  	
  /s/ Deborah McDermott

  	
   

  
	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
  Date:Exhibit 10.10

 

[NBC Letterhead]

 

October 26, 2004

 

Young Broadcasting, Inc. (as Licensee)

Davenport, Iowa

 

Re:  KWQC-TV, Davenport, Iowa

 

Reference is made to the Affiliation Agreement, dated February 3,
1995, between Broad Street Television L.P. (as predecessor-in-interest to
Licensee) and NBC (the “Affiliation Agreement”) and the notice of cancellation,
dated September 17, 2003, of the KWQC-TV Affiliation Agreement.

 

NBC will agree to extend the term of the Affiliation Agreement through
December 31, 2004, while a new agreement is negotiated; provided that NBC
shall have no obligation to pay Licensee or Station any amount of money in
connection with the Station’s affiliation (such as compensation or contractual
promotion reimbursement) as of the date hereof. 
The parties agree that in the event a new affiliation agreement is
signed on or prior to December 31, 2004, such new agreement will supercede
the Affiliation Agreement as of November 1, 2004.

 

If you are in agreement with the above, please indicate your acceptance
by signing in the space provided below, and return two original to us.

 

Very truly yours,

 

NBC Universal, Inc.

 

	
  By:

  	
  /s/    John Damiano

  	
   

  
	
   

  	
  John Damiano

  
	
   

  	
  Executive Vice President, Affiliate Relations

  

 

ACCEPTED AND AGREED:

 

YOUNG BROADCASTING, INC.

 

	
  By:

  	
  /s/   Deborah A. McDermott

  	
   

  
	
   

  	
  Name: Deborah A. McDermott

  
	
   

  	
  Title: PresidentExhibit 10.1

 

CREDIT
AGREEMENT

 

THIS AGREEMENT is entered into as of July 1, 2004, by and between DOT
HILL SYSTEMS CORP., a Delaware corporation (“Borrower”), and WELLS FARGO BANK,
NATIONAL ASSOCIATION (“Bank”).

 

RECITALS

 

Borrower has requested that Bank extend or continue credit to Borrower
as described below, and Bank has agreed to provide such credit to Borrower on
the terms and conditions contained herein.

 

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Bank and Borrower hereby agree as follows:

 

ARTICLE I

CREDIT TERMS

 

SECTION 1.1.          LINE OF
CREDIT.

 

(a)     Line of Credit.  Subject to the terms and conditions of this
Agreement, Bank hereby agrees to make advances to Borrower from time to time up
to and including July 1, 2006, not to exceed at any time the aggregate
principal amount of Thirty Million Dollars ($30,000,000.00) (“Line of Credit”),
the proceeds of which shall be used to finance Borrower’s working capital
requirements.  Borrower’s obligation to
repay advances under the Line of Credit shall be evidenced by a promissory note
dated as of July 1, 2004 (“Line of Credit Note”), all terms of which are
incorporated herein by this reference.

 

(b)    Letter of Credit
Subfeature. As a subfeature under the Line of Credit, Bank agrees from time
to time during the term thereof to issue or cause an affiliate to issue standby
and/or sight commercial letters of credit for the account of Borrower to
finance the procurement of material and services (each, a “Letter of Credit”
and collectively, “Letters of Credit”); provided however, that the aggregate
undrawn amount of all outstanding Letters of Credit shall not at any time
exceed Five Million Dollars ($5,000,000.00). 
The form and substance of each Letter of Credit shall be subject to
approval by Bank, in its sole discretion. 
Each Letter of Credit shall be issued for a term not to exceed three
hundred sixty-five (365) days, as designated by Borrower; provided however,
that no Letter of Credit shall have an expiration date subsequent to the
maturity date of the Line of Credit.  The
undrawn amount of all Letters of Credit shall be reserved under the Line of
Credit and shall not be available for borrowings thereunder.  Each Letter of Credit shall be subject to the
additional terms and conditions of the Letter of Credit agreements,
applications and any related documents required by Bank in connection with the
issuance thereof.  Each drawing paid
under a Letter of Credit shall be deemed an advance under the Line of Credit
and shall be repaid by Borrower in accordance with the terms and conditions of
this Agreement applicable to such advances; provided however, that if advances
under the Line of Credit are not available, for any reason, at the time any
drawing is paid, then Borrower shall immediately pay to Bank the full amount
drawn, together with interest thereon from the date such drawing is paid to the
date such amount is fully repaid by Borrower, at the rate of interest
applicable to advances under the Line of Credit.  In such event Borrower agrees

 

1

 

that Bank, in its sole discretion, may debit any account maintained by
Borrower with Bank for the amount of any such drawing.

 

(c)     Borrowing and Repayment.  Borrower may from time to time during the
term of the Line of Credit borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all of the limitations, terms and
conditions contained herein or in the Line of Credit Note; provided however, that
the total outstanding borrowings under the Line of Credit shall not at any time
exceed the maximum principal amount available thereunder, as set forth above.

 

(d)    Reservation of Foreign
Exchange “Delivery Limit.”  The
largest aggregate outstanding principal amount of Borrower’s foreign exchange
contracts (entered into by Bank as set forth in Section 1.2 below) which will
mature during any single two (2) day period shall be reserved under the Line of
Credit and shall not be available for borrowings thereunder.

 

(e)     Reservation of Business
MasterCard Line.  The principal
balance outstanding under Borrower’s Business MasterCard Line with Bank shall
be reserved under the Line of Credit and shall not be available for borrowings
thereunder.

