<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1999
Commission File Number: 0-22071
OVERLAND DATA, INC.
(Exact name of registrant as specified in its charter)
California 95-3535285
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation)
8975 Balboa Avenue, San Diego, California 92123-1599
(Address of principal executive offices, including zip code)
(858) 571-5555
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
As of February 14, 2000 there were 10,093,606 shares of the registrant's common
stock, no par value, issued and outstanding.
<PAGE>
OVERLAND DATA, INC.
FORM 10-Q
For the quarterly period ended December 31, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
Number
------
<S> <C> <C>
PART I - FINANCIAL INFORMATION
- ----------------------------------
Item 1. Financial Statements:
Consolidated condensed statement of operations --
Three months and six months ended
December 31, 1999 and 1998................................. 3
Consolidated condensed balance sheet --
December 31, 1999 and June 30, 1999....................... 4
Consolidated condensed statement of cash flows --
Six months ended December 31, 1999 and 1998............... 5
Notes to consolidated condensed financial statements............ 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................11
PART II - OTHER INFORMATION
- -------------------------------
Item 1. Legal Proceedings...............................................19
Item 4. Submission of Matters to a Vote of Security Holders.............21
Item 6. Exhibits and Reports on Form 8-K................................21
Signatures......................................................22
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
OVERLAND DATA, INC.
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net revenues:
Product sales ............. $27,469 $24,240 $50,114 $48,612
Royalties ................. - - 200 -
------- ------- ------- -------
Total net revenues ..... 27,469 24,240 50,314 48,612
Cost of goods sold .............. 20,493 16,927 37,096 33,883
------- ------- ------- -------
Gross profit .................... 6,976 7,313 13,218 14,729
------- ------- ------- -------
Operating expenses:
Sales and marketing ....... 3,244 3,015 6,376 5,803
Research and development .. 1,646 1,219 3,245 2,587
General and administrative 1,346 1,208 2,964 2,529
------- ------- ------- -------
Total operating expenses 6,236 5,442 12,585 10,919
------- ------- ------- -------
Income from operations .......... 740 1,871 633 3,810
Other income:
Interest, net ............. 199 221 374 457
Other income, net ......... 68 77 64 112
------- ------- ------- -------
Income before income taxes ...... 1,007 2,169 1,071 4,379
Provision for income taxes ...... 398 854 423 1,716
------- ------- ------- -------
Net income ...................... $ 609 $ 1,315 $ 648 $ 2,663
======= ======= ======= =======
Earnings per share:
Basic ..................... $ 0.06 $ 0.13 $ 0.06 $ 0.26
======= ======= ======= =======
Diluted ................... $ 0.06 $ 0.12 $ 0.06 $ 0.25
======= ======= ======= =======
Number of shares used in
computing earnings per share:
Basic ..................... 10,064 10,232 10,069 10,386
======= ======= ======= =======
Diluted ................... 10,493 10,563 10,410 10,669
======= ======= ======= =======
</TABLE>
See accompanying notes to consolidated condensed financial statements.
3
<PAGE>
OVERLAND DATA, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
(IN THOUSANDS, EXCEPT NUMBER OF SHARES)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1999 1999
------------- -----------
(unaudited)
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents ............................... $ 17,992 $ 16,199
Accounts receivable, less allowance for doubtful accounts
and returns of $893 and $885, respectively ........ 16,528 13,885
Inventories ............................................. 14,411 17,704
Deferred income taxes ................................... 1,375 1,375
Other current assets .................................... 1,811 2,136
-------- --------
Total current assets ....................... 52,117 51,299
Property and equipment, net ..................................... 4,172 4,657
Intangible and other assets ..................................... 355 274
-------- --------
$ 56,644 $ 56,230
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable ........................................ $ 5,845 $ 5,615
Accrued liabilities ..................................... 2,991 2,876
Accrued payroll and employee compensation ............... 1,224 1,827
-------- --------
Total current liabilities .................. 10,060 10,318
Deferred income taxes ........................................... 441 441
Other liabilities ............................................... 873 664
-------- --------
Total liabilities .......................... 11,374 11,423
-------- --------
Shareholders' equity:
Common stock, no par value, 25,000,000 shares
authorized; 10,070,306 and 10,089,668 shares
issued and outstanding, respectively .............. 30,808 31,030
Accumulated other comprehensive loss .................... (22) (59)
Retained earnings ....................................... 14,484 13,836
-------- --------
Total shareholders' equity ................. 45,270 44,807
-------- --------
$ 56,644 $ 56,230
======== ========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
4
<PAGE>
OVERLAND DATA, INC.
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
1999 1998
------------ ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income .............................................. $ 648 $ 2,663
Adjustments to reconcile net income to cash
provided by (used in) operating activities:
Depreciation and amortization ..................... 752 678
Changes in operating assets and liabilities:
Accounts receivable .......................... (2,643) 1,653
Inventories .................................. 3,293 1,354
Other assets ................................. 244 (113)
Accounts payable and accrued liabilities ..... 554 (2,171)
Accrued payroll and employee compensation .... (603) 456
-------- --------
Net cash provided by operating activities 2,245 4,520
INVESTING ACTIVITIES:
Capital expenditures .................................... (267) (496)
-------- --------
Net cash used in investing activities ... (267) (496)
-------- --------
FINANCING ACTIVITIES:
Proceeds from exercise of stock options ................. 37 45
Stock repurchases ....................................... (415) (2,596)
Net proceeds from issuance of common stock .............. 156 176
-------- --------
Net cash used in financing activities ... (222) (2,375)
-------- --------
Effect of exchange rate changes on cash ......................... 37 3
-------- --------
Net increase in cash and cash equivalents ....................... 1,793 1,652
Cash and cash equivalents at the beginning of the period ........ 16,199 15,550
-------- --------
Cash and cash equivalents at the end of the period .............. $ 17,992 $ 17,202
======== ========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
5
<PAGE>
OVERLAND DATA, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION
- -------------------------------
The accompanying condensed consolidated financial statements of Overland
Data, Inc. and its subsidiaries (the "Company") have been prepared by the
Company without audit pursuant to the rules and regulations of the Securities
and Exchange Commission for Form 10-Q. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. In the opinion of management, these
statements reflect all normal recurring adjustments necessary for a fair
presentation of the financial position, results of operations and cash flows
for all periods presented. The results of operations for such periods are not
necessarily indicative of the results expected for the full fiscal year. The
Company's second fiscal quarter ends on the Sunday closest to December 31.
For ease of presentation, the Company's second fiscal quarter end is deemed
to be December 31. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1999 on file with the
Securities and Exchange Commission.
NOTE 2 -- NET INCOME PER SHARE
- ------------------------------
Basic earnings per share ("EPS") is computed based on the weighted average
number of shares of common stock outstanding during the period. Diluted EPS
is computed based on the weighted average number of shares of common stock
outstanding during the period increased by the weighted average number of
common stock equivalents outstanding during the period, using the treasury
stock method. Anti-dilutive common stock equivalents excluded from the
computation of diluted earnings per share amounted to 77,000 and 380,000 at
December 31, 1999 and 1998, respectively.
6
<PAGE>
A reconciliation of the calculation of basic and diluted EPS is as follows (in
thousands, except per share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------- ------- ------- -------
(unaudited)
<S> <C> <C> <C> <C>
Net income ........................... $ 609 $ 1,315 $ 648 $ 2,663
======= ======= ======= =======
BASIC EPS:
Weighted average number of common
shares outstanding ............. 10,064 10,232 10,069 10,386
======= ======= ======= =======
Basic earnings per share ............. $ 0.06 $ 0.13 $ 0.06 $ 0.26
======= ======= ======= =======
DILUTED EPS:
Weighted average number of common
shares outstanding .............. 10,064 10,232 10,069 10,386
Common stock equivalents from the
issuance of options using the
treasury stock method ........... 429 331 341 283
------- ------- ------- -------
10,493 10,563 10,410 10,669
======= ======= ======= =======
Diluted earnings per share ........... $ 0.06 $ 0.12 $ 0.06 $ 0.25
======= ======= ======= =======
</TABLE>
NOTE 3 - COMPREHENSIVE INCOME
- -----------------------------
Comprehensive income includes, in addition to net income, foreign currency
translation effects which are charged or credited to the accumulated other
comprehensive income account within shareholders' equity.
7
<PAGE>
Comprehensive income for the three months and six months ended December 31,
1999 and 1998 was as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
--------------- -------------- -------------- ---------------
(unaudited)
<S> <C> <C> <C> <C>
Net income............................... $ 609 $ 1,315 $ 648 $ 2,663
Foreign currency translation effect...... (133) (16) 37 3
=============== ============== ============== ===============
Comprehensive income..................... $ 476 $ 1,299 $ 685 $ 2,666
=============== ============== ============== ===============
</TABLE>
NOTE 4 -- INVENTORIES
- ---------------------
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1999 1999
-------------------- --------------------
(unaudited)
<S> <C> <C>
Raw materials........ $ 7,690 $ 9,119
Work-in-process...... 2,730 3,074
Finished goods....... 3,991 5,511
==================== ====================
$ 14,411 $ 17,704
==================== ====================
</TABLE>
NOTE 5 -- LITIGATION
- ---------------------
The Company, its directors and certain of its officers were named as
defendants in two class action lawsuits filed on April 21, 1997 and May 2,
1997 in the U.S. District Court for the Southern District of California. In
both cases, the plaintiffs purported to represent a class of all persons who
purchased the Company's Common Stock between February 21, 1997 and March 14,
1997. The complaints alleged that the defendants violated various federal
securities laws through material misrepresentation and omissions in
connection with the Company's initial public offering and its Registration
Statement on Form S-1, which the Securities and Exchange Commission declared
effective on February 21, 1997. The plaintiffs sought rescission of their
share purchases or rescissory damages if their shares had been sold, as well
as attorneys' fees and other costs and expenses. The Shareholder who filed
the first of these two lawsuits was appointed to serve as the lead plaintiff
on September 29, 1998, and on December 17, 1998, the court certified the
shareholder class, allowing the litigation to proceed as a class action.
8
<PAGE>
The defendants answered the lead plaintiff's First Amended Complaint, denying
all material allegations and disavowing any wrongdoing. Factual discovery was
completed, but expert depositions were stayed by the court pending the
conduct of settlement conferences.
On September 24, 1999, the lead plaintiff and the defendants reached an
agreement in principle to settle the entire litigation, and that agreement
was memorialized in a Memorandum of Understanding dated October 4, 1999. The
litigants negotiated a Stipulation of Settlement that set forth the final
terms and conditions governing resolution of the class action law suit. The
court preliminarily approved this Stipulation of Settlement and ordered that
the members of the class be notified of the pendency of the settlement and be
given the opportunity to withdraw from its application. The class members
have until February 18, 2000 to withdraw and/or to submit in writing any
objections regarding the terms of the settlement or the attorneys' fees
sought by their counsel. The court will conduct a hearing on March 6, 2000 to
resolve any such objections, set the amount of attorneys' fees that the court
will award, and determine whether the settlement is fair and reasonable to
the class members. If the court approves the Stipulation of Settlement, then
the class members will have until April 7, 2000 to submit claim forms for
reimbursement.
The Company maintains directors' and officers' liability insurance to cover
the settlement payment contemplated by the Stipulation of Settlement, less
certain unreimbursed defense costs. As a result, the Company incurred a
one-time, pre-tax charge of $248,000 for the fiscal quarter ended September
30, 1999.
In July 1998, a lawsuit was filed in the U.S. District Court for the District
of Massachusetts alleging infringement by the Company related to its use of
the "GUTS" and "Guaranteed Up Time Service" trademarks. Written discovery in
the lawsuit has closed. The court has scheduled a hearing for April 18, 2000
on the Company's pending motion for summary judgement. Management believes
that the disposition of this matter will not have a material adverse effect
on the Company's financial position or results of operations.
NOTE 6 -- SUBSEQUENT EVENT
- --------------------------
On January 10, 2000, the Company announced that it had signed an asset
purchase agreement with Tecmar Technologies International, Inc. and two of
its wholly-owned subsidiaries, under which the Company would acquire from
Tecmar substantially all inventories, fixed assets, supplies, intellectual
property, trademarks and Internet addresses for approximately $3 million in
cash. Tecmar, based in Longmont, Colorado, develops and manufactures
entry-level tape storage solutions for the network storage environment.
Tecmar generated approximately $24 million in revenue in the twelve month
period ended October 31, 1999 and currently has about 40 employees. Under the
terms of the asset purchase agreement, the Tecmar entities have filed for
bankruptcy protection. The Company will acquire the assets from Tecmar on a
discounted basis free and clear of all liens, interests and claims pursuant
to a bankruptcy court order, and will assume no liabilities of Tecmar other
than ordinary course customer warranty claims. Completion of the acquisition
is expected in late February 2000 and is subject to bankruptcy court approval
and an overbid process. Overland
9
<PAGE>
Data and Tecmar previously announced they had entered into a joint
development agreement to design and manufacture high-performance Travan* and
Travan NS* tape drives incorporating Overland's proprietary Variable Rate
Randomizer ("VR2") technology.
10
<PAGE>
ITEM 2. -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
This Quarterly Report on Form 10-Q contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements usually contain the words "estimate,"
"anticipate," "expect" or similar expressions. All forward-looking statements
are inherently uncertain as they are based on various expectations and
assumptions concerning future events and they are subject to numerous known
and unknown risks and uncertainties. The forward-looking statements included
herein are based on current expectations and entail such risks and
uncertainties as those set forth below which could cause the Company's actual
results to differ materially from those projected in the forward-looking
statements. The Company disclaims any obligation to update or publicly
announce revisions to any such statements to reflect future events or
developments.
Advanced technology companies such as Overland Data are subject to numerous
risks and uncertainties, generally characterized by rapid technological
change and other highly competitive factors. In such an environment, the
Company's future success will depend on its ability to develop, manufacture
and market new and enhanced products on a timely and cost effect basis.
The Company's future revenue and operating results depend on gaining further
market acceptance for its LibraryXpress line of automated tape libraries and
its ability to manufacture sufficient product to satisfy demand.
Additionally, the Company's revenues are highly dependent upon the level of
sales to Compaq Computer Corporation, which comprised 43% of the Company's
revenues in the quarter ended December 31, 1999. Although Compaq is the
primary customer for this product line, Compaq is not required to purchase
minimum quantities and its orders can fluctuate from quarter to quarter.
The LibraryXpress products incorporate a line of DLT tape drives supplied by
Quantum Corporation, which had been the sole source for DLT tape technology.
At certain times in the past, the Company has not obtained an adequate supply
of such drives and there can be no assurance that such supply interruptions
will not recur. In September 1998, Quantum announced that it had entered into
a manufacturing license and marketing agreement with Tandberg Data ASA,
through which Tandberg became an independent second source of DLT tape
drives. Tandberg commenced full production of DLT7000 drives on September 1,
1999, a factor that has reduced the Company's dependence on Quantum.
The Company's TapeXpress line of legacy 36-track products have lessened in
importance over the last year and represented only 13% of the Company's sales
in the first half of fiscal year 2000. IBM is the Company's primary customer
for this product line, however, IBM is not required to purchase minimum
quantities pursuant to the supply arrangement, and IBM's orders can fluctuate
from quarter to quarter.
11
<PAGE>
The value of the Company's new Variable Rate Randomizer (VR2) encoding
technology is not determinable at this time. Although the Company has now
entered into licensing agreements with Tandberg Data ASA, Imation Corp. and
Seagate Technology, Inc., as well as a joint development agreement with
Tecmar Technologies, Inc. (the Seagate and Tecmar Technologies agreements
were signed in the second quarter of fiscal year 2000), the success of VR2
depends on the success of the licensee's tape drives, which ultimately
incorporate VR2. Success of VR2 cannot be assured because of the potential
difficulty of incorporating it into the electronics of new tape technology
platforms, the possible introduction of competing techniques to enhance tape
drive performance, and the uncertain market acceptance of VR2 enhanced tape
drives. The risks and uncertainties noted above, along with others which
could materially and adversely affect the Company's business, are set forth
more fully in the "Risk Factors," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and other sections of the
Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1999
on file with the Securities and Exchange Commission.
RESULTS OF OPERATIONS
The following table sets forth items in the Company's statement of operations
as a percentage of net revenues for the periods presented. The data has been
derived from the Company's unaudited condensed consolidated financial
statements.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net revenues ................... 100.0% 100.0% 100.0% 100.0%
Cost of goods sold ............. 74.6 69.8 73.7 69.7
----- ----- ----- -----
Gross profit ................... 25.4 30.2 26.3 30.3
----- ----- ----- -----
Operating expenses:
Sales and marketing ....... 11.8 12.4 12.7 11.9
Research and development .. 6.0 5.0 6.4 5.3
General and administrative 4.9 5.0 5.9 5.2
----- ----- ----- -----
Total operating expenses 22.7 22.4 25.0 22.4
----- ----- ----- -----
Income from operations ......... 2.7 7.8 1.3 7.9
Other income (expense):
Interest, net ............. 0.7 0.9 0.7 0.9
Other income, net ......... 0.2 0.3 0.1 0.2
----- ----- ----- -----
Income before income taxes ..... 3.6 9.0 2.1 9.0
Provision for income taxes ..... 1.4 3.5 0.8 3.5
----- ----- ----- -----
Net income ..................... 2.2% 5.5% 1.3% 5.5%
===== ===== ===== =====
</TABLE>
FOR THE THREE MONTHS ENDED DECEMBER 31, 1999 AND 1998
NET REVENUES. Net revenues of $27.5 million in the second quarter of
fiscal year 2000 were $3.3 million or 13.3% above net revenues of $24.2
million in the comparable quarter of the prior fiscal year. Improved sales
during the second quarter of fiscal year 2000 of the Company's LibraryXpress
products more than offset the decline in shipments of mature products (36,
18, and 9-track products). Sales of the LibraryXpress product family
increased by 50.7% from $13.4 million in the second
12
<PAGE>
quarter of fiscal year 1999 to $20.2 million in the second quarter of fiscal
year 2000, primarily due to strong shipments to Compaq Computer Corp., the
Company's largest customer. Sales of LibraryXpress products to Compaq grew
153.7% compared to the same quarter of the prior year. Sales of the Company's
mature 36-track products declined by 33.3% from $6.3 million in the second
quarter of fiscal year 1999 to $4.2 million in the second quarter of fiscal
year 2000. Sales of 9-track and 18-track products were discontinued by the
Company at the end of fiscal year 1999 and therefore, no sales of these
products were recorded in the second quarter of fiscal year 2000. Sales of
distributed DLT drives dropped slightly from $1.5 million in the second
quarter of fiscal year 1999 to $1.4 million in the second quarter of fiscal
year 2000.
A summary of the sales mix by product for the periods presented in the
statement of operations follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------- -------------- -------------- ------------------
<S> <C> <C> <C> <C>
Company products:
LibraryXpress......................... 73.7% 55.1% 74.0% 51.2%
36-track.............................. 15.2 25.9 13.3 31.8
18-track.............................. - 0.2 - 0.2
9-track............................... - 6.1 0.2 5.7
Spare parts, controllers, other....... 6.1 6.4 6.5 5.4
VR2 royalties......................... - - 0.4 -
Other products:
DLT distributed product............... 5.0 6.3 5.6 5.7
============= ============== ============== ==================
100.0% 100.0% 100.0% 100.0%
============= ============== ============== ==================
</TABLE>
GROSS PROFIT. The Company's gross profit for the second quarter of
fiscal year 2000 was $7.0 million, down 4.6% from $7.3 million in the second
quarter of fiscal year 1999. As a percentage of net revenues, the gross
margin of 25.4% in the second quarter of fiscal year 2000 was lower than the
gross margin of 30.2% in the comparable quarter of the prior year. This
decline was primarily the result of four factors: (1) a higher concentration
of lower margin Compaq sales in the second quarter of fiscal year 2000 versus
the second quarter of fiscal year 1999; (2) an expected decline in sales of
higher margin legacy products; (3) a shift in the product mix sold to Compaq
to lower margin configurations and; (4) pricing pressures on the Company's
branded LibraryXpress products.
13
<PAGE>
SALES AND MARKETING EXPENSE. Sales and marketing expense amounted to
$3.2 million or 11.8% of net revenues in the second quarter of fiscal year
2000 compared to $3.0 million or 12.4% of net revenues in the second quarter
of fiscal year 1999. The increased expenses in the current quarter are due
primarily to higher sales personnel costs and marketing consultant fees.
RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense
amounted to $1.6 million or 6.0% of net revenues in the second quarter of
fiscal year 2000 compared to $1.2 million or 4.9% of net revenues in the
second quarter of fiscal year 1999. The increased expenses in the current
quarter reflect personnel additions and higher development material costs
related to new product development programs.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense
amounted to $1.3 million or 4.9% of net revenues in the second quarter of
fiscal year 2000 compared to $1.2 million or 5.0% of net revenues in the
second quarter of fiscal year 1999. The increased expenses in the second
quarter of fiscal year 2000 reflect additional legal fees.
OTHER INCOME, NET. In the second quarter of the fiscal year 2000, net
other income amounted to $267,000, comprised primarily of interest income of
$199,000 and foreign currency gains of $68,000. This compared to net other
income in the second quarter of fiscal year 1999 of $298,000, comprised
primarily of interest income of $221,000 and foreign currency gains of
$77,000.
INCOME TAXES. The Company's effective tax rate in the second quarter of
fiscal year 2000 was 39.5% compared to 39.4% in the second quarter of fiscal
year 1999. The effective tax rate for all of fiscal year 1999 was 39.5% and
is expected to remain unchanged for fiscal year 2000.
NET INCOME. Net income amounted to $609,000 in the second quarter of
fiscal year 2000 compared to $1.3 million in the second quarter of fiscal
year 1999. Both diluted and basic net income per share for the second quarter
of fiscal year 2000 was $0.06, down $0.06 and $0.07, respectively, from the
comparable quarter of the prior year.
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998
NET REVENUES. The Company's net revenues of $50.3 million in the fiscal
2000 first half grew by $1.7 million or 3.5% over revenues of $48.6 million
in the comparable period of the prior year. Sales of the Company's
LibraryXpress products grew from $24.9 million in the fiscal 1999 first half
to $37.3 million in the fiscal 2000 first half, an increase of 49.8%. In
total, the OEM business comprised 55.7% of revenues for the fiscal 2000 first
half compared to 51.2% of revenues for the fiscal 1999 first half, due
primarily to increased sales to Digital Equipment Corp./Compaq. The fiscal
2000 first half sales of controllers, spare parts, software and other
products amounted to $3.3 million, an increase of 22.2% from the fiscal 1999
first half sales of $2.7 million. Finally, as expected, these gains were
partially offset by declines in sales of the Company's mature 36-track,
18-track and 9-track products, which fell by a combined
14
<PAGE>
62.8% from $18.3 million in the fiscal 1999 first half to $6.8 million in the
fiscal 2000 first half.
GROSS PROFIT. The Company's gross profit for the fiscal 2000 first half
was $13.2 million, a 10.3% decrease from the $14.7 million reported in the
fiscal 1999 first half. The gross margin percentage declined from 30.3% in
the fiscal 1999 first half to 26.3% in the fiscal 2000 first half. This
decline was due primarily to: (1) a higher concentration of lower margin
Compaq sales in the fiscal 2000 first half versus the fiscal 1999 first half;
(2) an expected decline in sales of higher margin legacy products; (3) a
shift in the product mix sold to Compaq to lower margin configurations and;
(4) pricing pressures on the Company's branded LibraryXpress products.
SALES AND MARKETING EXPENSE. Sales and marketing expense amounted to
$6.4 million or 12.7% of net revenues in the fiscal 2000 first half, compared
to $5.8 million or 11.9% of net revenues in the fiscal 1999 first half.
Growth in sales expenses of $252,000 was due primarily to wages of the new
sales personnel hired to generate demand through our expanding European
channel. The $321,000 increase in marketing expenses resulted primarily from
increased advertising and promotion costs for new products, as well as higher
marketing consulting fees.
RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense
amounted to $3.2 million or 6.4% of net revenues in the fiscal 2000 first
half, compared to $2.6 million or 5.3% of net revenues in the fiscal 1999
first half. The increased expenses reflect personnel additions and higher
development material costs related to new product development programs.
GENERAL AND ADMINISTRATIVE. General and administrative expense amounted
to $3.0 million or 5.9% of net revenues in the fiscal 2000 first half,
compared to $2.5 million or 5.2% of net revenues in the fiscal 1999 first
half. The increased expenses reflect additional legal fees, personnel
additions and increased costs associated with the production of the Company's
annual report.
OTHER INCOME, NET. In the fiscal 1999 first half, net other income
amounted to $569,000, comprised primarily of $457,000 in interest income and
$106,000 in foreign currency gains, compared to net other income of $438,000
in the fiscal 2000 first half, consisting primarily of $374,000 in interest
income and $51,000 in foreign currency gains.
INCOME TAXES. The Company's effective tax rate in the first half of
fiscal year 2000 was 39.5% compared to 39.2% in the first half of fiscal year
1999.
NET INCOME. Net income amounted to $648,000 in the fiscal 2000 first
half compared to $2.7 million in the fiscal 1999 first half. Diluted net
income per share decreased to $.06 in the fiscal 2000 first half compared to
$.25 in the first half of the prior year. Basic net income per share
decreased from $.26 to $.06 in the same time periods.
15
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
During the fiscal 2000 first half, the Company generated $1.8 million in
cash, including $1.4 million in earnings before depreciation and
amortization. Other major sources of cash included a $3.3 million decrease in
inventories and $156,000 from the sale of stock under the Company's employee
stock purchase plan. Primary uses of cash included a $2.6 million increase in
accounts receivable, $415,000 to repurchase shares of the Company's stock
pursuant to its share buyback program, and a $272,000 investment in capital
equipment. The Company's cash reserves rose to $18.0 million at December 31,
1999, compared to $16.2 million at June 30, 1999. The Company's working
capital amounted to $42.1 million, and it had no outstanding funded debt.
Although the Company's current outlook does not require additional debt
funding, on November 10, 1999, the Company renewed its bank line of credit of
$5 million. The Company believes that these resources will be sufficient to
fund its operations and to provide for its growth into the foreseeable future.
YEAR 2000 COMPLIANCE
THIS STATEMENT IS INTENDED AS A YEAR 2000 READINESS DISCLOSURE.
The year 2000 computer issue arose because certain computer systems
experienced problems handling dates in and beyond the year 1999.
Consequently, some computer hardware and software needed to be modified prior
to the year 2000 in order to remain functional. The widespread use and
dependency on computer technology in all areas of modern commerce may pose
significant risks to companies, including Overland, from year 2000 issues.
These risks include potential disruptions or failures within products and
operations of Overland and its suppliers, customers and service providers.
Because a large part of the risk is indirect through suppliers, service
providers and customers, the Company cannot accurately predict the impact of
the year 2000 issue on the Company, its financial condition and results of
operations.
The Company completed its year 2000 readiness work and to date has not
experienced any problems incident to the date rollover. Its approach included
four major phases consisting of inventory, assessment, resolution and
internal testing/certification.
The Company first completed its analysis of its own internally manufactured
products and concluded that none of the products sold by the Company had any
date functionality built into it, with the exception of certain products that
employed a display-only date/time function. This function, which is year 2000
compliant, allows the operator to set the LCD front panel display date and
time from the front panel.
16
<PAGE>
The Company then focused on the year 2000 functionality of its internal
computer systems and operating equipment. Overland completed its year 2000
preparations for its primary business systems in October 1997 when the
Company replaced its internal enterprise wide computer system, which it
believes to be year 2000 compliant. This system replacement included material
forecasting, inventory management, manufacturing management, order
administration, accounts payable, accounts receivable and financial
management. The Company then undertook a year 2000 assessment of its
secondary business systems, both information technology ("IT") and non-IT
systems. This assessment was completed and no significant issues arose. The
Company remedied all year 2000 issues as they were revealed. The Company
completed all remediation efforts and also successfully completed all testing
and certification.
The Company's final year 2000 focus was on external elements. As indicated
above, the Company's risk assessment included understanding the year 2000
readiness of its suppliers. The Company's risk assessment process associated
with suppliers included soliciting and analyzing responses to questionnaires
distributed to these suppliers, as well as web-site and SEC filing research,
telephone surveys, and onsite interviews with certain critical suppliers. The
Company completed interviews with all of its critical suppliers. All of the
critical suppliers surveyed had year 2000 plans in place. No suppliers
appeared to present any major year 2000 issues. All critical suppliers were
certified.
The year 2000 readiness of the Company's key supplier, Quantum Corporation,
was of particular importance. Quantum implemented a year 2000 compliance
program using a resolution approach based on the U.S. General Accounting
Office Year 2000 Assessment Guide. Quantum's program included the evaluation
of all of its products and internal systems and a review of the readiness of
its suppliers and service providers. On November 2, 1999, Quantum indicated
in its Form 10-Q filing with the SEC that it had assessed, remedied, and
certified all critical and key areas of their operations, including
information, technology, operating equipment with embedded chips or software
and products.
The Company also worked closely with key customers to evaluate their
readiness for year 2000 and performed site visits where deemed necessary. The
ability of customers to deal with year 2000 issues could have affected their
operations and their ability to order and pay for products. Based on the
level of risk assessed, the Company developed contingency plans to address
possible changes in customer order patterns.
Although not directly related to the year 2000 issue, the cost of installing
and implementing the Company's new ERP system in October 1997 was
approximately $1.5 million. The Company has had a policy since 1995 of
purchasing year 2000 compliant products where possible. The Company incurred
less than $150,000 of other costs to address the year 2000 issue, amounting
to less than 10% of the Company's IT budget. No significant system projects
have been deferred due to the year 2000 program.
17
<PAGE>
The foregoing statements are based on management's best estimates at the
present time, which were derived using numerous assumptions of future events
and conditions, including third party modification plans, third party
assurances of year 2000 compliance and other factors. There can be no
assurance that these assumptions will be accurate, that the estimates will be
achieved, and actual results could differ materially from those anticipated.
18
<PAGE>
PART II -- OTHER INFORMATION
ITEM 1. -- LEGAL PROCEEDINGS
The Company, its directors and certain of its officers were named as
defendants in two class action lawsuits filed on April 21, 1997 and May 2,
1997 in the U.S. District Court for the Southern District of California. In
both cases, the plaintiffs purported to represent a class of all persons who
purchased the Company's Common Stock between February 21, 1997 and March 14,
1997. The complaints alleged that the defendants violated various federal
securities laws through material misrepresentation and omissions in
connection with the Company's initial public offering and its Registration
Statement on Form S-1, which the Securities and Exchange Commission declared
effective on February 21, 1997. The plaintiffs sought rescission of their
share purchases or rescissory damages if their shares had been sold, as well
as attorneys' fees and other costs and expenses. The Shareholder who filed
the first of these two lawsuits was appointed to serve as the lead plaintiff
on September 29, 1998, and on December 17, 1998, the court certified the
shareholder class, allowing the litigation to proceed as a class action.
The defendants answered the lead plaintiff's First Amended Complaint, denying
all material allegations and disavowing any wrongdoing. Factual discovery was
completed, but expert depositions were stayed by the court pending the
conduct of settlement conferences.
On September 24, 1999, the lead plaintiff and the defendants reached an
agreement in principle to settle the entire litigation, and that agreement
was memorialized in a Memorandum of Understanding dated October 4, 1999. The
litigants negotiated a Stipulation of Settlement that set forth the final
terms and conditions governing resolution of the class action law suit. The
court preliminarily approved this Stipulation of Settlement and ordered that
the members of the class be notified of the pendency of the settlement and be
given the opportunity to withdraw from its application. The class members
have until February 18, 2000 to withdraw and/or to submit in writing any
objections regarding the terms of the settlement or the attorneys' fees
sought by their counsel. The court will conduct a hearing on March 6, 2000 to
resolve any such objections, set the amount of attorneys' fees that the court
will award, and determine whether the settlement is fair and reasonable to
the class members. If the court approves the Stipulation of Settlement, then
the class members will have until April 7, 2000 to submit claim forms for
reimbursement.
The Company maintains directors' and officers' liability insurance to cover
the settlement payment contemplated by the Stipulation of Settlement, less
certain unreimbursed defense costs. As a result, the Company incurred a
one-time, pre-tax charge of $248,000 for the fiscal quarter ended September
30, 1999.
In July 1998, a lawsuit was filed in the U.S. District Court for the District
of Massachusetts alleging infringement by the Company related to its use of
the "GUTS" and "Guaranteed Up Time Service" trademarks.
19
<PAGE>
Written discovery in the lawsuit has closed. The court has scheduled a
hearing for April 18, 2000 on the Company's pending motion for summary
judgement. Management believes that the disposition of this matter will
not have a material adverse effect on the Company's financial position or
results of operations.
20
<PAGE>
ITEM 4. -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On November 8, 1999, the Company held its Annual Meeting of Stockholders. At
the meeting, the stockholders approved management's slate of directors and
one additional proposal with the following vote distribution:
<TABLE>
<CAPTION>
ITEM AFFIRMATIVE NEGATIVE WITHHELD
---- ----------- -------- --------
<S> <C> <C> <C>
ELECTION OF BOARD MEMBERS
Scott McClendon 9,017,618 120,892
Martin D. Gray 9,063,669 74,841
William W. Otterson 8,968,717 169,793
Peter Preuss 8,968,545 169,965
John A. Shane 9,062,569 75,941
OTHER MATTERS
Reappoint PriceWaterhouseCoopers LLP as
independent auditors for fiscal year 2000 9,114,665 9,055 14,790
</TABLE>
ITEM 6. -- EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Development, Manufacturing and License Agreement
between Overland Data and Tecmar Technologies Inc.,
dated September 1, 1999 (1) (2)
10.2 Supply Agreement between Overland Data and Seagate
Technology, Inc., dated November 5, 1999 (1)
10.3 Credit Agreement effective as of November 9, 1999
between Overland Data and Imperial Bank (1)
27.0 Financial Data Schedule
- ------------------
(1) The Company has requested confidential treatment for certain portions of
this exhibit.
(2) The Development Manufacturing and License Agreement between Overland Data
and Tecmar Technologies Inc. was executed on November 18, 1999.
(b) Reports on Form 8-K
None
21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
OVERLAND DATA, INC.
Date: February 16, 2000 By: /s/ Vernon A. Loforti
--------------------------
Vernon A. LoForti
Vice President and
Chief Financial Officer
22
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
DEVELOPMENT, MANUFACTURING AND LICENSE AGREEMENT
This DEVELOPMENT, MANUFACTURING AND LICENSE AGREEMENT (this "AGREEMENT") is
entered into as of September 1, 1999 (the "EFFECTIVE DATE") by and between
OVERLAND DATA, INC., a California corporation with offices at 8975 Balboa
Avenue, San Diego, CA 92123-1599 ("OVERLAND"), and TECMAR TECHNOLOGIES, INC., a
Delaware corporation with offices at 1900 Pike Road, Bldg. E, Longmont, CO 80501
("TECMAR"). Overland and Tecmar are referred to collectively herein as the
"PARTIES."
RECITALS
WHEREAS, Overland has developed, and owns intellectual property and proprietary
rights in and to a data encoding and decoding channel technology for linear
magnetic tape formats; and
WHEREAS, Tecmar has developed and owns certain technology, intellectual property
and proprietary rights relating to the Tecmar Travan NS20 drives; and
WHEREAS, Tecmar desires to contribute and/or provide access to its technology,
intellectual property and proprietary rights in the Tecmar Travan NS20 drives to
facilitate development of a Overland/Tecmar common platform for the next
generation Travan tape drive; and
WHEREAS, Overland desires, at its sole cost and expense, to integrate its
channel technology with Tecmar's contributed Travan NS20 technology to develop
the Overland/Tecmar common platform for the next generation Travan tape drive;
and
WHEREAS, each of Overland and Tecmar, after exploring available alternatives,
have determined that, in view of the development of an Overland/Tecmar common
platform for the next generation Travan tape drive, each party will receive
sufficient and appropriate value as a result of a mutual exchange of source
code, technology, and license grants under each party's intellectual property
rights; and
WHEREAS, each of Overland and Tecmar desire to subcontract the manufacture of
such next generation Travan drives to a single third party manufacturer and to
purchase and resell such drives from such manufacturer; and
WHEREAS, Overland is willing to grant a license under its channel technology to
Tecmar on the terms and conditions set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, the Parties agree as follows:
1
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
1. DEFINITIONS. As used in this Agreement:
"AFFILIATE" of a party means any company that directly or indirectly
controls, is controlled by, or is under common control with such party.
"ASIC" means an application specific integrated circuit.
"DELIVERABLES" means the technology, information and other items listed
in EXHIBIT A pursuant to the Development Program undertaken pursuant to
this Agreement.
"DEVELOPMENT PROGRAM" means the research, development, design, pilot
production, validation and manufacturing activities of the Parties
pursuant to the Project Schedule commencing on the Effective Date and
ending on ***.
"MILESTONES" means determined significant events during the course of the
Project Schedule as set forth in EXHIBIT B.
"NEXT GENERATION TRAVAN DRIVE" means tape drive(s) whose specification
will be developed by the Parties pursuant to the Development Program as
set forth in EXHIBIT A and which read and write data onto future
generations of Travan (i) GB cartridges or (ii) NS cartridges.
"NEXT GENERATION TRAVAN VR(2) ASIC" means an ASIC embodying the VR(2)
Technology, which is a modification of existing ASIC designs of Overland
specifically adapted for incorporation into Next Generation Travan
Drives, such ASIC specification(s) to be developed by Overland and set
forth in EXHIBIT E for each Next Generation Travan Drive set forth in
EXHIBIT A.
"OTHER FUTURE DRIVES" means tape drive(s): (i) developed in whole or
in part by either Party; (ii) using a Travan or other linear recording
belt-driven cartridge wherein the tape path resides entirely within
such cartridge; (iii) which incorporates a Next Generation Travan VR(2)
ASIC or any other ASIC sold by Overland which incorporates Overland IP
(as defined in SECTION 4.1).
"OVERLAND PATENT RIGHTS" means all issued patents and patent applications
listed in EXHIBIT C that are pending as of the Effective Date, and all
counterparts, continuations, continuations-in-part, divisionals,
provisionals or reissues or extensions thereof, and any other patent
applications filed by Overland or any Affiliate of Overland before or
during the term of this Agreement relating to the VR(2) Technology,
including any and all patents issuing therefrom.
"PROJECT SCHEDULE" means the schedule for the Development Program as set
forth in EXHIBIT B.
2
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
"RESULTS" means any and all inventions, discoveries, technology, trade
secrets, ideas, data, processes, methods, and techniques, whether or not
patentable, including any improvements or modifications thereof, and all
patents, patent applications, trade secrets, and other proprietary rights
appurtenant thereto, which are made, created, or reduced to practice in
the course of development of the Development Program.
"TECMAR KNOW-HOW" means all inventions, discoveries, technology, trade
secrets, ideas, data, processes, methods, techniques, and any other
information Tecmar owns, controls, or has a license to (with the right to
sublicense), relating to the Tecmar Travan NS20 drive.
"TECMAR PATENT RIGHTS" means all issued patents and patent applications
listed in EXHIBIT D that are pending as of the Effective Date, and all
counterparts, continuations, continuations-in-part, divisionals,
provisionals or reissues or extensions thereof, and any other patent
applications filed by Tecmar or any Affiliate of Tecmar before or during
the term of this Agreement that relate to the Tecmar Travan NS20 drive,
including any and all patents issuing therefrom.
"VR(2) TECHNICAL INFORMATION" means information and know-how provided by
Overland relating to VR(2) Technology and the manufacture, engineering
and use of the VR(2) Technology, including without limitation the
following: manufacturing, engineering and circuit drawings, parts and
test specifications, test set drawings, schematics and documents,
development documents, systems specifications, quality assurance plans,
engineering technical practices, software, training and course
materials, vendor listings, and systems engineering applications.
"VR(2) TECHNOLOGY" means the data encoding and decoding channel
technology for linear magnetic tape formats developed by Overland, and
includes solid state circuits embodied in semiconductor chips,
associated specifications, designs, drawings, data, test qualification,
and other documented technical and application information related
thereto.
2. DEVELOPMENT PROGRAM
2.1 JOINT DEVELOPMENT. Overland and Tecmar agree to use commercially
reasonable efforts to conduct and/or have conducted the Development Program with
the objective of developing and commencing the manufacture of commercial volumes
of each Next Generation Travan Drive set forth in EXHIBIT A in accordance with
the Project Schedule set forth in EXHIBIT B. The responsibilities, Milestones
and Deliverables of each party in performing the Development Program will be as
set forth in the Project Schedule and EXHIBIT B. Each party will furnish to the
other party its respective Deliverables and Milestones at such times as set
forth in the Project Schedule.
2.2 MANAGEMENT. Overland, in its sole discretion, will manage any and
all activities of any Overland employees relating to the Development Program
with the objective of achieving
3
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
the Milestones and Deliverables as specified in the Project Schedule. Tecmar
will manage any and all activities of any Tecmar employees relating to the
Development Program with the objective of achieving the Milestones and
Deliverables as specified in the Project Schedule. Tecmar acknowledges and
agrees that (i) Overland, in its sole discretion, will have sole and
exclusive management control of the Development Program; (ii) within five (5)
business days following execution of this Agreement, Overland, in its sole
discretion, will appoint a program manager ("DEVELOPMENT PROGRAM MANAGER") to
manage the Development Program; (iii) within five (5) business days following
the execution of this Agreement, Tecmar, in its sole discretion, will appoint
a program manager ("TECMAR MANAGER") to manage the activities of Tecmar
employees related to the Development Program; and (iv) the Tecmar Manager
will report directly to the Development Program Manager and use his best
efforts to execute the instructions of the Development Program Manager
relating to the Development Program. During the term of this Agreement,
Tecmar will use its best efforts to timely deliver such documents and
information or instructions as the Development Program Manager may reasonably
request in order for Overland to perform its obligations pursuant to this
Agreement. Upon the reasonable request of the Tecmar Manager, the
Development Program Manager, in his reasonable judgment, may deliver such
documents or information requested, provided that such documents or
information requested by the Tecmar Manager will not be unreasonably withheld.
2.3 RESOURCES. Within 10 business days following a written request
from Overland or as otherwise agreed to by the Parties, Tecmar will make
available to Overland or otherwise provide Overland with access to any and all
documents, specifications, designs, schematics, manufacturing process
instructions, drive testing and performance, and other information relating to
the Tecmar Know-How which is deemed necessary in the reasonable discretion of
the Development Program Manager to conduct the Development Program. As of the
date hereof, Tecmar has provided to Overland sufficient information relating to
the qualifications of each of its engineering personnel most familiar with the
Tecmar Know-How ("TECMAR ENGINEERS"). The Tecmar Manager, in his reasonable
discretion, will assign appropriate Tecmar Engineers as set forth in the Project
Schedule ("PROGRAM ENGINEERS") to conduct the Development Program. Each of the
Program Engineers will (i) remain Tecmar employees at all times and (ii) conduct
significant Development Program activities in the Tecmar facility located in
Longmont, Colorado. Overland, in its sole discretion, will assign a sufficient
number of its engineers to successfully conduct the Development Program.
2.4 TERMINATION OF DEVELOPMENT PROGRAM. Notwithstanding anything to
the contrary in this Agreement, if (a) prior to or on ***, each of the
Milestones of the Project Plan is not successfully completed on or before its
scheduled date, or (b) the specification(s) for each of the Next Generation
Travan Drives set forth in EXHIBIT A are not completed, in the reasonable
discretion of Overland, by ***, then Tecmar acknowledges and agrees that
Overland may, in its sole discretion, terminate the Development Program at any
such time by delivery of fifteen (15) calendar days prior written notice of
termination to Tecmar .
4
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
2.5 NO GUARANTEE OF SUCCESS. Tecmar acknowledges and agrees that
Overland does not guarantee, represent or otherwise warrant that the Development
Program will be completed successfully, or that any information, know-how and/or
technology provided by Overland to conduct the Development Program will enable
Overland and/or the Parties to successfully complete and/or deliver any
Milestones and/or Deliverables under this Agreement, or that the performance
and/or delivery of any Milestones and/or Deliverables under this Agreement will
result in the successful development of any commercial product, including any
Next Generation Travan Drive. Overland acknowledges and agrees that Tecmar does
not guarantee, represent or otherwise warrant that any information, know-how
and/or technology provided by Tecmar to conduct the Development Program will
enable Tecmar and/or the Parties to successfully complete and/or deliver any
Milestones and/or Deliverables under this Agreement or will result in the
successful development of any commercial product, including any Next Generation
Travan Drive. Each party assumes the risk that the Development Program will not
(i) meet the market expectations, (ii) result in any commercially profitable
products or components, or (iii) produce any useful results.
2.6 EMPLOYEES. Each party agrees not to offer employment to any
employee of the other party without the prior written approval of the other
party during the term of this Agreement and for a period of one (1) year
following termination of this Agreement, PROVIDED, HOWEVER, that either party
may immediately offer employment to any employee of the other party (i)
following any termination of this Agreement for breach of warranty or material
breach in accordance with SECTION 9.3; or (ii) upon any termination of
employment, layoff or other release of such employee by the other party.
2.7 SOURCE CODE. Upon execution of this Agreement, Tecmar will
promptly deliver to Overland a complete and accurate copy of the firmware
source code for its Travan NS20 tape drive ("TECMAR SOURCE CODE"). Upon
execution of this Agreement, Overland will promptly deliver to Tecmar a
complete and accurate copy of the VHDL source code for its VR(2) switching
circuit that selects one of four decoder outputs ("OVERLAND SOURCE CODE").
Tecmar hereby grants to Overland a *** license under the Tecmar Source Code
to (i) conduct the Development Program and otherwise practice any technology
embodied in the Tecmar Source Code pursuant to this Agreement; (ii) make (or
have made), import, use, offer for sale, sell, import, distribute, copy,
reproduce, publish, make derivative works, license or otherwise dispose of
any portion of the Tecmar Source Code as part of a Next Generation Travan
Drive or Other Future Drive; and (iii) sublicense to third-party
manufacturers the rights granted to Overland under clauses (i) and (ii),
provided that such third party manufacturers agree to be bound by any
applicable terms and conditions of this Agreement. Overland hereby grants to
Tecmar a *** license under the Overland Source Code to (a) conduct the
Development Program and otherwise practice any technology embodied in the
Overland Source Code pursuant to this Agreement; (b) make (or have made),
import, use, offer for sale, sell, import, distribute, copy, reproduce,
publish, make derivative works, license or otherwise dispose of any portion
of the Overland Source Code as part of a Next Generation Travan Drive or
Other Future Drive; and (c) sublicense to third-party manufacturers the
rights granted to Tecmar under clauses (a) and (b), provided that such third
5
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
party manufacturers agree to be bound by any applicable terms and conditions
of this Agreement. Each of Overland and Tecmar will be subject to the
non-disclosure obligations of SECTION 6.2 with respect to the Tecmar Source
Code and the Overland Source Code, respectively.
2.8 SOURCE CODE LICENSE FEE. Overland will pay to Tecmar a fee of
$*** ("SOURCE CODE LICENSE FEE") to obtain a *** license under the Tecmar Source
Code. Overland will pay the Source Code License Fee to Tecmar in five equal
installments of $*** ("INSTALLMENT PAYMENT"). Each such Installment Payment
will be due and payable ***, PROVIDED, HOWEVER, that Overland, in its sole
discretion, may pay to Tecmar any remaining amounts of the Source Code License
Fee at any time following the Effective Date.
3. MANUFACTURING
3.1 SELECTION OF CONTRACT MANUFACTURER. The Parties will negotiate in
good faith to jointly agree on and select a contract manufacturer ("CONTRACT
MANUFACTURER") to fabricate each Next Generation Travan Drive resulting from a
successful completion of the Development Program. The Parties will negotiate in
good faith to enter into a supply agreement ("SUPPLY AGREEMENT") with the
Contract Manufacturer to manufacture and supply each such Next Generation Travan
Drives to each of Overland and Tecmar at the same cost.
