Prepared by MERRILL CORPORATION

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PnTDdzgTuGo2vgJD7oY5qe79N5R+lbXhnsHMWFfRiGOXAnX3IZMCrFwng2strSWq XvQYB9GZNZUMi7DODhanxQ== 0000912057-01-515746.txt : 20010516 0000912057-01-515746.hdr.sgml : 20010516 ACCESSION NUMBER: 0000912057-01-515746 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OVERLAND DATA INC CENTRAL INDEX KEY: 0000889930 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER STORAGE DEVICES [3572] IRS NUMBER: 953535285 STATE OF INCORPORATION: CA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-22071 FILM NUMBER: 1635864 BUSINESS ADDRESS: STREET 1: 8975 BALBOA AVE CITY: SAN DIEGO STATE: CA ZIP: 92123 BUSINESS PHONE: 8585715555 MAIL ADDRESS: STREET 1: 8975 BALBOA AVE CITY: SAN DIEGO STATE: CA ZIP: 92123 10-Q 1 a2048304z10-q.htm 10-Q Prepared by MERRILL CORPORATION
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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 March 31, 2001

Commission File Number: 0-22071

OVERLAND DATA, INC.
(Exact name of registrant as specified in its charter)

California
(State or other jurisdiction of incorporation)

95-3535285
(IRS Employer Identification No.)

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 May 10, 2001, there were 10,489,200 shares of the registrant's common stock, no par value, issued and outstanding.

OVERLAND DATA, INC.
FORM 10-Q
For the quarterly period ended March 31, 2001

Table of Contents

		Page Number
PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Consolidated Condensed Statement of Operations — Three months and nine months ended March 31, 2001 and 2000	3
	Consolidated Condensed Balance Sheet — March 31, 2001 and June 30, 2000	4
	Consolidated Condensed Statement of Cash Flows — Nine months ended March 31, 2001 and 2000	5
	Notes to Consolidated Condensed Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	9
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	15
PART II — OTHER INFORMATION
Item 6.	Exhibits and Reports on Form 8-K	16
	Signatures	16

OVERLAND DATA, INC.

CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS

(Unaudited)

(In thousands, except number of shares)

			Three Months Ended March 31,				Nine Months Ended March 31,
			2001		2000		2001		2000
Net revenues:
	Product sales		$	36,936	$	34,348	$	117,597	$	84,462
	Royalties & services			82		6		734		206

		Total net revenues		37,018		34,354		118,331		84,668
Cost of goods sold				27,502		25,529		86,708		62,625

Gross profit				9,516		8,825		31,623		22,043

Operating expenses:
	Sales and marketing			4,038		3,587		12,068		9,963
	Research and development			2,675		2,027		7,553		5,272
	General and administrative			2,088		1,500		6,132		4,464

		Total operating expenses		8,801		7,114		25,753		19,699

Income from operations				715		1,711		5,870		2,344
Other income:
	Interest income, net			158		171		350		545
	Other income, net			532		37		395		101

Income before income taxes				1,405		1,919		6,615		2,990
Provision for income taxes				555		758		2,613		1,181

Net income			$	850	$	1,161	$	4,002	$	1,809

Earnings per share:
	Basic		$	0.08	$	0.11	$	0.39	$	0.18

	Diluted		$	0.08	$	0.11	$	0.37	$	0.17

Number of shares used in computing earnings per share:
	Basic			10,385		10,118		10,371		10,087

	Diluted			10,971		10,984		10,931		10,435

See accompanying notes to consolidated condensed financial statements.

OVERLAND DATA, INC.

CONSOLIDATED CONDENSED BALANCE SHEET

(In thousands, except number of shares)

			March 31, 2001			June 30, 2000
			(unaudited)
ASSETS:
Current assets:
	Cash and cash equivalents		$	12,971		$	15,774
	Accounts receivable, less allowance for doubtful accounts and returns of $427 and $389, respectively			22,964			22,798
	Inventories			27,066			22,108
	Deferred income taxes			3,391			3,391
	Other current assets			2,689			1,684

		Total current assets		69,081			65,755
Property and equipment, net				5,503			5,033
Intangible and other assets				491			595

			$	75,075		$	71,383

LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
	Accounts payable		$	12,917		$	13,965
	Accrued liabilities			5,767			6,262
	Accrued payroll and employee compensation			2,629			2,271

		Total current liabilities		21,313			22,498
Deferred income taxes				466			466
Other liabilities				927			922

		Total liabilities		22,706			23,886

Shareholders' equity:
	Common stock, no par value, 25,000,000 shares authorized; 10,480,700 and 10,270,402 shares issued and outstanding, respectively			32,762			31,753
	Accumulated other comprehensive loss			(298	)		(159	)
	Retained earnings			19,905			15,903

		Total shareholders' equity		52,369			47,497

			$	75,075		$	71,383

See accompanying notes to consolidated condensed financial statements.

OVERLAND DATA, INC.

CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS

(Unaudited)

(In thousands)

					Nine Months Ended March 31,
					2001			2000
OPERATING ACTIVITIES:
	Net income				$	4,002		$	1,809
	Adjustments to reconcile net income to cash (used in) provided by operating activities:
		Depreciation and amortization				1,427			1,179
		Changes in operating assets and liabilities:
			Accounts receivable			(166	)		(8,885	)
			Inventories			(4,958	)		1,675
			Accounts payable and accrued liabilities			(1,543	)		6,729
			Accrued payroll and employee compensation			358			288
			Other			(895	)		(530	)

				Net cash (used in) provided by operating activities		(1,775	)		2,265

INVESTING ACTIVITIES:
	Capital expenditures					(1,897	)		(1,223	)
	Acquisition of certain Tecmar assets					0			(3,410	)

				Net cash used in investing activities		(1,897	)		(4,633	)

FINANCING ACTIVITIES:
	Net proceeds from issuance of common stock					601			300
	Proceeds from exercise of stock options					407			281
	Stock repurchases					—			(415	)

				Net cash provided by financing activities		1,008			166

Effect of exchange rate changes on cash						(139	)		(3	)

Net decrease in cash and cash equivalents						(2,803	)		(2,205	)
Cash and cash equivalents at the beginning of the period						15,774			16,199

Cash and cash equivalents at the end of the period					$	12,971		$	13,994

See accompanying notes to consolidated condensed financial statements.

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 in the U.S. 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 third fiscal quarter ends on the Sunday closest to March 31. For ease of presentation, the Company's third fiscal quarter end is deemed to be March 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, 2000 on file with the Securities and Exchange Commission.

Note 2—Inventories

Inventories consist of the following (in thousands):

	March 31, 2001		June 30, 2000
	(unaudited)
Raw materials	$	17,408	$	15,857
Work-in-process		4,040		2,767
Finished goods		5,618		3,484

	$	27,066	$	22,108

Note 3—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 131,000 and 79,000 at March 31, 2001 and 2000, respectively.

A reconciliation of the calculation of basic and diluted EPS is as follows (in thousands, except per share data):

		Three Months Ended March 31,				Nine Months Ended March 31,
		2001		2000		2001		2000
		(unaudited)				(unaudited)
Net income		$	850	$	1,161	$	4,002	$	1,809

BASIC EPS:
	Weighted average number of common shares outstanding		10,385		10,118		10,371		10,087

Basic earnings per share		$	0.08	$	0.11	$	0.39	$	0.18

DILUTED EPS:
	Weighted average number of common shares outstanding		10,385		10,118		10,371		10,087
	Common stock equivalents from the issuance of options using the treasury stock method		586		866		560		348

			10,971		10,984		10,931		10,435

Diluted earnings per share		$	0.08	$	0.11	$	0.37	$	0.17

Note 4—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 (loss) account within shareholders' equity.

Comprehensive income for the three months and nine months ended March 31, 2001 and 2000 was as follows (in thousands):

	Three Months Ended March 31,					Nine Months Ended March 31,
	2001			2000		2001			2000
	(unaudited)					(unaudited)
Net income	$	850		$	1,161	$	4,002		$	1,809
Foreign currency translation effect		(123	)		40		(140	)		(3	)

Comprehensive income	$	727		$	1,201	$	3,862		$	1,806

Note 5—2000 Stock Option Plan

On November 14, 2000, the Company's shareholders approved the adoption of the Company's 2000 Stock Option Plan (the "2000 Plan"). The 2000 Plan is administered by the Compensation Committee of the Board of Directors and provides for the issuance of stock options covering 1,000,000

shares of common stock to employees, officers, directors and consultants. The 2000 Plan permits the grant of "Incentive Stock Options" within the meaning of the internal revenue code.

Note 6—Commitments

During the second quarter of fiscal year 2001, the Company entered into an operating lease agreement for a new 158,000 square foot headquarters facility to be constructed in San Diego, California. The lease term commences upon the Company's occupancy of the building, scheduled for February 2002. The lease is for a period of 12 years and can be renewed for one additional five-year period. The Company can terminate the lease for failure by the landlord to meet certain construction dates. As security for the lease, the Company has issued to the landlord a $1,500,000 letter of credit, which is subject to reduction upon the maintenance of certain financial covenants and the passage of time.

Note 7—Sale of Rights and Assets

During the third quarter of fiscal year 2001 the Company sold certain rights and assets (including the product design together with all documentation, manufacturing rights, tooling and inventory) of its automated SLR loader product to Tandberg Data for a purchase price of $1,135,000. As a result of this transaction, the Company recorded a pre-tax gain of $810,000 within other income during the quarter. In connection with the sale, the Company also will receive a per unit royalty on the first 6,000 SLR loader units that are manufactured and sold by Tandberg Data. The Company's net revenue from SLR loader products during the nine months ended March 31, 2001 accounted for approximately 1% of total revenue.

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. Words and expressions reflecting optimism and satisfaction with current prospects, as well as words such as "believes," "intends," "expects," "plans," "anticipates," and variations thereof, identify forward-looking statements, but their absence does not mean that a statement is not forward looking. 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 not guarantees of performance. Such forward-looking statements 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. Factors that could cause or contribute to such differences include the timing and market acceptance of new product introductions by the Company and its competitors; loss of or significantly reduced orders from a major customer; rescheduling or cancellation of customer orders; general economic conditions; general competition and price pressures in the marketplace; unexpected shortages of critical components; and the Company's ability to control costs and expenses. The Company disclaims any obligation to update or publicly announce revisions to any such statements to reflect future events or developments. For a more detailed discussion of these and other risks, see our Annual Report on Form 10-K for the fiscal year ended June 30, 2000 and filed with the Securities and Exchange Commission on September 28, 2000.

Overview

Overland Data designs, develops, manufactures, markets and supports magnetic tape data storage drives and automation solutions. Businesses use these solutions for backup, archival and data interchange functions in high-availability network computing environments.

The Company's primary products are automated tape libraries, minilibraries, loaders and tape drives, which combine electro-mechanical robotics, electronic hardware and firmware developed by the Company with an emphasis on efficiency of design, functionality and reliability. Its products are based on a number of different tape technologies including DLTtape, AIT, DLT1, SLR, IBM compatible 3480/3490/3490E, Travan and DAT. The Travan and DAT products were acquired as part of the acquisition of assets from Tecmar Technologies International, Inc. and certain of its affiliates (collectively, "Tecmar") in February 2000. Overland also distributes products manufactured by other original equipment manufacturers ("OEMs") and markets various other products including storage management software supplied by third parties, spare parts and tape media. The Company also derives revenue from licensing its proprietary Variable Rate Randomizer (VR²)® tape encoding technology, which it has now licensed to Tandberg Data ASA, Imation Corp., Seagate Technology, Inc. and Storage Technology, Inc.

Recent Developments

On April 19, 2001 the Company announced that it had taken specific steps to reduce operating expenses to reflect current and expected business conditions. These steps included a reduction in workforce of 26 permanent employees, the elimination of 17 temporary positions, a 10% general salary reduction, and the elimination of officer bonuses for the second half of the current fiscal year. As a

result of these actions, and other cost reduction actions currently in place, the Company expects to record a one-time severance charge in the fourth quarter of fiscal year 2001.

Risk Factors

Advanced technology companies like 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 anticipate changes in technology, to develop new and enhanced products on a timely and cost-effective basis and to introduce, manufacture and achieve market acceptance of these new and enhanced products. In particular, the Company's future success will likely depend on the market acceptance of the recently introduced LibraryXpress® Neo Series™, a "next-generation" line of tape automation products. Development schedules for high technology products are inherently subject to uncertainty and there can be no assurance that the Company will be able to meet its product development schedules, including those for products based on its new VR² tape coding technique (both by the Company and its licensees), or that development costs will be within budgeted amounts. If the products or product enhancements that the Company develops are not deliverable due to developmental problems, quality issues or component shortage problems, or if such products or product enhancements do not achieve market acceptance or are unreliable, the Company's business, financial condition and results of operations may be materially and adversely affected. The introduction (whether by the Company or its competitors) of new products embodying new technologies such as new sequential or random access mass storage devices and the emergence of new industry standards could render existing products obsolete or not marketable.

The Company's current revenue stream is highly dependent upon the level of sales to Compaq Computer Corporation ("Compaq"), which comprised 60% of the Company's revenues in the third fiscal quarter ended March 31, 2001. Although Compaq is the primary customer for the LibraryXpress product line, Compaq is not required to purchase minimum quantities and its orders can fluctuate from quarter to quarter. The Company expects that Compaq will continue to represent a significant portion of the Company's revenues in future periods. Consequently, the Company's future operating results would be impacted materially and adversely by the loss of the Compaq account, or the reduction, delay or cancellation of Compaq orders

A large portion of the Company's products incorporate DLTtape drives manufactured by Quantum Corporation, which is also a competitor of the Company because Quantum markets its own tape drives and tape automation products. Although Quantum has licensed Tandberg Data to be a second source manufacturer of DLTtape drives, Overland has not qualified Tandberg as its alternative supplier. The Company does not have a long-term contract with Quantum, which could cease supplying DLTtape drives directly to the Company. From time to time in the past, the Company has not been able to obtain as many drives as it has needed from Quantum due to drive shortages or quality issues. Any prolonged inability to obtain adequate deliveries could require the Company to pay more for components, parts and other supplies, seek alternative sources of supply, delay shipment of products and damage relationships with current and prospective customers. Any such delay or damage could have a material adverse effect on the Company's business, financial condition and results of operations. In the past, the Company experienced problems with the supply of a newly introduced DLTtape drive and such problems adversely affected the Company's sales and earnings. No assurance can be given that such problems will not recur, or that the Company will not experience similar or more serious

disruptions in supply in the future with current versions of DLT drives, the new SDLT drive or any future DLT drive version.

Although the Company has licensed its proprietary VR² encoding technology to Tandberg Data ASA, Imation Corp., Seagate Technology, Inc. and Storage Technology, Inc., the success of VR² depends on the success of the licensee's tape drives that incorporate the VR² technology. 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 that 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, 2000 and filed with the Securities and Exchange Commission on September 28, 2000.

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.

			Three Months Ended March 31,				Nine Months Ended March 31,
			2001		2000		2001		2000
Net revenues			100.0	%	100.0	%	100.0	%	100.0	%
Cost of goods sold			74.3		74.3		73.3		74.0

Gross profit			25.7		25.7		26.7		26.0

Operating expenses:
	Sales and marketing		10.9		10.4		10.2		11.8
	Research and development		7.2		5.9		6.4		6.2
	General and administrative		5.6		4.4		5.2		5.3

		Total operating expenses	23.7		20.7		21.8		23.3

Income from operations			2.0		5.0		4.9		2.7
Other income:
	Interest, net		0.4		0.5		0.3		0.7
	Other income, net		1.4		0.1		0.4		0.1

Income before income taxes			3.8		5.6		5.6		3.5
Provision for income taxes			1.5		2.2		2.2		1.4

Net income			2.3	%	3.4	%	3.4	%	2.1	%

For the three months ended March 31, 2001 and 2000

Net Revenues. Net revenues of $37.0 million in the third quarter of fiscal year 2001 were $2.7 million or 7.8% above net revenues of $34.4 million in the third quarter of fiscal year 2000. This revenue growth is attributable primarily to improved sales of the Company's automated library and loader products, including increased sales of the AIT-based LibraryPro™ and the DLT1-based loader, both of which were introduced in the third quarter of fiscal year 2000. Sales of the Company's LibraryXpress products increased by 6.9% from $24.6 million in the third quarter of fiscal year 2000 to $26.4 million in the third quarter of fiscal year 2001. This increase was due primarily to increased shipments to Compaq, the Company's largest customer. Sales of library products to Compaq of $20.9 million grew 8.1% from $19.3 million during the same quarter of fiscal year 2000. Sales of the Company's lower-end loader products increased 9.3% from $3.1 million in the third quarter of fiscal year 2000 to $3.4 million in the third quarter of fiscal year 2001. As expected, sales of mature 36-track products declined 23.4% from $3.1 million in the third quarter of fiscal year 2000 to $2.4 million in the third quarter of fiscal year 2001. Sales of stand-alone drives of $1.5 million increased 21.0% from $1.3 million during the same quarter of fiscal year 2000. Sales of Travan, Ditto and DAT products, which the Company began selling after the February 2000 acquisition of certain Tecmar assets, decreased 13.8% from $719,000 in the third quarter of fiscal year 2000 to $620,000 in the third quarter of fiscal year 2001.

A summary of the sales mix by product for the periods presented in the statement of operations follows:

		Three Months Ended March 31,				Nine Months Ended March 31,
		2001		2000		2001		2000
Company products:
	LibraryXpress	71.2	%	71.7	%	73.6	%	67.0	%
	LoaderXpress	9.2		9.0		7.6		9.8
	36-track	6.4		9.1		5.9		11.6
	9-track	—		—		—		0.1
	Travan/Ditto/DAT	1.7		2.1		2.2		0.9
	Royalties & services	0.2		—		0.6		0.2
Other products:
	Spare parts, controllers, other	7.2		4.4		6.2		5.6
	Stand-alone drives	4.1		3.7		3.9		4.8

		100.0	%	100.0	%	100.0	%	100.0	%

Gross Profit. The Company's gross profit for the third quarter of fiscal year 2001 was $9.5 million, up 7.8% from $8.8 million in the third quarter of fiscal year 2000. As a percentage of net revenues, the gross margin of 25.7% remained unchanged from the third quarter of fiscal year 2000.

Sales and Marketing Expense. Sales and marketing expense amounted to $4.0 million or 10.9% of net revenues in the third quarter of fiscal year 2001 compared to $3.6 million or 10.4% of net revenues in the third quarter of fiscal year 2000. This increase in absolute dollars resulted primarily from higher personnel related costs and expenses related to internally consumed product for evaluation and demonstration purposes.

Research and Development Expense. Research and development expense amounted to $2.7 million or 7.2% of net revenues in the third quarter of fiscal year 2001, compared to $2.0 million or 5.9% of net revenues in the third quarter of fiscal year 2000. The higher expenses in absolute dollars during the

latest quarter primarily reflect an increased level of new product development efforts, prototype costs and the addition of the Longmont, Colorado-based engineering team.

General and Administrative Expense. General and administrative expense amounted to $2.1 million or 5.6% of net revenues in the third quarter of fiscal year 2001, compared to $1.5 million or 4.4% of net revenues in the third quarter of fiscal year 2000. This increase in absolute dollars primarily resulted from personnel additions and higher recruiting costs. In addition, the third quarter of fiscal year 2000 included a benefit of $257,000 due to an adjustment to the Company's allowance for doubtful accounts.

Interest Income, Net. The decrease in interest income during the third quarter of fiscal year 2001, as compared to the third quarter of fiscal year 2000, resulted primarily from lower average balances of cash and cash equivalents.

Other Income, Net. Other income of $532,000 in the third quarter of fiscal year 2001 was due primarily to the sale of the Company's SLR-based LoaderXpress product line, partially offset by foreign currency losses.

Income Taxes. The Company's effective tax rate in the third quarter of fiscal year 2001 was 39.5%, which was unchanged from the third quarter of fiscal year 2000. The effective tax rate for all of fiscal year 2000 was 39.5% and is expected to remain unchanged for fiscal year 2001.

Net Income. Net income amounted to $850,000 in the third quarter of fiscal year 2001, compared to $1.2 million in the third quarter of fiscal year 2000. Both diluted and basic net income per share for the third quarters of fiscal years 2001 and 2000 were $0.08 and $0.11, respectively.

For the nine months ended March 31, 2001 and 2000

Net Revenues. The Company's net revenues of $118.3 million in the first nine months of fiscal year 2001 grew by $33.7 million or 39.8% over net revenues of $84.7 million in the first nine months of fiscal year 2000. Sales of the Company's LibraryXpress products grew from $56.8 million in the first nine months of fiscal year 2000 to $87.1 million in the first nine months of fiscal year 2001, an increase of 53.5%. In total, the OEM business comprised 66.4% of revenues for the first nine months of fiscal year 2001 compared to 58.0% of revenues for the first nine months of fiscal year 2000. This increase was due primarily to increased sales to Compaq, which selected the Company as its supplier of mid-range DLT automation products in June 1999. Sales to Compaq commenced at relatively low levels during the first nine months of fiscal year 2000, during which the predecessor product sold by Compaq was phased out. Sales of the Company's LoaderXpress® products increased 9.3% to $9.0 million in the first nine months of fiscal year 2001 from $8.2 million in the first nine months of fiscal year 2000. During the first nine months of fiscal year 2001, sales of controllers, spare parts, software and other products amounted to $7.2 million, an increase of 51.5% from sales of $4.8 million for the first nine months of fiscal year 2000. Sales of Travan, Ditto and DAT products amounted to $2.7 million during the first nine months of fiscal year 2001. Revenues from VR² royalties and services were $734,000 during the first nine months of fiscal year 2001, compared to $206,000 in the first nine months of fiscal year 2000. Finally, as expected, these gains were partially offset by declines in sales of the Company's mature 36-track products, which fell by 28.3% from $9.8 million in the first nine months of fiscal year 2000 to $7.0 million in the first nine months of fiscal year 2001.

Gross Profit. The Company's gross profit for the first nine months of fiscal 2001 was $31.6 million, a 43.5% increase from the $22.0 million reported during the first nine months of fiscal year 2000. The gross margin percentage increased from 26.0% in the first nine months of fiscal year 2000 to 26.7% during the first nine months of fiscal year 2001. This increase resulted primarily from higher royalty revenue, decreased material costs and significant volume increases resulting in greater economies of scale. The Company's gross margin is sensitive to both volume and the channel mix of its

sales as sales to OEM customers are typically at lower margins compared to those of its branded products.

Sales and Marketing Expense. Sales and marketing expense amounted to $12.1 million or 10.2% of net revenues in the first nine months of fiscal year 2001, compared to $10.0 million or 11.8% of net revenues in the first nine months of fiscal year 2000. This increase in absolute dollars resulted primarily from higher personnel related costs and expenses related to internally consumed product for evaluation and demonstration purposes.

Research and Development Expense. Research and development expense amounted to $7.6 million or 6.4% of net revenues in the first nine months of fiscal year 2001, compared to $5.3 million or 6.2% of net revenues in the first nine months of fiscal year 2000. The increased expenses reflect the addition of the former Longmont, Colorado-based engineering team and higher development material costs related to new product development programs.

General and Administrative. General and administrative expense amounted to $6.1 million or 5.2% of net revenues in the first nine months of fiscal year 2001, compared to $4.5 million or 5.3% of net revenues in the first nine months of fiscal year 2000. This increase in absolute dollars reflects personnel additions and higher recruiting costs. In addition, the first nine months of fiscal year 2001 included an increase to the Company's allowance for doubtful accounts compared to a reduction in the first nine months of fiscal year 2000.

Interest Income, Net. The decrease in interest income during the first nine months of fiscal year 2001, as compared to the first nine months of fiscal year 2000, resulted primarily from lower average balances of cash and cash equivalents.

Other Income, Net. In the first nine months of fiscal year 2001, other income of $395,000 was due primarily to the sale of the Company's SLR-based LoaderXpress product line, partially offset by foreign currency losses. Other income of $101,000 during the first nine months of fiscal year 2000 was due primarily to the sale of a discontinued product line.

Income Taxes. The Company's effective tax rate in the first nine months of fiscal year 2001 was 39.5%, unchanged from the first nine months of fiscal year 2000.

Net Income. Net income amounted to $4.0 million in the first nine months of fiscal year 2001, compared to $1.8 million in the first nine months of fiscal year 2000. Diluted and basic net income per share increased to $.37 and $.39, respectively, in the first nine months of fiscal year 2001, compared to $.17 and $.18, respectively, in the first nine months of fiscal year 2000.

Liquidity and Capital Resources. Cash balances decreased during the first nine months of fiscal year 2001 by $2,803,000 as operating cash outflows of $1,775,000 and capital expenditures of $1,897,000 exceeded net inflows from financing activities of $1,008,000. Operating cash outflows during the first nine months of fiscal year 2001 resulted primarily from increases in inventories and decreases in accounts payable and other accrued liabilities, offset somewhat by net income before depreciation. Capital expenditures during the first nine months of fiscal year 2001 were comprised primarily of tooling, computers and related systems. Financing cash inflows during the first nine months of fiscal year 2001 were a result of the proceeds from the issuance of common stock under the Company's employee stock purchase plan and the exercise of stock options.

Cash balances decreased during the first nine months of fiscal year 2000 by $2,205,000, as operating cash inflows of $2,265,000 and net financing cash inflows of $166,000 were more than offset by net investing activities cash outflows of $4,633,000. Operating cash inflows during the first nine months of fiscal year 2000 resulted primarily from increases in accounts payable and other accrued liabilities, net income before depreciation and a decrease in inventories, all partially offset by an

increase in accounts receivable. Net investing cash outflows during the first nine months of fiscal year 2000 represented capital expenditures, comprised primarily of tooling, computers and related systems, and the purchase of certain Tecmar assets. Net financing cash inflows during the first nine months of fiscal year 2000 were a result of the proceeds from the issuance of common stock under the Company's employee stock purchase plan and the exercise of stock options, both offset somewhat by stock repurchases.