 

SECTION 1.2.          FOREIGN EXCHANGE
FACILITY.

 

(a)     Foreign Exchange
Facility.  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, 2006, 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).  No foreign exchange
contract shall be executed for a term in excess of twelve (12) months or for a
term which extends beyond July 1, 2006. 
Borrower shall have a “Delivery Limit” under the Foreign Exchange
Facility not to exceed at any time the aggregate principal amount of One
Million United States Dollars (US$1,000,000.00), which Delivery Limit reflects
the maximum principal amount of Borrower’s foreign exchange contracts which may
mature during any two (2) day period. 
All foreign exchange transactions shall be subject to the additional
terms of a Foreign Exchange Agreement dated as of July 1, 2004 (“Foreign
Exchange Agreement”), all terms of which are incorporated herein by this
reference.

 

(b)    Settlement.  Each foreign exchange contract under the
Foreign Exchange Facility shall be settled on its maturity date by Bank’s debit
to any deposit account maintained by Borrower with Bank.

 

(c)     Limitation on
Availability of Foreign Exchange Facility. 
Notwithstanding anything to the contrary contained herein, Bank shall
not enter into foreign exchange contracts for the account of Borrower if and to
the extent that the sum of the aggregate principal balance outstanding under
the Line of Credit (including the undrawn amount of any Letters of Credit) plus
the amounts described in subsections (d) and (e) of Section 1.1 above exceeds
Thirty Million Dollars ($30,000,000.00).

 

2

 

SECTION 1.3.          INTEREST/FEES.

 

(a)     Interest.           The outstanding principal balance of
each credit subject hereto shall bear interest at the rate of interest set
forth in each promissory note or other instrument executed in connection
therewith.

 

(b)    Computation and Payment.  Interest shall be computed on the basis of a
360-day year, actual days elapsed. 
Interest shall be payable at the times and place set forth in each
promissory note or other instrument or document required hereby.

 

(c)     Commercial Letter of
Credit Fees.  Borrower shall pay to
Bank fees upon the issuance of each commercial Letter of Credit, upon the
payment or negotiation of each drawing under any commercial Letter of Credit
and upon the occurrence of any other activity with respect to any commercial
Letter of Credit (including without limitation, the transfer, amendment or
cancellation of any commercial Letter of Credit) determined in accordance with
Bank’s standard fees and charges then in effect for such activity.

 

(d)    Standby Letter of Credit
Fees.  Borrower shall pay to Bank
(i) fees upon the issuance of each standby Letter of Credit equal to
ninety-five hundredths percent (0.95%) per annum (computed on the basis of a
360-day year, actual days elapsed) of the face amount thereof, and
(ii) fees upon the payment or negotiation of each drawing under any
standby Letter of Credit and fees upon the occurrence of any other activity
with respect to any standby Letter of Credit (including without limitation, the
transfer, amendment or cancellation of any standby Letter of Credit) determined
in accordance with Bank’s standard fees and charges then in effect for such
activity.

 

SECTION 1.4.          COLLECTION
OF PAYMENTS.  Borrower authorizes Bank to
collect all interest and fees due under each credit subject hereto by charging
Borrower’s deposit account number 4496-855008 with Bank, or any other deposit
account maintained by Borrower with Bank, for the full amount thereof.  Should there be insufficient funds in any
such deposit account to pay all such sums when due, the full amount of such
deficiency shall be immediately due and payable by Borrower.

 

SECTION 1.5.          COLLATERAL.

 

As security for all indebtedness of Borrower to Bank subject hereto,
Borrower hereby grants to Bank security interests of first priority in Borrower’s
Investment Management Account No. 10671901, maintained with Wells Capital
Management Incorporated.

 

All of the foregoing shall be evidenced by and subject to the terms of
such security agreements, financing statements and other documents as Bank
shall reasonably require, all in form and substance satisfactory to Bank.  Borrower shall reimburse Bank immediately
upon demand for all costs and expenses incurred by Bank in connection with any
of the foregoing security.

 

SECTION 1.6.          TERMINATION
OF CREDIT FACILITIES.  Borrower may
terminate the credit facilities provided under this Agreement at any time upon
two Business Days (as defined in the Line of Credit Note) notice upon payment
in full of all outstanding indebtedness of Borrower to Bank under this
Agreement and the other Loan Documents, including without limitation any
applicable prepayment fees, and provided that if any Letters of Credit or
foreign exchange contracts remain outstanding on the date of such termination,
such obligations shall be secured by such collateral as Bank may require in its
sole discretion, pursuant to such documents as Bank may require in form and
substance satisfactory to Bank.

 

3

 

ARTICLE II

REPRESENTATIONS AND WARRANTIES

 

Borrower makes the following representations and warranties to Bank,
which representations and warranties shall survive the execution of this
Agreement and shall continue in full force and effect until the full and final
payment, and satisfaction and discharge, of all obligations of Borrower to Bank
under the Loan Documents (as defined below).

 

SECTION 2.1.          LEGAL
STATUS.  Borrower is a corporation, duly
organized and existing and in good standing under the laws of the State of
Delaware, and is qualified or licensed to do business (and is in good standing
as a foreign corporation, if applicable) in all jurisdictions in which the
failure to so qualify or to be so licensed could have a material adverse effect
on Borrower.