3.2 LICENSES AND TECHNOLOGY TRANSFER. The Supply Agreement will
include the terms and conditions under which each of Overland and Tecmar will
grant licenses to the Contract Manufacturer under the Overland Patent Rights and
the Tecmar Patent Rights, respectively, and under the Results, only to the
extent any such patent rights and/or Results are needed by the Contract
Manufacturer to manufacture and sell such Next Generation Travan Drives solely
and exclusively to each of Overland and Tecmar. The Contract Manufacturer will
purchase from Overland all of its requirements for Next Generation Travan VR(2)
ASICs for incorporation into such Next Generation Travan Drives.
4. OWNERSHIP AND LICENSE GRANTS
4.1 OVERLAND OWNERSHIP. All right, title and interest in and to
the Overland Patent Rights, VR(2) Technical Information, VR(2) Technology,
any and all Results relating to the VR(2) Technical Information or the VR(2)
Technology, and any and all intellectual property embodied in the Next
Generation Travan VR(2) ASIC ("OVERLAND IP") and any and all inventions,
improvements or modifications relating thereto will be solely owned by
Overland. Tecmar will at no time acquire or retain, or appropriate for its
own use, any right, title or interest in or to any of the Overland IP.
Tecmar will not take any action that might impair in any way any right, title
or interest of Overland in or to any of the Overland IP, but will undertake
such reasonable efforts and execute and deliver such documents or
instructions as Overland may request in order for Overland to perfect,
maintain, or enforce any exclusionary rights under such Overland IP.
4.2 TECMAR OWNERSHIP. All right, title and interest in and to the
Tecmar Know-How and Tecmar Patent Rights ("TECMAR IP") and any and all
inventions, improvements or
6
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
modifications relating thereto will be solely owned by Tecmar. Overland will
at no time acquire or retain, or appropriate for its own use, any right,
title or interest in or to any of the Tecmar IP. Overland will not take any
action that might impair in any way any right, title or interest of Tecmar in
or to any of the Tecmar IP, but will undertake such reasonable efforts and
execute and deliver such documents or instructions as Tecmar may request in
order for Tecmar to perfect, maintain, or enforce any exclusionary rights
under such Tecmar IP.
4.3 JOINT OWNERSHIP. Except for such Results relating to the VR(2)
Technical Information or the VR(2) Technology, which ownership will remain
solely and exclusively in Overland pursuant to SECTION 4.1, all right, title
and interest in and to the Results and any and all inventions, improvements
or modifications related thereto will be jointly owned by Overland and
Tecmar. The Parties acknowledge and agree that (i) each party may, in its
sole discretion, dispose of any such right, title and interest in and to the
Results and (ii) each party will not take any action that might impair in any
way any right, title or interest of the other party in or to any of the
Results and any and all inventions, improvements or modifications related
thereto. The Parties will confer with each other regarding the prosecution
of jointly owned patent applications, and will endeavor to ensure that all
such applications are jointly filed before any public disclosure of the
discovery or invention claimed by the application. The Parties will share
the costs and expenses of prosecuting such patent applications equally and
will provide each other with periodic reports regarding the status of such
applications. If one party elects not to file or pursue prosecution of a
patent application, the other party will have the right to pursue, at its
sole cost and expense, such application, and the non-filing party will
cooperate in all reasonable respects therewith.
4.4 LICENSES. Tecmar hereby grants to Overland a *** license under
all of the Tecmar IP to (i) conduct the Development Program and otherwise
practice the technology embodied in any such Tecmar IP pursuant to this
Agreement; (ii) make (or have made), import, use, offer for sale and sell
Next Generation Travan Drives and Other Future Drives and any and all
components thereof; and (iii) sublicense to third-party manufacturers the
rights granted to Overland under clauses (i) and (ii), provided that such
third party manufacturers agree to be bound by any applicable terms and
conditions of this Agreement. The term of this license will run from ***.
Overland hereby grants to Tecmar a *** license under all of the Overland IP
(a) to conduct the Development Program; (b) to make (or have made), import,
use, offer for sale and sell Next Generation Travan Drives and Other Future
Drives incorporating a Next Generation Travan VR(2) ASIC; and (c) to make (or
have made), import, use, offer for sale and sell components of such Next
Generation Travan Drive and Other Future Drives, except for such components,
singly or in combination, which perform or otherwise provide one or more
functions substantially similar to those of a Next Generation Travan VR(2)
ASIC. Tecmar acknowledges and agrees that no right or license is granted by
Overland under any portion of any Overland IP to (x) make (or have made),
import, use, offer for sale or sell Next Generation Travan VR(2) ASICs; or
(y) design, make (or have made), import, use, offer for sale or sell one or
more ASICs compatible with a Next Generation Travan VR(2) ASIC; or (z)
design, make (or have made), import, use, offer for sale or sell any
components or circuitry, singly or in combination,
7
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
which perform or otherwise provide one or more functions substantially
similar to those of a Next Generation Travan VR(2) ASIC. Prior to or
concurrent with the execution of the Supply Agreement with the Contract
Manufacturer, the Parties agree to negotiate in good faith the terms and
conditions of an amendment to the TRAVAN-TM- VR(2) ASIC SUPPLY AGREEMENT dated
as of June 1, 1999, by and between Overland and Tecmar ("ASIC SUPPLY
AGREEMENT") wherein Overland agrees to supply Next Generation Travan VR(2)
ASICs required by Tecmar to manufacture and sell Next Generation Travan
Drives and Other Future Drives, PROVIDED, HOWEVER, that the royalty paid by
Tecmar for the four channel or one channel Next Generation Travan VR(2) ASIC
***. The term of this license will run from ***. Overland acknowledges and
agrees that the license grants of this SECTION 4.4 will not enable Overland
to apply the licensed technology to any single cartridge Travan NS20 tape
drive or any other tape drive product manufactured by or for and sold by
Tecmar as of the Effective Date.
4.5 RECORDS. Each party will keep complete and accurate records of
(i) any and all Results and (ii) its research and development projects with
respect to the Development Program. Each party will make such records available
to the other party upon request, subject to the confidentiality provisions in
ARTICLE 6.
4.6 FURTHER ASSURANCES. Each party will assist the other party, as
the other party may request, in securing the other party's rights as set forth
in this Agreement (it being understood that the party requesting such assistance
will reimburse the other party for any reasonable out-of-pocket costs incurred
by the other party in providing the requested assistance). Without limiting the
generality of the foregoing, each party will, at the other party's request,
execute and deliver any documents deemed necessary by the other party to
effectuate an assignment of rights under this Agreement or to enforce any rights
so assigned.
5. FUNDING
5.1 DEVELOPMENT FUNDING. Overland, at its sole cost and expense, will
provide the entire funding needed to conduct the Development Program. Within
***, Overland will pay, in advance, to Tecmar a fee of $*** per month ("INITIAL
ENGINEERING SERVICES FEE") for such month. Within ***, Overland will pay, in
advance, to Tecmar a fee of $*** per month ("REMAINING ENGINEERING SERVICES
FEE") for such month. In exchange for payment of such Initial and Remaining
Engineering Service Fees, the Program Engineers will conduct, perform and
deliver any and all engineering and design tasks necessary to conduct the
Development Program. Tecmar acknowledges and agrees that it may not subcontract
or otherwise delegate any engineering and/or design tasks pursuant to the
Development Program, except as approved by the Development Program Manager.
Overland will reimburse Tecmar for all of the reasonable costs and expenses
Tecmar incurs relating to the Development Program, including any development
materials or other reasonable expenses directly related to the Development
Program as set forth in EXHIBIT F, provided that (i) Tecmar receives the prior
written approval of the Development Program Manager prior to incurring any
amounts for such materials or expenses and (ii) the actual incurred amounts do
not exceed the approved amounts for such materials or expenses.
8
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
5.2 MANUFACTURING START-UP FUNDING. Each of Overland and Tecmar will
equally share the reasonable costs and expenses of manufacturing start-up
directly related to the fabrication of any Next Generation Travan Drives by the
Contract Manufacturer.
6. CONFIDENTIALITY
6.1 CONFIDENTIAL INFORMATION. For purposes of this Agreement, the
Deliverables, Overland Know-How, Tecmar Know-How, Project Schedule, Results,
VR(2) Technical Information, VR(2) Technology, and any other information and
materials that are disclosed by one party to the other party in writing and
clearly and conspicuously marked "confidential" or "proprietary" will be
considered "Confidential Information" of the disclosing party. Each party
will return the other party's Confidential Information, except for the
Results which are jointly owned by the Parties, upon the other party's
request and, in any event, upon the expiration or termination of this
Agreement.
6.2 NON-USE AND NON-DISCLOSURE. Each party will use the other party's
Confidential Information only for the purposes contemplated and permitted by
this Agreement. Neither party will disclose the other party's Confidential
Information to any third party except as may be required (i) by court order
(provided that the party subject to such court order gives prompt written notice
thereof to the party whose Confidential Information will be disclosed and
cooperates in any motion or action to prevent or limit the required disclosure)
and (ii) pursuant to any discovery obligations in litigation provided that a
mutually agreeable protective order has been entered by the court. Each party
further agrees to protect the other party's Confidential Information from
unauthorized use or disclosure in the same manner as it protects its own similar
Confidential Information (but in no event with less than reasonable care), and
to limit access to the other party's Confidential Information to only those of
its employees and agents who need such access for purposes contemplated by this
Agreement. However, the obligations in this SECTION 6.2 will not apply to any
information which is (a) presently publicly available, except as disclosed in
violation of this Agreement; or (b) lawfully received by any party from a third
party who is or who was not bound in a confidential relationship to the other
party; or (c) already properly and lawfully in possession of any party prior to
the date of this Agreement or the date of its disclosure, or information known
by any party prior hereto or which any party acquires during the term of this
Agreement by reason of its other business activities, regardless of its
incorporation into confidential information of the type described above; or (d)
required by law or governmental regulation or necessary for the purpose of
enforcement of this Agreement.
6.3 TERMS OF THIS AGREEMENT. Neither party will disclose the terms of
this Agreement to any third party other than its attorneys and accountants
without the other party's prior written consent except (a) as may be required by
law, (b) pursuant to any applicable Securities and Exchange Commission ("SEC")
or other foreign governmental securities regulatory entity filing rules,
regulations and/or requirements or (c) in connection with a proposed sale of
such party's business (whether by merger, sale of assets, sale of stock or
otherwise), provided that appropriate confidentiality agreements are signed by
the firms or
9
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
persons reviewing this Agreement. If a party, pursuant to 6.3 (b) above,
desires to so disclose any term of this Agreement, the disclosing party (x)
will provide 15 days written notice to the other party of its intent to
disclose and (y) will make application to the SEC or other foreign
governmental securities regulatory entity for confidential treatment, as
applicable, of certain portions of the Agreement as agreed to by the parties
unless the disclosing party provides a written opinion of counsel addressed
to the other party that disclosure of such certain portions is mandatory
under applicable SEC or foreign governmental securities regulatory entity
rules and regulations and that filing of such a request for confidential
treatment would be improper. However, the Parties may disclose information
referring to the existence of this Agreement and that it relates to the
development of a Next Generation Travan Drive.
7. REPRESENTATIONS AND WARRANTIES
7.1 ***
7.2 BY OVERLAND. Provided that ***, Overland represents and warrants
to Tecmar that:
(a) the execution, delivery and performance of this Agreement
by Overland have been duly authorized by all corporate
action on the part of Overland;
(b) Overland has full right, power and authority to enter into
and perform its obligations under this Agreement and to
grant the licenses to Tecmar in this Agreement, and the
execution, performance and operation of this Agreement
do not and will not violate, conflict with, or result in
a breach of any order to which Overland is subject or
agreement to which Overland is a party;
(c) EXHIBIT C contains a complete and accurate list of the
Overland Patent Rights as of the Effective Date; and
(d) except as provided in SECTION 7.1, no consent, approval or
authorization of, or filing, registration or qualification
with, any governmental authority or any other person is
required on the part of Overland in connection with the
execution, delivery and performance of this Agreement.
7.3 BY TECMAR. Provided that ***, Tecmar represents and warrants to
Overland that:
(a) the execution, delivery and performance of this Agreement
by Tecmar have been duly authorized by all corporate action
on the part of Tecmar;
(b) Tecmar has full right, power and authority to enter into
and perform its obligations under this Agreement and to
grant the licenses to Overland in this Agreement, and the
execution, performance and operation of this Agreement do
not and will not violate, conflict with, or result in a
breach of any order to which Tecmar is subject or
agreement to which Tecmar is a party;
10
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
(c) any and all information provided by Tecmar relating to the
Tecmar Engineers is complete, accurate and does not contain
any untrue statement of a material fact or omit to state
any material fact required to be stated therein or
necessary to make the statements made therein, in the light
of the circumstances under which they were made, not
misleading;
(d) to the best of Tecmar's knowledge after inquiry, none of
the Program Engineers has any plans to terminate employment
with Tecmar as of the Effective Date; and
(e) except as provided in SECTION 7.1, no consent, approval or
authorization of, or filing, registration or qualification
with, any governmental authority or any other person is
required on the part of Tecmar in connection with the
execution, delivery and performance of this Agreement.
8. INDEMNIFICATION
8.1 BY OVERLAND. Overland will indemnify and hold harmless Tecmar
and its directors, officers, employees, agents, successors and assigns from
and against any and all liability, damages, losses, claims, demands, actions,
judgments, costs, attorneys' fees, disbursements and expenses incurred in
connection with any action, claim or demand against Tecmar (i) based upon or
arising from an allegation that the use, offer for sale or sale by Tecmar of
a Next Generation Travan VR(2) ASIC as a component of a Next Generation
Travan Drive developed pursuant to this Agreement (except to the extent
attributable to the Tecmar Know-How and Tecmar Patent Rights furnished to
Overland by Tecmar) infringes upon or misappropriates any patent, copyright,
trade secret, or other proprietary right of a third party, or (ii) by reason
of injury to or death of any person or damage to or destruction of property
arising out of or resulting from the negligent, reckless or willful acts or
omissions of Overland, its employees, subcontractors or agents in the use,
offer for sale or sale of a Next Generation Travan VR(2) ASIC as a component
of a Next Generation Travan Drive. Overland will not be responsible for any
such losses, damages, liabilities, claims, actions, judgments, costs,
demands, attorneys' fees, disbursements and expenses caused by the sole
negligence or willful misconduct of Tecmar, its directors, officers or
employees. If an action, claim or demand is filed against Tecmar for which
Overland is to be responsible under this provision, Tecmar will promptly
notify Overland in writing of such action, claim or demand. Upon receipt of
such notice from Tecmar, if Overland acknowledges in writing to Tecmar that
Overland is obligated to indemnify Tecmar under the terms of this SECTION 8.1
in connection with such action, claim or demand, then Overland will be
entitled, if it so elects, to take control of the defense and investigation
of such action, claim or demand and to employ and engage attorneys of its own
choice to handle and defend the same at Overland's sole cost, risk and
expense and Tecmar will thereafter cooperate in all reasonable respects with
Overland and its attorneys in the investigation, trial and defense of such
action, claim or demand and any appeal arising therefrom. Tecmar may also,
through independent counsel and at its own cost, participate in such
investigation, trial and defense of such action, claim or demand and any
appeal arising therefrom. Overland may effect no
11
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
settlement without the prior written approval of Tecmar, which approval will
not be unreasonably withheld.
8.2 BY TECMAR. Tecmar will indemnify and hold harmless Overland and
its directors, officers, employees, agents, successors and assigns from and
against any and all liability, damages, losses, claims, demands, actions,
judgments, costs, attorneys' fees, disbursements and expenses incurred in
connection with any action, claim or demand against Overland (i) based upon
or arising from an allegation that the making, having made, using, offering
for sale or selling by Overland of a Next Generation Travan Drive developed
pursuant to this Agreement (except to the extent attributable solely and
exclusively to the Overland Know-How and Overland Patent Rights furnished to
Tecmar by Overland) infringes upon or misappropriates any patent, copyright,
trade secret, or other proprietary right of a third party, or (ii) by reason
of losses, injury to or death of any person or damage to or destruction of
property arising out of or resulting from any sales or use of the Travan NS
40 drive, or the negligent, reckless or willful acts or omissions of Tecmar,
its employees, subcontractors or agents in the use, offer for sale or sale of
the Next Generation Travan Drive. Tecmar will not be responsible for any such
losses, damages, liabilities, claims, actions, judgments, costs, demands,
attorneys' fees, disbursements and expenses caused by the sole negligence or
willful misconduct of Overland, its directors, officers or employees. If an
action, claim or demand is filed against Overland for which Tecmar is to be
responsible under this provision, Overland will promptly notify Tecmar in
writing of such action, claim or demand. Upon receipt of such notice from
Overland, if Tecmar acknowledges in writing to Overland that Tecmar is
obligated to indemnify Overland under the terms of this SECTION 8.2 in
connection with such action, claim or demand, then Tecmar will be entitled,
if it so elects, to take control of the defense and investigation of such
action, claim or demand and to employ and engage attorneys of its own choice
to handle and defend the same at Tecmar's sole cost, risk and expense and
Overland will thereafter cooperate in all reasonable respects with Tecmar and
its attorneys in the investigation, trial and defense of such action, claim
or demand and any appeal arising therefrom. Overland may also, through
independent counsel and at its own cost, participate in such investigation,
trial and defense of such action, claim or demand and any appeal arising
therefrom. Tecmar may effect no settlement without the prior written approval
of Overland, which approval will not be unreasonably withheld.
8.3 MUTUAL INDEMNITY. Each party ("INDEMNIFYING PARTY") will
indemnify and hold harmless the other party ("INDEMNIFIED PARTY") and its
directors, officers, employees, agents, successors and assigns from and against
any and all liability, damages, losses, claims, demands, actions, judgments,
costs, attorneys' fees, disbursements and expenses incurred in connection with
any action, claim or demand against the Indemnified Party (i) based upon or
arising from an allegation that the making, having made, using, offering for
sale or selling by the Indemnifying Party of an Other Future Drive developed
pursuant to this Agreement which is not made, used, offered for sale or sold by
the Indemnified Party infringes upon or misappropriates any patent, copyright,
trade secret, or other proprietary right of a third party, or (ii) by reason of
losses, injury to or death of any person or damage to or destruction of property
arising out of or resulting from any sales or use of such Other Future Drive, or
the negligent, reckless or willful acts or omissions
12
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
of the Indemnifying Party, its employees, subcontractors or agents in the
use, offer for sale or sale of such Other Future Drive. If an action, claim
or demand is filed against the Indemnified Party for which the Indemnifying
Party is to be responsible under this provision, the Indemnified Party will
promptly notify the Indemnifying Party in writing of such action, claim or
demand. The Indemnifying Party will take control of the defense and
investigation of such action, claim or demand and employ and engage attorneys
of its own choice to handle and defend the same at its sole cost, risk and
expense and the Indemnified Party will thereafter cooperate in all reasonable
respects with the Indemnifying Party and its attorneys in the investigation,
trial and defense of such action, claim or demand and any appeal arising
therefrom at the sole cost and expense of the Indemnifying Party. The
Indemnified Party may also, through independent counsel and at its own cost,
participate in such investigation, trial and defense of such action, claim or
demand and any appeal arising therefrom. The Indemnifying Partymay effect no
settlement without the prior written approval of the Indemnified Party, which
approval will not be unreasonably withheld.
8.4 DISCLAIMER OF OVERLAND WARRANTIES AND LIMITED LIABILITY.
OVERLAND SPECIFICALLY DISCLAIMS ALL WARRANTIES EXPRESSED OR IMPLIED,
INCLUDING BUT NOT LIMITED TO, IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE RESULTS, DELIVERABLES,
NEXT GENERATION TRAVAN VR(2) ASIC, AND NEXT GENERATION TRAVAN DRIVES AND ANY
PARTICULAR APPLICATION OR USE OF THE RESULTS, DELIVERABLES, NEXT GENERATION
TRAVAN VR(2) ASIC, AND NEXT GENERATION TRAVAN DRIVES. IN NO EVENT SHALL
OVERLAND BE LIABLE FOR ANY LOSS OR PROFIT OR ANY OTHER COMMERCIAL DAMAGE,
INCLUDING BUT NOT LIMITED TO SPECIAL, INCIDENTAL, CONSEQUENTIAL, PUNITIVE OR
OTHER DAMAGES. THE AMOUNTS OF COSTS AND DAMAGES PAID BY OVERLAND WILL NOT
EXCEED $***.
8.5 DISCLAIMER OF TECMAR WARRANTIES AND LIMITED LIABILITY. TECMAR
SPECIFICALLY DISCLAIMS ALL WARRANTIES EXPRESSED OR IMPLIED, INCLUDING BUT NOT
LIMITED TO, IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE WITH RESPECT TO THE RESULTS, DELIVERABLES, AND NEXT GENERATION TRAVAN
DRIVES AND ANY PARTICULAR APPLICATION OR USE OF THE RESULTS, DELIVERABLES AND
NEXT GENERATION TRAVAN DRIVES. IN NO EVENT SHALL TECMAR BE LIABLE FOR ANY LOSS
OR PROFIT OR ANY OTHER COMMERCIAL DAMAGE, INCLUDING BUT NOT LIMITED TO SPECIAL,
INCIDENTAL, CONSEQUENTIAL, PUNITIVE OR OTHER DAMAGES. THE AMOUNTS OF COSTS AND
DAMAGES PAID BY TECMAR WILL NOT EXCEED $***.
8.6 LIABILITY FOR INJURIES TO PERSONNEL. Each party will be solely
responsible for, and will indemnify and hold harmless the other party against,
all claims, losses, litigation, damages, and expenses resulting from injuries to
or the death of any of its personnel occurring
13
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
while any such person is traveling to or from any of the other party's
facilities, or is otherwise engaged in activities incident to this Agreement.
8.7 REMEDIES. The indemnities of this ARTICLE 8 are not exclusive
and the aggrieved party will in all events be entitled to seek whatever
additional remedies may be available at law or in equity.
8.8 SURVIVAL. The provisions of this ARTICLE 8 will survive any
termination, cancellation or expiration of this Agreement without limitation.
9. TERM AND TERMINATION
9.1 TERM. The term of this Agreement will begin on the Effective Date
and, unless earlier terminated pursuant to SECTION 9.2, will expire upon the
expiration of the license granted to Tecmar in SECTION 4.4. Any extension of
the term of this Agreement must be made by written agreement of the Parties.
9.2 TERMINATION RIGHTS. Each party may terminate this Agreement,
effective immediately upon written notice to the other party, if the other party
has failed to perform any material obligation under this Agreement or to cure
any other material breach of this Agreement within *** after receiving written
notice of such material nonperformance or material breach from the terminating
party. After November 30, 1999, either party may terminate this Agreement
without cause by providing written notice to the other party and such
termination without cause will take effect thirty (30) days following the date
of the other party's receipt of such notice of termination without cause. In
addition, Overland may terminate this Agreement pursuant to SECTION 2.4.
9.3 EFFECTS OF TERMINATION. Upon any termination of this Agreement
pursuant to SECTION 2.4 or any termination without cause pursuant to SECTION
9.2, then (a) all licenses granted under SECTION 4.4 will terminate; (b) the
Parties will cooperate to the extent needed to obtain appropriate intellectual
property protection for any Results achieved upon such termination; (c) the
Program Engineers will return to their normal duties and responsibilities at
Tecmar; and (d) each party will promptly return to the other party such party's
Confidential Information. Upon any termination for breach of warranty under
SECTION 7.3 or material breach under SECTION 9.2 by Tecmar, (i) Tecmar will
reimburse Overland for all reasonable costs and expenses incurred by Overland
during the period of time from the Effective Date until such termination date;
(ii) the license granted to Tecmar by Overland pursuant to SECTION 4.4 will
immediately terminate; (iii) the licenses granted to Overland by Tecmar pursuant
to SECTION 4.4 will survive; and (iv) each party will promptly return to the
other party such party's Confidential Information. Upon any termination for
breach of warranty under SECTION 7.2 or material breach under SECTION 9.2 by
Overland, (x) the license granted to Overland by Tecmar pursuant to SECTION 4.4
will immediately terminate; (y) each party will promptly return to the other
party such party's Confidential Information; and (z) Overland agrees to
negotiate in good faith the terms and conditions under which it will supply Next
Generation Travan VR(2) ASICs required by Tecmar to
14
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
complete the Development Program, and to manufacture, have manufactured or
sell Next Generation Travan Drives and Other Future Drives (but not to
manufacture, have manufactured or separately sell any Next Generation Travan
VR(2) ASIC's) and, only to the extent necessary to integrate such Next
Generation Travan VR(2) ASICs provided by Overland into a Next Generation
Travan Drive and Other Future Drive, the licenses granted to Tecmar by
Overland pursuant to SECTION 4.4 will survive.