The Company's working capital amounted to $47.8 million at March 31, 2001, and the Company's $5.0 million credit line remains unused. The Company believes that these resources will be sufficient to fund its operations into the foreseeable future, including anticipated capital expenditures in connection with the construction and occupancy of its new headquarters facilities.

Item 3.—Quantitative and Qualitative Disclosures About Market Risk

Market risk represents the risk of loss that may impact the financial position, results of operations or cash flows of the Company due to adverse changes in financial and commodity market prices and rates. The Company is exposed to market risk in the areas of changes in United States interest rates and changes in foreign currency exchange rates as measured against the United States dollar. These exposures are directly related to its normal operating and funding activities. Historically the Company has not used derivative instruments or engaged in hedging activities.

Interest Rate Risk. The Company's financial instruments with market risk exposure are the Company's cash equivalents, short-term investments and, to the extent utilized, revolving credit borrowings, of which no amounts were outstanding at March 31, 2001. The primary objective of the Company's investment activities is to preserve principal while at the same time maximizing yields without significantly increasing risk. To achieve this objective, the Company currently maintains a portfolio of high-grade commercial paper and money market funds.

The Company's revolving line of credit facility carries interest at the bank's prime rate or at the bank's banker's acceptance rate plus 2.25%. The Company's objective in maintaining access to these variable rate borrowings is the flexibility obtained regarding early repayment without penalties and lower overall costs as compared with fixed rate borrowings.

Under the Company's current policies, it does not use interest rate derivatives instruments to manage its exposure to interest rate changes. A hypothetical 100 basis point adverse move in interest rates along the entire interest rate yield curve would result in no material change in the Company's pre-tax earnings and cash flow.

Foreign Currency Risk. The Company conducts business on a global basis and essentially all of its products sold in international markets are denominated in U.S. dollars. Historically, export sales have represented a significant portion of the Company's sales and is expected to continue to represent a significant portion of sales.

The Company's wholly-owned subsidiaries in the United Kingdom, France and Germany incur costs which are denominated in local currencies. As exchange rates vary, these results when translated may vary from expectations and adversely impact overall expected results. The effect of exchange rate fluctuations on the Company's results during the first nine months of 2001 was a $247,000 expense.

PART II—OTHER INFORMATION

Item 6.—Exhibits and Reports on Form 8-K

(a): Exhibits


3.2		Bylaws dated November 15, 1993.
10.1		Employment Agreement dated January 1, 2001 between Overland Data, Inc. and Scott McClendon.
10.2		Employment Agreement dated January 1, 2001 between Overland Data, Inc. and W. Michael Gawarecki.
10.3		Employment Agreement dated January 1, 2001 between Overland Data, Inc. and Robert J. Scroop.
10.4		Employment Agreement dated March 12, 2001 between Overland Data, Inc. and Christopher Calisi.
10.5		Retention Agreement dated March 12, 2001 between Overland Data, Inc. and Christopher Calisi.
10.6		Form of Notice of Stock Option Award and Stock Option Award Agreement for options granted under the 2000 Stock Option Plan.

(b): Reports on Form 8-K.

None.

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: May 15, 2001		By:		/s/ Vernon A. LoForti Vernon A. LoForti Vice President and Chief Financial Officer

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Table of Contents
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
CONSOLIDATED CONDENSED BALANCE SHEET
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SIGNATURES
EX-3.2 2 a2048304zex-3_2.txt EXHIBIT 3.2 EXHIBIT 3.2 BYLAWS OF OVERLAND DATA, INC. NOVEMBER 15, 1993 TABLE OF CONTENTS