 

SECTION 2.2.          AUTHORIZATION
AND VALIDITY.  This Agreement and each
promissory note, contract, instrument and other document required hereby or at
any time hereafter delivered to Bank in connection herewith (collectively, the “Loan
Documents”) have been duly authorized, and upon their execution and delivery in
accordance with the provisions hereof will constitute legal, valid and binding
agreements and obligations of Borrower, enforceable in accordance with their
respective terms, subject to general principles of equity and the effect of
applicable bankruptcy, insolvency, fraudulent transfer or conveyance,
reorganization, arrangement, dissolution, moratorium or other similar laws
relating to or affecting creditors’ rights generally.

 

SECTION 2.3.          NO
VIOLATION.  The execution, delivery and
performance by Borrower of each of the Loan Documents do not violate any
provision of any law or regulation, or contravene any provision of the Articles
of Incorporation or By-Laws of Borrower, or result in any breach of or default
under any material contract, obligation, indenture or other instrument to which
Borrower is a party or by which Borrower may be bound.

 

SECTION 2.4.          LITIGATION.  There are no pending, or to the best of
Borrower’s knowledge threatened, actions, claims, investigations, suits or
proceedings by or before any governmental authority, arbitrator, court or
administrative agency which could have a material adverse effect on the
financial condition or operation of Borrower other than those disclosed by
Borrower to Bank in writing prior to the date hereof.

 

SECTION 2.5.          CORRECTNESS
OF FINANCIAL STATEMENT.  The financial
statement of Borrower dated March 31, 2004, a true copy of which has been
delivered by Borrower to Bank prior to the date hereof, (a) is complete
and correct and presents fairly the financial condition of Borrower as of March
31, 2004, (b) discloses all liabilities of Borrower that are required to
be reflected or reserved against under generally accepted accounting
principles, whether liquidated or unliquidated, fixed or contingent, as of
March 31, 2004, and (c) has been prepared in accordance with generally
accepted accounting principles consistently applied.  Since the date of such financial statement
there has been no material adverse change in the financial condition of
Borrower, nor has Borrower mortgaged, pledged, granted a security interest in
or otherwise encumbered any of its assets or properties except in favor of Bank
or as otherwise permitted by Bank in writing.

 

4

 

SECTION 2.6.          INCOME TAX
RETURNS.  Borrower has no knowledge of
any pending assessments or adjustments of its income tax payable with respect
to any year.

 

SECTION 2.7.          NO
SUBORDINATION.  There is no agreement,
indenture, contract or instrument to which Borrower is a party or by which
Borrower may be bound that requires the subordination in right of payment of
any of Borrower’s obligations subject to this Agreement to any other obligation
of Borrower.

 

SECTION 2.8.          PERMITS,
FRANCHISES.  Borrower possesses, and will
hereafter possess, all material permits, consents, approvals, franchises
and licenses required and rights to all material trademarks, trade names,
patents, and fictitious names, if any, necessary to enable it to conduct the
business in which it is now engaged in compliance in all material respects with
applicable law.

 

SECTION 2.9.          ERISA.  Borrower is in compliance in all material
respects with all applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended or recodified from time to time (“ERISA”);
Borrower has not violated any provision of any defined employee pension benefit
plan (as defined in ERISA) maintained or contributed to by Borrower (each, a “Plan”);
no Reportable Event as defined in ERISA has occurred and is continuing with
respect to any Plan initiated by Borrower; Borrower has met its minimum funding
requirements under ERISA with respect to each Plan; and each Plan will be able
to fulfill its benefit obligations as they come due in accordance with the Plan
documents and under generally accepted accounting principles.

 

SECTION 2.10.        OTHER
OBLIGATIONS.  Borrower is not in default
on any obligation for borrowed money, any purchase money obligation or any
other material lease, commitment, contract, instrument or obligation involving
more than $1,000,000.00 in the aggregate for all such defaults combined.

 

SECTION 2.11.        ENVIRONMENTAL
MATTERS.  Except as disclosed by Borrower
to Bank in writing prior to the date hereof, Borrower is in compliance in all
material respects with all applicable federal or state environmental, hazardous
waste, health and safety statutes, and any rules or regulations adopted
pursuant thereto, which govern or affect any of Borrower’s operations and/or
properties, including without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act
of 1976, and the Federal Toxic Substances Control Act, as any of the same may
be amended, modified or supplemented from time to time.  None of the operations of Borrower is the
subject of any federal or state investigation evaluating whether any remedial
action involving a material expenditure is needed to respond to a release of
any toxic or hazardous waste or substance into the environment.  Borrower has no material contingent liability
in connection with any release of any toxic or hazardous waste or substance
into the environment.

 

ARTICLE III

CONDITIONS

 

SECTION 3.1.          CONDITIONS
OF INITIAL EXTENSION OF CREDIT.  The
obligation of Bank to extend any credit contemplated by this Agreement is
subject to the fulfillment to Bank’s satisfaction of all of the following
conditions:

 

5

 

(a)     Approval of Bank
Counsel.  All legal matters
incidental to the extension of credit by Bank shall be satisfactory to Bank’s
counsel.

 

(b)    Documentation.  Bank shall have received, in form and
substance satisfactory to Bank, each of the following, duly executed:

 

(i)            This Agreement and each promissory
note or other instrument or document required hereby.

(ii)           Corporate Resolution: Borrowing.

(iii)          Certificate of Incumbency.

(iv)          Authorization for Foreign Exchange
Transactions.

(v)           Foreign Exchange Agreement.

(vi)          Security Agreement: Securities
Account.

