<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
Commission File Number: 0-22071
OVERLAND DATA, INC.
(Exact name of registrant as specified in its charter)
California 95-3535285
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation)
8975 Balboa Avenue, San Diego, California 92123-1599
(Address of principal executive offices, including zip code)
(858) 571-5555
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes / X / No / /
As of May 15, 2000, there were 10,218,701 shares of the registrant's common
stock, no par value, issued and outstanding.
<PAGE>
OVERLAND DATA, INC.
FORM 10-Q
For the quarterly period ended March 31, 2000
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I - FINANCIAL INFORMATION
- ----------------------------------
Item 1. Financial Statements:
Consolidated condensed statement of operations -- Three months and
nine months ended March 31, 2000 and 1999................................................3
Consolidated condensed balance sheet --
March 31, 2000 and June 30, 1999........................................................4
Consolidated condensed statement of cash flows -- Nine months
ended March 31, 2000 and 1999...........................................................5
Notes to consolidated condensed financial statements..........................................6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.....................................................................11
Item 3. Quantitative and Qualitative Disclosures About Market Risk....................................19
PART II - OTHER INFORMATION
- -------------------------------
Item 1. Legal Proceedings.............................................................................20
Item 4. Submission of Matters to a Vote of Security Holders...........................................20
Item 6. Exhibits and Reports on Form 8-K..............................................................21
Signatures....................................................................................21
</TABLE>
2
<PAGE>
OVERLAND DATA, INC.
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
2000 1999 2000 1999
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net revenues:
Product sales .................................. $34,348 $22,048 $84,462 $70,660
Royalties ...................................... 6 215 206 215
------- ------- ------- -------
Total net revenues .......................... 34,354 22,263 84,668 70,875
Cost of goods sold ................................... 25,529 15,741 62,625 49,624
------- ------- ------- -------
Gross profit ......................................... 8,825 6,522 22,043 21,251
------- ------- ------- -------
Operating expenses:
Sales and marketing ............................ 3,587 2,966 9,963 8,769
Research and development ....................... 2,027 1,305 5,272 3,892
General and administrative ..................... 1,500 1,282 4,464 3,811
------- ------- ------- -------
Total operating expenses .................... 7,114 5,553 19,699 16,472
------- ------- ------- -------
Income from operations ............................... 1,711 969 2,344 4,779
Other income:
Interest, net .................................. 171 188 545 645
Other income, net .............................. 37 56 101 168
------- ------- ------- -------
Income before income taxes ........................... 1,919 1,213 2,990 5,592
Provision for income taxes ........................... 758 477 1,181 2,193
------- ------- ------- -------
Net income ........................................... $ 1,161 $ 736 $ 1,809 $ 3,399
======= ======= ======= =======
Earnings per share:
Basic .......................................... $ 0.11 $ 0.07 $ 0.18 $ 0.33
======= ======= ======= =======
Diluted ........................................ $ 0.11 $ 0.07 $ 0.17 $ 0.32
======= ======= ======= =======
Number of shares used in computing earnings per share:
Basic .......................................... 10,118 10,100 10,087 10,291
======= ======= ======= =======
Diluted ........................................ 10,984 10,711 10,435 10,547
======= ======= ======= =======
</TABLE>
See accompanying notes to consolidated condensed financial statements.
3
<PAGE>
OVERLAND DATA, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
(IN THOUSANDS, EXCEPT NUMBER OF SHARES)
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
2000 1999
------------- -----------
(unaudited)
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents ........................ $ 13,994 $ 16,199
Accounts receivable, less allowance for doubtful
accounts and returns of $638 and $885,
respectively................................... 22,770 13,885
Inventories ...................................... 19,439 17,704
Deferred income taxes ............................ 1,375 1,375
Other current assets ............................. 2,530 2,136
-------- --------
Total current assets ................ 60,108 51,299
Property and equipment, net .............................. 4,702 4,657
Intangible and other assets .............................. 410 274
-------- --------
$ 65,220 $ 56,230
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable ................................. $ 10,968 $ 5,615
Accrued liabilities .............................. 3,535 2,876
Accrued payroll and employee compensation ........ 2,115 1,827
-------- --------
Total current liabilities ........... 16,618 10,318
Deferred income taxes .................................... 441 441
Other liabilities ........................................ 1,381 664
-------- --------
Total liabilities ................... 18,440 11,423
-------- --------
Shareholders'equity:
Common stock, no par value, 25,000,000 shares
authorized; 10,198,701 and 10,089,668 shares
issued and outstanding, respectively .......... 31,197 31,030
Accumulated other comprehensive loss ............. (62) (59)
Retained earnings ................................ 15,645 13,836
-------- --------
Total shareholders' equity .......... 46,780 44,807
-------- --------
$ 65,220 $ 56,230
======== ========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
4
<PAGE>
OVERLAND DATA, INC.