9.4 SURVIVAL. Sections 4.1, 4.2, 4.3, 4.5, 4.6, ARTICLE 6, ARTICLE 7,
ARTICLE 8, SECTION 9.3, ARTICLE 10 and the licenses granted pursuant to SECTION
2.7 will survive the expiration or termination of this Agreement.
10. GENERAL
10.1 PUBLICITY. Each party will obtain the other party's prior
approval (which will not be unreasonably withheld) of any press release or
public announcement referring to this Agreement or the relationship between the
Parties formed by this Agreement. Failure to provide such prior approval within
fifteen (15) days of submission of any press release or public announcement
shall be deemed approval to publish such release or announcement.
10.2 [RESERVED].
10.3 NOTICE. During the term of this Agreement, each party will
promptly notify the other party if it (or any of its Affiliates) files any
patent application regarding any of the jointly owned intellectual property as
set forth in SECTION 4.3, and upon the other party's request, it will disclose
the contents of any such application to the other party, subject to the
confidentiality provisions of ARTICLE 6. Each party will also notify the other
party upon the issuance of a patent pursuant to any such application.
10.4 RELATIONSHIP OF PARTIES. Overland and Tecmar are independent
contractors. This Agreement will not be deemed to create a partnership or joint
venture between the Parties. Except as expressly provided in this Agreement,
neither party has the authority to act on behalf of or bind the other party.
10.5 NOTICES AND CONSENTS. All notices and consents required or
permitted under this Agreement must be in writing and will be effective when
delivered (by personal delivery, postage-prepaid U.S. mail, or private courier)
to the appropriate party at the address set forth at the top of this Agreement.
Each party may change its address for receipt of notices by giving notice of the
new address to the other party.
10.6 GOVERNING LAW AND VENUE. This Agreement will be governed solely
and exclusively by the laws of the State of California without regard to
conflict of laws principles.
10.7 DISPUTE RESOLUTION. All disputed, controversies, or claims
arising out of, relating to or in connection with this contract, including the
determination of the scope of the agreement
15
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
to mediate, or between the Parties, will be settled initially through
non-binding mediation. Within five (5) business days of the receipt of a
notice to mediate from one of the parties to the other party, the Parties
will jointly select a neutral mediator to resolve such dispute. Immediately
following the selection of the mediator, each of the Parties agrees to
promptly meet with the mediator and to use good faith efforts to execute any
instructions and/or directions from the mediator to resolve such dispute. If
the Parties fail (i) to jointly select a neutral mediator within five (5)
business days of the receipt of a notice to mediate or (ii) to resolve such
dispute under the direction of the mediator within 30 calendar days of
receipt of the notice to mediate, then the Parties agree that all disputes,
controversies, or claims arising out of, relating to or in connection with
this contract, including the determination of the scope of the agreement to
arbitrate, or between the Parties, will be finally settled by mandatory
arbitration in accordance with the Expedited Procedures of the Commercial
Arbitration Rules ("RULES") of the American Arbitration Association ("AAA"),
applicable at the time of submission of the dispute to arbitration. The
arbitration will take place in San Diego, California at the offices of the
AAA. The dispute will be resolved by a single arbitrator appointed by the AAA
in accordance with the list procedure described in Paragraph 13 of the Rules,
except that the AAA will transmit the list within ten days of the filing of
the Demand for Arbitration, and the Parties will have five days to return the
list to the AAA with their objections and preferences. Nothing herein will
prevent a party, prior to appointment of the arbitrator, from making
application to any court of competent jurisdiction, for any provisional
remedy available at law or in equity. Such application for relief will not
constitute a waiver of this agreement to arbitrate. Upon appointment, the
arbitrator will have exclusive authority to order provisional or interim
relief, except that any relief ordered by the arbitrator may be immediately
and specifically enforced by a court otherwise having jurisdiction. The
Parties waive objection to venue and consent to the personal jurisdiction of
the federal courts of San Diego, California in any action to enforce this
agreement to arbitrate or any order or award of the arbitrator, or for the
provisional or interim remedies provided for in this Agreement. Discovery
will be limited to written requests for the production of specific documents.
The period for requesting documents will be 60 days commencing upon the day
that the answer is due under the Rules. The responding party will have 30
days to produce the requested documents by sending copies to the requesting
party or its representative via a recognized international courier service.
The Parties will also voluntarily produce all documents that they intend to
use at the arbitration hearing and a list of intended witnesses before the
close of discovery subject to supplementation for purposes of rebuttal or
good cause shown. The Parties waive any right to seek any discovery not
provided for i this Agreement irrespective of whether the laws of any country
provide for different or additional discovery in international arbitration.
The arbitrator will hold a pre-hearing conference within three days of the
close of discovery and will schedule and hold the final hearing within 30
days of the close of discovery. In any arbitration proceeding pursuant to
this Agreement, each party will bear the expenses of its witnesses. All
other costs of arbitration, including, without limitation, the fees and
expenses of the arbitrator, the cost of the record or transcripts thereof, if
any, administrative fees, the attorneys' fees of the Parties, and all other
fees and costs will be allocated to the Parties to the arbitration as
determined by the arbitrator, except that the prevailing party in such
arbitration will be entitled to recover its reasonable attorneys' fees and
expenses. EACH PARTY HERETO
16
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
HEREBY AGREES THAT THE ARBITRATION PROCEDURE PROVIDED IN THIS AGREEMENT WILL
BE THE SOLE AND EXCLUSIVE METHOD OF RESOLVING ANY DISPUTES, CONTROVERSIES OR
CLAIMS ARISING IN CONNECTION WITH, OR OUT OF THIS AGREEMENT, OR OTHERWISE
BETWEEN THE PARTIES TO THIS AGREEMENT.
10.8 REMEDIES. All rights and remedies under this Agreement are
cumulative, may be exercised singularly or concurrently, and will not be deemed
exclusive. The Parties agree that any breach of any confidentiality provision
of ARTICLE 6 would cause irreparable harm to the non-breaching party for which
monetary damages would be an inadequate remedy, and accordingly injunctive
relief is an appropriate remedy to prevent any threatened or ongoing breach of
any provision of ARTICLE 6.
10.9 WAIVERS. The failure of either party to enforce any provision of
this Agreement, unless waived in writing by such party, will not constitute a
waiver of that party's right to enforce that provision or any other provision of
this Agreement.
10.10 ASSIGNMENTS. Each party may use subcontractors in the performance
of its obligations under this Agreement provided that (i) such party remains
responsible for the performance of such obligations and the actions and
omissions of its subcontractors and (ii) Tecmar may not assign, delegate and/or
subcontract any of its engineering and/or design tasks or duties pursuant to
this Agreement, except as approved by the Development Program Manager. Neither
party may assign or transfer this Agreement to a third party without the other
party's prior written consent except in connection with a merger or sale of all
or substantially all of such party's Next Generation Travan Drive or Other
Future Drive business. Any attempted assignment or delegation in violation of
the foregoing will be void. This Agreement will bind and inure to the benefit
of the Parties' respective successors and permitted assigns.
10.11 SEVERABILITY. If any provision of this Agreement is held to be
unenforceable for any reason, the remaining provisions will remain in full force
and effect and the unenforceable provision will be considered modified to the
extent necessary to render such provision enforceable under applicable law.
10.12 CONSTRUCTION. Unless otherwise expressly stated, all references
in this Agreement to "days" mean calendar days and every use of the word
"including" means "including but not limited to". The headings given to
Articles or Sections of this Agreement are for convenience only and are not to
be given any weight or meaning when interpreting this Agreement. There are no
intended third party beneficiaries of this Agreement. This Agreement may be
executed in identical counterparts, each of which will be an original and which
together will constitute the same instrument.
10.13 ENTIRE AGREEMENT AND AMENDMENTS. This Agreement constitutes the
entire agreement between the Parties and supersedes all previous written or oral
communications or
17
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
understandings between them relating to the subject matter of this Agreement.
Notwithstanding the foregoing, this Agreement does not amend, modify or alter
in any way, and will have no effect on, the ASIC Supply Agreement previously
executed by the Parties on June 1, 1999. This Agreement may be amended only
in a writing signed by both Parties.
18
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective
Date.
OVERLAND DATA, INC. TECMAR TECHNOLOGIES, INC.
By: /s/ Scott McClendon By: /s/ Joseph R. Daiutolo
Scott McClendon Joseph R. Daiutolo
President & CEO President & CEO
November 18, 1999 November 18 , 1999
[SIGNATURE PAGE TO DEVELOPMENT, MANUFACTURING
AND LICENSE AGREEMENT]
19
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
EXHIBIT A
DEFINITIONS
The following definitions will apply to all of the Exhibits to this Agreement.
NS40
Travan cartridge drive with a 20 GB native capacity, using a VR(2)2 data
channel, with a 2-rail head supporting read-while-write operation, and
supporting ALDC hardware data compression. This drive is implemented with a
VR(2)2 ASIC to be provided by Overland Data.
30GB
Travan cartridge drive with a 15 GB native capacity, using a VR(2) data
channel, with a 1-rail head. This drive is implemented with a single-channel
VR(2) ASIC specified and provided by Overland Data.
ALDC - Adaptive Lossless Data Compression
A specific data compression algorithm realized in hardware and defined in
QIC-154.
DVT - Design Verification Testing
System level testing performed to insure the product meets specification;
specifically transfer rate, capacity and error rate specifications.
ECC - Error Correction Code
A hardware module which corrects user data using a Reed-Solomon algorithm.
FPGA - Field Programmable Gate Array
A device with hardware which is configurable via downloadable code. For
purposes of this Exhibit, FPGA refers to a Xilinx Vertex device.
VHDL - Very high-speed integrated circuit Hardware Description Language
A programming language used to describe the hardware functions to be implemented
in an FPGA or ASIC.
DELIVERABLES
1) NS40 and 30GB Drive Specifications
2) Schematics, mechanical drawings, and firmware required to specify,
assemble, support and extend the NS40 and 30GB drives.
3) VHDL files for the FPGA device to perform read-while-write formatter,
buffer management, ECC, motor control, and sensor monitoring functions.
4) 100 DVT drives, (a) 70 of 100 assembled as NS40 drives with dual-rail
RWW (read-while-write) heads and with or without ALDC hardware
compression devices, and (b) 30 of 100 assembled as 30GB drives with
single-rail non read-while-write heads and no hardware compression. Both
configurations use a common PCA, a common VR(2) channel pin-out, and a
common FPGA device to implement formatter, buffer management, ECC, motor
1
<PAGE>
EXHIBIT A
control, and sensor monitoring functions. Both configurations support an
ATAPI host interface.
5) 300 Evaluation drives, (a) 250 of 300 assembled as NS40 drives, and (b)
50 of 300 assembled as 30GB drives. The configuration is as described
in item 4.
6) 100 Evaluation drives, (a) 75 of 100 assembled as NS40 drives, and (b)
25 of 100 assembled as 30GB drives. Both configurations use a common PCA,
and a common Kawasaki ASIC for the formatter, buffer management, ECC,
motor control, and sensor monitoring functions. The 30GB drives will use
a single-channel VR(2) ASIC available from Overland Data. The NS40 drives
will use a VR(2) channel implementation suitable for supporting NS40 and
pin compatible with the single-channel VR(2) ASIC. Both configurations
support an ATAPI host interface.
2
<PAGE>
EXHIBIT B
PROJECT SCHEDULE
MILESTONES
<TABLE>
<S> <C> <C>
MILESTONE TECMAR DELIVERABLE OVERLAND DELIVERABLE
DATE
</TABLE>
***
1
<PAGE>
EXHIBIT C
OVERLAND PATENT RIGHTS
Patents for the Overland VR(2) recording technology:
1. U.S. Patent Number US571286301/27/1998
Randomizing Encoder for Digital Data Storage
2. U.S. Patent Number US581551409/29/1998
Variable Rate Bit Inserter for Digital Data Storage
3. U.S. Patent Number US593196808/03/1999
Digital Data Recording Channel
4. U.S. Patent Application Serial Number 09/134,243
Partial Response Recording Channel
5. U.S. Patent Application Serial Number 09/133,982
Write Format for Digital Data Storage
6. All pending and future international patents related to above U.S.
patents
1
<PAGE>
EXHIBIT D
TECMAR PATENT RIGHTS
Patents for the Tecmar Travan NS20 Drive:
1. U.S. Patent Application Serial Number 08/763,394
Apparatus and Method for Detecting Read/Write Gap Failure and Switching to
an Alternative Read/Write Gap.
2. Patent Cooperation Treaty (PCT) PCT/US97/22427
Apparatus and Method for Detecting Read/Write Gap Failure and Switching to
an Alternative Read/Write Gap.
1
<PAGE>
EXHIBIT E
TRAVAN NS40 VR(2) ASIC SPECIFICATION
***
TRAVAN 30GB VR(2) ASIC SPECIFICATION
***
1
<PAGE>
EXHIBIT F
TECMAR DEVELOPMENT PROGRAM COSTS AND EXPENSES
Overland Data with reimburse Tecmar Technologies for other costs directly
related to the engineering services provided by Tecmar Technologies pursuant to
the Development Program. Directly-related project costs are expected to include
the following:
1) Non-recurring engineering development costs including embedded operating
system, ARM evaluation boards, compilers, debuggers, synthesizer for
FPGA, simulator and router, and PCA layout.
2) NS40/30GB drive costs including DVT drives, evaluation drives using the
FPGA device, and evaluation drives using the Kawasaki ASIC.
3) Project-related travel costs.
4) Other costs as approved by the Overland Project Manager.
Tecmar and Overland will follow the procedures set forth below for reimbursement
of development materials and other directly related Project costs ("PROJECT
COSTS").
1) Since Overland is the Project Manager for the Project, Overland and
Tecmar agree that, as a general rule, Project Costs shall be primarily
procured by Overland without Tecmar's direct involvement in the
expenditure. Tecmar's Project Manager will communicate with the Overland
Project Manager as to any needs they may require with regard to Project
Costs. If the Overland Project Manager determines that such expenditure
is justified, the Overland Project Manager will follow Overland's
purchase requisition and order procedures in fulfilling the purchase
request; and Overland will be responsible to the selected vendor for
direct payment. If the materials or other items procured need to be used
at Tecmar's Longmont, CO facility, Overland will ensure that the vendor
is instructed with Tecmar's address as the ship to location.
2) It is anticipated that Tecmar will incur directly related Project Costs
in the nature of travel for Project related meetings and other items
(e.g., delivery charges for project-related documents and
correspondence). For these items, Tecmar will prepare a purchase
requisition describing the nature of the expenditure and the estimated
cost. The purchase requisition will be forwarded to the Overland project
manager, who will approve or deny such request within 5 business days of
receipt. If the Overland project manager approves such purchase
requisition, Overland agrees to reimburse Tecmar for the expense upon
receipt of appropriate supporting documentation (see 3. Below).
3) Tecmar agrees to submit a monthly invoice to Overland by the 5th business
day of the following month for approved directly related Project Costs
incurred in the preceding month. Tecmar will provide Overland with a
copy of the vendor invoice (or other such supporting document (e.g.,
employee expense report) and a copy of the purchase requisition approved
by the Overland project manager. Overland agrees to pay the Tecmar
invoice by the 15th business day.
1
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
SUPPLY AGREEMENT
THIS SUPPLY AGREEMENT is effective this 5th day of November 1999 (the "EFFECTIVE
DATE"), between Overland Data, Inc., a California corporation, having a place of
business at 8975 Balboa Avenue, San Diego, CA 92123 ("SELLER") and Seagate
Technology, Inc., a Delaware corporation, having a place of business at 1650
Sunflower Ave., Costa Mesa, California ("BUYER").
In consideration of the mutual promises and covenants contained herein and for
other good and valuable consideration, the receipt of which is acknowledged by
both parties, the parties agree as follows:
ARTICLE I.
DEFINITIONS
For purposes of this Agreement, the following terms and all other terms
defined in this Agreement shall have the meanings so defined:
1.1 ASIC. The term "ASIC" means an application specific integrated circuit.
1.2 CORE TECHNOLOGY. The term "Core Technology" means the patent rights as
described and claimed in United States Patent Nos. 5712863, 5815514 and
5931968.
1.3 DOCUMENTATION. The term "Documentation" means all present and future
manuals, notebooks, quick reference guides, comments and publications of
every nature, and all corrections, modifications and revisions thereto,
relating to Products.
1.4 IMPROVEMENTS AND MODIFICATIONS. The term "Improvements and
Modifications" means any and all changes in the design or Specifications
of any of the Products or the Core Technology, including the addition of
new features or capacities.
1.5 CORE TECHNOLOGY IMPROVEMENTS. The term "Core Technology Improvements"
means the improvements and modifications to the Core Technology where
implementation of such improvements and modifications would infringe upon
the patent claims of the Core Technology.
1.6 INTELLECTUAL PROPERTY. The term "Intellectual Property" means copyright
rights (including, without limitation the right to use, reproduce,
modify, distribute, publicly display and publicly perform the copyrighted
work), trademark rights (including, without limitation, trade names,
trade marks, service marks and trade dress) patent rights (including,
without limitation, the exclusive right to make, use or sell), trade
secrets, moral rights, rights of publicity, goodwill and all other
intellectual property rights as may exist now and/or hereafter come into
existence and all renewals and extensions thereof,
1
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
regardless of whether such rights arise under the laws of the United States or
any other country or jurisdiction.
1.7 INVENTION. The term "Invention" means any idea, design, concept,
technique, invention, discovery, algorithm or improvement relating to the
Products, whether or not patentable.
1.8 NEXT GENERATION TRAVAN CARTRIDGE. The term "Next Generation Travan
Cartridge" means the next and future generations of Travan Cartridges,
including (1) Travan NS Cartridge after the Travan NS 20 Cartridge, and
(2) Travan Cartridge after the Travan 20 GB Cartridge, and (3) off-path
Travan technology based Cartridges, all of which are presently expected
to have a capacity of greater than 20 GB (compressed).
1.9 NEXT GENERATION TRAVAN DRIVE. The term "Next Generation Travan Drive"
means a non-read-while-write drive which reads and writes data onto a
Next Generation Travan Cartridge.
1.10 PRODUCTS. The term "Products" means any present or future Travan VR(2)
ASIC.
1.11 SPECIFICATIONS. The term "Specifications" means the specification for
the Product as described in EXHIBIT B attached hereto.
1.12 TRAVAN VR(2) ASIC. The term "Travan VR(2) ASIC" means an ASIC embodying
the VR(2) technology, which is a modification of existing ASIC designs
of Seller specifically adapted for incorporation into Next Generation
Travan Drives which utilize non-read-while-write technology, such ASIC
specification for which is attached as EXHIBIT B.
ARTICLE II.
SALE AND PURCHASE OF PRODUCTS
2.1 SALE AND PURCHASE. Seller agrees to sell and Buyer agrees to buy Products
and such other items as may be mutually agreed upon subject to the terms
of this Agreement. Buyer will purchase Products pursuant to this
Agreement by issuing purchase orders from time to time.
2.2 RESTRICTIONS. Throughout the term of this Agreement and for five years
thereafter, Buyer will not (i) market, offer to sell, or sell any
Products purchased from Seller, except as part of Next Generation Travan
Drives, to third parties.
2.3 TERM OF AGREEMENT. This Agreement will commence on the Effective Date
and, except as otherwise provided in this Agreement, will terminate one
year from the Effective Date. The term of this Agreement will
automatically renew for an additional one-year term on
2
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
each anniversary of the Effective Date unless either party provides
the other party with written notice of such party's intention not to
renew at least 90 days prior to such anniversary.
2.4 PURCHASE ORDERS. Buyer will order Products by submitting purchase orders
to Seller in writing by priority or overnight U.S. mail, facsimile,
overnight private courier, or other electronic means mutually agreed upon
between the parties (the "PURCHASE ORDERS"). Each Purchase Order will
contain the item ordered, description, quantity, date for delivery or
performance, destination, and total price of the Purchase Order. Seller
will have 10 business days after receipt of a Purchase Order to reject
the Purchase Order. Acceptance by Seller is limited to the provisions of
this Agreement and Seller's Acknowledgement. Seller will not ship any
Products to Buyer without prior receipt of a Purchase Order.
2.5 FORECASTS. Buyer will provide Seller monthly rolling forecasts of Buyer's
anticipated requirements for the Products for the six-month period
following the date of the forecast, including the first two months of
such forecast as a firm purchase order. Buyer will not be bound by the
forecast for any period beyond the first two months and will have no
liability to Seller for any differences between a forecast requirement
for any period beyond the first two months of such forecast and the
actual Purchase Orders for such months submitted by Buyer.
2.6 PRECEDENCE. Each Purchase Order issued under this Agreement will be made
part of, and be incorporated into, this Agreement. Unless otherwise
specifically agreed to in writing between Buyer and Seller, the terms and
conditions of this Agreement will take precedence and govern any accepted
Purchase Order, or any additional terms stated on any such Purchase
Order, notwithstanding any contrary terms and conditions in the printed
portion of Buyer's Purchase Order form or Seller's Order Acknowledgment.
2.7 CANCELLATION OF PURCHASE ORDERS. Buyer may cancel the undelivered
portion of any purchase order upon written notice of cancellation to
Seller. Upon receipt of notice of cancellation, Seller shall immediately
stop work on the undelivered portion of the affected Purchase Order and
make no further commitments for materials or services to complete such
affected Purchase Order.
a. In the event of such notice of cancellation (unless such
cancellation is due to the default of Seller), Buyer will pay Seller for
direct, reasonable and actual out-of-pocket expenses, excluding overhead
and similar items, and any other expenses for which Seller is obligated
to reimburse its foundry, which either Seller or its foundry incurred
directly as a result of preparations to deliver such canceled Products.
b. In connection with such cancellation of Purchase Orders, Buyer may
require Seller to transfer title and deliver to Buyer, in the manner and
on the terms hereinafter set forth for non-cancelled orders any completed
Products from such cancelled order.
3
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
c. In no event shall Buyer's liability to Seller as a result of
cancellation of a Purchase Order exceed the total price of the cancelled
portion of such Purchase Order.
2.8 CAPACITY AND ALLOCATION. Seller will use commercially reasonable efforts
to satisfy Buyer's Purchase Orders and forecasted requirements. In the
event that Seller's capacity to produce the Products is constrained for
any reason, Seller will allocate such constrained supply among the
accepted purchase orders of its customers at its sole discretion, and
Buyer shall be released from Purchase Order obligations for amounts in
excess of Product allocated to Buyer.
2.9 SHIPPING. Buyer reserves the right to designate means of shipping.
Shipping methods will be as stated on Buyer's Purchase Order. No changes
will be made unless authorized in writing by Buyer. F.O.B. point will be
foundry facility as designated in EXHIBIT A. All shipments will be
adequately packaged to prevent any damage during normal transportation.
2.10 TITLE AND RISK OF LOSS. Title to, and risk of loss of, the Products will
pass to Buyer upon transfer of the Products to the F.O.B. point of
shipment. Buyer will make any claims against Seller for shortages in
quantities shipped within 30 days from the date of shipment.