(vii)         Addendum to Security Agreement:
Securities Account.

(viii)        Statement of Purpose (Form U-1).

(ix)           Securities Account Control Agreement.

(x)            Such other documents as Bank may require
under any other Section of this Agreement.

 

(c)     Financial Condition.  There shall have been no material adverse
change, as determined by Bank, in the financial condition or business of
Borrower, nor any material decline, as reasonably determined by Bank, in the
market value of any collateral required hereunder or a substantial or material
portion of the assets of Borrower.

 

(d)    Insurance.  Borrower shall have delivered to Bank
evidence of insurance coverage on all Borrower’s property, in form, substance,
amounts, covering risks and issued by companies reasonably satisfactory to
Bank, and where required by Bank, with loss payable endorsements in favor of
Bank.

 

SECTION 3.2.          CONDITIONS
OF EACH EXTENSION OF CREDIT.  The
obligation of Bank to make each extension of credit requested by Borrower
hereunder shall be subject to the fulfillment to Bank’s satisfaction of each of
the following conditions:

 

(a)     Compliance.  The representations and warranties contained
herein and in each of the other Loan Documents shall be true  in all material respects on and as of the
date of the signing of this Agreement and on the date of each extension of
credit by Bank pursuant hereto, with the same effect as though such
representations and warranties had been made on and as of each such date, and
on each such date, no Event of Default as defined herein, and no condition,
event or act which with the giving of notice or the passage of time or both
would constitute such an Event of Default, shall have occurred and be continuing
or shall exist.

 

(b)    Documentation.  Bank shall have received all additional
documents which may be required in connection with such extension of credit.

 

ARTICLE IV

AFFIRMATIVE COVENANTS

 

Borrower covenants that so long as Bank remains committed to extend
credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of

 

6

 

Borrower to Bank under any of the Loan Documents remain outstanding,
and until payment in full of all obligations of Borrower subject hereto,
Borrower shall, unless Bank otherwise consents in writing:

 

SECTION 4.1.          PUNCTUAL
PAYMENTS.  Punctually pay all principal,
interest, fees or other liabilities due under any of the Loan Documents at the
times and place and in the manner specified therein.

 

SECTION 4.2.          ACCOUNTING
RECORDS.  Maintain adequate books and
records in accordance with generally accepted accounting principles
consistently applied, and permit any representative of Bank, at any reasonable
time and upon reasonable notice, to inspect, audit and examine such books and
records, to make copies of the same, and to inspect the properties of Borrower;
provided however, that no more than two inspections, audits and examinations
per calendar year, other than any that relate to any period in such year during
which an Event of Default has occurred and is continuing, shall be required by
Bank.

 

SECTION 4.3.          FINANCIAL
STATEMENTS.  Provide to Bank all of the
following, in form and detail satisfactory to Bank:

 

(a)     not later than 90 days
after and as of the end of each fiscal year, a copy of Borrower’s Form 10K
report filed with the Securities Exchange Commission, including audited
financial statements with a balance sheet, an income statement, a statement of
cash flow and all schedules and footnotes in accordance with generally accepted
accounting principles;

 

(b)    not later than 45 days
after and as of the end of each fiscal quarter, a copy of Borrower’s Form 10Q
report filed with the Securities Exchange Commission, including financial
statements with a balance sheet, an income statement and a statement of cash
flow, prepared in accordance with generally accepted accounting principles,
except for the absence of schedules, footnotes and year-end adjustments;

 

(c)     not later than 90 days
after and as of the end of each fiscal quarter, a business plan of Borrower,
prepared by Borrower and delivered to Bank;

 

(d)    from time to time such
other information as Bank may reasonably request.

 

SECTION 4.4.          COMPLIANCE.  Preserve and maintain all material licenses,
permits, governmental approvals, rights, privileges and franchises necessary
for the conduct of its business; and comply with the provisions of all
documents pursuant to which Borrower is organized and/or which govern Borrower’s
continued existence and with the requirements of all laws, rules, regulations
and orders of any governmental authority applicable to Borrower and/or its
business in which failure to so comply could have a material adverse effect on Borrower.

 

SECTION 4.5.          INSURANCE.  Maintain and keep in force insurance of the
types and in amounts customarily carried in lines of business similar to that
of Borrower, including but not limited to fire, extended coverage, public
liability, flood (if required by law), property damage and workers’
compensation, with all such insurance carried with companies and in amounts
reasonably satisfactory to Bank, and deliver to Bank from time to time at Bank’s
request schedules setting forth all insurance then in effect.

 

SECTION 4.6.          FACILITIES.  Keep all properties useful or necessary to
Borrower’s business in good repair and condition, ordinary wear and tear
excepted, and from time to time

 

7

 

make necessary repairs, renewals and replacements thereto so that such
properties shall be fully and efficiently preserved and maintained.

 

SECTION 4.7.          TAXES AND
OTHER LIABILITIES.  Pay and discharge
when due any and all indebtedness, obligations, assessments and taxes, both real
or personal, including without limitation federal and state income taxes and
state and local property taxes and assessments, except such (a) as Borrower may
in good faith contest or as to which a bona fide dispute may arise, and (b) for
which Borrower has made provision, to Bank’s reasonable satisfaction, for
eventual payment thereof in the event Borrower is obligated to make such
payment.

 

SECTION 4.8.          LITIGATION.  Promptly give notice in writing to Bank of
any litigation pending or threatened against Borrower with a claim in excess of
$1,000,000.00.