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
2000 1999
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income .................................................. $ 1,809 $ 3,399
Adjustments to reconcile net income to cash
provided by (used in) operating activities:
Depreciation and amortization ............................ 1,179 1,022
Changes in operating assets and liabilities:
Accounts receivable ................................. (8,885) 299
Inventories ......................................... 1,675 1,602
Accounts payable and accrued liabilities ............ 6,729 (2,234)
Accrued payroll and employee compensation ........... 288 263
Other ............................................... (530) (326)
-------- --------
Net cash provided by operating activities ........ 2,265 4,025
-------- --------
INVESTING ACTIVITIES:
Capital expenditures ........................................ (1,223) (866)
Acquisition of certain Tecmar assets ........................ (3,410) 0
-------- --------
Net cash used in investing activities ............ (4,633) (866)
-------- --------
FINANCING ACTIVITIES:
Proceeds from exercise of stock options ..................... 281 89
Stock repurchases ........................................... (415) (2,631)
Net proceeds from issuance of common stock .................. 300 338
-------- --------
Net cash provided by (used in) financing
activities .................................... 166 (2,204)
-------- --------
Effect of exchange rate changes on cash ............................. (3) (40)
-------- --------
Net increase (decrease) in cash and cash equivalents ................ (2,205) 915
Cash and cash equivalents at the beginning of the period ............ 16,199 15,550
-------- --------
Cash and cash equivalents at the end of the period .................. $ 13,994 $ 16,465
======== ========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
5
<PAGE>
OVERLAND DATA, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements of Overland Data,
Inc. and its subsidiaries (the "Company") have been prepared by the Company
without audit pursuant to the rules and regulations of the Securities and
Exchange Commission for Form 10-Q. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. In the opinion of management, these statements reflect
all normal recurring adjustments necessary for a fair presentation of the
financial position, results of operations and cash flows for all periods
presented. The results of operations for such periods are not necessarily
indicative of the results expected for the full fiscal year. The Company's 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, 1999 on file with the Securities and Exchange Commission.
NOTE 2 -- NET INCOME PER SHARE
Basic earnings per share ("EPS") is computed based on the weighted average
number of shares of common stock outstanding during the period. Diluted EPS is
computed based on the weighted average number of shares of common stock
outstanding during the period increased by the weighted average number of common
stock equivalents outstanding during the period, using the treasury stock
method. Anti-dilutive common stock equivalents excluded from the computation of
diluted earnings per share amounted to 5,500 and 70,000 at March 31, 2000 and
1999, respectively.
6
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A reconciliation of the calculation of basic and diluted EPS is as follows (in
thousands, except per share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, DECEMBER 31,
2000 1999 2000 1999
--------- --------- --------- ---------
(unaudited)
<S> <C> <C> <C> <C>
Net income ........................... $ 1,161 $ 736 $ 1,809 $ 3,399
======= ======= ======= =======
BASIC EPS:
Weighted average number of common
shares outstanding ............. 10,118 10,100 10,087 10,291
======= ======= ======= =======
Basic earnings per share ............. $ 0.11 $ 0.07 $ 0.18 $ 0.33
======= ======= ======= =======
DILUTED EPS:
Weighted average number of common
shares outstanding .............. 10,118 10,100 10,087 10,291
Common stock equivalents from the
issuance of options using the
treasury stock method ........... 866 611 348 256
------- -------- -------- -------
10,984 10,711 10,435 10,547
======= ======== ======== =======
Diluted earnings per share ........... $ 0.11 $ 0.07 $ 0.17 $ 0.32
======= ======== ======== =======
</TABLE>
NOTE 3 - COMPREHENSIVE INCOME
Comprehensive income includes, in addition to net income, foreign currency
translation effects which are charged or credited to the accumulated other
comprehensive income account within shareholders' equity.