2.11 FORCE MAJEURE. Neither party will be considered in default or liable for
any failure to perform its obligations under this Agreement if such
failure arises out of an act of nature, war, strikes, lockouts, trade
disputes, fires, quarantine restrictions, Governmental action or any
other causes beyond the reasonable control of that party. The affected
party will immediately notify the other in writing if a force majeure
event delays performance and will state the revised date for performance.
Should Seller's inability to perform because of a force majeure event
continue for a period in excess of 30 days, Buyer will not be obligated
to purchase, at a later date, that portion of the Products that Seller is
unable to deliver because of a force majeure event.
ARTICLE III.
PRICES AND TERMS OF PAYMENT
3.1 PRICES. All Buyer purchases will be based on the prices in attached
EXHIBIT C. Upon any automatic renewal pursuant to the provisions of
SECTION 2.3, the parties will execute and date another revision of
EXHIBIT C setting forth Product pricing for such renewed term.
3.2 PAYMENT TERMS. Payment terms are *** after receipt of Seller's invoice.
Bills of lading and shipping notices will be forwarded with Seller's
invoice as needed. Seller's invoice will specify Buyer's Purchase Order
number. All sales of Product will be F.O.B. foundry facility.
4
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
3.3 TAXES. Unless otherwise stated in writing by Seller, all prices quoted
will be exclusive of all national, federal, state, local or any other
governmental use, sales, excise, occupational, property (ad valorem) and
similar taxes or duties now in force or enacted in the future. If any
such tax, fee or charge of any nature whatsoever is imposed on the
transaction, such tax will be paid by Buyer in addition to the prices
quoted or invoiced. If Seller is required to pay any such tax, fee or
charge at the time of sale or thereafter, Buyer will promptly reimburse
Seller after Seller provides Buyer with evidence of the amounts paid.
3.4 CREDITS. Amounts owed to Buyer due to rejections of Products, or
discrepancies on paid invoices will be, at Seller's option, fully
credited against future invoices payable by Buyer, or paid by Seller
within 30 calendar days from Seller's receipt of a debit memo or other
written request for payment from Buyer.
3.5 NO SET-OFFS. Buyer will not set off any amount owing at any time from
Seller or any of Seller's affiliated companies to Buyer or its
subsidiaries or affiliates against any amount payable at any time by
Buyer in connection with this Agreement and/or any Purchase Order issued
pursuant to this Agreement.
3.6 METHOD OF PAYMENT. All payments under this Agreement for the Products
purchased by Buyer will be made in United States dollars by (i) check, or
(ii) wire transfer to the account specified in Seller's Acknowledgement.
A finance charge of ***% per month will be assessed on any amounts which
are past due.
ARTICLE IV.
WARRANTIES
4.1 WARRANTY OBLIGATION. Seller warrants that for a period of one year (the
"WARRANTY PERIOD") from the date of shipment of the Products that such
Products will (a) be in compliance with the material terms of the
Specification attached hereto as EXHIBIT B, and (b) be of good
workmanship and free from substantial defects. Seller further warrants
that Seller has title to the Products. Seller does not warrant that all
defects will be corrected. The foregoing warranty will be subject to
Buyer or the end-user installing and using the Products in accordance
with the Specifications. Further, the foregoing warranty will not extend
to any Products which have been subject to mishandling, misuse, accident,
improper installation, application or use, nor does such warranty extend
to any Products that have been modified, repaired or altered by persons
other than Seller. Seller's sole obligation under this warranty is
limited to either (i) correction or modification of any substantial
defect(s) to the extent that such defect(s) can be documented, isolated,
reproduced and corrected, or (ii) product replacement.
5
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
4.2 FUNCTIONAL TEST VECTORS. Seller shall provide Buyer with functional test
vectors for the Products. It is the intent of the parties that the
functional test vectors will be provided as tools to assist Buyer in
verifying that the Products meet the Specifications.
4.3 REMEDY. If Seller receives notice, verbal followed by written, from
Buyer within the Warranty Period of failure of Products to satisfy the
above warranties, then, one of the following remedies will be selected
upon mutual agreement of the parties: (i) Seller will replace the
Products upon receipt from Buyer of the Products which prove to be
defective, (ii) Seller will correct at no charge to Buyer any defective
or non-conforming Products, (iii) Buyer will return such defective or
non-conforming Products to Seller and recover from Seller the amount paid
to Seller by Buyer thereof, or (iv) Buyer will correct the defective or
non-conforming Product itself and charge Seller with the cost of such
correction upon prior approval of Seller. If, for Products alleged to be
defective or non-conforming and which are returned to Seller by Buyer,
Seller determines that the parts returned by Buyer are not defective,
Seller will return such non-defective parts to Buyer at Buyer's expense
and Buyer will refund all shipping charges previously paid by Seller.
THE ABOVE REMEDIES ARE THE SOLE AND EXCLUSIVE REMEDIES OF BUYER FOR A
BREACH OF THE WARRANTY BY SELLER FOR THE PRODUCTS.
4.4 EXCLUSIONS. The foregoing warranty will not apply to adjustments,
modifications, replacements, or repair caused by: (i) accident,
transportation, mishandling, neglect, misuse or alterations by persons
other than Seller; (or (II) the use or operation of the Products in
violation of the Specification.
4.5 DISCLAIMER. SELLER DOES NOT WARRANT THAT THE PRODUCTS WILL MEET BUYER'S
REQUIREMENTS OR THAT THE PRODUCT WILL OPERATE IN THE COMBINATIONS WHICH
BUYER MAY SELECT FOR USE. THE PRODUCTS ARE PROVIDED WITHOUT ANY EXPRESS
OR IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE. FURTHER, SELLER DOES NOT WARRANT, GUARANTEE, OR MAKE ANY
REPRESENTATIONS REGARDING USE, OR THE RESULTS OF USE, OF THE PRODUCTS.
THE ENTIRE RISK AS TO THE RESULTS AND PERFORMANCE OF THE PRODUCTS IS
ASSUMED BY BUYER.
ARTICLE V
LIMITATION OF LIABILITY
5.1 LIMITATION OF LIABILITY. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN
THIS AGREEMENT, SELLER WILL NOT BE RESPONSIBLE OR LIABLE UNDER ANY
PROVISION OF THIS AGREEMENT OR UNDER ANY CONTRACT, NEGLIGENCE, PRODUCT
LIABILITY, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR LOSS
OR INACCURACY OF DATA, COST OF PROCUREMENT OF SUBSTITUTE GOODS, SERVICES
OR TECHNOLOGY, OR
6
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
ANY INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES INCLUDING, WITHOUT
LIMITATION, LOSS OF REVENUES AND LOSS OF PROFITS REGARDLESS OF WHETHER
SELLER HAS BEEN ADVISED OF THE EXPECTATION OR EXISTENCE OF SUCH
DAMAGES. ANY LIABILITY OF SELLER UNDER ANY THEORY WHATSOEVER WILL BE
LIMITED EXCLUSIVELY TO PRODUCT REPLACEMENT OR, IF UNENFORCEABLE, TO
PAYMENT OF AN AMOUNT NOT GREATER THAN AMOUNTS ACTUALLY RECEIVED BY
SELLER PURSUANT TO THIS AGREEMENT OR $***, WHICHEVER IS GREATER.
ARTICLE VI
CONFIDENTIAL DATA AND DISCLOSURES
6.1 CONFIDENTIAL INFORMATION. Each party agrees that any information
identified, and marked as confidential ("CONFIDENTIAL INFORMATION"),
including this Agreement and any schedules and exhibits thereto and the
VR(2) Technical Information, which is made available to the other party
in accordance with this Agreement shall be kept confidential. Each
party will use the other party's Confidential Information only for the
purposes contemplated and permitted by this Agreement. Neither party
will disclose the other party's Confidential Information to any third
party except as may be required (i) by court order (provided that the
party subject to such court order gives prompt written notice thereof to
the party whose Confidential Information will be disclosed and
cooperates in any motion or action to prevent or limit the required
disclosure), (ii) pursuant to any discovery obligation in litigation
provided that a mutually agreeable protective order has been entered by
the court, and (iii) pursuant to any applicable Securities and Exchange
Commission ("SEC") filing rules, regulations and/or requirements ("SEC
DISCLOSURE"), provided, however, that if a party desires to so disclose
the Confidential Information of the other party, the filing party (a)
will provide 30 days written notice to the other party of its intent to
file such other party's Confidential Information so as to enable the
other party to indicate which portions of its Confidential Information
to excerpt (the "EXCERPTED PORTIONS") and the general reasons therefor,
and (b) will make application to the SEC for confidential treatment of
the Excerpted Portions unless the filing party provides a written
opinion of counsel addressed to the other party that disclosure of
certain of the Excerpted Portions is mandatory under applicable SEC
rules and regulations and that filing of such a request for confidential
treatment would be improper. Each Party further agrees to protect the
other party's Confidential Information from unauthorized use or
disclosure in the same manner as it protects its own similar
Confidential Information (but in no event with less than reasonable
care), and to limit access to the other party's Confidential Information
to those of its employees and agents who need such access for purposes
contemplated and permitted by this Agreement. This obligation of
confidentiality shall last for four (4) years from the date the
Confidential Information is disclosed to the recipient, regardless of
the termination date of this Agreement.
7
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
6.2 EXCLUSIONS. The obligations in this Article VI will not apply to any
information which is (i) publicly available, except as disclosed in
violation of this Agreement; or (ii) lawfully received by any party from
a third party who is or who was not bound in a confidential relationship
to the other party; or (iii) already properly and lawfully in possession
of any party prior to the date of this Agreement or the date of its
disclosure, or information which such party demonstrates with appropriate
documentation was known prior hereto; or (iv) required by law or
governmental regulation or necessary for the purpose of enforcement of
this Agreement; or (v) independently developed by one party without use
of any Confidential Information of the other party by employees who have
had no access to such Confidential Information; or (vi) not marked as
"Confidential" or other similar legends indicating the confidential
nature of the information.
6.3 THIRD PARTY MANUFACTURERS. Notwithstanding the above, Buyer may share
such Confidential Information with a third party, but only to the extent
necessary for that third party to integrate Product into Buyer's product.
Prior to such disclosure Buyer will insure that the third party signs a
confidentiality agreement incorporating restrictions on disclosure of
Confidential Information substantially similar to restrictions in this
Section 6.3.
ARTICLE VII
INTELLECTUAL PROPERTY RIGHTS
7.1 INTELLECTUAL PROPERTY RIGHTS TO THE PRODUCTS AND CORE TECHNOLOGY. All
right, title and interest in or to the Intellectual Property of the
Products, including the Core Technology and including any and all
Inventions, Improvements and Modifications to the Products and Core
Technology developed by or for Seller, shall be solely owned by Seller.
7.2 IMPROVEMENTS AND MODIFICATIONS TO THE CORE TECHNOLOGY DEVELOPED BY BUYER.
If Buyer desires to develop or develops any Core Technology Improvements,
the parties must mutually agree upon the ownership or licensing to Seller
of such Core Technology Improvements prior to the implementation of such
Core Technology Improvements in the Product by either party.
7.3 IMPROVEMENTS AND MODIFICATIONS TO THE PRODUCT (EXCLUDING THE CORE
TECHNOLOGY) DEVELOPED BY BUYER. All right, title and interest in or to
the Intellectual Property of the Product, excluding the Core Technology
and including any and all Inventions, Improvements and Modifications to
the Products (excluding Core Technology) developed by or for Buyer, shall
be solely owned by Buyer.
ARTICLE VIII
8
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
LICENSE GRANT
8.1 LICENSE GRANT. Subject to the terms and conditions of this Agreement,
Seller hereby grants to Buyer ***.
8.2 TRADEMARK USAGE. Buyer will comply with all applicable laws and
governmental regulations pertaining to the proper use and designation of
Seller's lawful trademarks.
ARTICLE IX
INDEMNITY
9.1 INDEMNITY BY SELLER. Seller will indemnify and hold harmless Buyer and
its directors, officers, employees, agents, successors and assigns from
and against any and all liability, damages, losses, claims, demands,
actions, judgments, costs, attorneys' fees, disbursements and expenses
incurred in connection with any action, claim or demand against Buyer by
reason of injury to or death of any person or damage to or destruction of
property arising out of or resulting from the negligent, reckless or
willful acts or omissions of Seller, its employees, subcontractors or
agents in supplying the Products to Buyer pursuant to this Agreement.
Seller will not be responsible for any such losses, damages, liabilities,
claims, actions, judgments, costs, demands, attorneys' fees,
disbursements and expenses caused by the sole negligence or willful
misconduct of Buyer, its directors, officers or employees. If an action,
claim or demand is filed against Buyer for which Seller is to be
responsible under this provision, Buyer will promptly notify Seller in
writing of such action, claim or demand. Upon receipt of such notice
from Buyer, if Seller acknowledges in writing to Buyer that Seller is
obligated to indemnify Buyer under the terms of this SECTION 9.1 in
connection with such action, claim or demand, then Seller will be
entitled, if it so elects, to take control of the defense and
investigation of such action, claim or demand and to employ and engage
attorneys of its own choice to handle and defend the same at Seller's
sole cost, risk and expense and Buyer will thereafter cooperate in all
reasonable respects with Seller and its attorneys in the investigation,
trial and defense of such action, claim or demand and any appeal arising
therefrom. Buyer may also, through independent counsel and at its own
cost, participate in such investigation, trial and defense of such
action, claim or demand and any appeal arising therefrom. Seller may
effect no settlement without the prior written approval of Buyer, which
approval will not be unreasonably withheld. Seller also agrees to carry
fire and extended coverage insurance, and to be responsible for any of
Buyer's property while in Seller's possession, to maintain such property
in good condition, and not to dispose of such property except in
accordance with Buyer's instructions and the terms hereunder.
9.2 INDEMNITY BY BUYER. Buyer will indemnify and hold harmless Seller and its
directors, officers, employees, agents, successors and assigns from and
against any and all liability, damages, losses, claims, demands, actions,
judgments, costs, attorneys' fees,
9
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
disbursements and expenses incurred in connection with any action, claim
or demand against Seller by reason of losses, injury to or death of any
person or damage to or destruction of property arising out of or
resulting from any sales or use of devices incorporating the Products,
or the negligent, reckless or willful acts or omissions of Buyer, its
employees, subcontractors or agents in the use or sale of the Products.
Buyer will not be responsible for any such losses, damages, liabilities,
claims, actions, judgments, costs, demands, attorneys' fees,
disbursements and expenses caused by the sole negligence or willful
misconduct of Seller, its directors, officers or employees. If an
action, claim or demand is filed against Seller for which Buyer is to be
responsible under this provision, Seller will promptly notify Buyer in
writing of such action, claim or demand. Upon receipt of such notice
from Seller, if Buyer acknowledges in writing to Seller that Buyer is
obligated to indemnify Seller under the terms of this SECTION 9.2 in
connection with such action, claim or demand, then Buyer will be
entitled, if it so elects, to take control of the defense and
investigation of such action, claim or demand and to employ and engage
attorneys of its own choice to handle and defend the same at Buyer's
sole cost, risk and expense and Seller will thereafter cooperate in all
reasonable respects with Buyer and its attorneys in the investigation,
trial and defense of such action, claim or demand and any appeal arising
therefrom. Seller may also, through independent counsel and at its own
cost, participate in such investigation, trial and defense of such
action, claim or demand and any appeal arising therefrom. Buyer may
effect no settlement without the prior written approval of Seller, which
approval will not be unreasonably withheld. Buyer also agrees to carry
fire and extended coverage insurance, and to be responsible for any of
Seller's property while in Buyer's possession, to maintain such property
in good condition.
9.3 LIABILITY FOR INJURIES TO PERSONNEL. Each party will be solely
responsible for, and will indemnify the other party against, all claims,
losses, litigation, damages and expenses resulting from injuries to or
the death of any of its personnel occurring while any such person is
traveling to or from any of the other party's facilities, or is otherwise
engaged in activities incident to this Agreement.
ARTICLE X.
INTELLECTUAL PROPERTY INFRINGEMENT
10.1 REPRESENTATIONS. Seller represents and warrants that it knows of no
trade secret misappropriation that has occurred and has no reason to
believe that a misappropriation will occur with regard to any Product or
Documentation delivered to Buyer, and it knows of no patent, trademark,
copyright or other proprietary rights infringement by the Products on the
Effective Date of this Agreement.
10.2 DEFENSES. Seller will indemnify, defend any suit or proceeding brought
against, Buyer or its customers based on a claim that the Products, or
any part thereof, as supplied by Seller and used within the scope of this
Agreement constitutes an infringement of any U.S.
10
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
patent, copyright, trademark, trade secret or any other proprietary right
of any third party or embodied in the Products as supplied by Seller,
provided that (i) Buyer notifies Seller in writing within 30 days of the
claim, (ii) Seller has sole control of the defense and all related
settlement negotiations, and (iii) Buyer provides Seller with the
assistance, information and authority necessary to perform the above.
Seller will have no liability or obligation to defend any such claim of
infringement based on: (a) use of a superseded or altered version of
the Product if such infringement would have been avoided by the use of a
current unaltered version of the Product supplied by Seller; (b) any
customized Products, to the extent such customization was at the request
of Buyer; or (c) the combination, operation, or use of the Products
supplied by Seller pursuant to this Agreement with other devices and
components not supplied by Seller if such infringement would have been
avoided by the use of the Products solely without such devices or
components.
10.3 REMEDIES. If the Product is held or is believed by Seller to infringe,
Seller will have the option, at its expense, to (i) modify the Product
to be non-infringing; (ii) obtain for Buyer and its customers a license
to continue using the Product; or (iii) replace the Product with
non-infringing alternatives which conform to the Product specification.
THIS SECTION STATES SELLER'S ENTIRE LIABILITY FOR INFRINGEMENT.
ARTICLE XI
PRODUCT TRAINING
11.1 DEVELOPER KIT. Upon receipt of $*** from Buyer, Seller will provide to
Buyer a Developer Kit, including the items set forth in EXHIBIT D. The
Developer Kit will include a rudimentary training session ("VR(2)
UNIVERSITY") on the use of the Products at the scheduled times set forth
in EXHIBIT D. Telephonic support from Seller for a period of fifteen
(15) working days immediately following the completion of VR(2)
University is included as part of the Develop Kit. Buyer will pay any
travel, lodging, and other out-of-pocket expenses for its respective
employees to attend VR(2) University.
11.2 ENGINEERING SUPPORT. Upon Buyer's request, Seller will provide
telephonic engineering support to Buyer at a rate of $*** per hour.
Seller will invoice Buyer on a monthly basis for such engineering
support. Buyer will pay a minimum charge of $*** in any such month Buyer
uses such telephonic support. Seller will accumulate and calculate the
charges for such telephonic support on the basis of 0.10 hour time
increments, each such time increment corresponding to six minutes of
time.
ARTICLE XII.
TERMINATION
11
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
12.1 TERMINATION. Either party may terminate this Agreement immediately (i)
in the event of a material breach, including any failure by Buyer to make
payments of any amounts to Seller when due, of any term of this Agreement
by the other party which continues uncured for a period of *** after the
non-breaching party provides written notice to the breaching party; (ii)
upon any breach of the provisions of Article VI (Confidential Data and
Disclosures); or (iii) upon a breach by a party of any provision of
Article XII (Compliance with Laws).
12.2 INSOLVENCY. Either party may terminate this Agreement or suspend
performance, if at any time during the term of this Agreement the other
party will becomes insolvent or is unable to meet its obligations as they
become due; makes a general assignment for the benefit of creditors;
petitions, applies for, suffers or permits with or without its consent
the appointment of a custodian, receiver, trustee in bankruptcy or
similar officer for all or any substantial part of its business or
assets; avails itself or becomes subject to any proceeding under the
Federal Bankruptcy Code or any similar state, federal or foreign statute
relating to bankruptcy, insolvency, reorganization, receivership,
arrangement, adjustment of debts, dissolution or liquidation, which
proceeding is not dismissed within sixty (60) days of commencement
thereof.
12.3 ACCRUED OBLIGATIONS. Termination of this Agreement will not relieve
either party of any then-accrued payment obligation under this Agreement,
unless payment is disputed. Any and all payments by either party to the
other accrued pursuant to this Agreement as of the date of termination
will remain due and payable in accordance with the terms hereof.
12.4 CONSEQUENCES OF TERMINATION. Upon termination of this Agreement for any
reason whatsoever, each party will immediately deliver to the other all
Confidential Information and other materials related to, embodying, or
associated with, any of the Documentation, the VR(2) Technical
Information, and the Intellectual Property made available to, or
produced by, Buyer pursuant to the terms of this Agreement. Any
termination of this Agreement will not eliminate any liability arising
out of the conduct prior to the actual date of termination, and either
party may, following such termination, pursue such remedies as may be
available with respect to such liabilities. In addition, the
obligations of ARTICLE IV and SECTIONS 5.1, 6.1, 6.2, 7.1, , 9.1, 12 and
13, will survive any termination of this Agreement. Within 30 calendar
days after termination of this Agreement for any reason whatsoever, each
party will certify in writing to the other that it has satisfied all of
its obligations under this Section.
ARTICLE XIII.
COMPLIANCE WITH LAWS
13.1 CERTAIN LAWS. Parties hereby acknowledge and agree that certain laws of
the United States, including the Foreign Corrupt Practices Act, 15 U.S.C.
sections 78dd-1, ET SEQ., prohibit any person subject to the jurisdiction
of the United States from making any payment of money or anything of
value, directly or indirectly, to any foreign political
12
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
party or candidate for foreign political office for the purpose of
obtaining or retaining business. Parties hereby represent and warrant
that, in the performance of their duties pursuant to this Agreement,
each has not made, and will not make, any such proscribed payment. Each
party will indemnify and hold harmless the other from and against any
and all claims, losses and liabilities attributable to any breach by
that party of its obligations under this SECTION 13.1.
13
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
13.2 UNITED STATES EXPORT CONTROLS. Without limiting the generality of
SECTION 13.1, each party specifically acknowledges that certain of the
Confidential Information ("TECHNICAL DATA") may be subject to United
States export controls, pursuant to the Export Administration
Regulations, 15 C.F.R. Parts 768-799. Each party will comply strictly
with any applicable requirements of the Export Administration Regulations
with respect to all such Technical Data.
ARTICLE XIV.
ARBITRATION
14.1 GOVERNING LAW. This Agreement will be governed in all respects solely and
exclusively by the laws of the State of California, U.S.A. without regard
to conflict of laws principles. The United Nations Convention on the
International Sale of Goods will not apply to this Agreement.
14.2 DISPUTE RESOLUTION. In any disputes, controversies, or claims arising out
of, relating to, or in connection with this Agreement or between the
parties, including the determination of the scope of the agreement to
arbitrate, the parties agree to first endeavor to settle the dispute in
an amicable manner by good faith discussions and bargaining between the
parties. If the parties are unable to resolve the controversy, upon
request of one party, the parties agree to submit the dispute to an
arbitrator for final and binding arbitration at a location to be
determined by the non-requesting party. The arbitration will comply with
and be governed by provisions of the California Arbitration Act before an
arbitrator experienced in the matter to be decided.
14.3 ARBITRATION EXCEPTION; INJUNCTIVE RELIEF AVAILABILITY. Notwithstanding
the foregoing, any claim relating to either of the parties' confidential
information, trademarks, or other proprietary technology or intellectual
property may be, at either parties' election, be determined by a court
located in San Francisco, California, to whose exclusive jurisdiction the
parties hereby consent. Each party shall be authorized and entitled to
obtain preliminary and permanent injunctive relief, which rights and
remedies shall be cumulative and in addition to any other rights or
remedies to which a party may be entitled.
14
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
14.4 ANCILLARY RELIEF. Nothing herein will prevent a party, prior to
appointment of the arbitrator, from making application to any court of
competent jurisdiction, for any provisional remedy available at law or in
equity. Such application for relief will not constitute a waiver of this
agreement to arbitrate. Upon appointment, the arbitrator will have
exclusive authority to order provisional or interim relief, except that
any relief ordered by the arbitrator may be immediately and specifically
enforced by a court otherwise having jurisdiction. The parties waive
objection to venue and consent to the personal jurisdiction of the
federal courts of San Francisco, California, U.S.A. in any action to
enforce this agreement to arbitrate or any order or award of the
arbitrator, or for the provisional or interim remedies provided for in
this Agreement.