 

SECTION 4.10.        NOTICE TO
BANK.  Promptly (but in no event more
than five (5) days after the occurrence of each such event or matter) give
written notice to Bank in reasonable detail of: 
(a) the occurrence of any Event of Default, or any condition, event
or act which with the giving of notice or the passage of time or both would
constitute an Event of Default; (b) any change in the name or the
organizational structure of Borrower; (c) the occurrence and nature of any
Reportable Event or Prohibited Transaction, each as defined in ERISA, or any
funding deficiency with respect to any Plan; or (d) any termination or
cancellation of any insurance policy which Borrower is required to maintain, or
any uninsured or partially uninsured loss through liability or property damage,
or through fire, theft or any other cause affecting Borrower’s property in
excess of an aggregate of $1,000,000.00.

 

ARTICLE V

NEGATIVE COVENANTS

 

Borrower further covenants that so long as Bank remains committed to
extend credit to Borrower pursuant hereto, or any liabilities (whether direct
or contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower will not without Bank’s prior written
consent:

 

SECTION 5.1.          USE OF
FUNDS.  Use any of the proceeds of any
credit extended hereunder except for the purposes stated in Article I hereof.

 

SECTION 5.2.          OTHER
INDEBTEDNESS.  Create, incur, assume or
permit to exist any indebtedness or liabilities resulting from borrowings,
loans or advances, whether secured or unsecured, matured or unmatured,
liquidated or unliquidated, joint or several, except (a) the liabilities of
Borrower to Bank, (b) any other liabilities of Borrower existing as of,
and disclosed to Bank prior to, the date hereof and (c) new indebtedness or
liabilities resulting from such borrowings, loans or advances, not to exceed
$1,000,000.00 in the aggregate.

 

SECTION 5.3.          MERGER,
CONSOLIDATION, TRANSFER OF ASSETS.  Merge
into or consolidate with any other entity except if Borrower is the surviving
entity and no Event of Default has occurred and is continuing or would exist
after giving effect to such merger; make any substantial change in the nature
of Borrower’s business as conducted as of the date hereof; nor sell, lease,
transfer or otherwise dispose of all or a substantial or material portion of
Borrower’s assets except in the ordinary course of its business.

 

8

 

ARTICLE VI

EVENTS OF DEFAULT

 

SECTION 6.1.          The
occurrence of any of the following shall constitute an “Event of Default” under
this Agreement:

 

(a)     Borrower shall fail to pay
within five (5) days of when due any principal, interest, fees or other amounts
payable under any of the Loan Documents.

 

(b)    Any financial statement or
certificate furnished to Bank in connection with, or any representation or
warranty made by Borrower or any other party under this Agreement or any other
Loan Document shall prove to be incorrect, false or misleading in any material
respect when furnished or made.

 

(c)     Any default in the
performance of or compliance with any obligation, agreement or other provision
contained herein or in any other Loan Document (other than those referred to in
subsections (a) and (b) above), and with respect to any such default which by
its nature can be cured, such default shall continue for a period of thirty
(30) days from its occurrence.

 

(d)    Any default (beyond any
applicable grace period) in the payment or performance of any obligation, or
any defined event of default, under the terms of any contract or instrument
(other than any of the Loan Documents) pursuant to which Borrower, any
guarantor hereunder or any general partner or joint venturer in any Borrower
which is a partnership or joint venture (with each such guarantor, general
partner and/or joint venturer referred to herein as a “Third Party Obligor”)
has incurred any debt or other liability (i) to Bank, or (ii) to any person or
entity involving greater than $1,000,000.00 in the aggregate for all such
defaults combined.

 

(e)     The filing of a notice of
judgment lien against Borrower or any Third Party Obligor; or the recording of
any abstract of judgment against Borrower or any Third Party Obligor in any
county in which Borrower or such Third Party Obligor has an interest in real
property; or the service of a notice of levy and/or of a writ of attachment or
execution, or other like process, against the assets of Borrower or any Third
Party Obligor; or the entry of a judgment against Borrower or any Third Party
Obligor; if within twenty (20) days after the creation thereof, or at least ten
(10) days prior to the date on which any assets could be lawfully sold in
satisfaction thereof, the debt or claims relating to such judgments, liens,
levies, writs, executions and other process are not satisfied or stayed pending
appeal (with a bond or similar insurance satisfactory to Bank) or insured
against in a manner satisfactory to Bank.

 

(f)     Borrower or any Third
Party Obligor shall become insolvent, or shall suffer or consent to or apply
for the appointment of a receiver, trustee, custodian or liquidator of itself
or any of its property, or shall generally fail to pay its debts as they become
due, or shall make a general assignment for the benefit of creditors; Borrower
or any Third Party Obligor shall file a voluntary petition in bankruptcy, or
seeking reorganization, in order to effect a plan or other arrangement with
creditors or any other relief under the Bankruptcy Reform Act, Title 11 of the
United States Code, as amended or recodified from time to time (“Bankruptcy
Code”), or under any state or federal law granting relief to debtors, whether
now or hereafter in effect; or any involuntary petition or proceeding pursuant
to the Bankruptcy Code or any other applicable state or federal law relating to
bankruptcy, reorganization or other relief for debtors is filed or commenced
against Borrower or any Third Party Obligor, and such involuntary petition or

 

9

 

proceeding is unopposed or is not dismissed within sixty (60) days of
its commencement, or Borrower or any Third Party Obligor shall file an answer
admitting the jurisdiction of the court and the material allegations of any
involuntary petition; or Borrower or any Third Party Obligor shall be
adjudicated a bankrupt, or an order for relief shall be entered against
Borrower or any Third Party Obligor by any court of competent jurisdiction
under the Bankruptcy Code or any other applicable state or federal law relating
to bankruptcy, reorganization or other relief for debtors.