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-iv- BYLAWS OF OVERLAND DATA, INC. -- NOVEMBER 15, 1993 -- ARTICLE I OFFICES Section 1. PRINCIPAL OFFICES. The principal executive office of Overland Data, Inc., a California corporation (the "Corporation"), shall be at such place inside or outside the State of California as the Board of Directors may determine from time to time. Section 2. OTHER OFFICES. The Corporation may also have offices at such other places as the Board of Directors may from time to time designate, or as the business of the Corporation may require. ARTICLE II MEETINGS OF SHAREHOLDERS Section 1. ANNUAL MEETINGS OF SHAREHOLDERS. The annual meeting of shareholders of the Corporation for the election of directors to succeed those whose terms expire and for transaction of such other business as may properly come before the meeting shall be held between 30 and 120 days following the end of the fiscal year of the Corporation and at such place as may be determined by the Board of Directors. If the annual meeting of the shareholders be not held as herein prescribed, the election of directors may be held at any meeting thereafter called pursuant to these Bylaws. Section 2. SPECIAL MEETINGS. A special meeting of the shareholders, for any purpose whatsoever, unless otherwise prescribed by statute may be called at any time by the Board of Directors, the Chairman of the Board, the President, or by one or more shareholders of the Corporation holding not less than ten percent (10%) of the voting power of the Corporation. If a special meeting is called by any person or persons other than the Board of Directors, the request shall be in writing, specifying the time of such meeting and the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by telegraphic -1- or other facsimile transmission to the Chairman of the Board, the President, any Vice President or the Secretary of the Corporation. The officer receiving such request forthwith shall cause notice to be given to the shareholders entitled to vote, in accordance with the provisions of Sections 4 and 5 of this Article II, that a meeting will be held at the time requested by the person or persons calling the meeting, not less than thirty-five (35) nor more than sixty (60) days after the receipt of the request. If the notice is not given within twenty (20) days after receipt of the request, the person or persons requesting the meeting may give the notice. Nothing contained in this paragraph of this Section 2 shall be construed as limiting, fixing or affecting the time when a meeting of shareholders called by action of the Board of Directors may be held. Section 3. PLACE OF MEETINGS. All meetings of the shareholders shall be at any place within or outside the State of California designated by the Board of Directors. In the absence of any such designation, shareholders' meetings shall be held at the principal executive office of the Corporation. Section 4. NOTICE OF SHAREHOLDERS' MEETINGS. All notices of meetings of shareholders of the Corporation shall be sent or otherwise given in accordance with Section 5 of this Article II not less than ten (10) days (or if sent by third class mail, 30 days) nor more than sixty (60) days before the date of the meeting being noticed. The notice shall specify the place, date and hour of the meeting and (i) in the case of a special meeting, the general nature of the business to be transacted, and no other business may be transacted or (ii) in the case of the annual meetings, those matters which the Board of Directors, at the time of giving the notice, intends to present for action by the shareholders, but subject to Section 601(f) of the California Corporations Code any proper matter may be presented at the meeting for shareholder action, and (iii) in the case of any meeting at which directors are to be elected, the names of the nominees intended at the time of giving of the notice to be presented by management for election. If action is proposed to be taken at any meeting for approval of (i) a contract or transaction in which a director has a direct or indirect financial interest, pursuant to Section 310 of the Corporations Code of California, (ii) an amendment of the Articles of Incorporation, pursuant to Section 902 of such Code, (iii) a reorganization of the Corporation, pursuant to Section 1201 of such Code, (iv) a voluntary dissolution of the Corporation, pursuant to Section 1900 of such Code, or (v) a distribution in dissolution other than in accordance with the rights of outstanding preferred shares pursuant to Section 2007 of such Code, the notice shall also state the general nature of such proposal. Approval of such proposal shall be valid even though the notice did not state the general nature of such proposal if such proposal has received unanimous approval of those entitled to vote. -2- Section 5. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. Notice of any meeting of shareholders of the Corporation shall be given in writing to each shareholder entitled to vote, either personally or by first-class mail (unless the Corporation has 500 or more shareholders determined as provided by the California Corporations Code on the record date of the meeting in which case notice may be sent by third-class mail) or telegraphic or other written communication, charges prepaid, addressed to the shareholder at the address of such shareholder appearing on the books of the Corporation or given by the shareholder to the Corporation for the purpose of notice. If no such address appears on the Corporation's books or has been so given, notice shall be deemed to have been given if sent by first-class mail or telegraphic or other written communication to the Corporation's principal executive office, or if published at least once in a newspaper of general circulation in the county where such office is located. Notice shall be deemed to have been given at the time when delivered personally or deposited in the mail or sent by telegram or other means of written communication. If any notice addressed to a shareholder at the address of such shareholder appearing on the books of the Corporation is returned to the Corporation by the United States Postal Service marked to indicate that the United States Postal Service is unable to deliver the notice to the shareholder at such address, all future notices or reports shall be deemed to have been duly given without further mailing if the same shall be available to the shareholder upon written demand of the shareholder at the principal executive office of the Corporation for a period of one year from the date of the giving of such notice. An affidavit of the mailing or other means of giving any notice of any shareholders' meeting shall be executed by the Secretary, Assistant Secretary or any transfer agent of the Corporation giving such notice, and shall be filed and maintained in the minute book of the Corporation. Section 6. ADJOURNED MEETING AND NOTICE THEREOF. Any shareholders' meeting, annual or special, whether or not a quorum is present, may be adjourned from time to time by the vote of the holders of a majority of the voting shares represented at such meeting, either in person or by proxy, but in the absence of a quorum, no other business may be transacted at such meeting, except as provided in Section 6 of this Article II. When any meeting of shareholders, either annual or special, is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at a meeting at which the adjournment is taken, unless a new record date for the adjourned meeting is fixed, or unless the adjournment is for more than forty-five (45) days from the date set for the original meeting, in which case the Board of Directors shall set a new record date. Notice of any such -3- adjourned meeting, if required, shall be given to each shareholder of record entitled to vote at the adjourned meeting in accordance with the provisions of Sections 4 and 5 of this Article II. At any adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting. Section 7. QUORUM. The presence in person or by proxy of the persons entitled to vote a majority of the shares entitled to vote at any meeting of shareholders shall constitute a quorum for the transaction of business. The shareholders present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum, if any action taken (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum. Section 8. VOTING. The shareholders entitled to vote at any meeting of shareholders shall be determined in accordance with the provisions of Section 11 of this Article II, subject to the provisions of Sections 702 to 704, inclusive, of the Corporations Code of California (relating to voting shares held by a fiduciary, in the name of a Corporation or in joint ownership). Such vote may be by voice vote or by ballot; provided, however, that all elections for directors must be by ballot upon demand by a shareholder at any election and before the voting begins. Any shareholder entitled to vote on any matter (other than the election of directors) may vote part of the shares in favor of the proposal and refrain from voting the remaining shares or vote them against the proposal, but, if the shareholder fails to specify the number of shares such shareholder is voting affirmatively, it will be conclusively presumed that the shareholder's approving vote is with respect to all shares such shareholder is entitled to vote. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting and voting on any matter (other than the election of directors), provided that the shares voting affirmatively must also constitute at least a majority of the required quorum, shall be the act of the shareholders, unless the vote of a greater number or voting by classes is required by the California General Corporation Law or the Articles of Incorporation. At a shareholders' meeting involving the election of directors, no shareholder shall be entitled to cumulate votes (i.e., cast for any candidate a number of votes greater than the number of the shareholder's shares) unless such candidate or candidates' names have been placed in nomination prior to commencement of the voting and a shareholder has given notice prior to commencement of the voting of the shareholder's intention to cumulate votes. If any shareholder has given such notice, then every shareholder entitled to vote may cumulate such shareholder's votes for candidates in nomination and give one candidate a number of votes equal to the number of directors to -4- be elected multiplied by the number of votes to which such shareholder's shares are entitled, or distribute the shareholder's votes on the same principle among as many candidates as the shareholder shall think fit. The candidates receiving the highest number of votes of the shares entitled to be voted for them, up to the number of directors to be elected by such shares are elected. Section 9. WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDERS. The transactions of any meeting of shareholders, either annual or special, however called and noticed, and wherever held, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum be present either in person or by proxy, and if, either before or after the meeting, each of the persons entitled to vote, not present in person or by proxy, signs a written waiver of notice, or a consent to the holding of the meeting, or an approval of the minutes thereof. The waiver of notice or consent need not specify either the business to be transacted or the purpose of any annual or special meeting of shareholders, except that if action is taken or proposed to be taken for approval of any of those matters specified in the second paragraph of Section 4 of this Article II, the waiver of notice or consent shall state the general nature of such proposal. All such waivers, consents or approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Attendance of a person at a meeting shall also constitute a waiver of notice of such meeting, except when the person objects, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened, and except that attendance at a meeting is not a waiver of any right to object to the consideration of matters not included in the notice of the meeting if such objection is expressly made at the meeting. Section 10. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Any action which may be taken at any annual or special meeting of shareholders may be taken without a meeting and without prior notice, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. In the case of election of directors, such consent shall be effective only if signed by the holders of all outstanding shares entitled to vote for the election of directors; provided, however, that a director may be elected at any time to fill a vacancy not filled by the directors by the written consent of the holders of a majority of the outstanding shares entitled to vote for the election of such director. All such consents shall be filed with the Secretary of the Corporation and shall be maintained in the corporate records. -5- Any shareholder giving a written consent, or the shareholder's proxy holders, or a transferee of the shares or a personal representative of the shareholder or their respective proxy holder, may revoke the consent by a writing received by the Secretary of the Corporation prior to the time that written consents of the number of shares required to authorize the proposed action have been filed with the Secretary. If the consents of all shareholders entitled to vote have not been solicited in writing, and if the unanimous written consent of all such shareholders shall not have been received, the Secretary shall give prompt notice of the corporate action approved by the shareholders without a meeting. Such notice shall be given in the manner specified in Section 5 of this Article II. In the case of approval of (i) contracts or transactions in which a director has a direct or indirect financial interest, pursuant to Section 310 of the Corporations Code of California, (ii) indemnification of agents of the Corporation, pursuant to Section 317 of such Code, (iii) a reorganization of the Corporation, pursuant to Section 1201 of such Code, or (iv) a distribution in dissolution other than in accordance with the rights of outstanding preferred shares pursuant to Section 2007 of such Code, such notice shall be given at least ten (10) days before the consummation of any such action authorized by any such approval. Section 11. RECORD DATE FOR SHAREHOLDER NOTICE, VOTING, AND GIVING CONSENTS. For purposes of determining the shareholders entitled to notice of any meeting or to vote or entitled to give consent to corporate action without a meeting, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) days nor less than ten (10) days prior to the date of any such meeting nor more than sixty (60) days prior to such action without a meeting, and in such case only shareholders of the Corporation of record at the close of business on the date so fixed are entitled to notice and to vote or to give consents, as the case may be, notwithstanding any transfer of any shares on the books of the Corporation after the record date fixed as aforesaid, except as otherwise provided in California General Corporation Law. If the Board of Directors does not so fix a record date: (a) The record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the business day next preceding the day on which notice is given or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held. (b) The record date for determining shareholders entitled to give consent to corporate action in writing -6- without a meeting, (i) when no prior action by the Board has been taken, shall be the day on which the first written consent is given, or (ii) when prior action of the Board of Directors has been taken, shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto, or the sixtieth (60th) day prior to the date of such other action, whichever is later. Section 12. PROXIES. Every person entitled to vote for directors or on any other matter shall have the right to do so either in person or by one or more agents authorized by a written proxy signed by the person and filed with the Secretary of the Corporation. A validly executed proxy which does not state that it is irrevocable shall continue in full force and effect unless (i) revoked by the person executing it, prior to the vote pursuant thereto, by a writing delivered to the Corporation stating that the proxy is revoked or by a subsequent proxy presented to the meeting and executed by, or attendance at the meeting and voting in person by, the person executing the proxy; or (ii) written notice of the death or incapacity of the maker of such proxy is received by the Corporation before the vote pursuant thereto is counted; provided, however, that no such proxy shall be valid after the expiration of eleven (11) months from the date of such proxy, unless otherwise provided in the proxy. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 705(e) and (f) of the Corporations Code of California. Section 13. INSPECTORS OF ELECTION. Before any meeting of shareholders, the Board of Directors may appoint any persons other than nominees for office to act as inspectors of election at the meeting or its adjournment. If no inspectors of election are so appointed, the chairman of the meeting may, and on the request of any shareholder or a shareholders proxy shall, appoint inspectors of election at the meeting. The number of inspectors shall be either one (1) or three (3). If inspectors are appointed at a meeting on the request of one or more shareholders or proxies, the holders of a majority of shares or their proxies present at the meeting shall determine whether one (1) or three (3) inspectors are to be appointed. If any person appointed as inspector fails to appear or fails or refuses to act, the chairman of the meeting may, and upon the request of any shareholder or a shareholder's proxy shall, appoint a person to fill such vacancy. The duties of these inspectors shall be as follows: (a) Determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, and the authenticity, validity and effect of proxies; (b) Receive votes, ballots or consents; -7- (c) Hear and determine all challenges and questions in any way arising in connection with the right to vote; (d) Count and tabulate all votes or consents; (e) Determine when the polls shall close; (f) Determine the result; and (g) Do any other acts that may be proper to conduct the election or vote with fairness to all shareholders. ARTICLE III DIRECTORS Section 1. POWERS. Subject to the provisions of the California General Corporation Law and any limitations in the Articles of Incorporation or these Bylaws relating to action required to be approved by the shareholders or by the outstanding shares, the business and affairs of the Corporation shall be managed and all corporate powers shall be exercised by or under the direction of the Board of Directors. Section 2. NUMBER AND QUALIFICATION OF DIRECTORS. The authorized number of directors shall be not less than six (6) and not more than seven (7), the specific number to be set by resolution of the board of directors or the shareholders. The initial authorized number of directors shall be seven (7). Any amendment to these bylaws whereby the minimum number of authorized directors is set at less than five (5) shall not take effect if votes cast against it exceed 16-2/3% of the outstanding shares entitled to vote. Should any portion of this Section 2 of Article III be found invalid by a court of competent jurisdiction, the whole of this Section shall be revoked, and the authorized number of directors shall be seven (7). Section 3. ELECTION AND TERM OF OFFICE OF DIRECTORS. Directors shall be elected at each annual meeting of the shareholders to hold office until the next annual meeting. Each director, including a director elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until a successor has been elected and qualified. Section 4. VACANCIES. Vacancies in the Board of Directors may be filled by a majority of the remaining directors, -8- though less than a quorum, or by a sole remaining director, except that (i) in the case of a vacancy in the office of a director elected by the holders of a particular class or series of stock, such vacancy may be filled only by the vote of the holders of such class or series of stock and (ii) a vacancy created by the removal of a director by the vote or written consent of the shareholders or by court order may be filled only by the vote of a majority of the shares represented and voting at a duly held meeting at which a quorum is present, or by the written consent of holders of all outstanding shares entitled to vote. Each director so elected shall hold office until the next annual meeting of the shareholders and until a successor has been elected and qualified. A vacancy or vacancies in the Board of Directors shall be deemed to exist in the case of the death, resignation or removal of any director, or if the Board of Directors by resolution declares vacant the office of a director who has been declared of unsound mind by an order of court or convicted of a felony, or if the authorized number of directors be increased, or if the shareholders fail, at any meeting of shareholders at which any director or directors are elected, to elect the full authorized number of directors to be voted for at that meeting. The shareholders may elect a director or directors at any time to fill any vacancy or vacancies not filled by the directors, but any such election by written consent shall require the consent of a majority of the outstanding shares entitled to vote. Any director may resign upon giving written notice to the Chairman of the Board, the President, the Secretary or the Board of Directors. A resignation shall be effective upon the giving of the notice, unless the notice specifies a later time for its effectiveness. If the resignation of a director is effective at a future time, the Board of Directors may elect a successor to take office when the resignation becomes effective. No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of his term of office. Section 5. REMOVAL OF DIRECTORS. Any or all of the directors may be removed by the shareholders pursuant to the provisions of Section 303 of the Corporations Code of California or by order of court pursuant to Section 304 of the Corporations Code of California. Except as provided in Sections 302, 303 or 304 of the Corporations Code of California, a director may not be removed prior to the expiration of such director's term of office. Section 6. PLACE OF MEETINGS AND TELEPHONIC MEETINGS. Regular meetings of the Board of Directors may be held at any place within or without the State that has been designated from -9- time to time by resolution of the Board of Directors. In the absence of such designation, regular meetings shall be held at the principal executive office of the Corporation. Special meetings of the board shall be held at any place within or without the State that has been designated in the notice of the meeting or, if not stated in the notice or there is no notice, at the principal executive office of the Corporation. Any meeting, regular or special, may be held by conference telephone or similar communication equipment, so long as all directors participating in such meeting can hear one another, and all such directors shall be deemed to be present in person at such meeting. Section 7. ANNUAL MEETINGS. Immediately following each annual meeting of shareholders, the Board of Directors shall hold a regular meeting for the purpose of organization, any desired election of officers and the transaction of other business. Notice of this meeting shall not be required. Section 8. OTHER REGULAR MEETINGS. Other regular meetings of the Board of Directors shall be held without call at such time as shall from time to time be fixed by the Board of Directors. Such regular meetings may be held without notice. Section 9. SPECIAL MEETINGS. Special meetings of the Board of Directors for any purpose or purposes may be called at any time by the Chairman of the Board, President, Secretary or any two (2) directors. Written notice of the time and place of special meeting shall be delivered personally or by telephone to each director or sent by first-class mail or telegram, charges prepaid, addressed to each director at his or her address as it is shown upon the records of the Corporation. In case such notice is mailed, it shall be deposited in the United States mail at least four (4) days prior to the time of the holding of the meeting. In case such notice is delivered personally, or by telephone or telegram, it shall be delivered personally or by telephone or to the telegraph company at least forty-eight (48) hours prior to the time of the holding of the meeting. Any oral notice given personally or by telephone may be communicated to either the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director. The notice need not specify the purpose of the meeting nor the place if the meeting is to be held at the principal executive office of the Corporation. Section 10. WAIVER OF NOTICE. The transactions of any meeting of the Board of Directors, however called and noticed or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice if a quorum is present and if, either before or after the meeting, each of the directors not present signs a written waiver of notice, a consent to holding the meeting, or an approval of the minutes thereof. The waiver -10- of notice or consent need not specify the purpose of the meeting. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Notice of a meeting need not be given to any director who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to such director. Section 11. QUORUM. A majority of the authorized number of directors shall constitute a quorum for the transaction of business, except to adjourn as hereinafter provided. Every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present shall be regarded as the act of the Board of Directors, subject to the provisions of Section 310 of the Corporations Code of California (approval of contracts or transactions in which a director has a direct or indirect material financial interest) and Section 317(e) (indemnification of directors). A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for such meeting. Section 12. ADJOURNMENT . A majority of the directors present, whether or not constituting a quorum, may adjourn any meeting to another time and place. Section 13. NOTICE OF ADJOURNMENT. Notice of the time and place of holding an adjourned meeting need not be given, unless the meeting is adjourned for more than twenty-four (24) hours, in which case notice of such time and place shall be given prior to the time of the adjourned meeting, in the manner specified in Section 9 of this Article III, to the directors who were not present at the time of the adjournment. Section 14. ACTION WITHOUT MEETING. Any action required or permitted to be taken by the Board of Directors may be taken without a meeting, if all members of the Board of Directors shall individually or collectively consent in writing to such action. Such action by written consent shall have the same force and effect as a unanimous vote by the Board of Directors. Such written consent or consents shall be filed with the minutes of the proceedings of the Board. Section 15. FEES AND COMPENSATION OF DIRECTORS. Directors and members of committees may receive such compensation, if any, for their services, and such reimbursement of expenses, as may be fixed or determined by resolution of the Board of Directors. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity as an officer, agent, employee, or otherwise, and receiving compensation for such services. -11- ARTICLE IV COMMITTEES Section 1. COMMITTEES OF DIRECTORS. The Board of Directors may, by resolution adopted by a majority of the authorized number of directors, designate one or more committees, each consisting of two (2) or more directors, to serve at the pleasure of the Board of Directors. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent member at any meeting of the committee. Any such committee, to the extent provided in the resolution of the Board of Directors, shall have all the authority of the Board of Directors, except with respect to: (a) The approval of any action which, under the General Corporation Law of California, also requires shareholders' approval or approval of the outstanding shares; (b) The filling of vacancies on the Board of Directors or in any committee; (c) The fixing of compensation of the directors for serving on the Board or on any committee; (d) The adoption, amendment or repeal of Bylaws; (e) The amendment or repeal of any resolution of the Board of Directors which by its express terms is not so amendable or repealable; (f) A distribution to the shareholders of the Corporation, except at a rate or in a period amount or within a price range determined by the Board of Directors; or (g) The appointment of any other committees of the Board of Directors or the members thereof. Section 2. MEETINGS AND ACTION OF COMMITTEES. Meetings and action of committees shall be governed by, and held and taken in accordance with, the provisions of Article III of these Bylaws, Sections 6 (place of meetings), 8 (regular meetings), 9 (special meetings and notice), 10 (dispensing with notice), 11 (quorum), 12 (adjournment), 13 (notice of adjournment) and 14 (action without meeting), with such changes in the context of those Bylaws as are necessary to substitute the committee and its members for the Board of Directors and its members, except that the time of regular meetings of committees may be determined by resolution of the Board of Directors as well as the committee, special meetings of committees may also be called by resolution of the Board of Directors and notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The Board of Directors may adopt -12- rules for the government of any committee not inconsistent with the provisions of these Bylaws. ARTICLE V OFFICERS Section 1. OFFICERS. The officers of the Corporation shall be a President, a Secretary and a Treasurer, all of which shall be chosen by the Board of Directors. The Corporation may also have, at the discretion of the Board of Directors, a Chairman of the Board, one or more Vice Presidents, one or more Assistant Secretaries, one or more Assistant Treasurers, and such other officers as may be appointed in accordance with the provisions of Section 3 of this Article V. Any number of offices may be held by the same person. Section 2. APPOINTMENT OF OFFICERS. The officers of the Corporation, except such officers as may be appointed in accordance with the provisions of Section 3 of this Article V, shall be chosen by the Board of Directors, and each shall serve at the pleasure of the Board, subject to the rights, if any, of an officer under any contract of employment. Section 3. SUBORDINATE OFFICERS, ETC. The Board of Directors may appoint, and may empower the President to appoint, such other officers as the business of the Corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as are provided in the Bylaws or as the Board of Directors may from time to time determine. Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Any officer may be removed at any time, with or without cause, by the affirmative vote of a majority of all of the members of the Board of Directors, at any regular or special meeting thereof, or, except in case of an officer chosen by the Board of Directors, by any officer upon whom such power of removal may be conferred by the Board of Directors. Any officer may resign at any time by giving written notice of said resignation to the Board of Directors, the President or Secretary of the Corporation. Any such resignation shall take effect at the date of the receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Any such resignation is without prejudice to the rights, if any, of the Corporation under any contract to which the officer is a party. Section 5. INABILITY TO ACT. In the case of absence or inability to act of any officer of the Corporation and of any -13- person herein authorized to act in his place, the Board of Directors may from time to time delegate the powers or duties of such officer to any other officer or any director or other person whom it may select. Section 6. VACANCIES IN OFFICES. A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in these Bylaws for regular appointments to such office. Section 7. CHAIRMAN OF THE BOARD. The Chairman of the Board, if such an officer be elected, shall, if present, preside at all meetings of the Board of Directors and exercise and perform such other powers and duties as may be from time to time assigned to him by the Board of Directors or prescribed by the Bylaws. If there is no President, the Chairman of the Board shall in addition be the Chief Executive Officer of the Corporation and shall have the powers and duties prescribed in Section 8 of this Article V. Section 8. PRESIDENT. Subject to such supervisory powers, if any, as may be given by the Board of Directors to the Chairman of the Board, if there be such an officer, the President shall be the Chief Executive Officer of the Corporation and shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and the affairs of the Corporation. The President shall preside at all meetings of the shareholders and, in the absence of the Chairman of the Board, or if there be none, at all meetings of the Board of Directors. The President shall have the general powers and duties of management usually vested in the office of President of a Corporation, and shall have such other powers and duties as may be prescribed by the Board of Directors or the Bylaws. Section 9. VICE PRESIDENTS. In the absence or disability of the President, the Vice Presidents, if any, in order of their rank as fixed by the Board of Directors or, if not ranked, a Vice President designated by the Board of Directors, shall perform all the duties of the President, and when so acting shall have all the powers of, and be subject to all the restrictions upon, the President. The Vice Presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the Board of Directors or the Bylaws, the President or the Chairman of the Board if there is no President. Section 10. SECRETARY. The Secretary shall keep or cause to be kept, at the principal executive office or such other place as the Board of Directors may order, a book of minutes of all meetings and actions of directors, committees of directors and shareholders, with the time and place of holding, whether regular or special, and if special, how authorized, the notice thereof given, the names of those present at directors' and -14- committee meetings, the number of share present or represented at shareholders' meetings, and the proceedings thereof. The Secretary shall keep, or cause to be kept, at the principal executive office or at the office of the Corporation's transfer agent or registrar, as determined by resolution of the Board of Directors, a share register, or a duplicate share register, showing the names of all shareholders and their addresses, the number and classes of shares held by each, the number and date of certificates issued for the same, and the number and date of cancellation of every certificate surrendered for cancellation. The Secretary shall give, or cause to be given, notice of all meetings of the shareholders and of the Board of Directors required by the Bylaws or by law to be given, and he shall keep the seal of the Corporation, if one be adopted, in safe custody, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or by the Bylaws. The Assistant Secretary or the Assistant Secretaries, in the order of their seniority, shall, in the absence of disability of the Secretary, or in the event of such officer's refusal to act, perform the duties and exercise the powers and discharge such duties as may be assigned from time to time by the President or by the Board of Directors. Section 11. TREASURER. The Treasurer shall be the chief financial officer of the Corporation. Treasurer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the Corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, retained earnings and shares. The Treasurer shall deposit all moneys and other valuables in the name and to the credit of the Corporation with such depositaries as may be designated by the Board of Directors. He shall disburse the funds of the Corporation as may be ordered by the Board of Directors, shall render to the President and directors, whenever they request it, an account of all of his transactions as Treasurer and of the financial condition of the Corporation, and shall have other powers and perform such other duties as may be prescribed by the Board of Directors or the Bylaws. The Assistant Treasurer or the Assistant Treasurers, in the order of their seniority, shall, in the absence or disability of the Treasurer, or in the event of such officer's refusal to act, perform the duties and exercise the powers of the Treasurer, and shall have such powers and discharge such duties as may be assigned from time to time by the President or by the Board of Directors. -15- Section 12. SALARIES. The salaries of the officers shall be fixed from time to time by the Board of Directors and no officer shall be prevented from receiving such salary by reason of the fact that such officer is also a director of the Corporation. ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHER AGENTS The Corporation shall, to the maximum extent permitted by the General Corporation Law of California, indemnify each of its directors and officers against expenses, judgments, fines, settlements and other amounts actually and reasonably incurred in connection with any proceedings arising by reason of the fact any such person is or was a director or officer of the Corporation and shall advance to such director or officer expenses incurred in defending any such proceeding to the maximum extent permitted by such law. For purposes of this Article VI, a "director" or "officer" of the Corporation includes any person who is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director or officer of another corporation, or other enterprise, or was a director or officer of a corporation which was a predecessor corporation of the Corporation or of another enterprise at the request of such predecessor corporation. The Board of Directors may in its discretion provide by resolution for such indemnification of, or advance of expenses to, other agents of the Corporation, and likewise may refuse to provide for such indemnification or advance of expenses except to the extent such indemnification is mandatory under the California General Corporation law. ARTICLE VII RECORDS AND REPORTS Section 1. MAINTENANCE AND INSPECTION OF SHARE REGISTER. The Corporation shall keep at its principal executive office, or at the office of its transfer agent or registrar, if either be appointed and as determined by resolution of the Board of Directors, a record of its shareholders, giving the names and addresses of all shareholders and the number and class of shares held by each shareholder. The record of shareholders shall also be open to inspection upon the written demand of any shareholder or holder of a voting trust certificate, at any time during usual business hours, for a purpose reasonably related to such holder's interests as a shareholder or as the holder of a voting trust -16- certificate. Any inspection and copying under this Section 1 may be made in person or by an agent or attorney of the shareholder or holder of a voting trust certificate making such demand. Section 2. MAINTENANCE AND INSPECTION OF BYLAWS. The Corporation shall keep at its principal executive office, or if its principal executive office is not in the State of California at its principal business office in this state, the original or a copy of the Bylaws as amended to date, which shall be open to inspection by the shareholders at all reasonable times during office hours. If the principal executive office of the Corporation is outside this state and the Corporation has no principal business office in this state, the Secretary shall, upon the written request of any shareholder, furnish to such shareholder a copy of the Bylaws as amended to date. Section 3. MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS. The books and records of account and minutes of proceedings of the shareholders and the Board of Directors and any committee or committees of the Board of Directors shall be kept at such place or places designated by the Board of Directors, or, in the absence of such designation, at the principal executive office of the Corporation. The minutes shall be kept in written form and the books and records of account shall be kept either in written form or in any other form capable of being converted into written form. The minutes and accounting books and records shall be open to inspection upon the written demand of any shareholder or holder of a voting trust certificate, at any reasonable time during usual business hours, for a purpose reasonably related to such holder's interests as a shareholder or as the holder of a voting trust certificate. Such inspection may he made in person or by an agent or attorney, and shall include the right to copy and make extracts. Section 4. INSPECTION BY DIRECTORS. Every director shall have the absolute right at any reasonable time to inspect and copy all books, records, and documents of every kind and to inspect the physical properties of the Corporation of which such person is a director and also of its subsidiary corporations, domestic and foreign. Such inspection shall be made in person or by agent or attorney and the right to inspection includes the right to copy and make extracts. Upon specific request, every director shall have the absolute right to receive, at no cost and in a timely manner, copies of any regular report or document produced within the Corporation. Upon refusal of demand for inspection by a director, the superior court of the proper county may enforce such inspection and order the payment of reasonable attorneys fees and other court costs to the complaining director, agent or attorney. The performance of each officer is subject to the review of the Board of Directors. As an extension of directors rights of inspection, any director, their agent or attorney may initiate their own performance review at any time by interviewing -17- any officer, his/her peers, and his/her subordinates. Such interviewing by directors shall not imply any executive authority by such person(s) not otherwise authorized, but is merely an information gathering device in furtherance of corporate governance. The corporation will request that such officers and employees speak candidly and openly to any questions presented by any director, agent, or attorney pertaining to any actual or potential company business. This paragraph shall not be deemed to increase directors liability nor shall it be deemed to restrict or inhibit any rights directors otherwise have. Section 5. ANNUAL REPORT TO SHAREHOLDERS. The annual report to shareholders referred to in Section 1501 of the General Corporation Law is expressly dispensed with, but nothing herein shall be interpreted as prohibiting the Board of Directors from issuing annual or other periodic reports to the shareholders of the Corporation as they deem appropriate. ARTICLE VIII GENERAL CORPORATE MATTERS Section 1. RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING. For purposes of determining the shareholders entitled to receive payment of any dividend or other distribution or allotment of any rights or entitled to exercise any rights in respect of any other lawful action, (other than action by shareholders by written consent without a meeting) the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days prior to any such action, and in such case only shareholders of record on the date so fixed are entitled to receive the dividend, distribution or allotment of rights or to exercise the rights, as the case may be, notwithstanding any transfer of any shares on the books of the Corporation after the record date fixed as aforesaid, except as otherwise provided in the California General Corporation Law. If the Board of Director does not fix a record date, the record date for determining shareholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto, or the sixtieth (60th) day prior to the date of such action, whichever is later. Section 2. CHECK, DRAFTS, EVIDENCES OF INDEBTEDNESS. All checks, drafts or other orders for payment of money, notes or other evidences of indebtedness, issued in the name of or payable to the Corporation, shall be signed or endorsed by such person or persons and in such manner as, from time to time, shall be determined by resolution of the Board of Directors. -18- Section 3. CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED. The Board of Directors, except as otherwise provided in these Bylaws, may authorize any officer or officers, agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances; and, unless so authorized or ratified by the Board of Directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or to any amount. Section 4. CERTIFICATES FOR SHARES. A certificate or certificates for shares of the capital stock of the Corporation shall be issued to each shareholder when any such shares are fully paid. All certificates shall be issued in numerical order, shall state the name of the holder of the shares represented thereby, shall state the number, designation, if any, and class or series of shares represented thereby and shall contain any statement or summary required by any applicable provisions of the California Corporations Code. All certificates shall be signed in the name of the Corporation by the Chairman of the Board or the President or Vice President and by the Treasurer or an Assistant Treasurer or the Secretary or any Assistant Secretary, certifying the number of shares and the class or series of shares owned by the shareholder. Any or all of the signatures on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were an officer, transfer agent or registrar at the date of issue. Section 5. LOST CERTIFICATES. Except as hereinafter in this Section 5 provided, no new certificates for shares shall be issued in lieu of an old certificate unless the matter is surrendered to the Corporation and canceled at the same time. The Board of Directors may in case any share certificate or certificate for any other security is lost, stolen or destroyed, authorize the issuance of a new certificate in lieu thereof, upon such terms and conditions as the Board may require, including provision for indemnification of the Corporation secured by a bond or other adequate security sufficient to protect the Corporation against any claim that may be made against it, including any expense or liability, on account of the alleged loss, theft or destruction of such certificate or the issuance of such new certificate. Section 6. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The Chairman of the Board, the President, or any Vice President, or any other person authorized by resolution of the Board of Directors or by any of the foregoing designated officers, is authorized to vote on behalf of the Corporation any and all shares of any other Corporation or Corporations, foreign or domestic, standing in the name of the Corporation. The authority herein granted to said officers to vote or represent on behalf of the Corporation any -19- and all shares held by the Corporation in any other Corporation or Corporations may be exercised by any such officer in person or by any person authorized to do so by proxy duly executed by said officer. ARTICLE IX AMENDMENTS Section 1. AMENDMENT BY SHAREHOLDERS. New Bylaws may be adopted or these Bylaws may be amended or repealed by the vote or written consent of holders of a majority of the outstanding shares entitled to vote; provided, however, that if the Articles of Incorporation of the Corporation set forth the number of authorized directors of the Corporation, the authorized number of directors may be changed only by an amendment of the Articles of Incorporation. Section 2. AMENDMENT BY DIRECTORS. Subject to the rights of the shareholders as provided in Section 1 of this Article IX, Bylaws, other than a Bylaw or an amendment thereof changing the authorized number of directors, may be adopted, amended or repealed by the Board of Directors. ARTICLE X GENERAL Section 1. GOVERNING LAW. This Corporation is organized under the provisions of the California General Corporation Law (Corporation Code Sections 100-2319). The corporate affairs of this Corporation shall be governed by and conducted in accordance with the provisions of the California General Corporation Law, as the same presently exist and are from time to time hereafter amended or superseded, except in those instances where the Articles of Incorporation or Bylaws of this Corporation, now or though amendment hereafter, may adopt alternative rules which are permissible under the California General Corporation Law. Any provision (or portion thereof) in these Bylaws which is not permissible under the California General Corporation Law or is inconsistent with the Articles of Incorporation of this Corporation (as they may from time to time be amended and supplemented) is void, but the balance of these Bylaws shall nevertheless be valid and effective. Section 2. CONSTRUCTION AND DEFINITIONS. Unless the context requires otherwise, the general provisions, rules of -20- construction, and definitions in the California General Corporation Law shall govern the construction of these Bylaws. Without limiting the generality of the foregoing, the singular number includes the plural, the plural number includes the singular, and the term "person" includes both a Corporation and a natural person. -21- EX-10.1 3 a2048304zex-10_1.txt EXHIBIT 10.1 EXHIBIT 10.1 [OVERLAND LOGO] Overland Data, Inc. 8975 Balboa Avenue San Diego, CA 92123-1599 (858) 571-5555 (858) 495-4267 fax EMPLOYMENT AGREEMENT This Employment Agreement ("Agreement"), which shall become effective on January 1, 2001, finalizes the terms and conditions of employment agreed upon by and between Overland Data, Inc. ("Employer" or the "Company") and Scott McClendon ("Executive"). The parties agree as follows: 1. POSITIONS AND DUTIES. Executive will be employed by the Company in the positions of President and Chief Executive Officer ("CEO"), reporting to the Company's Board of Directors (the "Board"), and shall do and perform all services, acts or things necessary or advisable to manage and conduct the business of the Company and which are normally associated with the positions of President and CEO consistent with the bylaws of the Company and as required by the Board. If the Company hires a new President and CEO on or before June 30, 2001, then the Company shall appoint Executive to the position of Chairman of the Board. 1.1 BEST EFFORTS/FULL-TIME. During the Employment Term (as defined in paragraph 1.2 herein), Executive will act in the best interests of Employer and devote his full business time and best efforts to the performance of his duties under this Agreement. Executive agrees to be available to render such services at all reasonable times and places and in accordance with Employer's directives. Executive shall be assigned to work in the Company's corporate offices in San Diego, California, but may be required to travel in connection with his duties. Executive will abide by all policies, procedures, and decisions made by Employer, as well as all federal, state and local laws, regulations or ordinances applicable to his employment. During his employment, Executive must not engage in any work, paid or unpaid, that creates an actual or potential conflict of interest with Employer's business interests and if, in the opinion of the Board, an actual or potential conflict exists, the Board may in its sole discretion require Executive to choose to either (i) discontinue the other work or (ii) 1 resign from his employment with Employer. The foregoing restriction shall not preclude Executive from engaging in civic, charitable or religious activities, or from serving on boards of directors of companies or organizations so long as he notifies the Board of such services in writing, and such services do not pose a conflict or interfere with his responsibilities to Employer. It is anticipated that Executive shall generally devote no less than 40 hours per week to his duties for Employer. 1.2 TERM OF EMPLOYMENT. This Agreement shall commence on January 1, 2001, and, unless terminated by either party in accordance with paragraph 5 herein, shall continue until January 1, 2002. Thereafter, unless terminated by either party in accordance with paragraph 5, Executive's employment shall automatically renew for an additional one year term on such date and on each anniversary thereof (the period of employment hereunder shall be referred to herein as the "Employment Term"). Except as provided in paragraph 6, this Agreement shall continue during the Employment Term to govern the terms and conditions of Executive's employment, unless modified by the parties hereto in writing. 2. COMPENSATION. 2.1 BASE SALARY. As compensation for the proper and satisfactory performance of all duties under this Agreement, Executive shall earn a gross annual base salary of $325,000.00 ($12,500.00 gross per bi-weekly payroll period), less all legally required payroll deductions, payable in accordance with Employer's normal payroll practices ("Base Salary"). 2.2 BONUS. In addition, Executive will be eligible to receive potential annual bonus earnings of up to $195,000 or such other amount as determined by the Board, based on reasonable and obtainable performance criteria to be determined by the Board. This bonus will be based on the Company's June 30 fiscal year. 2.3 STOCK OPTIONS. Subject to the approval of the Board, Executive will be granted an option to purchase 50,000 shares of Employer's Common Stock under Employer's 2000 Stock Option Plan (the "2000 Plan"). The option exercise price will be equal to the closing market price of the Company's Common Stock on January 15, 2001. Except as otherwise provided in this Agreement, shares subject to this option will be governed by the terms and conditions of the 2000 Plan and the standard form of Stock Option Agreement that Executive will be required to sign as a condition of receiving this option. This option will be an incentive stock option to the maximum amount allowable by the Internal Revenue Code of 1986, as amended; the remainder of this option will be a non-qualified stock option. The shares of Common Stock underlying this option shall vest on a monthly basis over the first thirty-six (36) months following the effective date of this Agreement; PROVIDED, HOWEVER, that all outstanding shares underlying this option shall vest in full and be fully exercisable in the event that the Company hires a new President and CEO on or before June 30, 2001; and PROVIDED, FURTHER, that all outstanding shares underlying this option shall vest in full and be fully exercisable upon a "Change of Control" as defined in Section 1.2 of the 2 Retention Agreement, dated as of January 27, 2000 (the "Retention Agreement"), by and between the Company and Executive. 2.4 UNILATERAL MODIFICATION OF COMPENSATION. Employer reserves the right to modify Executive's compensation, at any time, at its sole and absolute discretion. 3. CUSTOMARY FRINGE BENEFITS. Executive shall be eligible for all customary and usual benefits generally available to all executive level employees of Employer, as determined in the sole and absolute discretion of Employer and subject to the terms and conditions set forth in the applicable benefit plan or policy. Employer reserves the right to change or eliminate any of the fringe benefits provided to executive level employees on a prospective basis at any time, at Employer's sole and absolute discretion. Executive understands that all benefits provided in this paragraph may be reduced by, or subject to, all legally required taxes. 4. BUSINESS EXPENSES. Executive will be reimbursed for all reasonable, out-of-pocket business expenses incurred in the performance of his duties on behalf of Employer subject to Executive's compliance with the Company's established expense reimbursement policy. 5. TERMINATION. 5.1 TERMINATION FOR CAUSE BY EMPLOYER. Employer may terminate Executive's employment under this Agreement immediately at any time for "Cause", which shall include, but is not limited to: (a) acts or omissions constituting gross negligence, recklessness or willful misconduct on the part of Executive with respect to his obligations or otherwise relating to the business of Employer; (b) Executive's material breach of this Agreement; (c) Executive's conviction or entry of a plea of nolo contendere for fraud, misappropriation or embezzlement, or any felony or crime of moral turpitude; (d) Executive's dishonesty or involvement in any conduct that adversely affects Employer's name or public image or is otherwise detrimental to Employer's business interests; (e) Executive's willful neglect of duties as determined in the sole and exclusive discretion of Employer; or (f) Executive's death. 5.1.1. ENTITLEMENTS UPON TERMINATION FOR CAUSE. In the event that Executive's employment is terminated for Cause in accordance with paragraph 5.1, Executive shall be entitled to receive: (a) the Base Salary then in effect, prorated to the date of termination; (b) any performance bonuses earned prior to the date of termination; and (c) any expense reimbursements to which Executive is entitled by virtue of his prior employment with Employer (collectively, (a), (b) and (c) above are referred to herein as the "Standard Entitlements"). In the event of such termination for Cause, Executive shall not be entitled to receive (i) the Severance Payment (as defined in paragraph 5.2 below), or any part thereof, or (ii) any further vesting of stock options; and all other obligations of Employer to Executive pursuant to this Agreement shall automatically terminate and be completely extinguished. 3 5.2 TERMINATION WITHOUT CAUSE BY EMPLOYER. Employer may terminate Executive's employment without Cause at any time. If Employer terminates Executive's employment without Cause, Executive shall be entitled to receive the Standard Entitlements. In addition to the above, in the event that (i) Executive complies with all of the conditions in paragraph 5.2.1 below and (ii) Employer terminates Executive's employment without Cause prior to the date on which a new President and CEO that is hired by the Company commences his employment as President and CEO (the "New CEO Hire Date"), then Executive will be entitled to an aggregate severance payment equal to Executive's then Base Salary, payable on a pro-rated basis in accordance with Employer's regular payroll practices, for the twelve (12) months immediately following such termination date (the "Severance Payment"); PROVIDED, HOWEVER, that, if Executive is removed from his positions as President and CEO as a result of the hiring of a new President and CEO by the Company, then such removal shall not constitute termination without Cause hereunder and Executive shall not be entitled to the Severance Payment. In addition, if (i) Employer has appointed Executive as Employer's Chairman of the Board, and (ii) Employer terminates Executive from such position without Cause on or before the Final Severance Date (as defined below), then Executive will be entitled to receive the Severance Payment provided that Executive complies with all of the conditions in paragraph 5.2.1 below. Upon Executive's termination without Cause, subject to the conditions specified above, any shares of Common Stock underlying Executive's then outstanding stock options that otherwise would vest during the twelve (12) months following the date of such termination shall vest in full and shall be immediately exercisable as of the date of such termination, and such stock options may be exercised in whole or in part at any time within thirty (30) days of the date of such termination without Cause. In the event of such termination without Cause, all of Employer's other obligations pursuant to this Agreement shall terminate automatically and extinguish completely following the date of such termination without Cause. As used herein, the "Final Severance Date" shall mean the first anniversary of the New CEO Hire Date. 5.2.1. CONDITIONS TO RECEIVE SEVERANCE PAYMENTS. The Severance Payment will be paid provided that the following conditions are met: (a) Executive complies with all surviving provisions of this Agreement as specified in paragraph 11.8 below; and (b) Executive executes a full general release in the form attached hereto as EXHIBIT A, releasing all claims, known or unknown, that Executive may have against Employer arising out of or in any way related to Executive's employment or termination of employment with Employer. 5.3 VOLUNTARY RESIGNATION BY EXECUTIVE FOR GOOD REASON. Executive may voluntarily resign his position with Employer at any time provided that he delivers to the Board at least thirty (30) days' advance written notice of his resignation. In the event that (i) Executive complies with all of the conditions in paragraph 5.2.1 above, and (ii) Executive resigns for Good Reason prior to the New CEO Hire Date, Executive will be entitled to receive the Severance Payment. In the event of such resignation for Good 4 Reason, all of Employer's other obligations pursuant to this Agreement shall terminate automatically and extinguish completely following the date of such resignation for Good Reason. In addition, if Employer has appointed Executive as Employer's Chairman of the Board, and if Executive resigns for Good Reason from such position on or before the Final Severance Date, then Executive will be entitled to receive the Severance Payment provided that Executive complies with all of the conditions in paragraph 5.2.1 above. Executive will be deemed to have resigned for "Good Reason" in the following circumstances: (a) Employer reduces Executive's Base Salary and potential annual bonus earnings by more than ten percent (10%), unless the reduction is made as part of, and is generally consistent with, a general reduction of other senior executive salaries and incentive compensation; (b) Executive's position and/or duties are modified so that his duties are no longer consistent with the position of President and CEO, PROVIDED, HOWEVER, that if Executive is removed from his positions as President and CEO as a result of the hiring of a new President and CEO by the Company, then such removal shall not constitute Good Reason hereunder; (c) if Employer has appointed Executive as Employer's Chairman of the Board, Executive's position and/or duties are modified so that his duties are no longer consistent with the position of Chairman of the Board; or (d) Employer relocates Executive's principal place of work to a location more than fifty (50) miles from Employer's current location without his prior written approval. 5.4 VOLUNTARY RESIGNATION BY EXECUTIVE WITHOUT GOOD REASON. In the event that Executive's resignation is without Good Reason, Executive will be entitled to receive the Standard Entitlements, but Executive shall not be entitled to receive (i) the Severance Payment, or any part thereof, or (ii) any further vesting of stock options; and all other obligations of Employer to Executive pursuant to this Agreement shall automatically terminate and be completely extinguished. 5.5 TERMINATION WITHOUT CAUSE OR RESIGNATION FOR GOOD REASON AFTER THE FINAL SEVERANCE DATE. If Executive is terminated without Cause after the Final Severance Date, or if Executive resigns for Good Reason after the Final Severance Date, then Executive shall not be entitled to the Severance Payment or any part thereof. 6. TERMINATION UPON CHANGE OF CONTROL. In the event of a "Change of Control" (as defined in the Retention Agreement), Employer's obligations to Executive pursuant to paragraph 5 above shall terminate automatically and extinguish completely, and the consequences of any termination or resignation of Executive following a Change of Control will be governed by the Retention Agreement. 7. CONFIDENTIALITY/INTELLECTUAL PROPERTY AGREEMENT AND INSIDER TRADING POLICY. Executive agrees that he has read, signed, and will abide by the terms and conditions of Employer's Confidentiality/Intellectual Property Agreement and Employer's Insider Trading Policy. Executive recognizes that his employment with the Company will involve contact with information of substantial value to the Company which gives the Company an advantage over its competitors who do not know or use it, including but not limited to, techniques, designs, drawings, processes, inventions, developments, equipment, 5 prototypes, sales and customer information, and business and financial information relating to the business, products, practices and techniques of the Company (hereinafter referred to as "Confidential and Proprietary Information"). Executive will at all times regard and preserve as confidential such Confidential and Proprietary Information obtained by Executive from whatever source and will not, either during his employment with the Company or thereafter, publish or disclose any part of such Confidential and Proprietary Information in any manner at any time, or use the same except on behalf of the Company, without the prior written consent of the Company. 8. NON-COMPETITION. During the Employment Term, Executive shall devote Executive's full business energies, interest, abilities and productive time to the proper and efficient performance of Executive's duties under this Agreement. The foregoing requirement shall not preclude Executive from engaging in civic, charitable or religious activities, or from serving on boards of directors of companies or organizations which will not present any direct conflict with the interest of Employer or affect the performance of Executive's duties hereunder. Except with the prior written consent of Employer, Executive will not, during the Employment Term, or any period during which Executive is receiving compensation or any other consideration from Employer, engage in competition with Employer, either directly or indirectly, in any manner or capacity, as adviser, principal, agent, partner, officer, director, employee, member of any association or otherwise, in any phase of the business of developing, manufacturing and marketing of products which are in the same field of use or which otherwise compete with the product or products actively under development by Employer. Except as permitted herein, Executive agrees not to acquire, assume or participate in, directly or indirectly, any position, investment or interest known by Executive to be adverse or antagonistic to Employer, its business or prospects, financial or otherwise. Ownership by Executive, as a passive investment, of less than one percent (1%) of the outstanding shares of capital stock of any corporation with one or more classes of its capital stock listed on a national securities exchange or publicly traded in the over-the-counter market shall not constitute a breach of this paragraph 8. 9. NONSOLICITATION. During the Employment Term and for a period of one year thereafter, irrespective of the manner of termination of employment, Executive agrees not to, directly or indirectly, separately, or in association with others: (a) interfere with, impair, disrupt, or damage Employer's relationship with any of its customers or prospective customers by soliciting, encouraging, or causing others to solicit or encourage any of them, for the purpose of diverting or taking away the business such customers have with Employer; or (b) interfere with, impair, disrupt, or damage Employer's business by soliciting, encouraging, or causing others to solicit or encourage, any of Employer's employees to discontinue their employment with Employer. 10. AGREEMENT TO ARBITRATE. Executive and Employer agree to arbitrate any claim or dispute ("Dispute") arising out of or in any way related to this Agreement, the 6 employment relationship between Employer and Executive or the termination of Executive's employment, except as provided in paragraph 10.1 below, to the fullest extent permitted by law. Except as provided above, this method of resolving Disputes shall be the sole and exclusive remedy of the parties. Accordingly, the parties understand that, except as provided herein, they are giving up their rights to have their disputes decided in a court of law and, if applicable, by a jury, and instead agree that their disputes shall be decided by an arbitrator. 10.1 SCOPE OF THE AGREEMENT. A Dispute shall include all disputes or claims between Executive and Employer arising out of, concerning or relating to Executive's employment by Employer, including, without limitation: claims for breach of contract, tort, discrimination, harassment, wrongful termination, demotion, discipline, failure to accommodate, compensation or benefits claims, constitutional claims and claims for violation of any local, state or federal law, or common law, to the fullest extent permitted by law. A Dispute shall not include any dispute or claim, whether brought by either Executive or Employer, for: (a) workers' compensation or unemployment insurance benefits; or (b) the exclusions from arbitration specified in the California Arbitration Act, California Code of Civil Procedure section 1281.8. For the purpose of this paragraph 10, references to "Employer" include Employer and all related or affiliated entities and their employees, supervisors, officers, directors, owners, stockholders, agents, pension or benefit plans, pension or benefit plan sponsors, fiduciaries, administrators, and the successors and assigns of any of them, and this paragraph 10 shall apply to them to the extent that Executive's claims arise out of or relate to their actions on behalf of Employer. 10.2 CONSIDERATION. The parties agree that their mutual promise to arbitrate any and all disputes between them, except as provided in paragraph 10.1, rather than litigate them before the courts or other bodies, provides adequate consideration for this paragraph 10. 10.3 INITIATION OF ARBITRATION. Either party may initiate an arbitration proceeding by providing the other party with written notice of any and all claims forming the basis of such proceeding in sufficient detail to inform the other party of the substance of such claims. In no event shall the request for arbitration be made after the date when institution or legal or equitable proceedings based on such claims would be barred by the applicable statute of limitations. 10.4 ARBITRATION PROCEDURE. The arbitration will be conducted by the American Arbitration Association pursuant to its Commercial Arbitration Rules in San Diego, California by a single, neutral arbitrator. The parties are entitled to representation by an attorney or other representative of their choosing. The arbitrator shall have the power to enter any award that could be entered by a judge of the Superior Court of the State of California, as applicable to the cause of action, and only such power. The parties agree to abide by and perform any award rendered by the arbitrator. Judgment on the award may be entered in any court having jurisdiction thereof. 7 10.5 COSTS OF ARBITRATION. Each of the parties hereto shall initially pay fifty percent (50%) of the arbitration filing, hearing fees and costs of the arbitrator. The arbitrator, as part of its final award, shall have the power to reallocate such fees and costs in favor of the prevailing party in the arbitration. In addition, each party will bear its own attorneys' fees, unless otherwise required or allowed by law and awarded by the arbitrator. 10.6 GOVERNING LAW. All Disputes between the parties shall be governed, determined and resolved by the internal laws of the State of California, including the California Arbitration Act, California Code of Civil Procedure 1280 et seq. 11. GENERAL PROVISIONS. 11.1 SUCCESSORS AND ASSIGNS. The rights and obligations of Employer under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of Employer. Executive shall not be entitled to assign any of Executive's rights or obligations under this Agreement. 11.2 INDEMNIFICATION. The indemnification provisions for Officers and Directors under Employer's Bylaws will (to the maximum extent permitted by law) be extended to Executive. 11.3 WAIVER. This Agreement may not be modified or amended except by an instrument in writing, signed by Executive and by a duly authorized representative of Employer other than Executive. Either party's failure to enforce any provision of this Agreement shall not in any way be construed as an amendment or waiver of any such provision, or prevent that party thereafter from enforcing each and every other provision of this Agreement. 11.4 SEVERABILITY. If any provision of this Agreement is held by an arbitrator or a court of law to be illegal, invalid or unenforceable, then: (a) that provision shall be deemed amended to achieve as nearly as possible the same economic effect as the original provision; and (b) the legality, validity and enforceability of the remaining provisions of this Agreement shall not be affected or impaired thereby. 11.5 INTERPRETATION; CONSTRUCTION. This Agreement has been drafted by Employer, but Executive has participated in the negotiation of its terms. Furthermore, Executive acknowledges that he has had an opportunity to review and revise the Agreement and have it reviewed by legal counsel, if desired. Therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement. 11.6 GOVERNING LAW. This Agreement will be governed by and construed in accordance with the laws of the State of California. 11.7 NOTICES. All notices or demands of any kind required or permitted to be given by the Company or Executive under this Agreement shall be given in writing and 8 shall be personally delivered (and receipted for) or mailed by certified mail, return receipt requested, postage prepaid, addressed as follows: IF TO THE COMPANY: IF TO EXECUTIVE: - ----------------- --------------- Overland Data, Inc. Scott McClendon 8975 Balboa Avenue 1 East Roseland Drive San Diego, CA 92123-4124 La Jolla, CA 92037 Attn: Chief Financial Officer Any such written notice shall be deemed received when personally delivered or three (3) days after its deposit in the United States mail as specified above. Either party may change its address for notices by giving notice to the other party in the manner specified in this paragraph 11.7. 11.8 SURVIVAL. The rights and obligations contained in paragraph 9 ("Nonsolicitation") shall survive any termination or expiration of this Agreement for a period of one year, and paragraphs 7 ("Confidentiality/ Intellectual Property Agreement and Insider Trading Policy"), 10 ("Agreement to Arbitrate") and 11 ("General Provisions") shall survive any termination or expiration of this Agreement. 