7
<PAGE>
Comprehensive income for the three months and nine months ended March 13,
2000 and 1999 was as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
2000 1999 2000 1999
--------- --------- --------- ---------
(unaudited)
<S> <C> <C> <C> <C>
Net income ............................ $ 1,161 $ 736 $ 1,809 $ 3,399
Foreign currency translation effect ... 40 (40) (3) (43)
------- ------- ------- -------
Comprehensive income .................. $ 1,201 $ 693 $ 1,806 $ 3,359
======= ======= ======= =======
</TABLE>
NOTE 4 -- INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
2000 1999
------------- ---------
(unaudited)
<S> <C> <C>
Raw materials ..... $12,245 $ 9,119
Work-in-process ... 3,265 3,074
Finished goods .... 3,929 5,511
------- -------
$19,439 $17,704
======= =======
</TABLE>
NOTE 5 -- LITIGATION
The Company, its directors and certain of its officers were named as
defendants in two class action lawsuits filed on April 21, 1997 and May 2,
1997 in the U.S. District Court for the Southern District of California. In
both cases, the plaintiffs purported to represent a class of all persons who
purchased the Company's Common Stock between February 21, 1997 and March 14,
1997. The complaints alleged that the defendants violated various federal
securities laws through material misrepresentations and omissions in
connection with the Company's initial public offering and its Registration
Statement on Form S-1, which the Securities and Exchange Commission declared
effective on February 21, 1997.
On September 24, 1999, the lead plaintiff and the defendants reached an
agreement in principle to settle the entire litigation.
8
<PAGE>
At a hearing held on March 6, 2000, the court determined the settlement was
fair and reasonable to the class members, and approved the settlement. Given
that no appeal was filed by April 6, 2000, the lawsuits have concluded.
The Company maintains directors' and officers' liability insurance to cover
the settlement payment, as well as all costs of defense, less certain
unreimbursed defense costs. As a result, the Company incurred a one-time,
pre-tax charge of $248,000 for the fiscal quarter ended September 30, 1999.
In July 1998, a lawsuit was filed in the U.S. District Court for the District
of Massachusetts alleging infringement by the Company related to its use of
the "GUTS" and "Guaranteed Up Time Service" trademarks. All discovery in the
lawsuit has now closed. The Company has filed a pending motion for summary
judgment. The court has not yet set a hearing date for that motion.
Management believes that the disposition of this matter will not have a
material adverse effect on the Company's financial position or results of
operations.
NOTE 6 -- ACQUISITION OF TECMAR ASSETS
On February 23, 2000, pursuant to an asset purchase agreement dated January
10, 2000, the Company purchased certain inventories, fixed assets, supplies,
intellectual property, trademarks and Internet addresses (the "Acquisition")
from Tecmar Technologies International, Inc. ("TTI") relating to its
wholly-owned subsidiary, Tecmar Technologies, Inc. ("Tecmar"). Total
consideration for the Acquisition amounted to approximately $3,410,000. The
assets were acquired on a discounted basis free and clear of all liens,
interests and claims pursuant to a bankruptcy court order, and the Company
assumed no liabilities of Tecmar other than ordinary course customer warranty
claims. Tecmar, based in Longmont, Colorado, develops and manufactures
entry-level tape drives for the entry-level network storage market. The
Company's reported statement of operations includes the results of Tecmar
from the February 23, 2000 acquisition date.
The Company has recorded the acquisition using the purchase method of
accounting. The consideration was all cash and has been allocated to the
assets acquired and liabilities assumed based on their estimated fair values.
As of May 16, 2000, the estimated fair value of the assets acquired exceed
the total consideration paid and the Company has allocated this excess amount
to first reduce the value of non-current assets to zero and then to negative
goodwill. The negative goodwill is being amortized to reduce general and
administrative expenses on a straight-line basis over 36 months, the
estimated period of benefit. These allocations are preliminary as the Company
still is in the process of evaluating the fair value of the assets acquired
and liabilities assumed. The allocations do not reflect any nonrecurring
costs that may be incurred to exit certain Tecmar activities, which cannot be
reasonably estimated at this time.
The Company's preliminary estimate of values and of the allocation of purchase
price are as follows:
9
<PAGE>
<TABLE>
<CAPTION>
(In Thousands)
<S> <C>
PURCHASE PRICE:
Cash consideration .................................... $ 3,239
Acquisition expenses .................................. 171
-------
Total ............................................ 3,410 (a)
-------
PRELIMINARY ALLOCATION OF PURCHASE PRICE:
Fair value of identifiable tangible assets acquired ... 4,895
Less fair value of liabilities assumed ................ (402)
-------
Total ............................................ 4,493 (b)
-------
EXCESS OF FAIR VALUE OF ASSETS ACQUIRED AND
LIABILITIES ASSUMED OVER PURCHASE PRICE (a) - (b) ....... (1,083)
Allocation of excess to reduce non-current
assets to zero value .................................. 628
-------
NEGATIVE GOODWILL RESIDUAL ................................. $ (455)
=======
</TABLE>
The following supplemental pro forma financial information is presented for
illustrative purposes only. The pro forma results for the Company's fiscal
year ended June 30, 1999 present the results for the Company as if the
Acquisition occurred on July 1, 1998. The pro forma results for the nine
months ended March 31, 2000 present the results for the Company as if the
Acquisition occurred on July 1, 1999. Because TTI's fiscal year end was
January 31 and the Company's fiscal year end is June 30, the supplemental pro
forma information was prepared using TTI's results for the twelve months
ended April 30, 1999 and for the nine months ended January 31, 2000,
respectively, in order to bring Tecmar's results to a period within 93 days
of the Company's fiscal year end. These pro forma results are not necessarily
indicative of the results of the combined operations which actually would
have been reported had the Acquisition occurred as of those dates, nor are
they necessarily indicative of the Company's future financial results of
operations.