14.5 EXPENSES. In any arbitration proceeding pursuant to this Agreement, each
party will bear the expenses of its witnesses. All other costs of
arbitration, including, without limitation, the fees and expenses of the
arbitrators, the cost of the record or transcripts thereof, if any,
administrative fees, the attorneys' fees of the parties, and all other
fees and costs will be allocated to the parties to the arbitration as
determined by the arbitrator, except that the prevailing party in such
arbitration will be entitled to recover its reasonable attorneys' fees
and expenses.
14.6 DISCOVERY. In any arbitration proceeding pursuant to this Agreement,
discovery will be limited to written requests for the production of
specific documents. The period for requesting documents will be 30 days
commencing upon the day that the answer is due under the Rules. The
responding party will have 15 days to produce the requested documents by
sending copies to the requesting party or its representative via a
recognized international courier service. The parties will also
voluntarily produce all documents that they intend to use at the
arbitration hearing and a list of intended witnesses before the close of
discovery subject to supplementation for purposes of rebuttal or good
cause shown. The parties waive any right to seek any discovery not
provided for in this Agreement irrespective of whether the laws of any
country provide for different or additional discovery in international
arbitration. The arbitrator will hold a pre-hearing conference within
three days of the close of discovery and will schedule and hold the final
hearing within 30 days of the close of discovery. Except as set forth in
Section 14.2, EACH PARTY HERETO HEREBY AGREES THAT THE ARBITRATION
PROCEDURE PROVIDED IN THIS AGREEMENT WILL BE THE SOLE AND EXCLUSIVE
METHOD OF RESOLVING ANY DISPUTES, CONTROVERSIES OR CLAIMS ARISING IN
CONNECTION WITH, OR OUT OF THIS AGREEMENT, OR OTHERWISE BETWEEN THE
PARTIES TO THIS AGREEMENT.
ARTICLE XV.
EPIDEMIC PRODUCT FAILURE
15.1 EPIDEMIC PRODUCT FAILURE. For the purposes of this Agreement, "Epidemic
Product Failure" means ***. The parties agree, however, that in no event
shall an Epidemic
15
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
Product Failure be deemed to occur during a Product ramp-up period of ***
from the first shipment of Products to Buyer. In the case of an Epidemic
Product Failure, Buyer and Seller shall cooperate to implement the
following procedure:
15.1.1 Buyer shall promptly notify Seller upon discovery of the failure.
15.1.2 Within five (5) working days Seller shall give an initial response
indicating its preliminary plans for diagnosing the problem.
15.1.3 Seller and Buyer shall jointly exert all commercially reasonable
efforts to diagnose the problem and plan a work-around or more
permanent solution.
15.1.4 Seller shall prepare and consult with Buyer regarding a recovery
plan as well as an appropriate work-around, as an interim
solution, if the parties mutually decide that such an interim
solution is required.
15.2 MANUFACTURING LICENSE. Seller hereby grants to Buyer a *** license to
manufacture or have manufactured the Products (the "Manufacturing
Rights") which Buyer may exercise at any time upon notice to Seller and
upon the occurrence of either of the following:
15.2.2 A Recovery Plan is not mutually agreed to in writing by the
parties within thirty (30) days from the date of initial
notification of the problem by Buyer to Seller. For the purposes
of this Agreement, a "Recovery Plan" means a plan for which each
party has devoted all commercially reasonable efforts to determine
the root cause of the problem, and which includes (i)
identification of the corrective action, and (ii) written
milestones for the performance of the corrective action.
15.2.3 Notwithstanding the terms of Section 2.8 hereof, If Seller
consistently or continuously fails to supply Buyer with Products
meeting the Specifications in the quantities (i) contained on a
firm forecast of Buyer, and (ii) included in a firm non-cancelable
Purchase Order submitted by Buyer and accepted by Seller pursuant
to the terms of Section 2.4 ("Purchase Orders") hereof. For the
purposes of this Section 15.2.3, Seller shall be deemed to have
failed consistently in performing its obligations to supply
Products if ***.
15.2.4 If Buyer does exercise its Manufacturing Rights pursuant to this
Section 15.2, the provisions of Section 15.3 shall additionally
apply.
15.3 ROYALTIES AND REPORTING PROVISIONS. In the event that Buyer exercises
its Manufacturing Rights as provided in Section 15.2, and in the event
that the parties have not previously executed a VR(2) Core License
Agreement , the parties shall negotiate in good faith prior to the first
sale of the Products manufactured by or for Buyer (i) the Product
royalties to be paid to Seller by Buyer, (ii) the payment procedures and
(iii) the sales and royalty reporting
16
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
obligations of Buyer. In general, Buyer shall additionally permit
Seller to conduct an audit, no more than once per each six (6) month
period and upon prior written notice to Buyer, to examine such books,
records and accounts of Buyer to verify royalties due to Seller
hereunder. The parties currently intend to negotiate and execute a
VR(2) Core License Agreement for the Products which shall contain such
additional terms as are described in this Section 15.3.
ARTICLE XVI.
MISCELLANEOUS
16.1 INDEPENDENT CONTRACTORS. Buyer and Seller hereby declare and agree that
each is engaged in an independent business and will perform its
obligations under this Agreement as an independent contractor and not as
the agent or employee of the other; that the persons performing work for
each party hereunder are not agents or employees of the other. Neither
party will have the right or authority to assign or create any obligation
of any kind, express or implied, on behalf of the other party, or to act
for or on behalf of the other party, to make commitments of any kind or
bind it in any way, to accept any service of process upon, or to receive
any notices of any nature whatsoever in its behalf.
16.2 ASSIGNMENT. Except as otherwise expressly proved in this Agreement,
neither party may assign its rights or delegate its duties under this
Agreement without the prior written consent of the other party; provided,
however, that any party may assign its rights and delegate its duties,
either in whole or in part, under this Agreement to any wholly owned or
controlled affiliate, provided that such assignment includes an express
assumption of the assignor's obligations hereunder. Any attempted
assignment or delegation in contravention of this SECTION 16.2 will be
void and of no effect.
16.3 NOTICE. Except as otherwise provided in this Agreement, all notices will
be deemed to have been given when in writing and delivered in person,
sent by electronic facsimile transmission, deposited in the United States
Mail, postage prepaid, certified mail, return receipt requested or sent
by a express courier service which provides documented delivery, and
addressed as follows: (i) if to Seller, Overland Data, Inc., 8975 Balboa
Avenue, San Diego, CA 92123; and (ii) if to Buyer: Seagate Technology,
Inc., 1650 Sunflower Avenue, Costa Mesa, CA 92626. These addresses may
be changed by written notice given by such party to the other pursuant to
this SECTION 16.3.
16.4 NO THIRD PARTY BENEFICIARIES. Except as otherwise provided in this
Agreement, the provisions of this Agreement are for the benefit solely of
the parties and not for any other person.
16.5 WAIVERS. Waiver by either party of any breach by the other party will
not be deemed a waiver of any other default. The failure or delay of
either party to assert any of its rights
17
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
under this Agreement will not be deemed a waiver of that party's right
thereafter to enforce each and every provision of this Agreement
16.6 AMENDMENTS. No provision of this Agreement will be deemed waived, amended
or modified by either party, unless such waiver, amendment or
modification is in writing and signed by the authorized representative of
the party against whom it is sought to enforce such waiver, amendment or
modification.
16.7 HEADINGS. The section and paragraph headings contained in this Agreement
are for reference purposes only and will not affect in any way the
meaning or interpretation of this Agreement.
16.8 SEVERABILITY. If any provision of this Agreement or the application of
any such provision to any person or circumstance, is declared judicially
to be invalid, unenforceable or void, such decision will not have the
effect of invalidating or voiding the remainder of this Agreement, it
being the intent and agreement of the parties that this Agreement will be
deemed to have been amended by modifying such provision to the extent
necessary to render it valid, legal and enforceable while preserving its
intent or, if such modification is not possible, by substituting therefor
another provision that is legal and enforceable and that achieves the
same objective.
16.9 COUNTERPARTS. This Agreement may be executed in several duplicate
originals , each of which will be deemed an original but all of which
together will constitute one and the same instrument.
16.10 ENTIRE AGREEMENT. This Agreement embodies the entire agreement of Buyer
and Seller respecting the Products and supersedes all prior agreements,
understandings and communications, whether written or oral, between the
parties with respect to its subject matter.
IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to be
duly executed as of the Effective Date.
SELLER: OVERLAND DATA, INC. BUYER: SEAGATE TECHNOLOGY, INC.
By: /s/ Scott McClendon By: /s/ Larry McMannon
Name: Scott McClendon Name: Larry McMannon
Title: President & CEO Title: VP & General Manager
Date: 11/5/99 Date: 11/5/99
18
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT A
TRAVAN-TM- VR(2)-TM- ASIC ORDERS
1. Buyer acknowledges that the Products are fabricated in lots having a size
corresponding to the aggregate number of parts ordered as set forth below.
VOLUME ORDERED LOT SIZE
25k - 50k 2,500 UNITS
50k - 100k 10,000 UNITS
100k - 250k 15,000 UNITS
250k+ 25,000 UNITS
2. Buyer will place purchase orders having a minimum order quantity of 2,500
units of the Products.
3. Buyer acknowledges that the minimum lead-time for fabrication and delivery of
any Products ordered will be 60 days from the date of receipt of Seller's
Acknowledgement.
19
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT B
SINGLE CHANNEL VR(2) ASIC SPECIFICATION
***
20
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
OVERLAND CONFIDENTIAL
EXHIBIT C
TRAVAN VR(2) ASIC PRICE/VOLUME SCHEDULE
ASIC ANNUAL VOLUME PRICE/ASIC
***
21
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
OVERLAND CONFIDENTIAL
EXHIBIT D
TRAVAN VR(2) ASIC DEVELOPER'S KIT
As part of the Travan VR(2) ASIC Developer's Kit, Overland will provide the
following items:
- - A five (5) day training session at Overland's facilities "VR(2)
University". This training course will commence on September 13th, 1999
and be completed on September 16th, 1999. Overland will provide the
facility and refreshments during the day. All other travel related
expenses are the responsibility of the buyer.
- - Fifteen (15) working days of telephonic engineering support. This
support time begins on September 17th, 1999 and concludes at the end of
the business day on October 7th, 1999.
- - A test PWB (with schematic) including the current single-channel VR(2)
ASIC.
- - A set of software with documentation for Test PWB communications and
coefficient calculations.
22
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
CREDIT AGREEMENT
This Credit Agreement("Agreement") is made and entered into on November 10,
1999, by and between Overland Data, Inc. a corporation, "Borrower" and Imperial
Bank, a California banking corporation, ("Bank").
Subject to the terms and conditions of this Agreement, any security agreement(s)
executed by Borrower in favor of Bank, any note(s) executed by Borrower in favor
of Bank, or any other agreements executed in conjunction therewith
(collectively, the "Loan Documents"), Bank shall make the loan(s) and or
advance(s) (individually a "Loan" and collectively "Loans") referred to below to
Borrower.
In consideration of mutual covenants and conditions hereof, the parties hereto
agree as follows:
1. AMOUNT AND TERMS OF CREDIT
1.01 REVOLVING CREDIT COMMITMENT.
(a) REVOLVING LINE OF CREDIT. Subject to the terms and conditions of
this Agreement, provided that no event of default then has occurred and is
continuing, Bank shall, upon Borrower's request make advances ("Revolving
Loans") to Borrower, for working capital and support of standby letter of credit
activity purposes in an amount not to exceed $5,000,000 (the "Revolving Line of
Credit") until November 5, 2001 (the "Revolving Line of Credit Maturity Date").
Revolving Loans may be repaid and reborrowed, provided that all outstanding
principal and accrued interest on the Revolving Loans shall be payable in full
on the Revolving Credit Maturity Date.
(b) REVOLVING NOTE. The interest rate, payment terms, maturity date and
certain other terms of the Revolving Loan will be contained in a promissory note
dated the date of this agreement, as such may be amended or replaced from time
to time.
(c) LETTER OF CREDIT USAGE AND SUBLIMIT. Subject to availability under
the Revolving Line of Credit, at any time and from time to time from the date
hereof through the banking day immediately prior to the Revolving Line of Credit
Maturity Date, Bank shall issue for the account of Borrower such standby and
commercial letters of credit ("Letters of Credit") as Borrower may request,
which requests shall be made by delivering to Bank a duly executed letter of
credit application on Bank's standard form; provided, however, that the
outstanding and undrawn amounts under all such Letters of Credit shall be deemed
to constitute Revolving Loans for the purpose of calculating availability under
the Revolving Line of Credit. Unless agreed to in writing by Bank, no Letter of
Credit shall have an expiration date that is later than Ninety days after the
Revolving Line of Credit Maturity Date. All Letters of Credit shall be in form
and substance acceptable to Bank in its sole discretion and shall be subject to
the terms and conditions of Bank's form application and letter of credit
agreement and other agreements required by Bank. Borrower will pay all
1
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
usual issuance and other fees that Bank notifies Borrower it will be charged for
issuing and processing Letters of Credit for Borrower.
(d) BANKERS ACCEPTANCES. Within the Revolving Credit Commitment, Bank
will make Bankers Acceptances in minimum increments of $250,000, due not later
than ninety days from the date of advance, but in any event not later than
ninety days after the Revolving Credit Commitment maturity date, to refinance
draws against Bank's Sight Letters of Credit provided, however, that the
aggregate amount of such Bankers Acceptances, Letters of Credit, and Revolving
Loans outstanding at any one time shall not exceed the Revolving Credit
Commitment.
Bankers Acceptances will be discounted at (2.25%) per annum in excess of Bank's
announced Bankers Acceptance Rate prevailing on the day the bankers acceptance
is created. Discount charges are payable at the time of each advance, and
principal is payable at maturity.
1.02 DOCUMENTATION FEE, COSTS AND EXPENSES. In addition to any other
amounts due, or to become due, concurrently with the execution hereof, Borrower
agrees to pay to Bank a documentation fee in the amount of $250.00, and all
other costs and expenses incurred by the Bank in the preparation of this
Agreement, the other Loan Documents and the perfection of any security interest
granted to Bank by Borrower.
1.03 COLLECTION OF PAYMENTS. Borrower authorizes Bank to collect all
interest, fees, costs, and/or expenses due under this Agreement by charging
Borrower's demand deposit account number *** with Bank, or any other demand
deposit account maintained by Borrower with Bank, for the full amount
thereof. Should there be insufficient funds in any such demand deposit
account to pay all such sums when due, the full amount of such deficiency
shall be immediately due and payable by Borrower.
2. REPRESENTATIONS OF BORROWER
Borrower represents and warrants that:
2.01 EXISTENCE AND RIGHTS. Borrower is a corporation, duly organized and
existing and in good standing under the laws of the state of California, which
shall survive at least five years beyond the maturity of any Loans hereunder.
Borrower is authorized and in good standing to do business in the state of its
incorporation; Borrower has the appropriate powers and adequate authority,
rights and franchises to own its property and to carry on its business as now
conducted, and is duly qualified and in good standing in each state in which the
character of the properties owned by it therein or the conduct of its business
makes such qualification necessary; and Borrower has the power and adequate
authority to make and carry out this Agreement. Borrower has no investment in
any other business entity unless specified in writing to Bank.
2.02 AGREEMENT AUTHORIZED. The execution, delivery and performance of
this Agreement and the Loan Documents are duly authorized and do not require the
consent or approval of any
2
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
governmental body or other regulatory authority; are not in contravention of
or in conflict with any law or regulation or any term or provision of
Borrower's articles of incorporation, by-laws, or similar document as the
case may be, and this Agreement is the valid, binding and legally enforceable
obligation of Borrower in accordance with its terms; subject only to
bankruptcy, insolvency or similar laws affecting creditors rights generally.
2.03 NO CONFLICT. The execution, delivery and performance of this
Agreement and the Loan Documents are not in contravention of or in conflict with
any agreement, indenture or undertaking to which Borrower is a party or by
which it or any of its property may be bound or affected, and do not cause any
lien, charge or other encumbrance to be created or imposed upon any such
property by reason thereof.
2.04 LITIGATION. Except as disclosed in writing to Bank by Borrower,
there is no litigation or other proceeding pending or threatened against or
affecting Borrower which if determined adversely to Borrower or its interest
would have a material adverse effect on the financial condition of Borrower, and
Borrower is not in default with respect to any order, writ, injunction, decree
or demand of any court or other governmental or regulatory authority.
2.05 FINANCIAL CONDITION. The balance sheet of Borrower as of September
30, 1999, and the related profit and loss statement for the three month period
ended as of that date, a copy of which has heretofore been delivered to Bank by
Borrower, and all other statements and data submitted in writing by Borrower to
Bank in connection with this request for credit are true and correct, and said
balance sheet truly presents the financial condition of Borrower as of the date
thereof, and has been prepared in accordance with generally accepted accounting
principles on a basis consistently maintained. Since such date there have been
no material adverse changes in the financial condition or business of Borrower.
Borrower has no knowledge of any liabilities, contingent or otherwise, at such
date not reflected in said balance sheet, and Borrower has not entered into any
special commitments or substantial contracts which are not reflected in said
balance sheet, other than in the ordinary and normal course of its business,
which may have a materially adverse effect upon its financial condition,
operations or business as now conducted.
2.06 TITLE TO ASSETS. Borrower has good title to its assets, and the same
are not subject to any liens or encumbrances other than those permitted by
Section 5.02 hereof.
2.07 TAX STATUS. Borrower has no liability for any delinquent state,
local or federal taxes, and, if Borrower has contracted with any government
agency, Borrower has no liability for renegotiation of profits.
2.08 TRADEMARKS, PATENTS. Borrower, as of the date hereof, possesses all
necessary trademarks, trade names, copyrights, patents, patent rights, and
licenses to conduct its business as now operated, without any known conflict
with the valid trademarks, trade names, copyrights, patents and license rights
of others.
3
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
2.09 REGULATION U. None of the proceeds of any Loan shall be used to
purchase or carry margin stock (as defined within Regulation U of the Board of
Governors of the Federal Reserve system).
2.10 ERISA. All defined benefit pension plans as defined in the Employees
Retirement Income Security Act of 1974, as amended ("ERISA"), of Borrower meet,
as of the date hereof, the minimum funding standards of Section 302 of ERISA,
and no Reportable Event or Prohibited Transaction as defined in ERISA has
occurred with respect to any such plan.
2.11 YEAR 2000 COMPLIANCE. Borrower and its subsidiaries, as applicable,
have reviewed the areas within their operations and business which could be
adversely affected by, and have developed or are developing a program to address
on a timely basis, the Year 2000 Problem and have made related appropriate
inquiry of material suppliers and vendors, and based on such review and program,
the Year 2000 Problem will not have a material adverse effect upon its financial
condition, operations or business as now conducted. "Year 2000 Problem" means
the possibility that any computer applications or equipment used by Borrower may
be unable to recognize and properly perform date sensitive functions involving
certain dates prior to and any dates on or after December 31, 1999.
3. CONDITIONS PRECEDENT TO LOAN
Prior to Bank being obligated to make any Loan pursuant to this
Agreement, Bank must receive all of the following, each of which must be in form
and substance satisfactory to Bank:
3.01 PROMISSORY NOTE(S). Original, executed promissory note(s) as
applicable.
3.02 ORGANIZATIONAL DOCUMENTS. Copies of the articles of incorporation,or
similar document as the case may be, of the Borrower.
3.03 AUTHORIZATIONS. Certified copies of all action taken by any Borrower
to authorize the execution, delivery and performance of the Loan Documents.
3.04 GOOD STANDING . Good standing certificates from the appropriate
secretary of state of the state in which any Borrower is organized and in each
state in which it is required to be qualified to do business.
3.05 This Agreement executed by Borrower.
3.06 ADDITIONAL DOCUMENTS. Such other documents as Bank may reasonably
deem necessary.
4. AFFIRMATIVE COVENANTS OF BORROWER
4
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
Borrower agrees that so long as it is indebted to Bank, under borrowings, or
other indebtedness, or so long as Bank has any obligation to extend credit to
Borrower it will, unless Bank shall otherwise consent in writing:
4.01 RIGHTS AND FACILITIES. Maintain and preserve all rights, franchises
and other authority adequate for the conduct of its business; maintain its
properties, equipment and facilities in good order and repair; conduct its
business in an orderly manner without voluntary interruption and, if a
corporation or partnership, maintain and preserve its existence.
4.02 INSURANCE. Maintain public liability, property damage and workers'
compensation insurance and insurance on all its insurable property against fire
and other hazards with responsible insurance carriers to the extent usually
maintained by similar businesses and/or in the exercise of good business
judgment, and as required by that Agreement to Provide Insurance executed by
Borrower, with the Bank to be shown as Lenders Loss Payee on such policies.
4.03 TAXES AND OTHER LIABILITIES. Pay and discharge, before the same
become delinquent and before penalties accrue thereon, all taxes, assessments
and governmental charges upon or against it or any of its properties, and all
its other liabilities at any time existing, except to the extent and so long as:
(a) The same are being contested in good faith and by appropriate proceedings
in such manner as not to cause any materially adverse effect upon its financial
condition or the loss of any right of redemption from any sale thereunder; and
(b) It shall have set aside on its books reserves (segregated to the extent
required by generally accepted accounting practice) deemed by it to be adequate
with respect thereto.
4.04 RECORDS AND REPORTS. Maintain a standard and modern system of accounting
in accordance with generally accepted accounting principles on a basis
consistently maintained; permit Bank's representatives to have access to, and to
examine its properties, books and records at all reasonable times and upon
reasonable notice during normal business hours; and furnish Bank:
(a) QUARTERLY FINANCIAL STATEMENT. As soon as available, and in any event
within Forty- Five (45) days after the close of each quarter, a consolidated
balance sheet, profit and loss statement and reconciliation of Borrower's
capital balance accounts as of the close of such period and covering operations
for the portion of Borrower's fiscal year ending on the last day of such period,
all in reasonable detail and reasonably acceptable to Bank, in accordance with
generally accepted accounting principles on a basis consistently maintained by
Borrower and certified by an appropriate officer of Borrower.
(b) ANNUAL FINANCIAL STATEMENT. As soon as available, and in any event
within Ninety (90) days after and as of the close of each fiscal year of
Borrower, a consolidated report of audit of Company, all in reasonable detail,
audited by an independent certified public accountant selected by Borrower and
5
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
reasonably acceptable to Bank, in accordance with generally accepted accounting
principles on a basis consistently maintained by Borrower and certified by an
appropriate officer of Borrower;
(c) OFFICER'S CERTIFICATE. Within Forty Five (45) days after the end of
each quarter and fiscal year of Borrower, a certificate of the chief financial
officer of Borrower, stating that Borrower has performed and observed each and
every covenant contained in this Agreement to be performed by it and that no
event has occurred and no condition then exists which constitutes an event of
default hereunder or would constitute such an event of default upon the lapse of
time or upon the giving of notice and the lapse of time specified herein; or, if
any such event has occurred or any such condition exists, specifying the nature
thereof..
(d) AUDIT REPORTS. Promptly after the receipt thereof by Borrower,
copies of any detailed audit reports submitted to Borrower by independent
accountants in connection with each annual or interim work on the accounts of
Borrower made by such accountants;
(e) STOCKHOLDER, SECURITY AND EXCHANGE COMMISSION STATEMENTS AND REPORTS
Promptly after the same are available, copies of all such proxy statements,
financial statements and reports as Borrower or any subsidiary shall send to its
members or stockholders as appropriate, if any, and copies of all reports which
Borrower or any subsidiary may file with the Securities and Exchange Commission.
(f) OTHER INFORMATION. Such other information relating to the affairs of
Borrower as the Bank reasonably may request from time to time.
4.05 WORKING CAPITAL. Maintain on a quarterly basis working capital,
meaning current assets minus current assets(excluding all amounts due from
stockholders, officers and affiliates) minus total current liabilities
(including all amounts due to stockholders, officers and affiliates) of not less
than Twenty Five Million Dollars ($25,000,000.00).