11.9 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties relating to the subject matter herein and supersedes all prior or simultaneous representations, discussions, negotiations, and agreements, whether written or oral. 11.10 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. THE PARTIES TO THIS AGREEMENT HAVE READ THE FOREGOING AGREEMENT IN ITS ENTIRETY AND FULLY UNDERSTAND EACH AND EVERY PROVISION CONTAINED HEREIN, WHEREFORE, THE PARTIES HAVE FREELY AND VOLUNTARILY EXECUTED THIS AGREEMENT AS OF THE DATE FIRST ABOVE WRITTEN. EXECUTIVE: - --------- /s/ Scott McClendon - ------------------------------------------ Scott McClendon 9 COMPANY: - ------- OVERLAND DATA, INC. /s/ Vernon A. LoForti - ------------------------------------------ Vernon A. LoForti Vice President and Chief Financial Officer 10 EXHIBIT A GENERAL RELEASE This GENERAL RELEASE ("RELEASE") is entered into effective as of ______________, ____, (the "EFFECTIVE DATE") by and between Overland Data, Inc., a California corporation, having its principal offices at 8975 Balboa Avenue, San Diego, California 92123-1599 (the "COMPANY") and Scott McClendon, an individual residing at [_______________] ("EMPLOYEE") with reference to the following facts: RECITALS A. The parties entered into an Employment Agreement (the "AGREEMENT") dated as of January 1, 2001 by which the parties agreed that upon the occurrence of certain conditions, Employee would become eligible for the Severance Payment as defined in the Agreement in exchange for Employee's release of the Company from all claims which Employee may have against the Company as of the date of the termination of Employee's employment. B. The parties desire to dispose of, fully and completely, all claims which Employee may have against the Company in the manner set forth in this Release. AGREEMENT 1. RELEASE. Employee, for himself and his heirs, successors and assigns, fully releases and discharges the Company, its officers, directors, employees, shareholders, attorneys, accountants, other professionals, insurers and agents (collectively, "Agents"), and all entities related to each party, including, but not limited to, heirs, executors, administrators, personal representatives, assigns, parent, subsidiary and sister corporations, affiliates, partners and co-venturers (collectively, "Related Entities"), from all rights, claims, demands, actions, causes of action, liabilities and obligations of every kind, nature and description whatsoever, Employee now has, owns or holds or has at anytime had, owned or held or may have against the Company, Agents or Related Entities from any source whatsoever, whether or not arising from or related to the facts recited in this Release. Employee specifically releases and waives any and all claims arising under any express or implied contract, rule, regulation or ordinance, including, without limitation, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Americans with Disabilities Act, the California Fair Employment and Housing Act, and the Age Discrimination in Employment Act, as amended ("ADEA"). 2. SECTION 1542 WAIVER. This Release is intended as a full and complete release and discharge of any and all claims that Employee may have against the Company, Agents or Related Entities. In making this release, Employee intends to release each of the Company, Agents and Related Entities from liability of any nature whatsoever for any claim of damages or injury or for equitable or declaratory relief of any kind, whether the claim, or any facts on which such claim might be based, is known 11 or unknown to him. Employee expressly waives all rights under Section 1542 of the California Civil Code, which Employee understands provides as follows: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR. Employee acknowledges that he may discover facts different from or in addition to those that he now believes to be true with respect to this Release. Employee agrees that this Release shall remain effective notwithstanding the discovery of any different or additional facts. 3. WAIVER OF CERTAIN CLAIMS. Employee acknowledges that he has been advised in writing of his right to consult with an attorney prior to executing the waivers set out in this Release, and that he has been given a 21-day period in which to consider entering into the release of ADEA claims, if any. In addition, Employee acknowledges that he has been informed that he may revoke a signed waiver of the ADEA claims for up to seven (7) days after executing this Release. 4. NO UNDUE INFLUENCE. This Release is executed voluntarily and without any duress or undue influence. Employee acknowledges that he has read this Release and executed it with his full and free consent. No provision of this Release shall be construed against any party by virtue of the fact that such party or its counsel drafted such provision or the entirety of this Release. 5. GOVERNING LAW. This Release is made and entered into in the State of California and accordingly the rights and obligations of the parties hereunder shall in all respects be construed, interpreted, enforced and governed in accordance with the laws of the State of California as applied to contracts entered into by and between residents of California to be wholly performed within California. 6. SEVERABILITY. If any provision of this Release is held to be invalid, void or unenforceable, the balance of the provisions of this Release shall, nevertheless, remain in full force and effect and shall in no way be affected, impaired or invalidated. 7. COUNTERPARTS. This Release may be executed simultaneously in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Release may be executed by facsimile, with originals to follow by overnight courier. 8. DISPUTE RESOLUTION PROCEDURES. Any dispute or claim arising out of this Release shall be subject to final and binding arbitration. The arbitration will be conducted by one arbitrator who is a member of the American Arbitration Association ("AAA") or of the Judicial Arbitration and Mediation Services ("JAMS") and will be 12 governed by the Model Employment Arbitration rules of AAA. The arbitration shall be held in San Diego, California. The arbitrator shall have all authority to determine the arbitrability of any claim and enter a final and binding judgment at the conclusion of any proceedings in respect of the arbitration. Any final judgment only may be appealed on the grounds of improper bias or improper conduct of the arbitrator. Notwithstanding any rule of AAA to the contrary, the parties will be entitled to conduct discovery (i.e. investigation of facts through depositions and other means) which shall be governed by California Code of Civil Procedure Section 1283.05 (the "CCP"). The arbitrator shall have all power and authority to enter orders relating to such discovery as are allowed under the CCP. The arbitrator will apply California substantive law in all respects. The party prevailing in the resolution of any such claim will be entitled, in addition to such other relief as may be granted, to an award of all actual attorneys fees and costs incurred in pursuit of the claim, without regard to any statute, schedule, or rule of court purported to restrict such award. 9. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of the parties with respect to the subject matter of this Agreement, and supersedes all prior and contemporaneous negotiations, agreements and understandings between the parties, oral or written. 10. MODIFICATION; WAIVERS. No modification, termination or attempted waiver of this Agreement will be valid unless in writing, signed by the party against whom such modification, termination or waiver is sought to be enforced. 11. AMENDMENT. This Agreement may be amended or supplemented only by a writing signed by Employee and the Company. Dated: --------------------------------- -------------------------------------- Scott McClendon 13 EX-10.2 4 a2048304zex-10_2.txt EXHIBIT 10.2 EXHIBIT 10.2 [OVERLAND LOGO] Overland Data, Inc. 8975 Balboa Avenue San Diego, CA 92123-1599 (858) 571-5555 (858) 495-4267 fax EMPLOYMENT AGREEMENT This Employment Agreement ("Agreement"), which shall become effective on January 1, 2001, finalizes the terms and conditions of employment agreed upon by and between Overland Data, Inc. ("Employer" or the "Company") and W. Michael Gawarecki ("Executive"). The parties agree as follows: 1. POSITIONS AND DUTIES. Executive will be employed by the Company in the position of Vice President of Operations, reporting to the Company's President and Chief Executive Officer ("CEO"), and shall do and perform all services, acts or things necessary or advisable to manage and conduct the business of the Company and which are normally associated with the position of Vice President of Operations consistent with the bylaws of the Company and as required by the Company's President & CEO and by the Company's Board of Directors (the "Board"). 1.1 BEST EFFORTS/FULL-TIME. During the Employment Term (as defined in paragraph 1.2 herein), Executive will act in the best interests of Employer and devote his full business time and best efforts to the performance of his duties under this Agreement. Executive agrees to be available to render such services at all reasonable times and places and in accordance with Employer's directives. Executive shall be assigned to work in the Company's corporate offices in San Diego, California, but may be required to travel in connection with his duties. Executive will abide by all policies, procedures, and decisions made by Employer, as well as all federal, state and local laws, regulations or ordinances applicable to his employment. During his employment, Executive must not engage in any work, paid or unpaid, that creates an actual or potential conflict of interest with Employer's business interests and if, in the opinion of the Board, an actual or potential conflict exists, the Board may in its sole discretion require Executive to choose to either (i) discontinue the other work or (ii) resign from his employment with Employer. The foregoing restriction shall not preclude Executive from engaging in civic, charitable or religious activities, or from serving on 1 boards of directors of companies or organizations so long as he notifies the Board of such services in writing, and such services do not pose a conflict or interfere with his responsibilities to Employer. It is anticipated that Executive shall generally devote no less than 40 hours per week to his duties for Employer. 1.2 TERM OF EMPLOYMENT. This Agreement shall commence on January 1, 2001, and, unless terminated by either party in accordance with paragraph 5 herein, shall continue until the first anniversary of the date on which the new President and Chief Executifve Officer hired by the Company to replace Scott McClendon commences his employment as President and Chief Executive Officer of the Company (the period of employment hereunder shall be referred to herein as the "Employment Term"). Except as provided in paragraph 6, this Agreement shall continue during the Employment Term to govern the terms and conditions of Executive's employment, unless modified by the parties hereto in writing. 2. COMPENSATION. 2.1 BASE SALARY. As compensation for the proper and satisfactory performance of all duties under this Agreement, Executive shall earn a gross annual base salary of $180,000.00 ($6,923.07 gross per bi-weekly payroll period), less all legally required payroll deductions, payable in accordance with Employer's normal payroll practices ("Base Salary"). 2.2 BONUS. In addition, Executive will be eligible to receive potential annual bonus earnings of up to $81,000 or such other amount as determined by the Board, based on reasonable and obtainable performance criteria to be mutually determined by the Board and the President & CEO. This bonus will be based on the Company's June 30 fiscal year. 2.3 STOCK OPTIONS. Subject to the approval of the Board, Executive will be granted an option to purchase 35,000 shares of Employer's Common Stock under Employer's 2000 Stock Option Plan (the "2000 Plan"). The option exercise price will be equal to the closing market price of the Company's Common Stock on January 15, 2001. Except as otherwise provided in this Agreement, shares subject to this option will be governed by the terms and conditions of the 2000 Plan and the standard form of Stock Option Agreement that Executive will be required to sign as a condition of receiving this option. This option will be an incentive stock option to the maximum amount allowable by the Internal Revenue Code of 1986, as amended; the remainder of this option will be a non-qualified stock option. The shares of Common Stock underlying this option shall vest on a monthly basis over the first twelve months following the effective date of this Agreement. Notwithstanding the foregoing, all outstanding shares underlying this option shall vest in full and be fully exercisable upon a "Change of Control" as defined in Section 1.2 of the Retention Agreement, dated as of January 27, 2000 (the "Retention Agreement"), by and between the Company and Executive. 2 2.4 UNILATERAL MODIFICATION OF COMPENSATION. Employer reserves the right to modify Executive's compensation, at any time, at its sole and absolute discretion. 3. CUSTOMARY FRINGE BENEFITS. Executive shall be eligible for all customary and usual benefits generally available to all executive level employees of Employer, as determined in the sole and absolute discretion of Employer and subject to the terms and conditions set forth in the applicable benefit plan or policy. Employer reserves the right to change or eliminate any of the fringe benefits provided to executive level employees on a prospective basis at any time, at Employer's sole and absolute discretion. Executive understands that all benefits provided in this paragraph may be reduced by, or subject to, all legally required taxes. 4. BUSINESS EXPENSES. Executive will be reimbursed for all reasonable, out-of-pocket business expenses incurred in the performance of his duties on behalf of Employer subject to Executive's compliance with the Company's established expense reimbursement policy. 5. TERMINATION. 5.1 TERMINATION FOR CAUSE BY EMPLOYER. Employer may terminate Executive's employment under this Agreement immediately at any time for "Cause", which shall include, but is not limited to: (a) acts or omissions constituting gross negligence, recklessness or willful misconduct on the part of Executive with respect to his obligations or otherwise relating to the business of Employer; (b) Executive's material breach of this Agreement; (c) Executive's conviction or entry of a plea of nolo contendere for fraud, misappropriation or embezzlement, or any felony or crime of moral turpitude; (d) Executive's dishonesty or involvement in any conduct that adversely affects Employer's name or public image or is otherwise detrimental to Employer's business interests; (e) Executive's willful neglect of duties as determined in the sole and exclusive discretion of Employer; or (f) Executive's death. 5.1.1. ENTITLEMENTS UPON TERMINATION FOR CAUSE. In the event that Executive's employment is terminated for Cause in accordance with paragraph 5.1, Executive shall be entitled to receive: (a) the Base Salary then in effect, prorated to the date of termination; (b) any performance bonuses earned prior to the date of termination; and (c) any expense reimbursements to which Executive is entitled by virtue of his prior employment with Employer (collectively, (a), (b) and (c) above are referred to herein as the "Standard Entitlements"). In the event of such termination for Cause, Executive shall not be entitled to receive (i) the Severance Payment (as defined in paragraph 5.2 below), or any part thereof, or (ii) any further vesting of stock options; and all other obligations of Employer to Executive pursuant to this Agreement shall automatically terminate and be completely extinguished. 5.2 TERMINATION WITHOUT CAUSE BY EMPLOYER. Employer may terminate Executive's employment without Cause at any time. If Employer terminates Executive's employment without Cause, Executive shall be entitled to receive the Standard 3 Entitlements. In addition to the above, in the event that (i) Employer terminates Executive's employment without Cause during the Employment Term, and (ii) Executive complies with all of the conditions in paragraph 5.2.1 below, Executive will be entitled to an aggregate severance payment equal to Executive's then Base Salary, payable on a pro-rated basis in accordance with Employer's regular payroll practices for the twelve (12) months immediately following such termination date (the "Severance Payment"). Upon Executive's termination without Cause, subject to the conditions specified above, any shares of Common Stock underlying Executive's then outstanding stock options that otherwise would vest during the twelve (12) months following the date of such termination shall vest in full and shall be immediately exercisable as of the date of such termination, and such stock options may be exercised in whole or in part at any time within thirty (30) days of the date of such termination without Cause. In the event of such termination without Cause, all of Employer's other obligations pursuant to this Agreement shall terminate automatically and extinguish completely following the date of such termination without Cause. 5.2.1. CONDITIONS TO RECEIVE SEVERANCE PAYMENTS. The Severance Payment will be paid provided that the following conditions are met: (a) Executive complies with all surviving provisions of this Agreement as specified in paragraph 11.8 below; and (b) Executive executes a full general release in the form attached hereto as EXHIBIT A, releasing all claims, known or unknown, that Executive may have against Employer arising out of or in any way related to Executive's employment or termination of employment with Employer. 5.3 VOLUNTARY RESIGNATION BY EXECUTIVE FOR GOOD REASON. Executive may voluntarily resign his position with Employer at any time provided that he delivers to the Board at least thirty (30) days' advance written notice of his resignation. In the event that (i) his resignation is for Good Reason (as defined below) and (ii) such resignation for Good Reason occurs during the Employment Term, Executive will be entitled to receive the Severance Payment, provided that Executive complies with all of the conditions in paragraph 5.2.1 above. In the event of such resignation for Good Reason, all of Employer's other obligations pursuant to this Agreement shall terminate automatically and extinguish completely following the date of such resignation for Good Reason. Executive will be deemed to have resigned for "Good Reason" in the following circumstances: (a) Employer reduces Executive's Base Salary and potential annual bonus earnings by more than ten percent (10%), unless the reduction is made as part of, and is generally consistent with, a general reduction of other senior executive salaries and incentive compensation; (b) Executive's position and/or duties are modified so that his duties are no longer consistent with the position of Vice President of Operations or (c) Employer relocates Executive's principal place of work to a location more than fifty (50) miles from Employer's current location without his prior written approval. 4 5.4 VOLUNTARY RESIGNATION BY EXECUTIVE WITHOUT GOOD REASON. In the event that Executive's resignation is without Good Reason, Executive will be entitled to receive the Standard Entitlements, but Executive shall not be entitled to receive (i) the Severance Payment, or any part thereof, or (ii) any further vesting of stock options; and all other obligations of Employer to Executive pursuant to this Agreement shall automatically terminate and be completely extinguished. 5.5 TERMINATION WITHOUT CAUSE OR RESIGNATION FOR GOOD REASON AFTER THE EMPLOYMENT TERM. If Executive is terminated without Cause after the Employment Term, or if Executive resigns for Good Reason after the Employment Term, then Executive shall not be entitled to the Severance Payment, or any part thereof, as defined in this Agreement. 6. TERMINATION UPON CHANGE OF CONTROL. In the event of a "Change of Control" (as defined in the Retention Agreement), Employer's obligations to Executive pursuant to paragraph 5 above shall terminate automatically and extinguish completely, and the consequences of any termination or resignation of Executive following a Change of Control will be as governed by the Retention Agreement. 7. CONFIDENTIALITY/INTELLECTUAL PROPERTY AGREEMENT AND INSIDER TRADING POLICY. Executive agrees that he has read, signed, and will abide by the terms and conditions of Employer's Confidentiality/Intellectual Property Agreement and Employer's Insider Trading Policy. Executive recognizes that his employment with the Company will involve contact with information of substantial value to the Company which gives the Company an advantage over its competitors who do not know or use it, including but not limited to, techniques, designs, drawings, processes, inventions, developments, equipment, prototypes, sales and customer information, and business and financial information relating to the business, products, practices and techniques of the Company (hereinafter referred to as "Confidential and Proprietary Information"). Executive will at all times regard and preserve as confidential such Confidential and Proprietary Information obtained by Executive from whatever source and will not, either during his employment with the Company or thereafter, publish or disclose any part of such Confidential and Proprietary Information in any manner at any time, or use the same except on behalf of the Company, without the prior written consent of the Company. 8. NON-COMPETITION. During the Employment Term, Executive shall devote Executive's full business energies, interest, abilities and productive time to the proper and efficient performance of Executive's duties under this Agreement. The foregoing requirement shall not preclude Executive from engaging in civic, charitable or religious activities, or from serving on boards of directors of companies or organizations which will not present any direct conflict with the interest of Employer or affect the performance of Executive's duties hereunder. 5 Except with the prior written consent of Employer, Executive will not, during the Employment Term, or any period during which Executive is receiving compensation or any other consideration from Employer, engage in competition with Employer, either directly or indirectly, in any manner or capacity, as adviser, principal, agent, partner, officer, director, employee, member of any association or otherwise, in any phase of the business of developing, manufacturing and marketing of products which are in the same field of use or which otherwise compete with the product or products actively under development by Employer. Except as permitted herein, Executive agrees not to acquire, assume or participate in, directly or indirectly, any position, investment or interest known by Executive to be adverse or antagonistic to Employer, its business or prospects, financial or otherwise. Ownership by Executive, as a passive investment, of less than one percent (1%) of the outstanding shares of capital stock of any corporation with one or more classes of its capital stock listed on a national securities exchange or publicly traded in the over-the-counter market shall not constitute a breach of this paragraph 8. 9. NONSOLICITATION. During the Employment Term and for a period of one year thereafter, irrespective of the manner of termination of employment, Executive agrees not to, directly or indirectly, separately, or in association with others: (a) interfere with, impair, disrupt, or damage Employer's relationship with any of its customers or prospective customers by soliciting, encouraging, or causing others to solicit or encourage any of them, for the purpose of diverting or taking away the business such customers have with Employer; or (b) interfere with, impair, disrupt, or damage Employer's business by soliciting, encouraging, or causing others to solicit or encourage, any of Employer's employees to discontinue their employment with Employer. 10. AGREEMENT TO ARBITRATE. Executive and Employer agree to arbitrate any claim or dispute ("Dispute") arising out of or in any way related to this Agreement, the employment relationship between Employer and Executive or the termination of Executive's employment, except as provided in paragraph 10.1 below, to the fullest extent permitted by law. Except as provided above, this method of resolving Disputes shall be the sole and exclusive remedy of the parties. Accordingly, the parties understand that, except as provided herein, they are giving up their rights to have their disputes decided in a court of law and, if applicable, by a jury, and instead agree that their disputes shall be decided by an arbitrator. 10.1 SCOPE OF THE AGREEMENT. A Dispute shall include all disputes or claims between Executive and Employer arising out of, concerning or relating to Executive's employment by Employer, including, without limitation: claims for breach of contract, tort, discrimination, harassment, wrongful termination, demotion, discipline, failure to accommodate, compensation or benefits claims, constitutional claims and claims for violation of any local, state or federal law, or common law, to the fullest extent permitted by law. A Dispute shall not include any dispute or claim, whether brought by either Executive or Employer, for: (a) workers' compensation or unemployment insurance 6 benefits; or (b) the exclusions from arbitration specified in the California Arbitration Act, California Code of Civil Procedure section 1281.8. For the purpose of this paragraph 10, references to "Employer" include Employer and all related or affiliated entities and their employees, supervisors, officers, directors, owners, stockholders, agents, pension or benefit plans, pension or benefit plan sponsors, fiduciaries, administrators, and the successors and assigns of any of them, and this paragraph 10 shall apply to them to the extent that Executive's claims arise out of or relate to their actions on behalf of Employer. 10.2 CONSIDERATION. The parties agree that their mutual promise to arbitrate any and all disputes between them, except as provided in paragraph 10.1, rather than litigate them before the courts or other bodies, provides adequate consideration for this paragraph 10. 10.3 INITIATION OF ARBITRATION. Either party may initiate an arbitration proceeding by providing the other party with written notice of any and all claims forming the basis of such proceeding in sufficient detail to inform the other party of the substance of such claims. In no event shall the request for arbitration be made after the date when institution or legal or equitable proceedings based on such claims would be barred by the applicable statute of limitations. 10.4 ARBITRATION PROCEDURE. The arbitration will be conducted by the American Arbitration Association pursuant to its Commercial Arbitration Rules in San Diego, California by a single, neutral arbitrator. The parties are entitled to representation by an attorney or other representative of their choosing. The arbitrator shall have the power to enter any award that could be entered by a judge of the Superior Court of the State of California, as applicable to the cause of action, and only such power. The parties agree to abide by and perform any award rendered by the arbitrator. Judgment on the award may be entered in any court having jurisdiction thereof. 10.5 COSTS OF ARBITRATION. Each of the parties hereto shall initially pay fifty percent (50%) of the arbitration filing, hearing fees and costs of the arbitrator. The arbitrator, as part of its final award, shall have the power to reallocate such fees and costs in favor of the prevailing party in the arbitration. In addition, each party will bear its own attorneys' fees, unless otherwise required or allowed by law and awarded by the arbitrator. 10.6 GOVERNING LAW. All Disputes between the parties shall be governed, determined and resolved by the internal laws of the State of California, including the California Arbitration Act, California Code of Civil Procedure 1280 et seq. 11. GENERAL PROVISIONS. 11.1 SUCCESSORS AND ASSIGNS. The rights and obligations of Employer under this Agreement shall inure to the benefit of and shall be binding upon the successors 7 and assigns of Employer. Executive shall not be entitled to assign any of Executive's rights or obligations under this Agreement. 11.2 INDEMNIFICATION. The indemnification provisions for Officers and Directors under Employer's Bylaws will (to the maximum extent permitted by law) be extended to Executive. 11.3 WAIVER. This Agreement may not be modified or amended except by an instrument in writing, signed by Executive and by a duly authorized representative of Employer other than Executive. Either party's failure to enforce any provision of this Agreement shall not in any way be construed as an amendment or waiver of any such provision, or prevent that party thereafter from enforcing each and every other provision of this Agreement. 11.4 SEVERABILITY. If any provision of this Agreement is held by an arbitrator or a court of law to be illegal, invalid or unenforceable, then: (a) that provision shall be deemed amended to achieve as nearly as possible the same economic effect as the original provision; and (b) the legality, validity and enforceability of the remaining provisions of this Agreement shall not be affected or impaired thereby. 11.5 INTERPRETATION; CONSTRUCTION. This Agreement has been drafted by Employer, but Executive has participated in the negotiation of its terms. Furthermore, Executive acknowledges that he has had an opportunity to review and revise the Agreement and have it reviewed by legal counsel, if desired. Therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement. 11.6 GOVERNING LAW. This Agreement will be governed by and construed in accordance with the laws of the State of California. 11.7 NOTICES. All notices or demands of any kind required or permitted to be given by the Company or Executive under this Agreement shall be given in writing and shall be personally delivered (and receipted for) or mailed by certified mail, return receipt requested, postage prepaid, addressed as follows: IF TO THE COMPANY: IF TO EXECUTIVE: - ----------------- --------------- Overland Data, Inc. W. Michael Gawarecki 8975 Balboa Avenue 3631 Brandywine Street San Diego, CA 92123-4124 San Diego, CA 92117 Attn: President & CEO Any such written notice shall be deemed received when personally delivered or three (3) days after its deposit in the United States mail as specified above. Either party may change its address for notices by giving notice to the other party in the manner specified in this paragraph 11.7. 8 11.8 SURVIVAL. The rights and obligations contained in paragraph 9 ("Nonsolicitation") shall survive any termination or expiration of this Agreement for a period of one year, and paragraphs 7 ("Confidentiality/Intellectual Property Agreement and Insider Trading Policy"), 10 ("Agreement to Arbitrate") and 11 ("General Provisions") shall survive any termination or expiration of this Agreement. 11.9 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties relating to the subject matter herein and supersedes all prior or simultaneous representations, discussions, negotiations, and agreements, whether written or oral. 11.10 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. THE PARTIES TO THIS AGREEMENT HAVE READ THE FOREGOING AGREEMENT IN ITS ENTIRETY AND FULLY UNDERSTAND EACH AND EVERY PROVISION CONTAINED HEREIN, WHEREFORE, THE PARTIES HAVE FREELY AND VOLUNTARILY EXECUTED THIS AGREEMENT AS OF THE DATE FIRST ABOVE WRITTEN. Executive: - --------- /s/ W. Michael Gawarecki - -------------------------------------------- W. Michael Gawarecki Company: - ------- OVERLAND DATA, INC. /s/ Scott McClendon - -------------------------------------------- Scott McClendon President and Chief Executive Officer 9 EXHIBIT A GENERAL RELEASE This GENERAL RELEASE ("RELEASE") is entered into effective as of ______________, ____, (the "EFFECTIVE DATE") by and between Overland Data, Inc., a California corporation, having its principal offices at 8975 Balboa Avenue, San Diego, California 92123-1599 (the "COMPANY") and W. Michael Gawarecki, an individual residing at [_______________] ("EMPLOYEE") with reference to the following facts: RECITALS A. The parties entered into an Employment Agreement (the "AGREEMENT") dated as of January 1, 2001 by which the parties agreed that upon the occurrence of certain conditions, Employee would become eligible for the Severance Payment as defined in the Agreement in exchange for Employee's release of the Company from all claims which Employee may have against the Company as of the date of the termination of Employee's employment. B. The parties desire to dispose of, fully and completely, all claims which Employee may have against the Company in the manner set forth in this Release. AGREEMENT 1. RELEASE. Employee, for himself and his heirs, successors and assigns, fully releases and discharges the Company, its officers, directors, employees, shareholders, attorneys, accountants, other professionals, insurers and agents (collectively, "Agents"), and all entities related to each party, including, but not limited to, heirs, executors, administrators, personal representatives, assigns, parent, subsidiary and sister corporations, affiliates, partners and co-venturers (collectively, "Related Entities"), from all rights, claims, demands, actions, causes of action, liabilities and obligations of every kind, nature and description whatsoever, Employee now has, owns or holds or has at anytime had, owned or held or may have against the Company, Agents or Related Entities from any source whatsoever, whether or not arising from or related to the facts recited in this Release. Employee specifically releases and waives any and all claims arising under any express or implied contract, rule, regulation or ordinance, including, without limitation, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Americans with Disabilities Act, the California Fair Employment and Housing Act, and the Age Discrimination in Employment Act, as amended ("ADEA"). 2. SECTION 1542 WAIVER. This Release is intended as a full and complete release and discharge of any and all claims that Employee may have against the Company, Agents or Related Entities. In making this release, Employee intends to release each of the Company, Agents and Related Entities from liability of any nature whatsoever for any claim of damages or injury or for equitable or declaratory relief of any kind, whether the claim, or any facts on which such claim might be based, is known 10 or unknown to him. Employee expressly waives all rights under Section 1542 of the California Civil Code, which Employee understands provides as follows: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR. Employee acknowledges that he may discover facts different from or in addition to those that he now believes to be true with respect to this Release. Employee agrees that this Release shall remain effective notwithstanding the discovery of any different or additional facts. 3. WAIVER OF CERTAIN CLAIMS. Employee acknowledges that he has been advised in writing of his right to consult with an attorney prior to executing the waivers set out in this Release, and that he has been given a 21-day period in which to consider entering into the release of ADEA claims, if any. In addition, Employee acknowledges that he has been informed that he may revoke a signed waiver of the ADEA claims for up to seven (7) days after executing this Release. 4. NO UNDUE INFLUENCE. This Release is executed voluntarily and without any duress or undue influence. Employee acknowledges that he has read this Release and executed it with his full and free consent. No provision of this Release shall be construed against any party by virtue of the fact that such party or its counsel drafted such provision or the entirety of this Release. 5. GOVERNING LAW. This Release is made and entered into in the State of California and accordingly the rights and obligations of the parties hereunder shall in all respects be construed, interpreted, enforced and governed in accordance with the laws of the State of California as applied to contracts entered into by and between residents of California to be wholly performed within California. 6. SEVERABILITY. If any provision of this Release is held to be invalid, void or unenforceable, the balance of the provisions of this Release shall, nevertheless, remain in full force and effect and shall in no way be affected, impaired or invalidated. 7. COUNTERPARTS. This Release may be executed simultaneously in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Release may be executed by facsimile, with originals to follow by overnight courier. 8. DISPUTE RESOLUTION PROCEDURES. Any dispute or claim arising out of this Release shall be subject to final and binding arbitration. The arbitration will be conducted by one arbitrator who is a member of the American Arbitration Association 11 ("AAA") or of the Judicial Arbitration and Mediation Services ("JAMS") and will be governed by the Model Employment Arbitration rules of AAA. The arbitration shall be held in San Diego, California. The arbitrator shall have all authority to determine the arbitrability of any claim and enter a final and binding judgment at the conclusion of any proceedings in respect of the arbitration. Any final judgment only may be appealed on the grounds of improper bias or improper conduct of the arbitrator. Notwithstanding any rule of AAA to the contrary, the parties will be entitled to conduct discovery (i.e. investigation of facts through depositions and other means) which shall be governed by California Code of Civil Procedure Section 1283.05 (the "CCP"). The arbitrator shall have all power and authority to enter orders relating to such discovery as are allowed under the CCP. The arbitrator will apply California substantive law in all respects. The party prevailing in the resolution of any such claim will be entitled, in addition to such other relief as may be granted, to an award of all actual attorneys fees and costs incurred in pursuit of the claim, without regard to any statute, schedule, or rule of court purported to restrict such award. 9. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of the parties with respect to the subject matter of this Agreement, and supersedes all prior and contemporaneous negotiations, agreements and understandings between the parties, oral or written. 10. MODIFICATION; WAIVERS. No modification, termination or attempted waiver of this Agreement will be valid unless in writing, signed by the party against whom such modification, termination or waiver is sought to be enforced. 11. AMENDMENT. This Agreement may be amended or supplemented only by a writing signed by Employee and the Company. Dated: -------------------------------- ----------------------------------- W. Michael Gawarecki 12 EX-10.3 5 a2048304zex-10_3.txt EXHIBIT 10.3 EXHIBIT 10.3 [OVERLAND LOGO] Overland Data, Inc. 8975 Balboa Avenue San Diego, CA 92123-1599 (858) 571-5555 (858) 495-4267 fax EMPLOYMENT AGREEMENT This Employment Agreement ("Agreement"), which shall become effective on January 1, 2001, finalizes the terms and conditions of employment agreed upon by and between Overland Data, Inc. ("Employer" or the "Company") and Robert J. Scroop ("Executive"). The parties agree as follows: 1. POSITIONS AND DUTIES. Executive will be employed by the Company in the position of Vice President of Engineering, reporting to the Company's President and Chief Executive Officer ("CEO"), and shall do and perform all services, acts or things necessary or advisable to manage and conduct the business of the Company and which are normally associated with the position of Vice President of Engineering consistent with the bylaws of the Company and as required by the Company's President & CEO and by the Company's Board of Directors (the "Board"). 1.1 BEST EFFORTS/FULL-TIME. During the Employment Term (as defined in paragraph 1.2 herein), Executive will act in the best interests of Employer and devote his full business time and best efforts to the performance of his duties under this Agreement. Executive agrees to be available to render such services at all reasonable times and places and in accordance with Employer's directives. Executive shall be assigned to work in the Company's corporate offices in San Diego, California, but may be required to travel in connection with his duties. Executive will abide by all policies, procedures, and decisions made by Employer, as well as all federal, state and local laws, regulations or ordinances applicable to his employment. During his employment, Executive must not engage in any work, paid or unpaid, that creates an actual or potential conflict of interest with Employer's business interests and if, in the opinion of the Board, an actual or potential conflict exists, the Board may in its sole discretion require Executive to choose to either (i) discontinue the other work or (ii) resign from his employment with Employer. The foregoing restriction shall not preclude Executive from engaging in civic, charitable or religious activities, or from serving on 1 boards of directors of companies or organizations so long as he notifies the Board of such services in writing, and such services do not pose a conflict or interfere with his responsibilities to Employer. It is anticipated that Executive shall generally devote no less than 40 hours per week to his duties for Employer. 1.2 TERM OF EMPLOYMENT. This Agreement shall commence on January 1, 2001, and, unless terminated by either party in accordance with paragraph 5 herein, shall continue until the first anniversary of the date on which the new President and Chief Executifve Officer hired by the Company to replace Scott McClendon commences his employment as President and Chief Executive Officer of the Company (the period of employment hereunder shall be referred to herein as the "Employment Term"). Except as provided in paragraph 6, this Agreement shall continue during the Employment Term to govern the terms and conditions of Executive's employment, unless modified by the parties hereto in writing. 2. COMPENSATION. 2.1 BASE SALARY. As compensation for the proper and satisfactory performance of all duties under this Agreement, Executive shall earn a gross annual base salary of $200,000.00 ($7,692.30 gross per bi-weekly payroll period), less all legally required payroll deductions, payable in accordance with Employer's normal payroll practices ("Base Salary"). 2.2 BONUS. In addition, Executive will be eligible to receive potential annual bonus earnings of up to $80,000 or such other amount as determined by the Board, based on reasonable and obtainable performance criteria to be mutually determined by the Board and the President & CEO. This bonus will be based on the Company's June 30 fiscal year. 2.3 STOCK OPTIONS. Subject to the approval of the Board, Executive will be granted an option to purchase 30,000 shares of Employer's Common Stock under Employer's 2000 Stock Option Plan (the "2000 Plan"). The option exercise price will be equal to the closing market price of the Company's Common Stock on January 15, 2001. Except as otherwise provided in this Agreement, shares subject to this option will be governed by the terms and conditions of the 2000 Plan and the standard form of Stock Option Agreement that Executive will be required to sign as a condition of receiving this option. This option will be an incentive stock option to the maximum amount allowable by the Internal Revenue Code of 1986, as amended; the remainder of this option will be a non-qualified stock option. The shares of Common Stock underlying this option shall vest on a monthly basis over the first twelve months following the effective date of this Agreement. Notwithstanding the foregoing, all outstanding shares underlying this option shall vest in full and be fully exercisable upon a "Change of Control" as defined in Section 1.2 of the Retention Agreement, dated as of January 27, 2000 (the "Retention Agreement"), by and between the Company and Executive. 2 2.4 UNILATERAL MODIFICATION OF COMPENSATION. Employer reserves the right to modify Executive's compensation, at any time, at its sole and absolute discretion. 3. CUSTOMARY FRINGE BENEFITS. Executive shall be eligible for all customary and usual benefits generally available to all executive level employees of Employer, as determined in the sole and absolute discretion of Employer and subject to the terms and conditions set forth in the applicable benefit plan or policy. Employer reserves the right to change or eliminate any of the fringe benefits provided to executive level employees on a prospective basis at any time, at Employer's sole and absolute discretion. Executive understands that all benefits provided in this paragraph may be reduced by, or subject to, all legally required taxes. 4. BUSINESS EXPENSES. Executive will be reimbursed for all reasonable, out-of-pocket business expenses incurred in the performance of his duties on behalf of Employer subject to Executive's compliance with the Company's established expense reimbursement policy. 5. TERMINATION. 5.1 TERMINATION FOR CAUSE BY EMPLOYER. Employer may terminate Executive's employment under this Agreement immediately at any time for "Cause", which shall include, but is not limited to: (a) acts or omissions constituting gross negligence, recklessness or willful misconduct on the part of Executive with respect to his obligations or otherwise relating to the business of Employer; (b) Executive's material breach of this Agreement; (c) Executive's conviction or entry of a plea of nolo contendere for fraud, misappropriation or embezzlement, or any felony or crime of moral turpitude; (d) Executive's dishonesty or involvement in any conduct that adversely affects Employer's name or public image or is otherwise detrimental to Employer's business interests; (e) Executive's willful neglect of duties as determined in the sole and exclusive discretion of Employer; or (f) Executive's death. 5.1.1. ENTITLEMENTS UPON TERMINATION FOR CAUSE. In the event that Executive's employment is terminated for Cause in accordance with paragraph 5.1, Executive shall be entitled to receive: (a) the Base Salary then in effect, prorated to the date of termination; (b) any performance bonuses earned prior to the date of termination; and (c) any expense reimbursements to which Executive is entitled by virtue of his prior employment with Employer (collectively, (a), (b) and (c) above are referred to herein as the "Standard Entitlements"). In the event of such termination for Cause, Executive shall not be entitled to receive (i) the Severance Payment (as defined in paragraph 5.2 below), or any part thereof, or (ii) any further vesting of stock options; and all other obligations of Employer to Executive pursuant to this Agreement shall automatically terminate and be completely extinguished. 5.2 TERMINATION WITHOUT CAUSE BY EMPLOYER. Employer may terminate Executive's employment without Cause at any time. If Employer terminates Executive's employment without Cause, Executive shall be entitled to receive the Standard Entitlements. In addition to the above, in the event that (i) Employer terminates 3 Executive's employment without Cause during the Employment Term, and (ii) Executive complies with all of the conditions in paragraph 5.2.1 below, Executive will be entitled to an aggregate severance payment equal to Executive's then Base Salary, payable on a pro-rated basis in accordance with Employer's regular payroll practices for the twelve (12) months immediately following such termination date (the "Severance Payment"). Upon Executive's termination without Cause, subject to the conditions specified above, any shares of Common Stock underlying Executive's then outstanding stock options that otherwise would vest during the twelve (12) months following the date of such termination shall vest in full and shall be immediately exercisable as of the date of such termination, and such stock options may be exercised in whole or in part at any time within thirty (30) days of the date of such termination without Cause. In the event of such termination without Cause, all of Employer's other obligations pursuant to this Agreement shall terminate automatically and extinguish completely following the date of such termination without Cause. 5.2.1. CONDITIONS TO RECEIVE SEVERANCE PAYMENTS. The Severance Payment will be paid provided that the following conditions are met: (a) Executive complies with all surviving provisions of this Agreement as specified in paragraph 11.8 below; and (b) Executive executes a full general release in the form attached hereto as EXHIBIT A, releasing all claims, known or unknown, that Executive may have against Employer arising out of or in any way related to Executive's employment or termination of employment with Employer. 5.3 VOLUNTARY RESIGNATION BY EXECUTIVE FOR GOOD REASON. Executive may voluntarily resign his position with Employer at any time provided that he delivers to the Board at least thirty (30) days' advance written notice of his resignation. In the event that (i) his resignation is for Good Reason (as defined below) and (ii) such resignation for Good Reason occurs during the Employment Term, Executive will be entitled to receive the Severance Payment, provided that Executive complies with all of the conditions in paragraph 5.2.1 above. In the event of such resignation for Good Reason, all of Employer's other obligations pursuant to this Agreement shall terminate automatically and extinguish completely following the date of such resignation for Good Reason. Executive will be deemed to have resigned for "Good Reason" in the following circumstances: (a) Employer reduces Executive's Base Salary and potential annual bonus earnings by more than ten percent (10%), unless the reduction is made as part of, and is generally consistent with, a general reduction of other senior executive salaries and incentive compensation; (b) Executive's position and/or duties are modified so that his duties are no longer consistent with the position of Vice President of Engineering or (c) Employer relocates Executive's principal place of work to a location more than fifty (50) miles from Employer's current location without his prior written approval. 5.4 VOLUNTARY RESIGNATION BY EXECUTIVE WITHOUT GOOD REASON. In the event that Executive's resignation is without Good Reason, Executive will be entitled to receive the Standard Entitlements, but Executive shall not be entitled to receive (i) the 4 Severance Payment, or any part thereof, or (ii) any further vesting of stock options; and all other obligations of Employer to Executive pursuant to this Agreement shall automatically terminate and be completely extinguished. 5.5 TERMINATION WITHOUT CAUSE OR RESIGNATION FOR GOOD REASON AFTER THE EMPLOYMENT TERM. If Executive is terminated without Cause after the Employment Term, or if Executive resigns for Good Reason after the Employment Term, then Executive shall not be entitled to the Severance Payment, or any part thereof, as defined in this Agreement. 6. TERMINATION UPON CHANGE OF CONTROL. In the event of a "Change of Control" (as defined in the Retention Agreement), Employer's obligations to Executive pursuant to paragraph 5 above shall terminate automatically and extinguish completely, and the consequences of any termination or resignation of Executive following a Change of Control will be as governed by the Retention Agreement. 7. CONFIDENTIALITY/INTELLECTUAL PROPERTY AGREEMENT AND INSIDER TRADING POLICY. Executive agrees that he has read, signed, and will abide by the terms and conditions of Employer's Confidentiality/Intellectual Property Agreement and Employer's Insider Trading Policy. Executive recognizes that his employment with the Company will involve contact with information of substantial value to the Company which gives the Company an advantage over its competitors who do not know or use it, including but not limited to, techniques, designs, drawings, processes, inventions, developments, equipment, prototypes, sales and customer information, and business and financial information relating to the business, products, practices and techniques of the Company (hereinafter referred to as "Confidential and Proprietary Information"). Executive will at all times regard and preserve as confidential such Confidential and Proprietary Information obtained by Executive from whatever source and will not, either during his employment with the Company or thereafter, publish or disclose any part of such Confidential and Proprietary Information in any manner at any time, or use the same except on behalf of the Company, without the prior written consent of the Company. 8. NON-COMPETITION. During the Employment Term, Executive shall devote Executive's full business energies, interest, abilities and productive time to the proper and efficient performance of Executive's duties under this Agreement. The foregoing requirement shall not preclude Executive from engaging in civic, charitable or religious activities, or from serving on boards of directors of companies or organizations which will not present any direct conflict with the interest of Employer or affect the performance of Executive's duties hereunder. Except with the prior written consent of Employer, Executive will not, during the Employment Term, or any period during which Executive is receiving compensation or any other consideration from Employer, engage in competition with Employer, either directly or indirectly, in any manner or capacity, as adviser, principal, agent, partner, officer, director, employee, member of any association or otherwise, in any phase of the 5 business of developing, manufacturing and marketing of products which are in the same field of use or which otherwise compete with the product or products actively under development by Employer. Except as permitted herein, Executive agrees not to acquire, assume or participate in, directly or indirectly, any position, investment or interest known by Executive to be adverse or antagonistic to Employer, its business or prospects, financial or otherwise. Ownership by Executive, as a passive investment, of less than one percent (1%) of the outstanding shares of capital stock of any corporation with one or more classes of its capital stock listed on a national securities exchange or publicly traded in the over-the-counter market shall not constitute a breach of this paragraph 8. 9. NONSOLICITATION. During the Employment Term and for a period of one year thereafter, irrespective of the manner of termination of employment, Executive agrees not to, directly or indirectly, separately, or in association with others: (a) interfere with, impair, disrupt, or damage Employer's relationship with any of its customers or prospective customers by soliciting, encouraging, or causing others to solicit or encourage any of them, for the purpose of diverting or taking away the business such customers have with Employer; or (b) interfere with, impair, disrupt, or damage Employer's business by soliciting, encouraging, or causing others to solicit or encourage, any of Employer's employees to discontinue their employment with Employer. 10. AGREEMENT TO ARBITRATE. Executive and Employer agree to arbitrate any claim or dispute ("Dispute") arising out of or in any way related to this Agreement, the employment relationship between Employer and Executive or the termination of Executive's employment, except as provided in paragraph 10.1 below, to the fullest extent permitted by law. Except as provided above, this method of resolving Disputes shall be the sole and exclusive remedy of the parties. Accordingly, the parties understand that, except as provided herein, they are giving up their rights to have their disputes decided in a court of law and, if applicable, by a jury, and instead agree that their disputes shall be decided by an arbitrator. 10.1 SCOPE OF THE AGREEMENT. A Dispute shall include all disputes or claims between Executive and Employer arising out of, concerning or relating to Executive's employment by Employer, including, without limitation: claims for breach of contract, tort, discrimination, harassment, wrongful termination, demotion, discipline, failure to accommodate, compensation or benefits claims, constitutional claims and claims for violation of any local, state or federal law, or common law, to the fullest extent permitted by law. A Dispute shall not include any dispute or claim, whether brought by either Executive or Employer, for: (a) workers' compensation or unemployment insurance benefits; or (b) the exclusions from arbitration specified in the California Arbitration Act, California Code of Civil Procedure section 1281.8. For the purpose of this paragraph 10, references to "Employer" include Employer and all related or affiliated entities and their employees, supervisors, officers, directors, owners, stockholders, agents, pension or benefit plans, pension or benefit plan sponsors, fiduciaries, administrators, and the successors and assigns of any of them, and this paragraph 10 shall apply to them to the 6 extent that Executive's claims arise out of or relate to their actions on behalf of Employer. 10.2 CONSIDERATION. The parties agree that their mutual promise to arbitrate any and all disputes between them, except as provided in paragraph 10.1, rather than litigate them before the courts or other bodies, provides adequate consideration for this paragraph 10. 10.3 INITIATION OF ARBITRATION. Either party may initiate an arbitration proceeding by providing the other party with written notice of any and all claims forming the basis of such proceeding in sufficient detail to inform the other party of the substance of such claims. In no event shall the request for arbitration be made after the date when institution or legal or equitable proceedings based on such claims would be barred by the applicable statute of limitations. 10.4 ARBITRATION PROCEDURE. The arbitration will be conducted by the American Arbitration Association pursuant to its Commercial Arbitration Rules in San Diego, California by a single, neutral arbitrator. The parties are entitled to representation by an attorney or other representative of their choosing. The arbitrator shall have the power to enter any award that could be entered by a judge of the Superior Court of the State of California, as applicable to the cause of action, and only such power. The parties agree to abide by and perform any award rendered by the arbitrator. Judgment on the award may be entered in any court having jurisdiction thereof. 10.5 COSTS OF ARBITRATION. Each of the parties hereto shall initially pay fifty percent (50%) of the arbitration filing, hearing fees and costs of the arbitrator. The arbitrator, as part of its final award, shall have the power to reallocate such fees and costs in favor of the prevailing party in the arbitration. In addition, each party will bear its own attorneys' fees, unless otherwise required or allowed by law and awarded by the arbitrator. 10.6 GOVERNING LAW. All Disputes between the parties shall be governed, determined and resolved by the internal laws of the State of California, including the California Arbitration Act, California Code of Civil Procedure 1280 et seq. 11. GENERAL PROVISIONS. 11.1 SUCCESSORS AND ASSIGNS. The rights and obligations of Employer under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of Employer. Executive shall not be entitled to assign any of Executive's rights or obligations under this Agreement. 11.2 INDEMNIFICATION. The indemnification provisions for Officers and Directors under Employer's Bylaws will (to the maximum extent permitted by law) be extended to Executive. 11.3 WAIVER. This Agreement may not be modified or amended except by an instrument in writing, signed by Executive and by a duly authorized representative of 7 Employer other than Executive. Either party's failure to enforce any provision of this Agreement shall not in any way be construed as an amendment or waiver of any such provision, or prevent that party thereafter from enforcing each and every other provision of this Agreement. 11.4 SEVERABILITY. If any provision of this Agreement is held by an arbitrator or a court of law to be illegal, invalid or unenforceable, then: (a) that provision shall be deemed amended to achieve as nearly as possible the same economic effect as the original provision; and (b) the legality, validity and enforceability of the remaining provisions of this Agreement shall not be affected or impaired thereby. 11.5 INTERPRETATION; CONSTRUCTION. This Agreement has been drafted by Employer, but Executive has participated in the negotiation of its terms. Furthermore, Executive acknowledges that he has had an opportunity to review and revise the Agreement and have it reviewed by legal counsel, if desired. Therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement. 11.6 GOVERNING LAW. This Agreement will be governed by and construed in accordance with the laws of the State of California. 11.7 NOTICES. All notices or demands of any kind required or permitted to be given by the Company or Executive under this Agreement shall be given in writing and shall be personally delivered (and receipted for) or mailed by certified mail, return receipt requested, postage prepaid, addressed as follows: IF TO THE COMPANY: IF TO EXECUTIVE: - ----------------- --------------- Overland Data, Inc. Robert J. Scroop 8975 Balboa Avenue 13414 Appalachian Way San Diego, CA 92123-4124 San Diego, CA 92129 Attn: President & CEO Any such written notice shall be deemed received when personally delivered or three (3) days after its deposit in the United States mail as specified above. Either party may change its address for notices by giving notice to the other party in the manner specified in this paragraph 11.7. 11.8 SURVIVAL. The rights and obligations contained in paragraph 9 ("Nonsolicitation") shall survive any termination or expiration of this Agreement for a period of one year, and paragraphs 7 ("Confidentiality/Intellectual Property Agreement and Insider Trading Policy"), 10 ("Agreement to Arbitrate") and 11 ("General Provisions") shall survive any termination or expiration of this Agreement. 11.9 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties relating to the subject matter herein and supersedes all prior or simultaneous representations, discussions, negotiations, and agreements, whether written or oral. 8 11.10 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. THE PARTIES TO THIS AGREEMENT HAVE READ THE FOREGOING AGREEMENT IN ITS ENTIRETY AND FULLY UNDERSTAND EACH AND EVERY PROVISION CONTAINED HEREIN, WHEREFORE, THE PARTIES HAVE FREELY AND VOLUNTARILY EXECUTED THIS AGREEMENT AS OF THE DATE FIRST ABOVE WRITTEN. Executive: - --------- /s/ Robert J. Scroop - ------------------------------------- Robert J. Scroop Company: - ------- OVERLAND DATA, INC. /s/ Scott McClendon - ------------------------------------- Scott McClendon President and Chief Executive Officer 9 EXHIBIT A GENERAL RELEASE This GENERAL RELEASE ("RELEASE") is entered into effective as of ______________, ____, (the "EFFECTIVE DATE") by and between Overland Data, Inc., a California corporation, having its principal offices at 8975 Balboa Avenue, San Diego, California 92123-1599 (the "COMPANY") and Robert J. Scroop, an individual residing at [_____________] ("EMPLOYEE") with reference to the following facts: RECITALS A. The parties entered into an Employment Agreement (the "AGREEMENT") dated as of January 1, 2001, by which the parties agreed that upon the occurrence of certain conditions, Employee would become eligible for the Severance Payment as defined in the Agreement in exchange for Employee's release of the Company from all claims which Employee may have against the Company as of the date of the termination of Employee's employment. B. The parties desire to dispose of, fully and completely, all claims which Employee may have against the Company in the manner set forth in this Release. AGREEMENT 1. RELEASE. Employee, for himself and his heirs, successors and assigns, fully releases and discharges the Company, its officers, directors, employees, shareholders, attorneys, accountants, other professionals, insurers and agents (collectively, "Agents"), and all entities related to each party, including, but not limited to, heirs, executors, administrators, personal representatives, assigns, parent, subsidiary and sister corporations, affiliates, partners and co-venturers (collectively, "Related Entities"), from all rights, claims, demands, actions, causes of action, liabilities and obligations of every kind, nature and description whatsoever, Employee now has, owns or holds or has at anytime had, owned or held or may have against the Company, Agents or Related Entities from any source whatsoever, whether or not arising from or related to the facts recited in this Release. Employee specifically releases and waives any and all claims arising under any express or implied contract, rule, regulation or ordinance, including, without limitation, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Americans with Disabilities Act, the California Fair Employment and Housing Act, and the Age Discrimination in Employment Act, as amended ("ADEA"). 2. SECTION 1542 WAIVER. This Release is intended as a full and complete release and discharge of any and all claims that Employee may have against the Company, Agents or Related Entities. In making this release, Employee intends to release each of the Company, Agents and Related Entities from liability of any nature whatsoever for any claim of damages or injury or for equitable or declaratory relief of any kind, whether the claim, or any facts on which such claim might be based, is known 10 or unknown to him. Employee expressly waives all rights under Section 1542 of the California Civil Code, which Employee understands provides as follows: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR. Employee acknowledges that he may discover facts different from or in addition to those that he now believes to be true with respect to this Release. Employee agrees that this Release shall remain effective notwithstanding the discovery of any different or additional facts. 3. WAIVER OF CERTAIN CLAIMS. Employee acknowledges that he has been advised in writing of his right to consult with an attorney prior to executing the waivers set out in this Release, and that he has been given a 21-day period in which to consider entering into the release of ADEA claims, if any. In addition, Employee acknowledges that he has been informed that he may revoke a signed waiver of the ADEA claims for up to seven (7) days after executing this Release. 4. NO UNDUE INFLUENCE. This Release is executed voluntarily and without any duress or undue influence. Employee acknowledges that he has read this Release and executed it with his full and free consent. No provision of this Release shall be construed against any party by virtue of the fact that such party or its counsel drafted such provision or the entirety of this Release. 5. GOVERNING LAW. This Release is made and entered into in the State of California and accordingly the rights and obligations of the parties hereunder shall in all respects be construed, interpreted, enforced and governed in accordance with the laws of the State of California as applied to contracts entered into by and between residents of California to be wholly performed within California. 6. SEVERABILITY. If any provision of this Release is held to be invalid, void or unenforceable, the balance of the provisions of this Release shall, nevertheless, remain in full force and effect and shall in no way be affected, impaired or invalidated. 7. COUNTERPARTS. This Release may be executed simultaneously in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Release may be executed by facsimile, with originals to follow by overnight courier. 8. DISPUTE RESOLUTION PROCEDURES. Any dispute or claim arising out of this Release shall be subject to final and binding arbitration. The arbitration will be conducted by one arbitrator who is a member of the American Arbitration Association ("AAA") or of the Judicial Arbitration and Mediation Services ("JAMS") and will be 11 governed by the Model Employment Arbitration rules of AAA. The arbitration shall be held in San Diego, California. The arbitrator shall have all authority to determine the arbitrability of any claim and enter a final and binding judgment at the conclusion of any proceedings in respect of the arbitration. Any final judgment only may be appealed on the grounds of improper bias or improper conduct of the arbitrator. Notwithstanding any rule of AAA to the contrary, the parties will be entitled to conduct discovery (i.e. investigation of facts through depositions and other means) which shall be governed by California Code of Civil Procedure Section 1283.05 (the "CCP"). The arbitrator shall have all power and authority to enter orders relating to such discovery as are allowed under the CCP. The arbitrator will apply California substantive law in all respects. The party prevailing in the resolution of any such claim will be entitled, in addition to such other relief as may be granted, to an award of all actual attorneys fees and costs incurred in pursuit of the claim, without regard to any statute, schedule, or rule of court purported to restrict such award. 9. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of the parties with respect to the subject matter of this Agreement, and supersedes all prior and contemporaneous negotiations, agreements and understandings between the parties, oral or written. 10. MODIFICATION; WAIVERS. No modification, termination or attempted waiver of this Agreement will be valid unless in writing, signed by the party against whom such modification, termination or waiver is sought to be enforced. 11. AMENDMENT. This Agreement may be amended or supplemented only by a writing signed by Employee and the Company. Dated: ---------------------------------- ----------------------------------- Robert J. Scroop 12 EX-10.4 6 a2048304zex-10_4.txt EXHIBIT 10.4 EXHIBIT 10.4 [OVERLAND LOGO] Overland Data, Inc. 8975 Balboa Avenue San Diego, CA 92123-1599 (858) 571-5555 (858) 495-4267 fax EMPLOYMENT AGREEMENT This Employment Agreement ("Agreement"), which shall become effective on March 12, 2001, finalizes the terms and conditions of employment agreed upon by and between Overland Data, Inc. ("Employer" or the "Company") and Christopher Calisi ("Executive"). The parties agree as follows: 1. POSITIONS AND DUTIES. Executive will be employed by the Company in the positions of President and Chief Executive Officer ("CEO"), reporting to the Company's Board of Directors (the "Board"), and shall do and perform all services, acts or things necessary or advisable to manage and conduct the business of the Company and which are normally associated with the positions of President and CEO consistent with the bylaws of the Company and as required by the Board. Executive will also serve as a member of the Board, upon being duly elected by majority vote of the existing Directors, and will be eligible to hold such office until he stands for re-election at the 2001 Annual Meeting of the Company's shareholders. 1.1 BEST EFFORTS/FULL-TIME. During the Employment Term (as defined in paragraph 1.2 herein), Executive will act in the best interests of Employer and devote his full business time and best efforts to the performance of his duties under this Agreement. Executive agrees to be available to render such services at all reasonable times and places and in accordance with Employer's directives. Executive shall be assigned to work in the Company's corporate offices in San Diego, California, but may be required to travel in connection with his duties. Executive will abide by all policies, procedures, and decisions made by Employer, as well as all federal, state and local laws, regulations or ordinances applicable to his employment. During his employment, Executive must not engage in any work, paid or unpaid, that creates an actual or potential conflict of interest with Employer's business interests and if, in the opinion of the Board, an actual or potential conflict exists, the Board may in its sole discretion require Executive to choose to either (i) discontinue the other work or (ii) 1 resign from his employment with Employer. The foregoing restriction shall not preclude Executive from engaging in civic, charitable or religious activities, or from serving on boards of directors of companies or organizations so long as he notifies the Board of such services in writing, and such services do not pose a conflict or interfere with his responsibilities to Employer. Within seven (7) days of the date of this Agreement, Executive shall provide to the Board a list of (i) all boards of directors of companies or organizations that Executive serves on or currently intends to serve on during the Employment Term, and (ii) a list of civic, charitable or religious activities that Executive engages in or currently intends to engage in during the Employment Term. It is anticipated that Executive shall generally devote no less than 40 hours per week to his duties for Employer. 1.2 TERM OF EMPLOYMENT. This Agreement shall commence on March 12, 2001, and, unless terminated by either party in accordance with paragraph 5 herein, shall continue until March 11, 2002. Thereafter, unless terminated by either party in accordance with paragraph 5, Executive's employment shall automatically renew for an additional one year term on such date and on each anniversary thereof (the period of employment hereunder shall be referred to herein as the "Employment Term"). Except as provided in paragraph 6, this Agreement shall continue during the Employment Term to govern the terms and conditions of Executive's employment, unless modified by the parties hereto in writing. 2. COMPENSATION. 2.1 BASE SALARY. As compensation for the proper and satisfactory performance of all duties under this Agreement, Executive shall earn a gross annual base salary of $375,000.00 ($14,423.08 gross per bi-weekly payroll period), less all legally required payroll deductions, payable in accordance with Employer's normal payroll practices ("Base Salary"). 2.2 BONUS. In addition, Executive will be eligible to receive potential annual bonus earnings of up to seventy-five percent (75%) of the Base Salary or such other amount as determined by the Board, based on reasonable and obtainable performance criteria to be determined by the Board. This bonus will be based on the Company's June 30 fiscal year. 2.3 STOCK OPTIONS. Subject to the approval of the Board, Executive will be granted an option to purchase 600,000 shares of Employer's Common Stock under Employer's 2000 Stock Option Plan (the "2000 Plan"). The option exercise price will be equal to the closing market price of the Company's Common Stock on March 12, 2001. Except as otherwise provided in this Agreement, shares subject to this option will be governed by the terms and conditions of the 2000 Plan and the standard form of Stock Option Agreement that Executive will be required to sign as a condition of receiving this option. This option will be an incentive stock option to the maximum amount allowable by the Internal Revenue Code of 1986, as amended; the remainder of this option will be a non-qualified stock option. A total of 100,000 shares of Common Stock underlying this option shall vest on September 12, 2001, and an additional 16,666 shares shall vest 2 on the 12th of each subsequent month until August 2003, and 16,686 shares shall vest on the 12th of March 2004. Notwithstanding the foregoing, all outstanding shares underlying this option shall vest in full and be fully exercisable upon a "Change of Control" as defined in Section 1.2 of the Retention Agreement, dated as of March 12, 2001, (the "Retention Agreement"), by and between the Company and Executive. 2.4 UNILATERAL MODIFICATION OF COMPENSATION. Employer reserves the right to modify Executive's compensation, at any time, at its sole and absolute discretion. 