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1999 2000
------------- ------------
(In Thousands) (unaudited)
<S> <C> <C>
Net sales .............................. $ 114,685 $ 99,777
Net income ............................. (701) (4,741)
Diluted net loss per share ............. (0.07) (0.45)
</TABLE>
10
<PAGE>
ITEM 2. -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Forward-looking statements usually contain the
words "estimate," "anticipate," "expect," "plan" or similar expressions. All
forward-looking statements are inherently uncertain as they are based on various
expectations and assumptions concerning future events and they are subject to
numerous known and unknown risks and uncertainties. The forward-looking
statements included herein are based on current expectations and entail such
risks and uncertainties as those set forth below, which could cause the
Company's actual results to differ materially from those projected in the
forward-looking statements. The Company disclaims any obligation to update or
publicly announce revisions to any such statements to reflect future events or
developments.
OVERVIEW
Overland Data designs, develops, manufactures, markets and supports magnetic
tape data storage systems used by businesses for backup, archival and data
interchange functions in high-availability network computing environments, from
entry level to the enterprise. The Company's primary products are automated tape
libraries, minilibraries and loaders, which combine electromechanical robotics,
electronic hardware and firmware developed by the Company. Currently, the
Company's products are based on two different half-inch magnetic tape
technologies - DLT and 36-track.
In March 1996,the Company introduced the LibraryXpress, a scalable automated
tape library system incorporating DLT tape drives, and began shipping the LXB
base module. Subsequently, the Company introduced the following modules as part
of the same product line:
- the LXG global control unit;
- the LXC capacity module;
- the LXS MiniLibrary;
- the LoaderXpress;
- the MinilibraryXpress;
- the EnterpriseXpress.
The Company sells these products primarily to OEM partners, who integrate the
Company's products into finished goods sold to end-users. The Company's sales
are generated in part through its website, located at
http://www.overlanddata.com.
The Company's second product line, TapeXpress, consists of 36-track products
based on the IBM 3480/3490/3490E technologies. These technologies are
maturing, and sales have declined as expected during the current fiscal year.
The Company also distributes products manufactured by other OEM's and markets
other items supplied
11
<PAGE>
by third parties including controller cards, interchange software, storage
management software, spare parts and tape media.
The Company has licensed the proprietary tape encoding technology that it
developed and patented under the name VR2 to Seagate Technology, Inc.,
Tandberg Data and Imation Corp., as well as a recent letter of intent with
Storage Technology, Inc. OEM products using the Company's patented VR2
technology were shipped to customers beginning in the third quarter of this
fiscal year. Finally, on February 23, 2000, the Company acquired various
assets from Tecmar Technologies International, Inc., to support its market
initiative to supply storage backup to small businesses.
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 develop, manufacture and market new and
enhanced products on a timely and cost effective basis.
The Company's future revenue and operating results depend on gaining further
market acceptance for its LibraryXpress line of automated tape libraries, and on
its ability to manufacture sufficient product to satisfy demand. Additionally,
the Company's revenues are highly dependent upon the level of sales to Compaq
Computer Corporation, which comprised 58% of the Company's revenues in the
quarter ended March 31, 2000. Although Compaq is the primary customer for this
product line, Compaq is not required to purchase minimum quantities and its
orders can fluctuate from quarter to quarter.
The LibraryXpress products incorporate a line of DLT tape drives supplied by
Quantum Corporation, which had been the sole source for DLT tape technology. At
certain times in the past, the Company has not obtained an adequate supply of
these drives and there can be no assurance that these supply interruptions will
not recur. In September 1998, Quantum announced that it had entered into a
manufacturing license and marketing agreement with Tandberg Data ASA, through
which Tandberg became an independent second source of DLT tape drives. Tandberg
commenced full production of DLT7000 drives on September 1, 1999, a factor that
has reduced the Company's dependence on Quantum.