4.06 QUICK RATIO. Maintain on a quarterly basis a consolidated quick
ratio of cash and accounts receivable to current liabilities of at least 1.5 to
1.00.
4.07 TANGIBLE NET WORTH. Maintain on a quarterly basis a consolidated
Tangible Net Worth (defined as stockholder's equity less any value for goodwill,
trademarks, patents, copyrights, leaseholds, organization expense and other
similar intangible items, and any amounts due from stockholders, officers and
affiliates) of not less than Thirty Million Dollars ($30,000,000).
4.8 DEBT TO TANGIBLE NET WORTH. Maintain on a quarterly basis a
consolidated ratio of total liabilities to Tangible Net Worth (defined as
stockholder's equity less any value for goodwill, trademarks, patents,
copyrights, leaseholds, organization expense and other similar intangible items,
and any amounts due from stockholders, officers and affiliates) of not greater
than 1.0 to 1.00.
6
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
4.09 OUT OF DEBT: The unpaid balance of the Revolving Loans shall be $0
for at least Thirty (30) consecutive days during each calendar year].
4.10 ERISA. Cause all defined benefit pension plans, as defined in ERISA,
of Borrower to, at all times, meet the minimum funding standards of Section
302 of ERISA, and ensure that no Reportable Event or Prohibited Transaction, as
defined in ERISA, will occur with respect to any such plan.
4.11 LAWS. At all times comply with, or cause to be complied with, all
laws, statutes, rules, regulations, orders and directions of any governmental
authority having jurisdiction over Borrower or Borrower's business.
4.12 GAAP. Compliance with all financial covenants shall be calculated
based on generally accepted accounting principles applied on a consistent basis
as maintained by Borrower.
4.13 YEAR 2000 COMPLIANT. Borrower shall perform all acts reasonably
necessary to ensure that (a) Borrower and any business in which Borrower holds a
substantial interest, and (b) all customers, suppliers and vendors whose
compliance is likely to be material to Borrower's business, become Year 2000
Compliant in a timely manner. Such acts shall include, without limitation,
performing a comprehensive review and assessment of all Borrower's systems and
adopting a detailed plan, with itemized budget, for the remediation, monitoring
and testing of such systems. As used in this paragraph, "Year 2000 Compliant"
shall mean, in regard to any entity, that all software, hardware, firmware,
equipment, goods or systems utilized by or material to the business operations
or financial condition of such entity, will properly perform date sensitive
functions before, during and after the year 2000. Borrower shall, immediately
upon request, provide to Bank such certifications or other evidence of
Borrower's compliance with the terms of this paragraph as Bank may from time to
time require.
4.14 OPERATING ACCOUNTS. Maintain all primary accounts and banking
relationship with the Bank. Maintain, or cause to be maintained, on deposit with
Bank, non-interest bearing demand deposit balances sufficient to compensate Bank
for all services provided by Bank. Balances shall be calculated after reduction
for the reserve requirement of the Federal Reserve Board and uncollected funds.
Any deficiencies shall be charged directly to the Borrower on a monthly basis.
4.15 NOTICES. Promptly notify Bank in writing of (i) the occurrence of any
Event of Default hereunder or any event which upon notice and lapse of time
would be an Event of Default; (ii) all litigation affecting Borrower where the
amount is $100,000 or more; any substantial dispute which may exist between
Borrower and any governmental regulatory body or law enforcement authority; any
change in Borrower's name or principal place of business; or any other matter
which has resulted or might result in a material adverse change in Borrower's
financial condition or operations.
5. NEGATIVE COVENANTS OF BORROWER
7
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
Borrower agrees that so long as it is indebted to Bank, or so long as Bank has
any obligation to extend credit to Borrower, it will not, without Bank's written
consent:
5.01 TYPE OF BUSINESS; MANAGEMENT; CHANGE IN CONTROL. Make any substantial
change in the character of its business; make any change in its Chief Executive
Officer or Chief Financial Officer..
5.02 LIENS AND ENCUMBRANCES. Create, incur, permit to exist, or assume
any mortgage, pledge, encumbrance, lien or charge of any kind upon any asset now
owned or hereafter acquired by it, other than liens for taxes not delinquent and
liens in Bank's favor, except for those already existing as of September 30,
1999.
5.03 LOANS, SECONDARY LIABILITIES. Make any loans or advances to any
person or other entity other than in the ordinary and normal course of its
business as now conducted or make any investment in the securities of any person
or other entity other than the United States Government; or guarantee or
otherwise become liable upon the obligation of any person or other entity,
except by endorsement of negotiable instruments for deposit or collection in the
ordinary and normal course of its business.
5.04 ACQUISITION OR SALE OF BUSINESS; MERGER OR CONSOLIDATION. Purchase
or otherwise acquire the assets or business of any person or other entity with
an acquisition price in excess of $1,000,000; or liquidate, dissolve, merge or
consolidate, or commence any proceedings therefor; or sell any assets except in
the ordinary and normal course of its business as now conducted; or sell, lease,
assign, or transfer any substantial part of its business or fixed assets, or any
property or other assets necessary for the continuance of its business as now
conducted, including without limitation the selling of any property or other
asset accompanied by the leasing back of the same.
5.05 CAPITAL EXPENDITURES. Make or incur obligations for fixed or capital
assets, which includes purchase money indebtedness or capital lease obligations
in excess of $1,000,000 in any twelve month period thereafter.
5.06 OPERATING LEASE EXPENDITURES. Make or incur obligations for
operating leases for real or personal property in excess of $1,000,000 in any
twelve (12) month period thereafter.
6. EVENTS OF DEFAULT
The occurrence of any of the following events of default ("Events of Default")
shall, at Bank's option, terminate Bank's commitment to lend and make all sums
of principal and interest then remaining unpaid on all Borrower's indebtedness
to Bank immediately due and payable, all without demand, presentment or notice,
all of which are hereby expressly waived:
8
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
6.01 FAILURE TO PAY. Failure to pay any installment of principal or of
interest on any indebtedness of Borrower to Bank within five (5) days of its due
date.
6.02 BREACH OF COVENANT. Failure of Borrower to perform any other term or
condition of this Agreement or any Loan Document binding upon Borrower.
6.03 BREACH OF WARRANTY. Any of Borrower's representations or warranties
made herein or any statement or certificate at any time given in writing
pursuant hereto or in connection herewith shall be false or misleading in any
respect.
6.04 INSOLVENCY; RECEIVER OR TRUSTEE. Borrower shall become insolvent; or
admit its inability to pay its debts as they mature; or make an assignment for
the benefit of creditors; or apply for or consent to the appointment of a
receiver or trustee for it or for a substantial part of its property or
business.
6.05 JUDGMENTS, ATTACHMENTS. Any money judgment in excess of $100,000,
writ or warrant of attachment, or similar process shall be entered or filed
against Borrower or any of its assets and shall remain unvacated, unbonded or
unstayed for a period of ten (10) days or in any event later than five (5) days
prior to the date of any proposed sale thereunder.
6.06 BANKRUPTCY. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against Borrower and, if
instituted against it, shall not be dismissed within thirty (30) days
thereafter.
6.07 CESSATION OF BUSINESS. Borrower shall voluntarily suspend its
business.
6.08 ADVERSE CHANGE. Any change which, in the opinion of Bank, is
materially adverse to the financial condition of Borrower or any Guarantor; or
should Bank, for any reason, believe that the prospect of Borrower's payment or
performance hereunder or under any other agreement or instrument with Bank be
impaired.
6.09 OTHER DEFAULTS. Borrower, shall commit or do or fail to commit or
do any act or thing which would constitute an event of default under any of the
terms of any other agreement, document or instrument executed or to be executed
by it concerning the obligation to pay money.
6.10 ADVANCES. Notwithstanding anything to the contrary contained herein,
Bank shall have no duty to make advances while any event of default exists
notwithstanding any cure period provided for herein.
7. MISCELLANEOUS PROVISIONS
7.01 FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of
Bank or any holder of notes issued hereunder, in the exercise of any power,
right or privilege hereunder shall operate
9
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
as a waiver thereof, nor shall any single or partial exercise of any such
power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege. All rights and remedies existing under
this Agreement or any note (s) issued in connection with a Loan that Bank may
make hereunder, are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
7.02 COUNTERPARTS; ENTIRE AGREEMENT. This Agreement may be executed by
the parties hereto in several counterparts, each of which shall be deemed to be
an original and all of which shall constitute together but one and the same
agreement. This Agreement, and the other Loan Documents constitute the entire
understanding among the parties hereto with respect to the subject matter hereof
and supersedes any prior agreements, written or oral, with respect thereto.
7.03 ATTORNEY'S FEES. Borrower will pay promptly to Bank without demand
after notice, with interest thereon from the date of expenditure at the rate
applicable to the Loan, reasonable attorneys' fees and all costs and expenses
paid or incurred by Bank in collecting or compromising the Loan after the
occurrence of an Event of Default, whether or not suit is filed. If suit is
brought to enforce any provision of this Agreement, the prevailing party shall
be entitled to recover its reasonable attorneys' fees and court costs in
addition to any other remedy or recovery awarded by the court.
7.04 ADDITIONAL REMEDIES. The rights, powers and remedies given to Bank
hereunder shall be cumulative and not alternative and shall be in addition to
all rights, powers and remedies given to Bank by law against Borrower or any
other person, including but not limited to Bank's rights of setoff or banker's
lien.
7.05 INUREMENT. The benefits of this Agreement shall inure to the
successors and assigns of Bank and the permitted successors and assigns of
Borrower.
7.06 APPLICABLE LAW. This Agreement and all other agreements and
instruments required by Bank in connection therewith shall be governed by and
construed according to the laws of the state of California, to the jurisdiction
of whose courts the parties hereby agree to submit.
7.07 OFFSET. In addition to and not in limitation of all rights of offset
that Bank or other holder of the Loan may have under applicable law, Bank or
other holder of any note issued hereunder shall, upon the occurrence of any
Event of Default or any event which with the passage of time or notice would
constitute such an Event of Default, have the right to appropriate and apply to
the payment of the Loan any and all balances, credits, deposits, accounts or
monies of Borrower then or thereafter with Bank or other holder, within ten (10)
days after the Event of Default, and notice of the occurrence of any Event of
Default by Bank to Borrower.
7.08 SEVERABILITY. Should any one or more provisions of the Agreement be
determined to be illegal or unenforceable, all other provisions nevertheless
shall be effective.
7.09 TIME OF THE ESSENCE. Time is hereby declared to be of the essence of
this Agreement and of every part hereof.
10
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
7.10 ACCOUNTING. All accounting terms shall have the meanings applied
under generally accepted accounting principles unless otherwise specified.
7.11 REFERENCE PROVISION.
(a) Other than (i) nonjudicial foreclosure and all matters in connection
therewith regarding security interests in real or personal property; or (ii) the
appointment of a receiver, or the exercise of other provisional remedies (any
and all of which may be initiated pursuant to applicable law), each controversy,
dispute or claim between the parties arising out of or relating to this Credit
Agreement, any security agreement executed by Borrower in favor of Bank or any
note executed by Borrower in favor of Bank or any other agreement or instrument
issued in favor of Bank by Borrower (collectively in this Section, the
"Agreement") which controversy, dispute or claim is not settled in writing
within thirty (30) days after the "CLAIM DATE" (defined as the date on which a
party subject to this Agreement gives written notice to all other parties that a
controversy, dispute or claim exists), will be settled by a reference proceeding
in California in accordance with the provisions of Section 638 ET SEQ. of the
California Code of Civil Procedure, or their successor section ("CCP"), which
shall constitute the exclusive remedy for the settlement of any controversy,
dispute or claim concerning this Agreement, including whether such controversy,
dispute or claim is subject to the reference proceeding and except as set forth
above, the parties waive their rights to initiate any legal proceedings against
each other in any court or jurisdiction other than the Superior Court in the
County where the Real Property, if any, is located or Los Angeles County if none
(the "COURT"). The referee shall be a retired Judge of the Court selected by
mutual agreement of the parties, and if they cannot so agree within forty-five
(45) days after the Claim Date, the referee shall be promptly selected by the
Presiding Judge of the Court (or his representative). The referee shall be
appointed to sit as a temporary judge, with all of the powers for a temporary
judge, as authorized by law, and upon selection should take and subscribe to the
oath of office as provided for in Rule 244 of the California Rules of Court (or
any subsequently enacted Rule). Each party shall have one peremptory challenge
pursuant to CCP Section 170.6. The referee shall (a) be requested to set the
matter for hearing within sixty (60) days after the date of selection of the
referee and (b) try any and all issues of law or fact and report a statement of
decision upon them, if possible, within ninety (90) days of the Claim Date. Any
decision rendered by the referee will be final, binding and conclusive and
judgment shall be entered pursuant to CCP Section 644 in any court in the state
of California having jurisdiction. Any party may apply for a reference
proceeding at any time after thirty (30) days following notice to any other
party of the nature of the controversy, dispute or claim, by filing a petition
for a hearing and/or trial. All discovery permitted by this Agreement shall be
completed no later than fifteen (15) days before the first hearing date
established by the referee. The referee may extend such period in the event of
a party's refusal to provide requested discovery for any reason whatsoever,
including, without limitation, legal objections raised to such discovery or
unavailability of a witness due to absence or illness. No party shall be
entitled to "priority" in conducting discovery. Depositions may be taken by
either party upon seven (7) days written notice, and request for production or
inspection of documents shall be responded to within ten (10) days after
service. All disputes relating to discovery which cannot be resolved by the
parties shall be submitted to the referee whose decision shall be final and
binding upon the parties. Pending appointment of the referee as provided
herein, the Superior Court is empowered to issue temporary and/or provisional
remedies, as appropriate.
11
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
(b) Except as expressly set forth in this Agreement, the referee shall
determine the manner in which the reference proceeding is conducted including
the time and place of all hearings, the order of presentation of evidence, and
all other questions that arise with respect to the course of the reference
proceeding. All proceedings and hearings conducted before the referee, except
for trial, shall be conducted without a court reporter except that when any
party so requests, a court reporter will be used at any hearing conducted before
the referee. The party making such a request shall have the obligation to
arrange for and pay for the court reporter. The costs of the court reporter at
the trial shall be borne equally by the parties.
(c) The referee shall be required to determine all issues in accordance with
existing case law and the statutory laws of the state of California. The rules
of evidence applicable to proceedings at law in the state of California will be
applicable to the reference proceeding. The referee shall be empowered to enter
equitable as well as legal relief, to provide all temporary and/or provisional
remedies and to enter equitable orders that will be binding upon the parties.
The referee shall issue a single judgment at the close of the reference
proceeding which shall dispose of all of the claims of the parties that are the
subject of the reference. The parties hereto expressly reserve the right to
contest or appeal from the final judgment or any appealable order or appealable
judgment entered by the referee. The parties hereto expressly reserve the right
to findings of fact, conclusions of laws, a written statement of decision, and
the right to move for a new trial or a different judgment, which new trial, if
granted, is also to be a reference proceeding under this provision.
(d) In the event that the enabling legislation which provides for appointment
of a referee is repealed (and no successor statute is enacted), any dispute
between the parties that would otherwise be determined by the reference
procedure herein described will be resolved and determined by arbitration. The
arbitration will be conducted by a retired judge of the Court, in accordance
with the California Arbitration Act, Section 1280 through Section 1294.2 of the
CCP as amended from time to time. The limitations with respect to discovery as
set forth hereinabove shall apply to any such arbitration proceeding.
7.12 SURETYSHIP WAIVERS AND CONSENTS. Each Borrower agrees that it is
jointly and severally, directly, and primarily liable to Bank for payment in
full of all obligations under the Loan Documents ("Obligations") and that such
liability is independent of the duties, obligations and liabilities of the other
Borrower. The Loan Documents are a primary and original obligation of each
Borrower, are not the creation of a surety relationship, and are an absolute,
unconditional, and continuing promise of payment and performance which shall
remain in full force and effect without respect to future changes in conditions,
including any change of law or any invalidity or irregularity with respect to
the Loan Documents. Each Borrower acknowledges that the obligations of such
Borrower undertaken herein might be construed to consist, at least in part, of
the guaranty of obligations of persons or entities other than such Borrower
(including any other Borrower party hereto) and, in full recognition of that
fact, each Borrower consents and agrees that the Bank may, at any time and from
time to time, without notice or demand, whether before or after any actual or
purported termination, repudiation, or revocation of this Agreement by any one
or more Borrowers, and without affecting the enforceability or continuing
effectiveness hereof as to each Borrower: (a) supplement, restate, modify,
amend, increase, decrease, extend, renew, accelerate, or otherwise change the
time for payment or the terms of the Obligations or
12
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
any part thereof, including any increase or decrease of the rate(s) of
interest thereon; (b) supplement restate, modify, amend, increase, decrease
or waive, or enter into or give any agreement, approval, or consent with
respect to, the Obligations or any part thereof, or any of the Loan Documents
or any additional security or guaranties, or any condition covenant, default,
remedy, right, representation or term thereof or thereunder; (c) accept new
or additional instruments, documents or agreements in exchange for or
relative to any of the Loan Documents or the Obligations or any part thereof;
(d) accept partial payments on the Obligations; (e) receive and hold
additional security or guaranties for the Obligations or any part hereof; (f)
release, reconvey, terminate, waive, abandon, fail to perfect, subordinate,
exchange, substitute, transfer, or enforce any security or guaranties, and
apply any security and direct the order or manner of sale thereof as the Bank
in its sole and absolute discretion may determine; (g) release any Person
from any personal liability with respect to the Obligations or any part
thereof; (h) settle, release on terms satisfactory to the Bank or by
operation of applicable laws, or otherwise liquidate or enforce any
Obligations and any security therefor or guaranty thereof in any manner,
consent to the transfer of any security and bid and purchase at any sale; or
(i) consent to the merger, change, or any other restructuring or termination
of the corporate or partnership existence of any Borrower or any other
Person, and correspondingly restructure the Obligations, and any such merger,
change, restructuring, or termination shall not affect the liability of any
Borrower or the continuing effectiveness hereof, or the enforceability hereof
with respect to all or any part of the Obligations.
Upon the occurrence and during the continuance of any Event of Default,
the Bank may enforce this Agreement independently as to each Borrower and
independently of any other remedy or security the Bank at any time may have or
hold in connection with the Obligations, and it shall not be necessary for the
Bank to marshal assets in favor of any Borrower or any other Person or to
proceed upon or against or exhaust any security or remedy before proceeding to
enforce this Agreement. Each Borrower expressly waives any right to require the
Bank to marshal assets in favor of any Borrower or any other Person or to
proceed against any other Borrower or any Collateral provided by any Person, and
agrees that the Bank may proceed against Borrowers or any Collateral in such
order as it shall determine in its sole and absolute discretion.
The Bank may file a separate action or actions against any Borrower,
whether action is brought or prosecuted with respect to any security or against
any other person, or whether any other person is joined in any such action or
actions. Each Borrower agrees that the Bank and any Borrower and any affiliate
of any Borrower may deal with each other in connection with the Obligations or
otherwise, or alter any contracts or agreements now or hereafter existing
between any of them, in any manner whatsoever, all without in any way altering
or affecting the continuing efficacy of this Agreement.
The Bank's hereunder shall be reinstated and revived, and the
enforceability of this Agreement shall continue, with respect to any amount at
any time paid on account of the Obligations which thereafter shall be required
to be restored or returned by the Bank, all as though such amount had not been
paid. The rights of the Bank created or granted herein and the enforceability
of this Agreement at all times shall remain effective to cover the full amount
of all the Obligations even though the Obligations, including any part thereof
or any other security or guaranty therefor, may be or hereafter
13
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
may become invalid or otherwise unenforceable as against any Borrower and
whether or not any other Borrower shall have any personal liability with
respect thereto.
To the maximum extent permitted by applicable law and to the extent that
a Borrower is deemed a guarantor, each Borrower expressly waives any and all
defenses now or hereafter arising or asserted by reason of (a) any disability or
other defense of any other Borrower with respect to the Obligations, (b) the
unenforceability or invalidity of any security or guaranty for the Obligations
or lack of perfection or continuing perfection or failure of priority of any
security for the Obligations, (c) the cessation for any cause whatsoever of the
liability of any other Borrower (other than by reason of the full payment and
performance of all Obligations), (d) any failure of the to marshal assets in
favor Bank of any Borrower or any other person, (e) any failure of the Bank to
give notice of sale or other disposition of collateral to any Borrower or any
other Person or any defect in any notice that may be given in connection with
any sale or disposition of collateral, (f) any failure of the Bank to comply
with applicable law in connection with the sale or other disposition of any
collateral or other security for any Obligation, including any failure of the
Bank to conduct a commercially reasonable sale or other disposition of any
collateral or other security for any Obligation, (g) any act or omission of the
Bank or others that directly or indirectly results in or aids the discharge or
release of any Borrower or the Obligations or any security or guaranty therefor
by operation of law or otherwise, (h) any law which provides that the obligation
of a surety or guarantor must neither be larger in amount nor in other respects
more burdensome than that of the principal or which reduces a surety's or
guarantor's obligation in proportion to the principal obligation, (i) any
failure of the Bank to file or enforce a claim in any bankruptcy or other
proceeding with respect to any Person, (j) the election by the Bank of the
application or non-application of Section 1111(b)(2) of the United States
Bankruptcy code, (k) any extension of credit or the grant of any lien under
Section 364 of the United States Bankruptcy code, (1) any use of cash collateral
under Section 363 of the United States Bankruptcy Code, (m) any agreement or
stipulation with respect to the provision of adequate protection in any
bankruptcy proceeding of any Person, (n) the avoidance of any lien in favor of
the Bank for any reason, or (o) any action taken by the Bank that is authorized
by this section or any other provision of any Loan Document. Until such time as
all of the Obligations have been fully, finally, and indefeasibly paid in full
in cash: (i) each Borrower hereby waives and postpones any right of subrogation
it has or may have as against any other Borrower respect to the Obligations; and
(ii) in addition, each borrower also hereby waives and postpones any right to
proceed or to seek recourse against or with respect to any property or asset of
any other Borrower. Each borrower expressly waives all setoffs and
counterclaims and all presentments, demands for payment or performance, notices
of nonpayment or nonperformance, protests, notices of protest, notices of
dishonor and all other notices or demands of any kind or nature whatsoever with
respect to the Obligations, and all notices of acceptance of this Agreement or
of the existence, creation or incurring of new or additional Obligations.
In the event that all or any part of the Obligations at any time are
secured by any one or more deeds of trust or mortgages or other instruments
creating or granting liens on any interests in real property, each Borrower
authorizes the Bank, upon the occurrence of and during the continuance of any
Event of Default, at its sole option, without notice or demand and without
affecting the obligations of any Borrower, the enforceability of this Agreement,
or the validity or enforceability of any Liens of the Bank,
14
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
to foreclose any or all of such deeds of trust or mortgages or other
instruments by judicial or nonjudicial sale.
To the fullest extent permitted by applicable law, to the extent that a
Borrower is deemed a guarantor, each Borrower expressly waives any defenses to
the enforcement of this Agreement or any rights of the Bank created or granted
hereby or to the recovery by the Bank against any Borrower or any other Person
liable therefor of any deficiency after a judicial or nonjudicial foreclosure or
sale, even though such a foreclosure or sale may impair the subrogation rights
of Borrowers and may preclude Borrowers from obtaining reimbursement or
contribution from other Borrowers. To the fullest extent permitted by
applicable law, each Borrower expressly waives any suretyship defenses or
benefits that it otherwise might or would have under applicable law. WITHOUT
LIMITING THE GENERALITY OF ANY OTHER WAIVER OR OTHER PROVISION SET FORTH IN THIS
SECTION, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH BORROWER WAIVES
ALL RIGHTS AND DEFENSES ARISING OUT OF AN ELECTION OF REMEDIES BY THE BANK, EVEN
THOUGH THAT ELECTION OF REMEDIES, SUCH AS A NONJUDICIAL FORECLOSURE WITH RESPECT
TO SECURITY FOR THE OBLIGATIONS, HAS DESTROYED SUCH BORROWER'S RIGHTS OF
SUBROGATION AND REIMBURSEMENT AGAINST THE OTHER BORROWERS BY THE OPERATION LAW,
INCLUDING BUT NOT LIMITED TO SECTION 580d OF THE CODE OF CIVIL PROCEDURE, OR
OTHERWISE.