3. CUSTOMARY FRINGE BENEFITS. Executive shall be eligible for all customary and usual benefits generally available to all executive level employees of Employer, as determined in the sole and absolute discretion of Employer and subject to the terms and conditions set forth in the applicable benefit plan or policy. Employer reserves the right to change or eliminate any of the fringe benefits provided to executive level employees on a prospective basis at any time, at Employer's sole and absolute discretion. Executive understands that all benefits provided in this paragraph may be reduced by, or subject to, all legally required taxes. 4. BUSINESS EXPENSES. Executive will be reimbursed for all reasonable, out-of-pocket business expenses incurred in the performance of his duties on behalf of Employer subject to Executive's compliance with the Company's established expense reimbursement policy. 5. TERMINATION. 5.1 TERMINATION FOR CAUSE BY EMPLOYER. Employer may terminate Executive's employment under this Agreement immediately at any time for "Cause", which shall include, but is not limited to: (a) acts or omissions constituting gross negligence, recklessness or willful misconduct on the part of Executive with respect to his obligations or otherwise relating to the business of Employer; (b) Executive's material breach of this Agreement; (c) Executive's conviction or entry of a plea of nolo contendere for fraud, misappropriation or embezzlement, or any felony or crime of moral turpitude; (d) Executive's dishonesty or involvement in any conduct that adversely affects Employer's name or public image or is otherwise detrimental to Employer's business interests; (e) Executive's willful neglect of duties as determined in the sole and exclusive discretion of Employer; or (f) Executive's death. 5.1.1. ENTITLEMENTS UPON TERMINATION FOR CAUSE. In the event that Executive's employment is terminated for Cause in accordance with paragraph 5.1, Executive shall be entitled to receive: (a) the Base Salary then in effect, prorated to the date of termination; (b) any performance bonuses earned prior to the date of termination; and (c) any expense reimbursements to which Executive is entitled by virtue of his prior employment with Employer (collectively, (a), (b) and (c) above are referred to herein as the "Standard Entitlements"). In the event of such termination for Cause, Executive shall not be entitled to receive (i) the Severance Payment (as defined in paragraph 5.2 below), or any part thereof, or (ii) any further vesting of stock options; 3 and all other obligations of Employer to Executive pursuant to this Agreement shall automatically terminate and be completely extinguished. 5.2 TERMINATION WITHOUT CAUSE BY EMPLOYER. Employer may terminate Executive's employment without Cause at any time. If Employer terminates Executive's employment without Cause, Executive shall be entitled to receive the Standard Entitlements. In addition to the above, in the event that (i) Employer terminates Executive's employment without Cause and (ii) Executive complies with the conditions in paragraph 5.2.1 below, Executive will be entitled to an aggregate severance payment equal to Executive's then Base Salary, payable in a lump-sum amount (the "Severance Payment"). Upon Executive's termination without Cause, subject to the conditions specified above, any shares of Common Stock underlying Executive's then outstanding stock options that otherwise would vest during the twelve (12) months following the date of such termination shall vest in full and shall be immediately exercisable as of the date of such termination, and such stock options may be exercised in whole or in part at any time within three (3) months of the date of such termination without Cause. In the event of such termination without Cause, all of Employer's other obligations pursuant to this Agreement shall terminate automatically and extinguish completely following the date of such termination without Cause. 5.2.1. CONDITIONS TO RECEIVE SEVERANCE PAYMENTS. The Severance Payment will be paid provided that Executive executes a full general release in the form attached hereto as EXHIBIT A, releasing all claims, known or unknown, that Executive may have against Employer arising out of or in any way related to Executive's employment or termination of employment with Employer. 5.3 VOLUNTARY RESIGNATION BY EXECUTIVE FOR GOOD REASON. Executive may voluntarily resign his position with Employer at any time provided that he delivers to the Board at least thirty (30) days' advance written notice of his resignation. In the event that (i) Executive's resignation is for Good Reason (as defined below) and (ii) Executive complies with the conditions in paragraph 5.2.1 above, Executive will be entitled to receive the Severance Payment. In the event of such resignation for Good Reason, all of Employer's other obligations pursuant to this Agreement shall terminate automatically and extinguish completely following the date of such resignation for Good Reason. Executive will be deemed to have resigned for "Good Reason" in the following circumstances: (a) Employer reduces Executive's Base Salary and potential annual bonus earnings by more than ten percent (10%), unless the reduction is made as part of, and is generally consistent with, a general reduction of other senior executive salaries and incentive compensation; (b) Executive's position and/or duties are modified so that his duties are no longer consistent with the position of President and CEO or (c) Employer relocates Executive's principal place of work to a location more than fifty (50) miles from Employer's current location without his prior written approval. 5.4 VOLUNTARY RESIGNATION BY EXECUTIVE WITHOUT GOOD REASON. In the event that Executive's resignation is without Good Reason, Executive will be entitled to receive the Standard Entitlements, but Executive shall not be entitled to receive (i) the Severance Payment, or any part thereof, or (ii) any further vesting of stock options; and 4 all other obligations of Employer to Executive pursuant to this Agreement shall automatically terminate and be completely extinguished. 6. TERMINATION UPON CHANGE OF CONTROL. In the event of a "Change of Control" (as defined in the Retention Agreement), Employer's obligations to Executive pursuant to paragraph 5 above shall terminate automatically and extinguish completely, and the consequences of any termination or resignation of Executive following a Change of Control will be as governed by the Retention Agreement. 7. CONFIDENTIALITY/INTELLECTUAL PROPERTY AGREEMENT AND INSIDER TRADING POLICY. Executive agrees that he has read, signed, and will abide by the terms and conditions of Employer's Confidentiality/Intellectual Property Agreement and Employer's Insider Trading Policy. Executive recognizes that his employment with the Company will involve contact with information of substantial value to the Company which gives the Company an advantage over its competitors who do not know or use it, including but not limited to, techniques, designs, drawings, processes, inventions, developments, equipment, prototypes, sales and customer information, and business and financial information relating to the business, products, practices and techniques of the Company (hereinafter referred to as "Confidential and Proprietary Information"). Executive will at all times regard and preserve as confidential such Confidential and Proprietary Information obtained by Executive from whatever source and will not, either during his employment with the Company or thereafter, publish or disclose any part of such Confidential and Proprietary Information in any manner at any time, or use the same except on behalf of the Company, without the prior written consent of the Company. 8. NON-COMPETITION. During the Employment Term, Executive shall devote Executive's full business energies, interest, abilities and productive time to the proper and efficient performance of Executive's duties under this Agreement. The foregoing requirement shall not preclude Executive from engaging in civic, charitable or religious activities, or from serving on boards of directors of companies or organizations which will not present any direct conflict with the interest of Employer or affect the performance of Executive's duties hereunder. Except with the prior written consent of Employer, Executive will not, during the Employment Term, or any period during which Executive is receiving compensation or any other consideration from Employer, engage in competition with Employer, either directly or indirectly, in any manner or capacity, as adviser, principal, agent, partner, officer, director, employee, member of any association or otherwise, in any phase of the business of developing, manufacturing and marketing of products which are in the same field of use or which otherwise compete with the product or products actively under development by Employer. Except as permitted herein, Executive agrees not to acquire, assume or participate in, directly or indirectly, any position, investment or interest known by Executive to be adverse or antagonistic to Employer, its business or prospects, financial or otherwise. 5 Ownership by Executive, as a passive investment, of less than one percent (1%) of the outstanding shares of capital stock of any corporation with one or more classes of its capital stock listed on a national securities exchange or publicly traded in the over-the-counter market shall not constitute a breach of this paragraph 8. 9. NONSOLICITATION. During the Employment Term and for a period of one year thereafter, irrespective of the manner of termination of employment, Executive agrees not to, directly or indirectly, separately, or in association with others: (a) interfere with, impair, disrupt, or damage Employer's relationship with any of its customers or prospective customers by soliciting, encouraging, or causing others to solicit or encourage any of them, for the purpose of diverting or taking away the business such customers have with Employer; or (b) interfere with, impair, disrupt, or damage Employer's business by soliciting, encouraging, or causing others to solicit or encourage, any of Employer's employees to discontinue their employment with Employer. 10. AGREEMENT TO ARBITRATE. Executive and Employer agree to arbitrate any claim or dispute ("Dispute") arising out of or in any way related to this Agreement, the employment relationship between Employer and Executive or the termination of Executive's employment, except as provided in paragraph 10.1 below, to the fullest extent permitted by law. Except as provided above, this method of resolving Disputes shall be the sole and exclusive remedy of the parties. Accordingly, the parties understand that, except as provided herein, they are giving up their rights to have their disputes decided in a court of law and, if applicable, by a jury, and instead agree that their disputes shall be decided by an arbitrator. 10.1 SCOPE OF THE AGREEMENT. A Dispute shall include all disputes or claims between Executive and Employer arising out of, concerning or relating to Executive's employment by Employer, including, without limitation: claims for breach of contract, tort, discrimination, harassment, wrongful termination, demotion, discipline, failure to accommodate, compensation or benefits claims, constitutional claims and claims for violation of any local, state or federal law, or common law, to the fullest extent permitted by law. A Dispute shall not include any dispute or claim, whether brought by either Executive or Employer, for: (a) workers' compensation or unemployment insurance benefits; or (b) the exclusions from arbitration specified in the California Arbitration Act, California Code of Civil Procedure section 1281.8. For the purpose of this paragraph 10, references to "Employer" include Employer and all related or affiliated entities and their employees, supervisors, officers, directors, owners, stockholders, agents, pension or benefit plans, pension or benefit plan sponsors, fiduciaries, administrators, and the successors and assigns of any of them, and this paragraph 10 shall apply to them to the extent that Executive's claims arise out of or relate to their actions on behalf of Employer. 10.2 CONSIDERATION. The parties agree that their mutual promise to arbitrate any and all disputes between them, except as provided in paragraph 10.1, rather than litigate them before the courts or other bodies, provides adequate consideration for this paragraph 10. 6 10.3 INITIATION OF ARBITRATION. Either party may initiate an arbitration proceeding by providing the other party with written notice of any and all claims forming the basis of such proceeding in sufficient detail to inform the other party of the substance of such claims. In no event shall the request for arbitration be made after the date when institution or legal or equitable proceedings based on such claims would be barred by the applicable statute of limitations. 10.4 ARBITRATION PROCEDURE. The arbitration will be conducted by the American Arbitration Association pursuant to its Commercial Arbitration Rules in San Diego, California by a single, neutral arbitrator. The parties are entitled to representation by an attorney or other representative of their choosing. The arbitrator shall have the power to enter any award that could be entered by a judge of the Superior Court of the State of California, as applicable to the cause of action, and only such power. The parties agree to abide by and perform any award rendered by the arbitrator. Judgment on the award may be entered in any court having jurisdiction thereof. 10.5 COSTS OF ARBITRATION. Each of the parties hereto shall initially pay fifty percent (50%) of the arbitration filing, hearing fees and costs of the arbitrator. The arbitrator, as part of its final award, shall have the power to reallocate such fees and costs in favor of the prevailing party in the arbitration. In addition, each party will bear its own attorneys' fees, unless otherwise required or allowed by law and awarded by the arbitrator. 10.6 GOVERNING LAW. All Disputes between the parties shall be governed, determined and resolved by the internal laws of the State of California, including the California Arbitration Act, California Code of Civil Procedure 1280 et seq. 11. GENERAL PROVISIONS. 11.1 SUCCESSORS AND ASSIGNS. The rights and obligations of Employer under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of Employer. Executive shall not be entitled to assign any of Executive's rights or obligations under this Agreement. 11.2 INDEMNIFICATION. The indemnification provisions for Officers and Directors under Employer's Bylaws will (to the maximum extent permitted by law) be extended to Executive. 11.3 WAIVER. This Agreement may not be modified or amended except by an instrument in writing, signed by Executive and by a duly authorized representative of Employer other than Executive. Either party's failure to enforce any provision of this Agreement shall not in any way be construed as an amendment or waiver of any such provision, or prevent that party thereafter from enforcing each and every other provision of this Agreement. 11.4 SEVERABILITY. If any provision of this Agreement is held by an arbitrator or a court of law to be illegal, invalid or unenforceable, then: (a) that provision shall be 7 deemed amended to achieve as nearly as possible the same economic effect as the original provision; and (b) the legality, validity and enforceability of the remaining provisions of this Agreement shall not be affected or impaired thereby. 11.5 INTERPRETATION; CONSTRUCTION. This Agreement has been drafted by Employer, but Executive has participated in the negotiation of its terms. Furthermore, Executive acknowledges that he has had an opportunity to review and revise the Agreement and have it reviewed by legal counsel, if desired. Therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement. 11.6 GOVERNING LAW. This Agreement will be governed by and construed in accordance with the laws of the State of California. 11.7 NOTICES. All notices or demands of any kind required or permitted to be given by the Company or Executive under this Agreement shall be given in writing and shall be personally delivered (and receipted for) or mailed by certified mail, return receipt requested, postage prepaid, addressed as follows: IF TO THE COMPANY: IF TO EXECUTIVE: - ----------------- --------------- Overland Data, Inc. Christopher Calisi 8975 Balboa Avenue 5032 Zimmer Cove San Diego, CA 92123-4124 San Diego, CA 92130 Attn: Chief Financial Officer Any such written notice shall be deemed received when personally delivered or three (3) days after its deposit in the United States mail as specified above. Either party may change its address for notices by giving notice to the other party in the manner specified in this paragraph 11.7. 11.8 SURVIVAL. The rights and obligations contained in paragraph 9 ("Nonsolicitation") shall survive any termination or expiration of this Agreement for a period of one year, and paragraphs 7 ("Confidentiality/Intellectual Property Agreement and Insider Trading Policy"), 10 ("Agreement to Arbitrate") and 11 ("General Provisions") shall survive any termination or expiration of this Agreement. 11.9 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties relating to the subject matter herein and supersedes all prior or simultaneous representations, discussions, negotiations, and agreements, whether written or oral. 11.10 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 8 THE PARTIES TO THIS AGREEMENT HAVE READ THE FOREGOING AGREEMENT IN ITS ENTIRETY AND FULLY UNDERSTAND EACH AND EVERY PROVISION CONTAINED HEREIN, WHEREFORE, THE PARTIES HAVE FREELY AND VOLUNTARILY EXECUTED THIS AGREEMENT AS OF THE DATE FIRST ABOVE WRITTEN. Executive: - --------- /s/ Christopher Calisi - ------------------------------------------ Christopher Calisi Company: - ------- OVERLAND DATA, INC. /s/ Vernon A. LoForti - ------------------------------------------ Vernon A. LoForti Vice President and Chief Financial Officer 9 EXHIBIT A GENERAL RELEASE This GENERAL RELEASE ("RELEASE") is entered into effective as of ______________, ____, (the "EFFECTIVE DATE") by and between Overland Data, Inc., a California corporation, having its principal offices at 8975 Balboa Avenue, San Diego, California 92123-1599 (the "COMPANY") and Christopher Calisi, an individual residing at [_____________] ("EMPLOYEE") with reference to the following facts: RECITALS A. The parties entered into an Employment Agreement (the "AGREEMENT") dated as of March 12, 2001, by which the parties agreed that upon the occurrence of certain conditions, Employee would become eligible for the Severance Payment as defined in the Agreement in exchange for Employee's release of the Company from all claims which Employee may have against the Company as of the date of the termination of Employee's employment. B. The parties desire to dispose of, fully and completely, all claims which Employee may have against the Company in the manner set forth in this Release. AGREEMENT 1. RELEASE. Employee, for himself and his heirs, successors and assigns, fully releases and discharges the Company, its officers, directors, employees, shareholders, attorneys, accountants, other professionals, insurers and agents (collectively, "Agents"), and all entities related to each party, including, but not limited to, heirs, executors, administrators, personal representatives, assigns, parent, subsidiary and sister corporations, affiliates, partners and co-venturers (collectively, "Related Entities"), from all rights, claims, demands, actions, causes of action, liabilities and obligations of every kind, nature and description whatsoever, Employee now has, owns or holds or has at anytime had, owned or held or may have against the Company, Agents or Related Entities from any source whatsoever, whether or not arising from or related to the facts recited in this Release. Employee specifically releases and waives any and all claims arising under any express or implied contract, rule, regulation or ordinance, including, without limitation, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Americans with Disabilities Act, the California Fair Employment and Housing Act, and the Age Discrimination in Employment Act, as amended ("ADEA"). 2. SECTION 1542 WAIVER. This Release is intended as a full and complete release and discharge of any and all claims that Employee may have against the Company, Agents or Related Entities. In making this release, Employee intends to release each of the Company, Agents and Related Entities from liability of any nature whatsoever for any claim of damages or injury or for equitable or declaratory relief of any kind, whether the claim, or any facts on which such claim might be based, is known 10 or unknown to him. Employee expressly waives all rights under Section 1542 of the California Civil Code, which Employee understands provides as follows: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR. Employee acknowledges that he may discover facts different from or in addition to those that he now believes to be true with respect to this Release. Employee agrees that this Release shall remain effective notwithstanding the discovery of any different or additional facts. 3. WAIVER OF CERTAIN CLAIMS. Employee acknowledges that he has been advised in writing of his right to consult with an attorney prior to executing the waivers set out in this Release, and that he has been given a 21-day period in which to consider entering into the release of ADEA claims, if any. In addition, Employee acknowledges that he has been informed that he may revoke a signed waiver of the ADEA claims for up to seven (7) days after executing this Release. 4. NO UNDUE INFLUENCE. This Release is executed voluntarily and without any duress or undue influence. Employee acknowledges that he has read this Release and executed it with his full and free consent. No provision of this Release shall be construed against any party by virtue of the fact that such party or its counsel drafted such provision or the entirety of this Release. 5. GOVERNING LAW. This Release is made and entered into in the State of California and accordingly the rights and obligations of the parties hereunder shall in all respects be construed, interpreted, enforced and governed in accordance with the laws of the State of California as applied to contracts entered into by and between residents of California to be wholly performed within California. 6. SEVERABILITY. If any provision of this Release is held to be invalid, void or unenforceable, the balance of the provisions of this Release shall, nevertheless, remain in full force and effect and shall in no way be affected, impaired or invalidated. 7. COUNTERPARTS. This Release may be executed simultaneously in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Release may be executed by facsimile, with originals to follow by overnight courier. 8. DISPUTE RESOLUTION PROCEDURES. Any dispute or claim arising out of this Release shall be subject to final and binding arbitration. The arbitration will be conducted by one arbitrator who is a member of the American Arbitration Association ("AAA") or of the Judicial Arbitration and Mediation Services ("JAMS") and will be 11 governed by the Model Employment Arbitration rules of AAA. The arbitration shall be held in San Diego, California. The arbitrator shall have all authority to determine the arbitrability of any claim and enter a final and binding judgment at the conclusion of any proceedings in respect of the arbitration. Any final judgment only may be appealed on the grounds of improper bias or improper conduct of the arbitrator. Notwithstanding any rule of AAA to the contrary, the parties will be entitled to conduct discovery (i.e. investigation of facts through depositions and other means) which shall be governed by California Code of Civil Procedure Section 1283.05 (the "CCP"). The arbitrator shall have all power and authority to enter orders relating to such discovery as are allowed under the CCP. The arbitrator will apply California substantive law in all respects. The party prevailing in the resolution of any such claim will be entitled, in addition to such other relief as may be granted, to an award of all actual attorneys fees and costs incurred in pursuit of the claim, without regard to any statute, schedule, or rule of court purported to restrict such award. 9. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of the parties with respect to the subject matter of this Agreement, and supersedes all prior and contemporaneous negotiations, agreements and understandings between the parties, oral or written. 10. MODIFICATION; WAIVERS. No modification, termination or attempted waiver of this Agreement will be valid unless in writing, signed by the party against whom such modification, termination or waiver is sought to be enforced. 11. AMENDMENT. This Agreement may be amended or supplemented only by a writing signed by Employee and the Company. Dated: ------------------------------- ----------------------------------- Christopher Calisi 12 EX-10.5 7 a2048304zex-10_5.txt EXHIBIT 10.5 EXHIBIT 10.5 RETENTION AGREEMENT THIS RETENTION AGREEMENT (the "AGREEMENT"), dated March 12, 2001, is made by and between Overland Data Inc., a California corporation having its principal offices at 8975 Balboa Avenue, San Diego, California 92123-1599 (the "COMPANY") and Christopher Calisi ("EMPLOYEE"). AGREEMENT WHEREAS, Employee is a key employee of the Company; WHEREAS, the Company considers that providing Employee with certain employment termination benefits will operate as an incentive for Employee to remain employed by the Company in the event of a Change of Control. NOW THEREFORE, to induce Employee to remain employed by the Company, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and Employee agree as follows: 1. DEFINITIONS. 1.1 "BASE SALARY" shall mean the Employee's gross annual salary at the time of a Change of Control or the Termination Date, whichever is higher. 1.2 "CHANGE OF CONTROL" is defined to have occurred if, and only if, during Employee's employment: (a) any individual, partnership, firm, corporation, association, trust, unincorporated organization or other entity or person, or any syndicate or group deemed to be a person under Section 14(d)(2) of the Exchange Act is or becomes the "Beneficial Owner" (as defined in Rule 13d-3 of the General Rules and Regulations under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's then outstanding securities entitled to vote in the election of directors of the Company; (b) there occurs a reorganization, merger, consolidation or other corporate transaction involving the Company ("TRANSACTION"), in each case, with respect to which the stockholders of the Company immediately prior to such Transaction do not, immediately after the Transaction, own more than fifty (50) percent of the combined voting power of the Company or other corporation resulting from such Transaction; or (c) all or substantially all of the assets of the Company are sold, liquidated or distributed. 1.3 "CAUSE" shall mean: (a) Employee's gross neglect of his duties to the Company, where Employee has been given a reasonable opportunity to cure his gross neglect (which reasonable opportunity must be granted during the thirty-day period preceding termination); (b) any violation by Employee of Employee's obligations under this Agreement or any employment agreement which Employee may have with the Company; (c) Employee taking any role in any buy-out of the Company without the approval of the Company's majority shareholder; or (d) Employee's commission of any act of fraud, theft or embezzlement against the Company. 1.4 "COMPENSATION" shall mean Base Salary plus Target Bonus. 1.5 "RESIGNATION FOR GOOD REASON" shall mean the voluntary resignation by Employee of his employment with the Company within two years following a Change of Control and within three (3) months of the following Good Reasons: (a) any reduction in Employee's Base Salary or Target Bonus; or (b) any reduction in Employee's title; or (c) any significant reduction in Employee's responsibilities and authority; (d) any failure by the Company to pay Employee's Base Salary; or (e) a relocation by the Company of Employee's place of Employment outside a fifty (50) mile radius of Employee's current place of employment. An event described in Section 1.5(a) through (e) will not constitute Good Reason unless Employee provides written notice to the Company of his intention to resign for Good Reason and unless the Company does not cure the Good Reason within ten (10) days of the Company's receipt of the written notice. 1.6 "SEVERANCE PERIOD" shall begin on the Termination Date and extend for twelve months following the Termination Date. 1.7 "TARGET BONUS" shall mean the variable annual compensation represented by the percentage of Base Salary Employee is eligible to receive, prior to a Change of Control, in the event targeted goals are achieved for the year. 1.8 "TERMINATION DATE" shall mean the date of termination of Employee's employment relationship with the Company. 1.9 "TERMINATION PAYMENTS" shall mean any payment or distribution of Compensation or benefits made pursuant to SECTION 4.1 (a)-(c) of this Agreement. 2 2. TITLE AND DUTIES. Employee will hold the position of President and Chief Executive Officer. His primary duties will include such duties as are assigned or delegated to Employee by the Company's Board of Directors. Employee will: (i) devote his entire business time, attention, skill, and energy exclusively to the business of the Company; (ii) use his best efforts to promote the success of the Company's business; and (iii) cooperate fully with the Board of Directors of the Company in the advancement of the best interests of the Company. 3. AT-WILL EMPLOYMENT. Employee reaffirms that Employee's employment relationship with the Company is at-will, terminable at any time and for any reason by either the Company or Employee. While certain paragraphs of this Agreement describe events that could occur at a particular time in the future, nothing in this Agreement may be construed as a guarantee of employment of any length. 4. TERMINATION PAYMENTS. 4.1 If, within two (2) years immediately following a Change of Control, Employee's employment terminates as the result of (i) termination by the Company of Employee's employment for a reason other than Cause; or (ii) Employee's Resignation for Good Reason (a) Employee will receive a pro-rata share of Base Salary and accrued but unused vacation through the Termination Date, less applicable state and federal taxes or other payroll deduction; (b) Employee is eligible for Severance under this Agreement in a lump-sum amount equal to Base Salary plus Target Bonus, multiplied by 2.5, less applicable state and federal taxes or other payroll deduction; (c) If Employee elects to continue insurance coverage as afforded to Employee according to the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"), Company will reimburse Employee the amount of the premiums incurred by Employee during the Severance Period. Nothing in this Agreement will extend Employee's COBRA period beyond the period allowed under COBRA, nor is Company assuming any responsibility which Employee has for formally electing to continue coverage; 4.2 The payments set forth in SECTIONS 4.1(b) AND (c) above are in exchange for, and contingent upon Employee's execution of a release of all claims as of the Termination Date, in substantially the form attached to this Agreement as Exhibit 1. 4.3 If Employee's employment terminates for any reason after the two year period immediately following a Change of Control or terminates during that two year period for any reason other than (i) termination by the Company of Employee's employment for a reason other than Cause; or (ii) Employee's Resignation for Good Reason, the Company will pay Employee a pro-rata share of Base Salary and accrued but unused vacation through the Termination Date. 4.4 If Employee resigns his employment for Good Reasons described in Section 1.5 (b) or (c) above, payment of the above Termination Payments is contingent upon Employee's willingness, at the Company's request, to continuing performing his duties on behalf of the Company in good faith for up to ninety (90) days following the occurrence of the events 3 described in these Sections 1.5 (b) and (c). Employee will continue to receive his regular Base Salary paid according to the Company's regular payroll practices during the up-to ninety (90) day period and will receive the Termination Payment upon completion of that period. 5. RETIREMENT AND PROFIT-SHARING PLANS. Notwithstanding anything in this Agreement to the contrary, Employee's rights in any retirement, pension or profit-sharing plans offered by the Company shall be governed by the rules of such plans as well as by applicable law; provided, however, that on the Termination Date, Employee shall become fully vested in all pension and 401(k) account balances. 6. TAX CONSEQUENCES. The Company makes no representations regarding the tax consequence of any provision of this Agreement. Employee is advised to consult with his own tax advisor with respect to the tax treatment of any payment contained in this Agreement. 7. TAX ADJUSTMENT. Notwithstanding the foregoing or any other provision of this Agreement to the contrary, if tax counsel selected by the Company and acceptable to Employee determines that any portion of any payment under this Agreement would constitute an "excess parachute payment" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), the payments to be made to Employee under this Agreement shall be reduced (but not below zero) such that the value of the aggregate payments that Employee is entitled to receive under this Agreement and any other agreement or plan or program of the Company shall be one dollar ($1) less than the maximum amount of payments which Employee may receive without becoming subject to the tax imposed by Section 4999 of the Code. 8. DISPUTE RESOLUTION PROCEDURES. Any dispute or claim arising out of this agreement shall be subject to final and binding arbitration. The arbitration will be conducted by one arbitrator who is a member of the American Arbitration Association ("AAA") or of the Judicial Arbitration and Mediation Services ("JAMS"). The arbitration shall be held in San Diego, California. The arbitrator shall have all authority to determine the arbitrability of any claim and enter a final and binding judgment at the conclusion of any proceedings in respect of the arbitration. Any final judgment only may be appealed on the grounds of improper bias or improper conduct of the arbitrator. The parties will be entitled to conduct discovery (i.e., investigation of facts through depositions and other means) which shall be governed by the California Code of Civil Procedure (the "CCP") section 1283.05. The arbitrator shall have all power and authority to enter orders relating to such discovery as are allowed under the CCP. The arbitrator will apply California substantive law in all respects. The party prevailing in the resolution of any such claim will be entitled, in addition to such other relief as may be granted, to an award of all reasonable attorneys fees and costs incurred in pursuit of the claim, without regard to any statute, schedule, or rule of court purported to restrict such award. 9. GENERAL PROVISIONS. 9.1 GOVERNING LAW. This Agreement will be governed by and construed in accordance with the laws of California. 9.2 ASSIGNMENT. Employee may not assign, pledge or encumber his interest in this Agreement or any part thereof. 4 9.3 NO WAIVER OF BREACH. The failure to enforce any provision of this Agreement will not be construed as a waiver of any such provision, nor prevent a party from enforcing the provision or any other provision of this Agreement. The rights granted the parties are cumulative, and the election of one will not constitute a waiver of such party's right to assert all other legal and equitable remedies available under the circumstances. 9.4 SEVERABILITY. The provisions of this Agreement are severable, and if any provision will be held to be invalid or otherwise unenforceable, in whole or in part, the remainder of the provisions, or enforceable parts of this Agreement, will not be affected. 9.5 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of the parties with respect to the subject matter of this Agreement, and supersedes all prior and contemporaneous negotiations, agreements and understandings between the parties, oral or written. 9.6 MODIFICATION; WAIVERS. No modification, termination or attempted waiver of this Agreement will be valid unless in writing, signed by the party against whom such modification, termination or waiver is sought to be enforced. 9.7 FEES AND EXPENSES. If any proceeding is brought for the enforcement or interpretation of this Agreement, or because of any alleged dispute, breach, default or misrepresentation in connection with any provisions of this Agreement, the successful or prevailing party will be entitled to recover from the other party reasonable attorneys' fees and other costs incurred in that proceeding (including, in the case of an arbitration, arbitration fees and expenses), in addition to any other relief to which such party may be entitled. 9.8 AMENDMENT. This Agreement may be amended or supplemented only by a writing signed by both of the parties hereto. 9.9 DUPLICATE COUNTERPARTS. This Agreement may be executed in duplicate counterparts; each of which shall be deemed an original; provided, however, such counterparts shall together constitute only one instrument. 9.10 INTERPRETATION. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 5 9.11 DRAFTING AMBIGUITIES. Each party to this Agreement and its counsel have reviewed and revised this Agreement. The rule of construction that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any of the amendments to this Agreement. OVERLAND DATA, INC. Dated: 2-21-01 By: /s/ Vernon A. LoForti ------------------------------------------ Vernon A. LoForti, Vice President and Chief Financial Officer Dated: 2-21-01 /s/ Christopher Calisi ------------------------------------------ Christopher Calisi 6 EXHIBIT 1 GENERAL RELEASE This GENERAL RELEASE ("RELEASE") is entered into effective as of ______________, ____, (the "EFFECTIVE DATE") by and between Overland Data, Inc., a California corporation, having its principal offices at 8975 Balboa Avenue, San Diego, California 92123-1599 ("COMPANY") and Christopher Calisi, an individual residing at ________________________________ ("EMPLOYEE") with reference to the following facts: RECITALS A. The parties entered into a Retention Agreement ("the Agreement") dated March 12, 2001, by which the parties agreed that upon the occurrence of certain conditions, Employee would become eligible for Termination Payments as defined in the Agreement in exchange for Employee's release of the Company from all claims which Employee may have against the Company as of the Termination Date. B. The parties desire to dispose of, fully and completely, all claims, which Employee may have against the Company in, the manner set forth in this Release. AGREEMENT 1. RELEASE. Employee, for himself and his heirs, successors and assigns, each fully releases, and discharges Company, its officers, directors, employees, shareholders, attorneys, accountants, other professionals, insurers and agents of the other (collectively "Agents"), and all entities related to each party, including, but not limited to, heirs, executors, administrators, personal representatives, assigns, parent, subsidiary and sister corporations, affiliates, partners and co-venturers (collectively "Related Entities"), from all rights, claims, demands, actions, causes of action, liabilities and obligations of every kind, nature and description whatsoever, Employee now has, owns or holds or has at anytime had, owned or held or may have against the Company, Agents or Related Entities from any source whatsoever, whether or not arising from or related to the facts recited in this Release. Employee specifically releases and waives any and all claims arising under any express or implied contract, rule, regulation or ordinance, including, without limitation, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Americans with Disabilities Act, the California Fair Employment and Housing Act, and the Age Discrimination in Employment Act, as amended ("ADEA"). 2. SECTION 1542 WAIVER. This Release is intended as a full and complete release and discharge of any and all claims that Employee may have against the Company, Agents or Related Entities. In making this release, Employee intends to release the Company, Agents and Related Entities from liability of any nature whatsoever for any claim of damages or injury or for equitable or declaratory relief of any kind, whether the claim, or any facts on which such claim might be based, is known or unknown to him. Employee expressly waives all rights under ss.1542 of the California Civil Code, which Employee understands provides as follows: 1 A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR. Employee acknowledges that he may discover facts different from or in addition to those that he now believes to be true with respect to this Release. Employee agrees that this Release shall remain effective notwithstanding the discovery of any different or additional facts. 3. WAIVER OF CERTAIN CLAIMS. Employee acknowledges that he has been advised in writing of his right to consult with an attorney prior to executing the waivers set out in this Release, and that he has been given a 21-day period in which to consider entering into the release of ADEA claims, if any. In addition, Employee acknowledges that he has been informed that he may revoke a signed waiver of the ADEA claims for up to seven (7) days after executing this Release. 4. NO UNDUE INFLUENCE. This Release is executed voluntarily and without any duress or undue influence. Employee acknowledges he has read this Release and executed it with his full and free consent. No provision of this Release shall be construed against any party by virtue of the fact that such party or its counsel drafted such provision or the entirety of this Release. 5. GOVERNING LAW. This Release is made and entered into in the State of California and accordingly the rights and obligations of the parties hereunder shall in all respects be construed, interpreted, enforced and governed in accordance with the laws of the State of California as applied to contracts entered into by and between residents of California to be wholly performed within California. 6. SEVERABILITY. If any provision of this Release is held to be invalid, void or unenforceable, the balance of the provisions of this Release shall, nevertheless, remain in full force and effect and shall in no way be affected, impaired or invalidated. 7. COUNTERPARTS. This Release may be executed simultaneously in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Release may be executed by facsimile, with originals to follow by overnight courier. 8. DISPUTE RESOLUTION PROCEDURES. Any dispute or claim arising out of this Release shall be subject to final and binding arbitration. The arbitration will be conducted by one arbitrator who is a member of the American Arbitration Association (AAA) or of the Judicial Arbitration and Mediation Services (JAMS) and will be governed by the Model Employment Arbitration rules of AAA. The arbitration shall be held in San Diego, California. The arbitrator shall have all authority to determine the arbitrability of any claim and enter a final and binding judgment at the conclusion of any proceedings in respect of the arbitration. Any final judgment only may be appealed on the grounds of improper bias or improper conduct of the arbitrator. Notwithstanding any rule of AAA to the contrary, the parties will be entitled to conduct 2 discovery (i.e. investigation of facts through depositions and other means) which shall be governed by California Code of Civil Procedure Section 1283.05 (the "CCP"). The arbitrator shall have all power and authority to enter orders relating to such discovery as are allowed under the CCP. The arbitrator will apply California substantive law in all respects. The party prevailing in the resolution of any such claim will be entitled, in addition to such other relief as may be granted, to an award of all actual attorneys fees and costs incurred in pursuit of the claim, without regard to any statute, schedule, or rule of court purported to restrict such award. 9. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of the parties with respect to the subject matter of this Agreement, and supersedes all prior and contemporaneous negotiations, agreements and understandings between the parties, oral or written. 10. MODIFICATION; WAIVERS. No modification, termination or attempted waiver of this Agreement will be valid unless in writing, signed by the party against whom such modification, termination or waiver is sought to be enforced. 11. AMENDMENT. This Agreement may be amended or supplemented only by a writing signed by Employee and the Company. Dated: ------------------------------------ ------------------------------------ Christopher Calisi 3 EX-10.6 8 a2048304zex-10_6.txt EXHIBIT 10.6 EXHIBIT 10.6 OVERLAND DATA, INC. 2000 STOCK OPTION PLAN NOTICE OF STOCK OPTION AWARD Grantee's Name and Address: -------------------------------------- -------------------------------------- -------------------------------------- You have been granted an option (an "OPTION") to purchase shares of Common Stock, subject to the terms and conditions of this Notice of Stock Option Award (this "NOTICE"), the Overland Data, Inc. 2000 Stock Option Plan, as amended from time to time (the "PLAN") and the Stock Option Award Agreement (the "OPTION AGREEMENT") attached as EXHIBIT A hereto. If this is Grantee's first stock option under the Plan, a copy of the Plan is attached hereto as EXHIBIT B. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Notice. Date of Award: ------------------------------------ Exercise Price per Share: $ ------------------------------------ Total Number of Shares Subject to this Option: ------------------------------------ Type of Option: Incentive Stock Option --------- Non-Qualified Stock Option --------- Expiration Date: ------------------------------------ Post-Termination Exercise Period: Thirty (30) Days VESTING SCHEDULE: Subject to Grantee's Continuous Service and other limitations set forth in this Notice, the Plan and the Option Agreement, this Option may be exercised, in whole or in part, in accordance with the following schedule: One-third (1/3) of the Shares subject to this Option shall vest twelve (12) months after the Date of Award, and 1/36 of the Shares subject to this Option shall vest on each monthly anniversary of the Date of Award thereafter. IN WITNESS WHEREOF, the Company and the Grantee have executed this Notice and agree that this Option is to be governed by the terms and conditions of this Notice, the Plan and the Option Agreement. OVERLAND DATA, INC., a California corporation By: ---------------------------------------- Vernon A. LoForti Vice President & Chief Financial Officer THE GRANTEE ACKNOWLEDGES AND AGREES THAT THE SHARES SUBJECT TO THIS OPTION SHALL VEST, IF AT ALL, ONLY DURING THE PERIOD OF THE GRANTEE'S CONTINUOUS SERVICE (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). THE GRANTEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS NOTICE, THE OPTION AGREEMENT, OR THE PLAN SHALL CONFER UPON THE GRANTEE ANY RIGHT WITH RESPECT TO FUTURE AWARDS OR CONTINUATION OF GRANTEE'S CONTINUOUS SERVICE, NOR SHALL IT INTERFERE IN ANY WAY WITH THE GRANTEE'S RIGHT OR THE RIGHT OF THE GRANTEE'S EMPLOYER TO TERMINATE GRANTEE'S CONTINUOUS SERVICE, WITH OR WITHOUT CAUSE, AND WITH OR WITHOUT NOTICE. THE GRANTEE ACKNOWLEDGES THAT UNLESS THE GRANTEE HAS A WRITTEN EMPLOYMENT AGREEMENT WITH THE COMPANY TO THE CONTRARY, GRANTEE'S STATUS IS AT WILL. The Grantee acknowledges receipt of a copy of the Plan and the Option Agreement, and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts this Option subject to all of the terms and provisions hereof and thereof. The Grantee has reviewed this Notice, the Plan and the Option Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Notice, and fully understands all provisions of this Notice, the Plan and the Option Agreement. The Grantee hereby agrees that all disputes arising out of or relating to this Notice, the Plan and the Option Agreement shall be resolved in accordance with SECTION 13 of the Option Agreement. The Grantee further agrees to notify the Company upon any change in the residence address indicated in this Notice. Dated: Signed: --------------------- ---------------------------------- Grantee's signature Printed name: ---------------------------- 2 EXHIBIT A OVERLAND DATA, INC. 2000 STOCK OPTION PLAN STOCK OPTION AWARD AGREEMENT 1. GRANT OF OPTION. Overland Data, Inc., a California corporation (the "COMPANY"), hereby grants to the Grantee (the "GRANTEE") named in this Notice of Stock Option Award (the "NOTICE"), an option (the "OPTION") to purchase the Total Number of Shares of Common Stock subject to this Option (the "SHARES") set forth in this Notice, at the Exercise Price per Share set forth in this Notice (the "EXERCISE PRICE") subject to the terms and provisions of this Notice, this Stock Option Award Agreement (the "OPTION AGREEMENT") and the Company's 2000 Stock Option Plan, as amended from time to time (the "PLAN"), which are incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Option Agreement. If designated in this Notice as an Incentive Stock Option, this Option is intended to qualify as an Incentive Stock Option as defined in SECTION 422 of the Code. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of Shares subject to Options designated as Incentive Stock Options which become exercisable for the first time by the Grantee during any calendar year (under all plans of the Company or any Parent or Subsidiary) exceeds $100,000, such excess Options, to the extent of the Shares covered thereby in excess of the foregoing limitation, shall be treated as Non-Qualified Stock Options. For this purpose, Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of the Shares shall be determined as of the date this Option with respect to such Shares is awarded. 2. EXERCISE OF OPTION. (a) RIGHT TO EXERCISE. This Option shall be exercisable during its term in accordance with the Vesting Schedule set out in this Notice and with the applicable provisions of the Plan and this Option Agreement. This Option shall be subject to the provisions of SECTION 11 of the Plan relating to the exercisability or termination of this Option in the event of a Corporate Transaction, Change in Control or Related Entity Disposition. The Grantee shall be subject to reasonable limitations on the number of requested exercises during any monthly or weekly period as determined by the Administrator. In no event shall the Company issue fractional Shares. (b) METHOD OF EXERCISE. This Option shall be exercisable only by delivery of an Exercise Notice (attached as Appendix A) which shall state the election to exercise this Option, the whole number of Shares in respect of which this Option is being exercised, such other representations and agreements as to the holder's investment intent with respect to such Shares and such other provisions as may be required by the Administrator. The Exercise Notice shall be signed by the Grantee and shall be delivered in person, by certified mail, or by such other method as determined from time to time by the Administrator to the Company accompanied by payment of the Exercise Price. This Option shall be deemed to be exercised upon receipt by the Company of such written notice accompanied by the Exercise Price, which, to the extent selected, shall be deemed to be satisfied by use of the broker-dealer sale and remittance procedure to pay the Exercise Price provided in SECTION 3(d), below. (c) TAXES. No Shares will be delivered to the Grantee or other person pursuant to the exercise of this Option until the Grantee or other person has made arrangements acceptable to the Administrator for the satisfaction of applicable income tax, employment tax, and social security tax withholding obligations, including, without limitation, obligations incident to the receipt of Shares or the disqualifying disposition of Shares received on exercise of an Incentive Stock Option. Upon exercise of this Option, the Company or the Grantee's employer may offset or withhold (from any amount owed by the Company or the Grantee's employer to the Grantee) or collect from the Grantee or other person an amount sufficient to satisfy such tax obligations and/or the employer's withholding obligations. 3. METHOD OF PAYMENT. Payment of the Exercise Price shall be by any of the following, or a combination thereof, at the election of the Grantee; PROVIDED, HOWEVER, that such exercise method does not then violate any Applicable Law: (a) check; (b) money order; (c) surrender of Shares or delivery of a properly executed form of attestation of ownership of Shares as the Administrator may require (including withholding of Shares otherwise deliverable upon exercise of this Option) which have a Fair Market Value on the date of surrender or attestation equal to the aggregate Exercise Price of the Shares as to which this Option is being exercised [(but only to the extent that such exercise of this Option would not result in an accounting compensation charge with respect to the Shares used to pay the exercise price); (d) payment through a broker-dealer sale and remittance procedure pursuant to which the Grantee (i) shall provide written instructions to a Company designated brokerage firm to effect the immediate sale of some or all of the purchased Shares and remit to the Company, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased Shares and (ii) shall provide written directives to the Company to deliver the certificates for the purchased Shares directly to such brokerage firm in order to complete the sale transaction. 4. RESTRICTIONS ON EXERCISE. This Option may not be exercised if the issuance of the Shares subject to this Option upon such exercise would constitute a violation of any Applicable Laws. In addition, this Option, if an Incentive Stock Option, may not be exercised until such time as the Plan has been approved by the shareholders of the Company. 5. TERMINATION OR CHANGE OF CONTINUOUS SERVICE. In the event the Grantee's Continuous Service terminates, the Grantee may, to the extent otherwise so entitled at the date of such termination (the "TERMINATION DATE"), exercise this Option during the Post-Termination Exercise Period; provided, however, in the event Grantee's Continuous Service terminates during a trading blackout period as outlined in the Company's Insider Trading Policy, the Post- 2 Termination Exercise Period will commence immediately after the trading blackout period has ended. In no event shall this Option be exercised later than the Expiration Date set forth in this Notice. In the event of the Grantee's change in status from Employee, Director or Consultant to any other status of Employee, Director or Consultant, this Option shall remain in effect and, except to the extent otherwise determined by the Administrator, continue to vest; PROVIDED, HOWEVER, that with respect to any Incentive Stock Option that shall remain in effect after a change in status from Employee to Director or Consultant, such Incentive Stock Option shall cease to be treated as an Incentive Stock Option and shall be treated as a Non-Qualified Stock Option on the day three (3) months and one (1) day following such change in status. Except as provided in SECTIONS 6 and 7 below, to the extent that the Grantee is not entitled to exercise this Option on the Termination Date, or if the Grantee does not exercise this Option within the Post-Termination Exercise Period, this Option shall terminate. 6. DISABILITY OF GRANTEE. In the event the Grantee's Continuous Service terminates as a result of his or her Disability, the Grantee may, but only within twelve (12) months from the Termination Date (and in no event later than the Expiration Date), exercise this Option to the extent he or she was otherwise entitled to exercise it on the Termination Date; PROVIDED, HOWEVER, that if such Disability is not a "disability" as such term is defined in SECTION 22(e)(3) of the Code and this Option is an Incentive Stock Option, such Incentive Stock Option shall cease to be treated as an Incentive Stock Option and shall be treated as a Non-Qualified Stock Option on the day three (3) months and one (1) day following the Termination Date. To the extent that the Grantee is not entitled to exercise this Option on the Termination Date, or if the Grantee does not exercise this Option to the extent so entitled within the time specified herein, this Option shall terminate. 7. DEATH OF GRANTEE. In the event of the termination of the Grantee's Continuous Service as a result of his or her death, or in the event of the Grantee's death during the Post-Termination Exercise Period or during the twelve (12) month period following the Grantee's termination of Continuous Service as a result of his or her Disability, the Grantee's estate, or a person who acquired the right to exercise this Option by bequest or inheritance, may exercise this Option, but only to the extent the Grantee could exercise this Option at the date of termination, within twelve (12) months from the date of death (but in no event later than the Expiration Date). To the extent that the Grantee is not entitled to exercise this Option on the date of death, or if this Option is not exercised to the extent so entitled within the time specified herein, this Option shall terminate. 8. CHANGE OF CONTROL. In the event of a Change in Control (as defined below), each Option which is at the time outstanding under the Agreement automatically shall become fully vested and exercisable and be released from any restrictions on transfer (other than transfer restrictions applicable to Options) and repurchase or forfeiture rights, immediately prior to the specified effective date of such Change in Control, for all of the Option Shares at the time represented by such Option. Effective upon the consummation of such Change in Control, all outstanding Options under the Agreement shall terminate. However, all such Options shall not terminate if the Options are, in connection with such Change in Control, assumed by the successor corporation or its parent corporation thereof. 3 As used in this subsection, "CHANGE IN CONTROL" means any of the following transactions to which the Company is a party: (i) a merger or consolidation in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the state in which the Company is incorporated; (ii) the sale, transfer or other disposition of all or substantially all of the assets of the Company (including the capital stock of the Company's subsidiary corporations); (iii) approval by the Company's shareholders of any plan or proposal for the complete liquidation or dissolution of the Company; (iv) any reverse merger in which the Company is the surviving entity but in which securities possessing more than fifty percent (50%) of the total combined voting power of the Company's outstanding securities are transferred to a person or persons different from those who held such securities immediately prior to such merger; or (v) acquisition by any person or related group of persons (other than the Company or by a Company-sponsored employee benefit plan) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company's outstanding securities, but excluding any such transaction that the Committee determines shall not be a Change in Control. 9. TRANSFERABILITY OF OPTION. This Option, if an Incentive Stock Option, may not be transferred in any manner other than by will or by the laws of descent and distribution and may be exercised during the lifetime of the Grantee only by the Grantee; PROVIDED, HOWEVER, that the Grantee may designate a beneficiary of the Grantee's Incentive Stock Option in the event of the Grantee's death on a beneficiary designation form provided by the Administrator. This Option, if a Non-Qualified Stock Option may be transferred to any person by will and by the laws of descent and distribution. Non-Qualified Stock Options also may be transferred during the lifetime of the Grantee by gift and pursuant to a domestic relations order to members of the Grantee's Immediate Family to the extent and in the manner determined by the Administrator. The terms of this Option shall be binding upon the executors, administrators, heirs, successors and transferees of the Grantee. 10. TERM OF OPTION. This Option may be exercised no later than the Expiration Date set forth in this Notice or such earlier date as otherwise provided herein. 11. TAX CONSEQUENCES. Set forth below is a brief summary as of the date of this Option Agreement of some of the federal tax consequences of exercise of this Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE GRANTEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES. 4 (a) EXERCISE OF INCENTIVE STOCK OPTION. If this Option qualifies as an Incentive Stock Option, there will be no regular federal income tax liability upon the exercise of this Option, although the excess, if any, of the Fair Market Value of the Shares on the date of exercise over the Exercise Price will be treated as income for purposes of the alternative minimum tax for federal tax purposes and may subject the Grantee to the alternative minimum tax in the year of exercise. (b) EXERCISE OF INCENTIVE STOCK OPTION FOLLOWING DISABILITY. If the Grantee's Continuous Service terminates as a result of Disability that is not total and permanent disability as defined in SECTION 22(e)(3) of the Code, to the extent permitted on the date of termination, the Grantee must exercise an Incentive Stock Option within three (3) months of such termination for the Incentive Stock Option to be qualified as an Incentive Stock Option. (c) EXERCISE OF NON-QUALIFIED STOCK OPTION. On exercise of a Non-Qualified Stock Option, the Grantee will be treated as having received compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the Fair Market Value of the Shares on the date of exercise over the Exercise Price. If the Grantee is an Employee or a former Employee, the Company will be required to withhold from the Grantee's compensation or collect from the Grantee and pay to the applicable taxing authorities an amount in cash equal to a percentage of this compensation income at the time of exercise, and may refuse to honor the exercise and refuse to deliver Shares if such withholding amounts are not delivered at the time of exercise. (d) DISPOSITION OF SHARES. In the case of a Non-Qualified Stock Option, if Shares are held for more than one year, any gain realized on disposition of the Shares will be treated as long-term capital gain for federal income tax purposes and subject to tax at a maximum rate of 20%. In the case of an Incentive Stock Option, if Shares transferred pursuant to this Option are held for more than one year after receipt of the Shares and are disposed more than two years after the Date of Award, any gain realized on disposition of the Shares also will be treated as capital gain for federal income tax purposes and subject to the same tax rates and holding periods that apply to Shares acquired upon exercise of a Non-Qualified Stock Option. If Shares purchased under an Incentive Stock Option are disposed of prior to the expiration of such one-year or two-year periods, any gain realized on such disposition will be treated as compensation income (taxable at ordinary income rates) to the extent of the difference between the Exercise Price and the lesser of (i) the Fair Market Value of the Shares on the date of exercise, or (ii) the sale price of the Shares. 12. ENTIRE AGREEMENT: GOVERNING LAW. This Notice, the Plan and this Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and the Grantee with respect to the subject matter hereof, and may not be modified adversely to the Grantee's interest except by means of a writing signed by the Company and the Grantee. Nothing in this Notice, the Plan and this Option Agreement (except as expressly provided therein) is intended to confer any rights or remedies on any persons other than the parties. This Notice, the Plan and this Option Agreement are to be construed in accordance with and governed by the internal laws of the State of California (as permitted by SECTION 1646.5 of the California Civil Code, or any similar successor provision) without giving effect to any choice of law rule that would cause the 5 application of the laws of any jurisdiction other than the internal laws of the State of California to the rights and duties of the parties. Should any provision of this Notice, the Plan or this Option Agreement be determined by a court of law to be illegal or unenforceable, such provision shall be enforced to the fullest extent allowed by law and the other provisions shall nevertheless remain effective and shall remain enforceable. 13. HEADINGS. The captions used in this Notice and this Option Agreement are inserted for convenience and shall not be deemed a part of this Option for construction or interpretation. 14. DISPUTE RESOLUTION. The provisions of this SECTION 13 shall be the exclusive means of resolving disputes arising out of or relating to this Notice, the Plan and this Option Agreement. The Company, the Grantee, and the Grantee's assignees pursuant to SECTION 8 (the "parties") shall attempt in good faith to resolve any disputes arising out of or relating to this Notice, the Plan and this Option Agreement by negotiation between individuals who have authority to settle the controversy. Negotiations shall be commenced by either party by notice of a written statement of the party's position and the name and title of the individual who will represent the party. Within thirty (30) days of the written notification, the parties shall meet at a mutually acceptable time and place, and thereafter as often as they reasonably deem necessary, to resolve the dispute. If the dispute has not been resolved by negotiation, the parties agree that any suit, action, or proceeding arising out of or relating to this Notice, the Plan or this Option Agreement shall be brought in the United States District Court for the Southern District of California (or should such court lack jurisdiction to hear such action, suit or proceeding, in a California state court in the County of San Diego) and that the parties shall submit to the jurisdiction of such court. The parties irrevocably waive, to the fullest extent permitted by law, any objection the party may have to the laying of venue for any such suit, action or proceeding brought in such court. THE PARTIES ALSO EXPRESSLY WAIVE ANY RIGHT THEY HAVE OR MAY HAVE TO A JURY TRIAL OF ANY SUCH SUIT, ACTION OR PROCEEDING. If any one or more provisions of this SECTION 13 shall for any reason be held invalid or unenforceable, it is the specific intent of the parties that such provisions shall be modified to the minimum extent necessary to make it or its application valid and enforceable. 15. NOTICES. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States mail by certified mail (if the parties are within the United States) or upon deposit for delivery by an internationally recognized express mail courier service (for international delivery of notice), with postage and fees prepaid, addressed to the other party at its address as shown beneath its signature in this Notice, or to such other address as such party may designate in writing from time to time to the other party. 6 APPENDIX A EXERCISE NOTICE OVERLAND DATA, INC. STOCK OPTIONS (PLEASE PRINT) DATE: SOCIAL SECURITY # OF OPTIONEE: ------------------------ -------------------- NAME OF OPTIONEE: --------------------------------------------------------------- ADDRESS OF OPTIONEE: ------------------------------------------------------------ PHONE # OF OPTIONEE: FAX # OF OPTIONEE: ------------------------ ----------------- ********************************************** EFFECTIVE TODAY, THE UNDERSIGNED HEREBY ELECTS TO EXERCISE HIS/HER OPTION TO PURCHASE SHARES OF COMMON STOCK OF OVERLAND DATA, INC. GRANTED PURSUANT TO THE OPTION PLAN INDICATED BELOW AND THE NOTICE OF STOCK OPTION AWARD AND/OR STOCK OPTION AWARD AGREEMENT, IN ACCORDANCE WITH THE INFORMATION SET FORTH BELOW AND ON THE ATTACHED TWO PAGES. NUMBER OF OPTIONS TO BE EXERCISED: OPTION PLAN: ------------------- ------------- OPTION PRICE PER SHARE: $ ------------ A. OPTION COST: $ ---------------- B. TAXES DUE: $ (IF NON-QUAL/NON-STATUTORY) ---------------- TOTAL (A + B): $ ---------------- CHECK TRANSACTION -- WIRE TRANSACTION -- OTHER (CIRCLE ONE) NUMBER OF OPTIONS TO BE EXERCISED: OPTION PLAN: ------------------- -------------- OPTION PRICE PER SHARE: $ ------------ A. OPTION COST: $ --------------- B. TAXES DUE: $ (IF NON-QUAL/NON-STATUTORY) --------------- TOTAL (A + B): $ --------------- CHECK TRANSACTION -- WIRE TRANSACTION -- OTHER (CIRCLE ONE) ********************************************* TRADE INSTRUCTIONS: I WISH TO EXERCISE ALL OF THE ABOVE OPTIONS UPON ACCEPTANCE OF MY - ----- REQUEST AND I WOULD LIKE THE FOLLOWING CERTIFICATE(S) ISSUED IN THE FOLLOWING DENOMINATION(S), ISSUED IN THE FOLLOWING NAME(S), AND SENT TO THE FOLLOWING ADDRESS(S): ---------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- I WISH TO EXERCISE ALL OF THE ABOVE OPTIONS UPON ACCEPTANCE OF MY - ----- REQUEST AND I WOULD LIKE THE TRANSACTION TO BE HANDLED THROUGH THE FOLLOWING BROKER/AGENT. MY ACCOUNT NUMBER IS: -------------------------------------------------- BROKER / CONTACT NAME: ------------------------------------------------- ADDRESS: --------------------------------------------------------------- PHONE #: FAX #: --------------------------- ---------------------------- ADDITIONAL INSTRUCTIONS, IF ANY: ------------------------------------------------ - -------------------------------------------------------------------------------- ----------------------------- PAGE 1 OF 3 SIGNATURE OF OPTIONEE EXERCISE NOTICE (CONTINUED) 1. EXERCISE OF OPTION. Effective today, the undersigned (referred to as "Grantee" or "Optionee") hereby elects to exercise the Grantee's option to purchase shares of the Common Stock (the "SHARES") of Overland Data, Inc. (the "COMPANY") under and pursuant to the Stock Option Plan (the "Plan") shown on the face hereof and the Notice of Stock Option Award (the "NOTICE") and/or the Stock Option Award Agreement (the "OPTION AGREEMENT"). Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Exercise Notice. 2. REPRESENTATIONS OF THE GRANTEE. The Grantee acknowledges that the Grantee has received, read and understood this Exercise Notice, the Plan, the Notice and/or the Option Agreement and agrees to abide by and be bound by their terms and conditions. 3. RIGHTS AS SHAREHOLDER. Until the stock certificate evidencing such Shares is issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Shares, notwithstanding the exercise of this Option. The Company shall issue (or cause to be issued) such stock certificate promptly after this Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in the Plan. 4. DELIVERY OF PAYMENT. The Grantee herewith delivers to the Company the full Exercise Price for the Shares, which, to the extent selected, shall be deemed to be satisfied by use of the broker-dealer sale and remittance procedure to pay the Exercise Price provided in the Option Agreement. 5. TAX CONSULTATION. The Grantee understands that the Grantee may suffer adverse tax consequences as a result of the Grantee's purchase or disposition of the Shares. The Grantee represents that the Grantee has consulted with any tax consultants the Grantee deems advisable in connection with the purchase or disposition of the Shares and that the Grantee is not relying on the Company for any tax advice. 6. TAXES. The Grantee agrees to satisfy all applicable federal, state and local income and employment tax withholding obligations and herewith delivers to the Company the full amount of such obligations or has made arrangements acceptable to the Company to satisfy such obligations. In the case of an Incentive Stock Option, the Grantee also agrees, as partial consideration for the designation of this Option as an Incentive Stock Option, to notify the Company in writing within thirty (30) days of any disposition of any shares acquired by exercise of this Option if such disposition occurs within two (2) years from the Date of Award or within one (1) year from the date the Shares were transferred to the Grantee. If the Company is required to satisfy any federal, state or local income or employment tax withholding obligations as a result of such an early disposition, the Grantee agrees to satisfy the amount of such withholding in a manner that the Administrator prescribes PAGE 2 OF 3 7. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights under this Exercise Notice to single or multiple assignees, and this agreement shall inure to the benefit of the successors and assigns of the Company. This Exercise Notice shall be binding upon the Grantee and his or her heirs, executors, administrators, successors and assigns. 8. HEADINGS. The captions used in this Exercise Notice are inserted for convenience and shall not be deemed a part of this agreement for construction or interpretation. 9. DISPUTE RESOLUTION. The provisions of the Option Agreement shall be the exclusive means of resolving disputes arising out of or relating to this Exercise Notice. 10. GOVERNING LAW; SEVERABILITY. This Exercise Notice is to be construed in accordance with and governed by the internal laws of the State of California (as permitted by Section 1646.5 of the California Civil Code, or any similar successor provision) without giving effect to any choice of law rule that would cause the application of the laws of any jurisdiction other than the internal laws of the State of California to the rights and duties of the parties. Should any provision of this Exercise Notice be determined by a court of law to be illegal or unenforceable, such provision shall be enforced to the fullest extent allowed by law and the other provisions shall nevertheless remain effective and shall remain enforceable. 11. NOTICES. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States mail by certified mail, (if the parties are within the United States) or upon deposit for delivery by an internationally recognized express mail courier service (for international delivery of notice) with postage and fees prepaid, addressed to the other party at its address of record, or to such other address as such party may designate in writing from time to time to the other party. 12. FURTHER INSTRUMENTS. The parties agree to execute such further instruments and to take such further action as may be reasonably necessary to carry out the purposes and intent of this agreement. 13. ENTIRE AGREEMENT. The Plan, the Notice and/or the Option Agreement are incorporated herein by reference, and together with this Exercise Notice constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and the Grantee with respect to the subject matter hereof, and may not be modified adversely to the Grantee's interest except by means of a writing signed by the Company and the Grantee. Nothing in the Plan, the Notice, and/or the Option Agreement and this Exercise Notice (except as expressly provided therein) is intended to confer any rights or remedies on any persons other than the parties. PAGE 3 OF 3 -----END PRIVACY-ENHANCED MESSAGE-----