 

(g)    There shall exist or occur
any material adverse event or condition which Bank in good faith believes
impairs, or is substantially likely to impair, the prospect of payment or
performance by Borrower of its obligations under any of the Loan Documents.

 

(h)    The death or incapacity of
any individual Borrower or Third Party Obligor. 
The dissolution or liquidation of any Borrower or Third Party Obligor
which is a corporation, partnership, joint venture or other type of entity; or
Borrower or any such Third Party Obligoradopts a plan to effect the dissolution
or liquidation of such Borrower or Third Party Obligor; or an action for the
involuntary dissolution of Borrower or any such Third Party Obligor is
commenced and is not contested by an appropriate proceeding promptly instituted
and diligently prosecuted.

 

SECTION 6.2.          REMEDIES.  Upon the occurrence and during the
continuance of any Event of Default: 
(a) all indebtedness of Borrower under each of the Loan Documents,
any term thereof to the contrary notwithstanding, shall at Bank’s option and
without notice become immediately due and payable without presentment, demand,
protest or notice of dishonor, all of which are hereby expressly waived by each
Borrower; (b) the obligation, if any, of Bank to extend any further credit
under any of the Loan Documents shall immediately cease and terminate; and
(c) Bank shall have all rights, powers and remedies available under each
of the Loan Documents, or accorded by law, including without limitation the
right to resort to any or all security for any credit subject hereto and to
exercise any or all of the rights of a beneficiary or secured party pursuant to
applicable law.  All rights, powers and
remedies of Bank may be exercised at any time by Bank and from time to time
after the occurrence and during the continuance of an Event of Default, are
cumulative and not exclusive, and shall be in addition to any other rights,
powers or remedies provided by law or equity. 
Notwithstanding anything to the contrary contained herein, Bank shall
have no obligation to permit borrowings hereunder during the five (5) day period
referred to in 6.1 (a) above or during the sixty (60) day period described in
Section 6.1 (f) above.

 

ARTICLE VII

MISCELLANEOUS

 

SECTION 7.1.          NO
WAIVER.  No delay, failure or
discontinuance of Bank in exercising any right, power or remedy under any of
the Loan Documents shall affect or operate as a waiver of such right, power or
remedy; nor shall any single or partial exercise of any such right, power or
remedy preclude, waive or otherwise affect any other or further exercise
thereof or the exercise of any other right, power or remedy.  Any waiver, permit, consent or approval of
any kind by Bank of any breach of or default under any of the Loan Documents
must be in writing and shall be effective only to the extent set forth in such
writing.

 

10

 

SECTION 7.2.          NOTICES.  All notices, requests and demands which any
party is required or may desire to give to any other party under any provision
of this Agreement must be in writing delivered to each party at the following
address:

 

 

	
  BORROWER:

  	
   

  	
  DOT HILL SYSTEMS CORP.

  
	
   

  	
   

  	
  6305 El Camino Real

  
	
   

  	
   

  	
  Carlsbad, CA 92009

  
	
   

  	
   

  	
   

  
	
  BANK:

  	
   

  	
  WELLS FARGO BANK, NATIONAL ASSOCIATION

  
	
   

  	
   

  	
  San Diego RCBO

  
	
   

  	
   

  	
  401 B Street, Suite 2201

  
	
   

  	
   

  	
  San Diego, CA 92101

  
	
   

  	
   

  	
   

  

 

 

or to such other address as any party may designate by written notice
to all other parties.  Each such notice,
request and demand shall be deemed given or made as follows:  (a) if sent by hand delivery, upon
delivery; (b) if sent by mail, upon the earlier of the date of receipt or
three (3) days after deposit in the U.S. mail, first class and postage prepaid;
and (c) if sent by telecopy, upon receipt.

 

SECTION 7.3.          COSTS,
EXPENSES AND ATTORNEYS’ FEES.  Borrower
shall pay to Bank 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 Bank’s in-house
counsel), expended or incurred by Bank in connection with (a) the
negotiation and preparation of this Agreement and the other Loan Documents,
Bank’s continued administration hereof and thereof, and the preparation of any
amendments and waivers hereto and thereto, (b) the enforcement of Bank’s
rights and/or the collection of any amounts which become due to Bank under any
of the Loan Documents, and (c) the prosecution or defense of any action in
any way related to any of the Loan Documents, 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 any Borrower or any other
person or entity.

 

SECTION 7.4.          SUCCESSORS,
ASSIGNMENT.  This Agreement shall be
binding upon and inure to the benefit of the heirs, executors, administrators,
legal representatives, successors and assigns of the parties; provided however,
that Borrower may not assign or transfer its interest hereunder without Bank’s
prior written consent.  Bank reserves the
right to sell, assign, transfer, negotiate or grant participations in all or
any part of, or any interest in, Bank’s rights and benefits under each of the
Loan Documents.  In connection therewith,
Bank may disclose all documents and information which Bank now has or may
hereafter acquire relating to any credit subject hereto, Borrower or its
business, or any collateral required hereunder.