Borrower and each of them warrant and agree that each of the waivers and
consents set forth herein are made after consultation with legal counsel and
with full knowledge of their significance and consequences, with the
understanding that events giving rise to any defense or right waived may
diminish, destroy or otherwise adversely affect rights which Borrower otherwise
may have against any other Borrower, the Bank or others, or against Collateral.
If any of the waivers or consents herein are determined to be contrary to any
applicable law or public policy, such waivers and consents shall be effective to
the maximum extent permitted by law.
7.13 This Agreement may be modified only by a writing signed by all parties
hereto.
15
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
This Agreement is executed on behalf of the parties by duly authorized officers
as of the date first above written.
IMPERIAL BANK OVERLAND DATA, INC.
("BANK") ("BORROWER")
By: /s/ Tracy M. Fredricks By: /s/ Scott McClendon
Tracy M. Fredricks Scott McClendon
Its: Vice President Its: President/CEO
By: /s/ Vernon A. LoForti
Vernon A. LoForti
Its: Vice President/CFO
16
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
IMPERIAL BANK
MEMBER FDIC
PROMISSORY NOTE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL COLLATERAL ACCOUNT OFFICER INITIALS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$5,000,000.00 11-10-1999 11-05-2001 *** 000 *** ***
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
References in the shaded area are for Lender's use only and do not limit
the applicability of this document to any particular loan or item.
- ------------------------------------------------------------------------------
BORROWER: OVERLAND DATA, INC. LENDER: IMPERIAL BANK
8975 BALBOA AVENUE SAN DIEGO REGIONAL OFFICE
SAN DIEGO, CA 92123 701 B STREET, SUITE 600
SAN DIEGO, CA 92101-8120
==============================================================================
PRINCIPAL AMOUNT: $5,000,000.00 INITIAL RATE: 8.500%
DATE OF NOTE: NOVEMBER 10, 1999
PROMISE TO PAY. OVERLAND DATA, INC. ("BORROWER") promises to pay to Imperial
Bank ("LENDER"), or order, in lawful money of the United States of America,
the principal amount of Five Million $ 00/100 Dollars ($5,000,000.00) or so
much as may be outstanding, together with interest on the unpaid principal
balance of each advance. Interest shall be calculated from the date of each
advance until repayment of each advance.
PAYMENT: Borrower will pay this loan in one payment of all outstanding
principal plus all accrued unpaid interest on November 5, 2001. In addition,
Borrower will pay regular monthly payments of accrued unpaid interest
beginning December 5, 1999, and all subsequent interest payments are due on
the same day of each month after that. The annual interest rate for this
Note is computed on a 365/360 basis; that is, by applying the ratio of the
annual interest rate over a year of 360 days, multiplied by the outstanding
principal balance, multiplied by the actual number of days he principal
balance is outstanding. Borrower will pay Lender a Lender's address shown
above or at such other place as Lender may designate in writing. Unless
otherwise agreed or required by applicable law, payments will be applied
first to any unpaid collection costs and any late charges, then to any unpaid
interest, and any remaining amount to principal.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change
from time to time based on changes in an index which is the Imperial Bank
Prime Rate (the "Index"). The Prime Rate is the rate announced by Lender as
its Prime Rate of interest from time to time. Lender will tell Borrower the
current index rate upon Borrower's request. Borrower understands that Lender
may make loans based on other rates as well. The interest rate change will
not occur more often than each day. THE INDEX CURRENTLY IS 8.500%. THE
INTEREST RATE TO BE APPLIED TO THE UNPAID PRINCIPAL BALANCE OF THIS NOTE WILL
BE AT A RATE EQUAL TO THE INDEX, RESULTING IN AN INITIAL RATE OF 8.500%.
NOTICE: Under no circumstances will the interest rate on this Note be more
than the maximum rate allowed by applicable law.
PREPAYMENT: MINIMUM INTEREST CHARGE. Borrower agrees that all loan fees and
other prepaid finance charges are earned fully as of the date of the loan and
will not be subject to refund upon early payment (whether voluntary or as a
result of default), except as otherwise required by law. In any event, even
upon full prepayment of this Note, Borrower understands that Lender is
entitled to A MINIMUM INTEREST CHARGE OF $250.00. Other than borrower's
obligation to pay any minimum interest charge, Borrower may pay without
penalty all or a portion of the amount owed earlier than it is due. Early
payments will not, unless agreed to by Lender in writing, relieve Borrower of
Borrower's obligation to continue to make payments of accrued unpaid
interest. Rather, they will reduce the principal balance due.
LATE CHARGE. If a payment is 10 DAYS OR MORE LATE, Borrower will be charged
5.000% of the unpaid portion of the regularly scheduled payment.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform
when due any other term, obligation, covenant, or condition contained in this
Note or any agreement related to this Note, or in any other agreement or loan
Borrower has with Lender. (c) Any representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf is false or
misleading in any material respect either now or at the time made or
furnished. (d) Borrower becomes insolvent, a receiver is appointed for any
part of Borrower's property, Borrower makes an assignment for the benefit of
creditors, or any proceeding is commenced either by Borrower or against
Borrower under any bankruptcy or insolvency laws. (e) Any creditor tries to
take any of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with
Lender. (f) Any guarantor dies or any of the other events described in this
default section occurs with respect to any guarantor of this Note. (g) A
material adverse change occurs in Borrower's financial condition, or Lender
believes the prospect of payment or performance of the indebtedness is
impaired. (h) Lender in good faith deems itself insecure.
If any default, other than a default in payment, is curable and if Borrower
has not been given a notice of a breach of the same provision of this Note
within the preceding twelve (12) months, it may be cured (and no event of
default will have occurred) if Borrower, after receiving written notice from
Lender demanding cure of such default: (a) cures the default within ten (10)
days; or (b) if the cure requires more than ten (10) days, immediately
initiates steps which Lender deems in Lender's sole discretion to be
sufficient to cure the default and thereafter continues and completes all
reasonable and necessary steps sufficient to produce compliance as soon as
reasonably practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon Borrower's failure to
pay all amounts declared due pursuant to this section, including failure to
pay upon final maturity, Lender, at its option, may also, if permitted under
applicable law, do one or both of the following: (a) increase the variable
interest rate on this Note to 5.000 percentage points over the index, and (b)
add any unpaid accrued interest to principal and such sum will bear interest
therefrom until paid at the rate provided in this Note (including any
increased rate). Lender may hire or pay someone else to help collect this
Note if Borrower does not pay. Borrower also will pay Lender that amount.
This includes, subject to any limits under applicable law, Lender's
attorneys' fees and Lender's legal expenses whether or not there is a
lawsuit, including attorneys' fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collection services.
Borrower also will pay any court costs, in addition to all other sums
provided by law. THIS NOTE HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY
LENDER IN THE STATE OF CALIFORNIA. IF THERE IS A LAWSUIT, BORROWER AGREES
UPON LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF LOS
ANGELES COUNTY, THE STATE OF CALIFORNIA. LENDER AND BORROWER HEREBY WAIVE THE
RIGHT TO ANY JURY TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY
EITHER LENDER OF BORROWER AGAINST THE OTHER. (INITIAL HERE SM/VAL) THIS
NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF CALIFORNIA.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $25.00 if Borrower
makes a payment on Borrower's loan and the check or preauthorized charge with
which Borrower pays is later dishonored.
RIGHT OF SETOFF. Borrower grants to Lender a contractual security interest
in, and hereby assigns, conveys, delivers, pledges, and transfers to Lender
all Borrower's right, title and interest in and to, Borrower's accounts with
Lender (whether checking, savings, or some other account), including without
limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA and Keogh
accounts, and all trust accounts for which the grant of a security interest
would be prohibited by law. Borrower authorized Lender, to the extent
permitted by applicable law, to charge or setoff all sums owing on this Note
against any and all such accounts.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances
under this Note may be requested orally by Borrower or by an authorized
person. All oral requests shall be confirmed in writing on the day of the
request. All communications, instructions, or directions by telephone or
otherwise to Lender are to be directed to Lender's office shown above. The
following party or parties are authorized to request advances under the line
of credit until Lender receives from Borrower at Lender's address shown above
written notice of revocation of their authority: SCOTT MCCLENDON,
PRESIDENT/CEO; VERNON A. LOFORTI, VP/CFO; AND MARTIN D. GRAY, SECRETARY.
Borrower agrees to be liable for all sums either: (a) advanced in accordance
with the instructions of an authorized person or (b) credited to any of
Borrower's accounts with Lender. The unpaid principal balance owing on this
Note at any time may be evidenced by endorsements on this Note or by Lender's
internal records, including daily computer print-outs. Lender will have no
obligation to advance funds under this Note if: (a) Borrower or any guarantor
is in default under the terms of this Note or any agreement that Borrower or
any guarantor has with Lender, including any agreement made in connection
with the signing of this Note: (b) Borrower of any guarantor ceases doing
business or is insolvent; (c) any guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such guarantor's guarantee of this Note
or any other loan with Lender; (d) Borrower has applied funds provided
pursuant to this Note for purposes other than those authorized by Lender; or
(e) Lender in good faith deems itself insecure under this Note or any other
agreement between Lender and Borrower.
CREDIT AGREEMENT. This Note is subject to the provisions of the Credit
Agreement dated November 10, 1999, and all amendments thereto and
replacements therefor.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person
who signs, guarantees or endorses this Note, to the extent allowed by law,
waive any applicable statute of limitations, presentment, demand for payment,
protest and notice of dishonor. Upon any change in the terms of this Note,
and unless otherwise expressly stated in writing, no party who signs this
Note, whether as maker, guarantor, accommodation maker or endorser, shall be
released from liability. All such parties agree that Lender may renew or
extend (repeatedly and for any length of time) this loan, or release any
party or guarantor or collateral; or impair, fail to realize upon or perfect
Lender's security interest in the collateral; and take any other action
deemed necessary by Lender without the consent of or notice to anyone. All
such parties also agree that Lender may modify this loan without the consent
of or notice to anyone other than the party with whom the modification is
made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER
AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY
OF THE NOTE.
BORROWER:
OVERLAND DATA, INC.
By: /s/ V.A. LoForti By: /s/ Scott McClendon
--------------------------- ----------------------------------
AUTHORIZED OFFICER AUTHORIZED OFFICER
=============================================================================
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL COLLATERAL ACCOUNT OFFICER INITIALS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$5,000,000.00 11-10-1999 11-05-2001 *** 000 *** ***
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
References in the shaded area are for Lender's use only and do not limit
the applicability of this document to any particular loan or item.
- --------------------------------------------------------------------------------
BORROWER: OVERLAND DATA, INC. LENDER: IMPERIAL BANK
8975 BALBOA AVENUE SAN DIEGO REGIONAL OFFICE
SAN DIEGO, CA 92123 701 B STREET, SUITE 600
SAN DIEGO, CA 92101-8120
================================================================================
I, the undersigned Secretary or Assistant Secretary of OVERLAND DATA, INC. (the
"Corporation"), HEREBY CERTIFY that the Corporation is organized and existing
under and by virtue of the laws of the State of California as a corporation for
profit, with its principal office at 8975 BALBOA AVENUE, SAN DIEGO, CA 92123,
and is duly authorized to transact business in the State of California.
I FURTHER CERTIFY that at a meeting of the Directors of the Corporation, duly
called and held on November 8, 1999, at which a quorum was present and voting,
or by other duly authorized corporate action in lieu of a meeting, the following
resolutions were adopted:
BE IT RESOLVED, that any two (2) of the following named officers, employees, or
agents of this Corporation, whose actual signatures are shown below:
NAMES POSITIONS ACTUAL SIGNATURES
----- --------- -----------------
SCOTT MCCLENDON PRESIDENT/CEO X /s/ Scott McClendon
------------------------
VERNON A. LOFORTI VP/CFO, SECRETARY X /s/ Vernon A. Loforti
------------------------
MARTIN D. GRAY ASST. SECRETARY/ X /s/ Martin D. Gray
VP/CTO ------------------------
acting for and on behalf of the Corporation and as its act and deed be, and they
hereby are, authorized and empowered:
BORROW MONEY. To borrow from time to time from Imperial Bank ("Lender"),
on such terms as may be agreed upon between the Corporation and Lender,
such sum or sums of money as in their judgment should be borrowed; however,
not exceeding at any one time the amount of Five Million Three Hundred
Thousand & 00/100 Dollars ($5,300,000.00). In addition to such sum or sums
of money as may be currently borrowed by the Corporation from Lender.
EXECUTE NOTES. To execute and deliver to Lender the promissory note or
notes, or other evidence of credit accommodations of the Corporation, on
Lender's forms, at such rates of interest and on such terms as may be
agreed upon, evidencing the sums of money so borrowed or any indebtedness
of the Corporation to Lender, and also to execute and deliver to Lender one
or more renewals, extensions, modifications, refinancings, consolidations,
or substitutions for one or more of the notes, any portion of the notes, or
any other evidence of credit accommodations.
GRANT SECURITY. To mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to Lender, as security for the payment of
any loans or credit accommodations so obtained, any promissory notes so
executed (including any amendments to or modifications, renewals, and
extensions of such promissory notes), or any other or further indebtedness
of the Corporation to Lender at any time owing, however the same may be
evidenced, any property now or hereafter belonging to the Corporation or in
which the Corporation now or hereafter may have an interest, including
without limitation all real property and all personal property (tangible or
intangible) of the Corporation. Such property may be mortgaged, pledged,
transferred, endorsed, hypothecated, or encumbered at the time such loans
are obtained or such indebtedness is incurred, or at any other time or
times, and may be either in addition to or in lieu of any property
theretofore mortgaged, pledged, transferred, endorsed, hypothecated, or
encumbered.
EXECUTE SECURITY DOCUMENTS. To execute and deliver to Lender the forms of
mortgage, deed of trust, pledge agreement, hypothecation agreement, and
other security agreements and financing statements which may be required by
Lender, and which shall evidence the terms and conditions under and
pursuant to which such liens and encumbrances, or any of them, are given;
and also to execute and deliver to Lender any other written instruments,
any chattel paper, or any other collateral, of any kind or nature, which
Lender may deem necessary or proper in connection with or pertaining to the
giving of the liens and encumbrances. Notwithstanding the foregoing, any
one of the above authorized persons may execute, deliver, or record
financing statements.
NEGOTIATE ITEMS. To draw, endorse, and discount with Lender all drafts,
trade acceptances, promissory notes, or other evidences of indebtedness
payable to or belonging to the Corporation in which the Corporation may
have an interest, and either to receive cash for the same or to cause such
proceeds to be credited to the account of the Corporation with Lender, or
to cause such other disposition of the proceeds derived therefrom as they
may deem advisable.
FURTHER ACTS. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances thereunder,
and in all cases, to do and perform such other acts and things, to pay any
and all fees and costs, and to execute and deliver such other documents and
agreements, including agreements waiving the right to a trial by jury, as
they may in their discretion deem reasonable necessary or proper in order
to carry into effect the provisions of these Resolutions. The following
person or persons currently are authorized to request advances and
authorize payments under the line of credit until Lender receives written
notice of revocation of their authority: SCOTT MCCLENDON, PRESIDENT/CEO;
VERNON A. LOFORTI, VP/CFO; and MARTIN D. GRAY, SECRETARY.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to these
Resolutions and performed prior to the passage of these Resolutions are hereby
ratified and approved, that these Resolutions shall remain in full force and
effect and Lender may rely on these Resolutions until written notice of their
revocation shall have been delivered to and received by Lender. Any such notice
shall not affect any of the Corporation's agreements or commitments in effect at
the time notice is given.
BE IT FURTHER RESOLVED, that the Corporation will notify Lender in writing at
Lender's address shown above (or such other addresses as Lender may designate
from time to time) prior to any (a) change in the name of the Corporation, (b)
change in the assumed business name(s) of the Corporation, (c) change in the
management of the Corporation, (d) change in the authorized signer(s), (e)
conversion of the Corporation to a new or different type of business entity, or
(f) change in any other aspect of the Corporation that directly or indirectly
relates to any agreements between the Corporation and Lender. No change in the
name of the Corporation will take effect until after Lender has been notified.
SIGNATURE AUTHORIZATION. An exhibit titled "SIGNATURE AUTHORIZATION" is
attached to this Resolution and by this reference is made a part of this
Resolution just as if all the provisions, terms and conditions of the Exhibit
had been fully set forth in this Resolution.
I FURTHER CERTIFY that the officers, employees, and agents named above are duly
elected, appointed, or employed by or for the Corporation, as the case may be,
and occupy the positions set opposite their respective names; that the foregoing
Resolutions now stand of record on the books of the Corporation; and that the
Resolutions are in full force and affect and have not been modified or revoked
in any manner whatsoever. The Corporation has no corporate seal, and therefore,
no seal is affixed to this certificate.
IN TESTIMONY WHEREOF, I HAVE HEREUNTO SET MY HAND ON NOVEMBER 10, 1999 AND
ATTEST THAT THE SIGNATURES SET OPPOSITE THE NAMES LISTED ABOVE ARE THEIR GENUINE
SIGNATURES.
CERTIFIED TO AND ATTESTED BY:
X /s/ Martin D. Gray
----------------------------------
X /s/ Vernon A. Loforti
----------------------------------
NOTE: In case the Secretary or other certifying officer is designated by the
foregoing resolutions as one of the signing officers, it is advisable to have
this certificate signed by a second Officer or Director of the Corporation.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
=================================================================
BORROWER: OVERLAND DATA, INC. LENDER: IMPERIAL BANK
8975 BALBOA AVENUE SAN DIEGO REGIONAL OFFICE
SAN DIEGO, CA 92123 701 B STREET, SUITE 600
SAN DIEGO, CA 92101-8120
=================================================================
THIS SIGNATURE AUTHORIZATION IS ATTACHED TO AND BY THIS REFERENCE IS MADE A PART
OF EACH BORROWING RESOLUTION, DATED NOVEMBER 10, 1999, AND EXECUTED IN
CONNECTION WITH A LOAN OR OTHER FINANCIAL ACCOMMODATIONS BETWEEN IMPERIAL BANK
AND OVERLAND DATA, INC..
The individuals named below, any one acting alone, are hereby authorized and
appointed for and on behalf of Borrower from time to time to do any of the
following:
(1) To request advances of credit under the Agreement and to effect repayment
of any credit outstanding under the Agreement;
(2) To execute and deliver assignments, borrowing certificates, instruments,
schedules, reports, invoices, bills, shipping documents and such other documents
or certificates as may be necessary or appropriate under the Agreement or any
other agreement or instrument relating thereto or delivered in connection
therewith;
(3) To transfer and endorse to Bank in payment of Borrower's obligations to
Bank any checks, drafts, notes or other instruments payable to Borrower; and
(4) To do or perform any and all other acts or matters in any way relating to
any or all of the foregoing.
The undersigned individuals each further certifies that the specimen signatures
below are the genuine signatures of the individuals designated herein and that
their signatures shall be binding on Borrower until Bank receives written notice
of termination of the authority of any such designated individuals.
Signature: /s/ Scott McClendon
-----------------------------------
Name: Scott McClendon
----------------------------------------
Signature: /s/ V.A. LoForti
-----------------------------------
Name: V.A. LoForti
---------------------------------------- THIS SECTION IS FOR INDIVIDUALS
AUTHORIZED TO PERFORM ITEMS
Signature: /s/ Martin D. Gray 1 THROUGH 4 MENTIONED ABOVE.
-----------------------------------
NAMES & SIGNATURES
Name: Martin D. Gray
----------------------------------------
Signature:
-----------------------------------
Name:
----------------------------------------
THIS SIGNATURE AUTHORIZATION IS EXECUTED ON NOVEMBER 10, 1999.
BORROWER:
OVERLAND DATA, INC.
By: /s/ V.A. LoForti
------------------------------------------
AUTHORIZED OFFICER
By: /s/ Scott McClendon
------------------------------------------
AUTHORIZED OFFICER
LENDER:
Imperial Bank
By:
------------------------------------------
Authorized Officer
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
[LOGO]
IMPERIAL BANK
Member FDIC
DISBURSEMENT REQUEST AND AUTHORIZATION
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$5,000,000.00 11-10-1999 11-05-2001 *** 000 *** ***
- ---------------------------------------------------------------------------------------------------------
</TABLE>
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
- -------------------------------------------------------------------------------
BORROWER: OVERLAND DATA, INC. LENDER: Imperial Bank
8975 BALBOA AVENUE San Diego Regional Office
SAN DIEGO, CA 92123 701 B Street, Suite 600
San Diego, CA 92101-8120
===============================================================================
LOAN TYPE. This is a Variable Rate (at Imperial Bank Prime Rate, making an
initial rate of 8.500%). Revolving Line of Credit Loan to a Corporation for
$5,000,000.00 due on November 5, 2001.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for (please
initial):
/ / ________ Personal, Family, or Household Purposes or Personal
Investment.
/X/ VAL Business (Including Real Estate Investment).
--------
[ILLEGIBLE]
SPECIFIC PURPOSE. The specific purpose of this loan is: RENEW LINE ORIGINALLY
FOR WORKING CAPITAL AND SUPPORT LETTER OF CREDIT ACTIVITY.
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Lender's conditions for making the loan have been
satisfied. Please disburse the loan proceeds of $5,000,000.00 as follows:
AMOUNT PAID TO BORROWER DIRECTLY: $5,000,000.00
$5,000,000.00 Deposited to Account # *** --------------
NOTE PRINCIPAL: $5,000,000.00
CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the
following charges:
PREPAID FINANCE CHARGES PAID IN CASH:
$250.00 Documentation Fee $250.00
---------------
TOTAL CHARGES PAID IN CASH: $250.00
DISBURSEMENT PROVISION. *or by Cashier's Checks or by wire transfers when
advances are requested.
INTERNATIONAL SUB-LIMITS. Subject to conditions and limitations as specified
in the Credit Agreement dated November 10, 1999, as it may be revised from
time to time. Proceeds are to be available and applied as required for
International transactions.
AUTOMATIC PAYMENTS. Borrower hereby authorizes Lender automatically to deduct
from Borrower's account numbered *** the amount of any loan payment.
If the funds in the account are insufficient to cover any payment, Lender
shall not be obligated to advance funds to cover the payment.
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT
AND THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER'S FINANCIAL
CONDITION AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO
LENDER. THIS AUTHORIZATION IS DATED NOVEMBER 10, 1999.
BORROWER:
OVERLAND DATA, INC.
By: /s/ V.A. LoForti By: /s/ Scott McClendon
--------------------------------- --------------------------------
AUTHORIZED OFFICER AUTHORIZED OFFICER
===============================================================================
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS FOR THE 6 MONTHS ENDED DEC. 31,
1999, THE CONSOLIDATED CONDENSED BALANCE SHEET AS OF DEC. 31, 1999 AND THE
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS FOR THE 6 MONTHS ENDED DEC. 31,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 17,992
<SECURITIES> 0
<RECEIVABLES> 16,528
<ALLOWANCES> 0
<INVENTORY> 14,411
<CURRENT-ASSETS> 52,117
<PP&E> 4,172
<DEPRECIATION> 0
<TOTAL-ASSETS> 56,644
<CURRENT-LIABILITIES> 10,060
<BONDS> 0
0
0
<COMMON> 30,808
<OTHER-SE> 14,462
<TOTAL-LIABILITY-AND-EQUITY> 56,644
<SALES> 50,314
<TOTAL-REVENUES> 50,314
<CGS> 37,096
<TOTAL-COSTS> 37,096
<OTHER-EXPENSES> 12,585
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (374)
<INCOME-PRETAX> 1,071
<INCOME-TAX> 423
<INCOME-CONTINUING> 648
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 648
<EPS-BASIC> .06
<EPS-DILUTED> .06
</TABLE>
