Exhibit 10.17
Execution
Copy
SECURITY AGREEMENT
1. THE SECURITY. OVERLAND STORAGE,
INC., a California corporation (“Debtor”), hereby
grants to ADAPTEC, INC., a Delaware corporation
(“Creditor”) a security interest in all of the
Debtor’s right, title and interest in, to and under the
following described property (“Collateral”):
A. All inventory now owned or
hereafter acquired by Debtor;
B. All negotiable and nonnegotiable
documents of title, insurance proceeds and other proceeds now owned
or hereafter acquired by Debtor covering any of the above-described
property; and
C. All books and records now owned
or hereafter acquired by Debtor pertaining to any of the
above-described property, including but not limited to any
computer-readable memory and any computer hardware or software
necessary to process such memory (“Books and
Records”).
2. THE INDEBTEDNESS. The Collateral
secures and will secure the payment, performance and observance of
all indebtedness, obligations and liabilities of Debtor to Creditor
under that certain Promissory Note dated as of an even date
herewith executed by Debtor as maker in favor of Creditor in the
original principal amount of One Million Four Hundred Thirty One
Thousand Seven Hundred Eighteen Dollars and Forty Cents
($1,431,718.40) (as the same may be amended from time to time, the
“Note”). For the purposes of this Security Agreement,
“Indebtedness” means the obligations and liabilities of
Debtor under the Note.
3. TITLE; NO OTHER LIENS. Debtor
represents and warrants to Creditor that Debtor owns the Collateral
free and clear of any liens, claims, security interests,
encumbrances and restrictions on the transfer thereof, except the
security interest of Creditor.
4. DEBTOR’S COVENANTS. Debtor
covenants and warrants that unless compliance is waived by Creditor
in writing:
A. Debtor will properly preserve the
Collateral; defend the Collateral against any material adverse
claims and demands; and keep accurate Books and Records.
B. Debtor has notified Creditor in
writing of, and will notify Creditor in writing prior to any change
in, the locations of (i) Debtor’s place of business or
Debtor’s chief executive office if Debtor has more than one
place of business, and (ii) any Collateral.
C. Debtor will notify Creditor in
writing prior to any change in Debtor’s name, identity or
business structure.
D. Debtor will maintain and keep in
force insurance covering the Collateral against loss or damage of
the kinds customarily insured against by persons engaged in the
same or similar business, of such types and in such amounts as are
customarily carried under similar circumstances by such other
persons. Such insurance shall be issued by insurance companies
acceptable to Creditor and, if requested by Creditor, include a
loss payable endorsement in favor of Creditor in a form acceptable
to Creditor.
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E. Debtor has not granted and will
not grant any security interest in any of the Collateral except to
Creditor, and will keep the Collateral free of all liens, claims,
security interests, encumbrances and restrictions on the transfer
thereof except the security interest of Creditor.
F. Debtor will not sell, lease,
agree to sell or lease, or otherwise dispose of, or remove from
Debtor’s place of business any Collateral except in the
ordinary course of business as heretofore conducted by
Debtor.
G. Debtor will promptly notify
Creditor in writing of any event which affects the value of the
Collateral, the ability of Debtor or Creditor to dispose of the
Collateral, or the rights and remedies of Creditor in relation
thereto, including, but not limited to, the levy of any legal
process against any Collateral.
H. If any Collateral is or becomes
the subject of any negotiable document of title, including any
warehouse receipt or bill of lading, Debtor shall deliver such
document to Creditor.
I. Until Creditor exercises its
rights to make collection, Debtor will diligently collect all
Collateral.
5. ADDITIONAL REQUIREMENTS. Debtor
agrees that Creditor may at its option at any time, whether or not
Debtor is in default:
A. Require Debtor to deliver to
Creditor (i) copies of or extracts from the Books and Records,
and (ii) information on matters affecting the
Collateral.
B. Examine the Collateral, including
the Books and Records, and make copies of or extracts from the
Books and Records, and for such purposes enter at any reasonable
time upon the property where any Collateral or any Books and
Records are located.
6. DEFAULTS. Any one or more of the
following shall be a default hereunder:
A. Debtor fails to pay any
Indebtedness after the same becomes due, whether at stated
maturity, by acceleration or otherwise, beyond any applicable grace
periods.
B. Debtor fails to perform or
observe (i) the covenant set forth in Section 4(F) or
(ii) any other covenant or agreement under this Security
Agreement on its part to be performed or observed and such failure
continues for 30 days.
C. Debtor becomes insolvent, or is
generally not paying or admits in writing its inability to pay its
debts as they become due, makes a general assignment for the
benefit of creditors, or commences any case, proceeding or other
action under any bankruptcy or other law for the relief of
debtors.
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D. Any custodian, receiver or
trustee is appointed to take possession, custody or control of all
or a substantial portion of the property of Debtor and the
appointment continues undischarged or unstayed for 60 calendar
days.
E. Any case, proceeding or other
action is commenced against Debtor under any bankruptcy or other
law for the relief of debtors and continues undismissed or unstayed
for 60 calendar days or an order for relief is entered in any such
proceeding.
7. CREDITOR’S REMEDIES AFTER
DEFAULT. In the event of any default Creditor may do any one or
more of the following:
A. Declare any Indebtedness
immediately due and payable.
B. Enforce the security interest
given hereunder pursuant to the Uniform Commercial Code and any
other applicable law.
C. Require Debtor to assemble the
Collateral, including the Books and Records, and make them
availa