 

SECTION 7.5.          CONFIDENTIALITY.  Bank agrees to hold any Confidential
Information (as defined below) that it may receive from Borrower in confidence,
except for disclosure: (i) to Bank’s representatives (which shall include,
without limitation, all other banks and companies affiliated with Wells Fargo
& Company) who need to know the Confidential Information for the purpose of
Bank’s ongoing credit accommodations to Borrower, it being expressly understood
and agreed that such persons and entities shall be informed of the confidential
nature of the Confidential Information and shall be required by Bank to treat
the information as confidential in accordance with the terms and conditions
hereof; (ii) to legal counsel, accountants and other

 

11

 

professional advisors to Bank; (iii) to federal and state bank
examiners and other regulatory officials having jurisdiction over Bank; (iv) as
required by law or legal process, provided that Bank agrees to notify Borrower
of any such disclosures unless prohibited by applicable law, or in connection
with any legal proceeding to which Bank and Borrower are adverse parties; and
(v) to any person or entity in connection with a proposed sale, assignment or
transfer of all or any part of Bank’s interest in the Loan Documents, provided
that the recipient has accepted such information subject to a confidentiality
agreement substantially similar to this Section 7.5.  As used herein, the term “Confidential
Information” shall mean all non-public, confidential and/or proprietary
information of Borrower, now or at any time hereafter provided to Bank by
Borrower, or any of Borrower’s officers, employees, agents or representatives,
in connection with Bank’s ongoing credit accommodations to Borrower, and shall
include, without limitation, any and all financial, technical and/or business
information relating to Borrower and its subsidiaries, including trade secrets,
research and development test results, marketing or business plans and
strategies, forecasts, budgets, projections, customer and supplier information,
and any other analyses, computations or studies prepared by or for Borrower or
its subsidiaries.  This confidentiality
provision shall not extend to any portion of the Confidential Information that:
(a) is or becomes generally available to the public other than as a result of a
disclosure by Bank or its representatives; (b) is or becomes available to Bank
on a non-confidential basis by Borrower or any officer, employee, agent or
representative of Borrower prior to its disclosure by Bank; or (c) is or
becomes available to Bank on a non-confidential basis from a source other than
Borrower.

 

SECTION 7.6.          ENTIRE
AGREEMENT; AMENDMENT.  This Agreement and
the other Loan Documents constitute the entire agreement between Borrower and
Bank with respect to each credit subject hereto and supersede all prior
negotiations, communications, discussions and correspondence concerning the
subject matter hereof.  This Agreement
may be amended or modified only in writing signed by each party hereto.

 

SECTION 7.7.          NO THIRD
PARTY BENEFICIARIES.  This Agreement is
made and entered into for the sole protection and benefit of the parties hereto
and their respective permitted successors and assigns, and no other person or
entity shall be a third party beneficiary of, or have any direct or indirect
cause of action or claim in connection with, this Agreement or any other of the
Loan Documents to which it is not a party.

 

SECTION 7.8.          TIME.  Time is of the essence of each and every
provision of this Agreement and each other of the Loan Documents.

 

SECTION 7.9.          SEVERABILITY
OF PROVISIONS.  If any provision of this
Agreement shall be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity without invalidating the remainder of such provision or any
remaining provisions of this Agreement.

 

SECTION 7.10.        COUNTERPARTS.  This Agreement may be executed in any number
of counterparts, each of which when executed and delivered shall be deemed to
be an original, and all of which when taken together shall constitute one and
the same Agreement.

 

SECTION 7.11.        GOVERNING
LAW.  This Agreement shall be governed by
and construed in accordance with the laws of the State of California.

 

12

 

SECTION 7.12.        ARBITRATION.

 

(a)     Arbitration.  The parties hereto agree, upon demand by any
party, to submit to binding arbitration all claims, disputes and controversies
between or among them (and their respective employees, officers, directors,
attorneys, and other agents), whether in tort, contract or otherwise arising
out of or relating to in any way (i) the loan and related Loan Documents which
are the subject of this Agreement and its negotiation, execution,
collateralization, administration, repayment, modification, extension,
substitution, formation, inducement, enforcement, default or termination; or
(ii) requests for additional credit.

 

(b)    Governing Rules.  Any arbitration proceeding will (i) proceed
in a location in California selected by the American Arbitration Association (“AAA”);
(ii) be governed by the Federal Arbitration Act (Title 9 of the United States
Code), notwithstanding any conflicting choice of law provision in any of the
documents between the parties; and (iii) be conducted by the AAA, or such other
administrator as the parties shall mutually agree upon, in accordance with the
AAA’s commercial dispute resolution procedures, unless the claim or counterclaim
is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and
costs in which case the arbitration shall be conducted in accordance with the
AAA’s optional procedures for large, complex commercial disputes (the
commercial dispute resolution procedures or the optional procedures for large,
complex commercial disputes to be referred to, as applicable, as the “Rules”).  If there is any inconsistency between the
terms hereof and the Rules, the terms and procedures set forth herein shall control.  Any party who fails or refuses to submit to
arbitration following a demand by any other party shall bear all costs and
expenses incurred by such other party in compelling arbitration of any dispute.  Nothing contained herein shall be deemed to
be a waiver by any party that is a bank of the protections afforded to it under
12 U.S.C. §91 or any similar applicable state law.

 

(c)     No Waiver of Provisional Remedies,
Self-Help and Foreclosure.  The
arbitration requirement does not limit the right of any party to (i) foreclose
against real or personal property collateral; (ii) exercise self-help remedies
relating to collateral or proceeds of collateral such as setoff or
repossession; or (iii) obtain provisional or ancillary remedies such as
replevin, injunctive relief, attachment or the appointment of a receiver,
before during or after the pendency of any arbitration proceeding.  This exclusion does not constitute a waiver
of the right or obligation of any party to submit any dispute to arbitration or
reference hereunder, including those arising from the exercise of the actions
detailed in sections (i), (ii) and (iii) of this paragraph.

 

(d)    Arbitrator
Qualifications and Powers.  Any
arbitration proceeding in which the amount in controversy is $5,000,000.00 or
less will be decided by a single arbitrator selected according to the Rules,
and who shall not render an award of greater than $5,000,000.00.  Any dispute in which the amount in
controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel
of three arbitrators; provided however, that all three arbitrators must
actively participate in all hearings and deliberations.  The arbitrator will be a neutral attorney
licensed in the State of California or a neutral retired judge of the state or
federal judiciary of California, in either case with a minimum of ten years
experience in the substantive law applicable to the subject matter of the
dispute to be arbitrated.  The arbitrator
will determine whether or not an issue is arbitratable and will give effect to
the statutes of limitation in determining any claim.  In any arbitration proceeding the arbitrator
will decide (by documents only or with a hearing at the arbitrator’s
discretion) any pre-hearing motions which are similar to motions to dismiss for
failure to state a claim or motions for summary adjudication.  The arbitrator shall resolve all disputes in
accordance with the substantive law of California and may grant any remedy or
relief that a

 

13

 

 court of such state could order
or grant within the scope hereof and such ancillary relief as is necessary to
make effective any award.  The arbitrator
shall also have the power to award recovery of all costs and fees, to impose
sanctions and to take such other action as the arbitrator deems necessary to
the same extent a judge could pursuant to the Federal Rules of Civil Procedure,
the California Rules of Civil Procedure or other applicable law.  Judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction.  The institution and maintenance of an action
for judicial relief or pursuit of a provisional or ancillary remedy shall not
constitute a waiver of the right of any party, including the plaintiff, to
submit the controversy or claim to arbitration if any other party contests such
action for judicial relief.

 

(e)     Discovery.  In any arbitration proceeding discovery will
be permitted in accordance with the Rules. 
All discovery shall be expressly limited to matters directly relevant to
the dispute being arbitrated and must be completed no later than 20 days before
the hearing date and within 180 days of the filing of the dispute with the
AAA.  Any requests for an extension of
the discovery periods, or any discovery disputes, will be subject to final
determination by the arbitrator upon a showing that the request for discovery
is essential for the party’s presentation and that no alternative means for
obtaining information is available.

 

(f)     Class Proceedings and
Consolidations.  The resolution of
any dispute arising pursuant to the terms of this Agreement shall be determined
by a separate arbitration proceeding and such dispute shall not be consolidated
with other disputes or included in any class proceeding.

 

(g)    Payment Of Arbitration
Costs And Fees.  The arbitrator shall award all costs and
expenses of the arbitration proceeding.

 

(h)    Real Property
Collateral; Judicial Reference. 
Notwithstanding anything herein to the contrary, no dispute shall be
submitted to arbitration if the dispute concerns indebtedness secured directly
or indirectly, in whole or in part, by any real property unless (i) the holder
of the mortgage, lien or security interest specifically elects in writing to
proceed with the arbitration, or (ii) all parties to the arbitration waive any
rights or benefits that might accrue to them by virtue of the single action
rule statute of California, thereby agreeing that all indebtedness and
obligations of the parties, and all mortgages, liens and security interests
securing such indebtedness and obligations, shall remain fully valid and
enforceable.  If any such dispute is not
submitted to arbitration, the dispute shall be referred to a referee in
accordance with California Code of Civil Procedure Section 638 et seq., and
this general reference agreement is intended to be specifically enforceable in
accordance with said Section 638.  A
referee with the qualifications required herein for arbitrators shall be
selected pursuant to the AAA’s selection procedures.  Judgment upon the decision rendered by a
referee shall be entered in the court in which such proceeding was commenced in
accordance with California Code of Civil Procedure Sections 644 and 645.

 

(i)      Miscellaneous.  To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the dispute with the
AAA.  No arbitrator or other party to an
arbitration proceeding may disclose the existence, content or results thereof,
except for disclosures of information by a party required in the ordinary
course of its business or by applicable law or regulation.  If more than one agreement for arbitration by
or between the parties potentially applies to a dispute, the arbitration
provision most directly related to the Loan Documents or the subject matter of
the dispute shall control.  This
arbitration provision shall survive termination, amendment or expiration of any
of the Loan Documents or any relationship between the parties.

 

14

 

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

 

	
   

  	
   

  	
  WELLS FARGO BANK,

  	
   

  
	
  DOT HILL SYSTEMS CORP.

  	
   

  	
  NATIONAL
  ASSOCIATION

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ James L. Lambert

  	
   

  	
  By:

  	
  /s/ Brian P. Chambers

  	
   

  
	
   

  	
  James L. Lambert

  	
   

  	
   

  	
   Brian P. Chambers

  	
   

  
	
   

  	
  President

  	
   

  	
   

  	
   Vice President

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By: 

  	
  /s/ Preston Romm

  	
   

  	
   

  	
   

  
	
   

  	
  Preston Romm

  	
   

  	
   

  	
   

  
	
   

  	
  Chief Financial Officer

  	
   

  	
   

  	
   

  
							

 

15

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