The Company's TapeXpress line of legacy 36-track products have lessened in
importance over the prior fiscal year and represented only 12% of the
Company's sales in the first nine months of fiscal year 2000. IBM is the
Company's primary customer for this product line. However, IBM is not
required to purchase minimum quantities pursuant to the supply arrangement,
and IBM's orders can fluctuate from quarter to quarter.
The value of the Company's new Variable Rate Randomizer (VR(2)) encoding
technology is not determinable at this time. Although the Company has now
entered into licensing agreements with Tandberg Data ASA, Imation Corp. and
Seagate
12
<PAGE>
Technology, Inc., as well as a recent letter of intent with Storage
Technology, Inc., the success of VR(2) depends on the success of the
licensee's tape drives, which ultimately incorporate the VR(2) technology.
Success of VR(2) 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 VR(2) enhanced tape
drives.
The Company's model for conducting business and generating revenues from the
sale of products over the Internet to other businesses is new and unproven. As a
result, demand and market acceptance for the Company's products are subject to a
high degree of uncertainty and risk. The Company is attempting to capitalize on
a business model not currently implemented by all of its competitors. The
Company cannot assure that businesses in the data storage industry will adopt
its Internet solution for obtaining data storage products. If this new market
fails to develop, develops more slowly than expected or becomes saturated with
competitors, or the Company's products do not achieve or sustain market
acceptance, then the Company's business could be harmed.
Mergers and acquisitions of high-technology companies are inherently risky.
On February 23, 2000, the Company moved into the small-business, low-cost
server backup market with its acquisition of TTI inventories, fixed assets,
supplies, intellectual property, trademarks and Internet addresses.
Acquisitions involve numerous risks, including the following:
- - difficulties in integrating the acquired assets, operations,
technologies and products;
- - the diversion of management's attention from normal daily operations of
the business;
- - difficulties in completing projects associated with purchased in-process
research and development;
- - risks of entering markets in which the Company has no limited direct
prior experience and where competitors in such markets have stronger market
positions; and
- - the potential loss of key employees related to the integration and
operation of the acquired assets.
No assuance can be given that the Tecmar acquisition will be successful or
that it will not materially adversely affect the Company's business,
operating results or financial condition.
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, 1999 on file with the Securities
and Exchange Commission.
13
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth items in the Company's statement of operations as
a percentage of net revenues for the periods presented. The data has been
derived from the Company's unaudited condensed consolidated financial
statements.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net revenues ........................ 100.0% 100.0% 100.0% 100.0%
Cost of goods sold .................. 74.3 70.7 74.0 70.0
----- ----- ----- -----
Gross profit ........................ 25.7 29.3 26.0 30.0
----- ----- ----- -----
Operating expenses:
Sales and marketing ............ 10.4 13.3 11.8 12.4
Research and development ....... 5.9 5.9 6.2 5.5
General and administrative ..... 4.4 5.8 5.3 5.4
----- ----- ----- -----
Total operating expenses ..... 20.7 25.0 23.3 23.3
----- ----- ----- -----
Income from operations .............. 5.0 4.3 2.7 6.7
Other income:
Interest, net .................. 0.5 0.8 0.7 0.9
Other income, net .............. 0.1 0.2 0.1 0.2
----- ----- ----- -----
Income before income taxes .......... 5.6 5.3 3.5 7.8
Provision for income taxes .......... 2.2 2.1 1.4 3.1
----- ----- ----- -----
Net income .......................... 3.4% 3.2% 2.1% 4.7%
===== ===== ===== =====
</TABLE>
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
NET REVENUES. Net revenues of $34.4 million in the third quarter of
fiscal year 2000 were $12.1 million or 54.3% above net revenues of $22.3
million in the comparable quarter of the prior fiscal year. Improved sales
during the third quarter of fiscal year 2000 of the Company's LibraryXpress
and LoaderXpress products more than offset the decline in shipments of mature
products (36, 18, and 9-track products). Sales of the LibraryXpress product
family increased by 98.4% from $12.4 million in the third quarter of fiscal
year 1999 to $24.6 million in the third quarter of fiscal year 2000,
primarily due to strong shipments to Compaq Computer Corp., the Company's
largest customer. Sales of LibraryXpress products to Compaq of $19.3 million
grew 310.6% from sales of $4.7 million during the same quarter of the prior
fiscal year. Sales of the Company's mature 36-track products declined by
28.6% from $4.4 million in the third quarter of fiscal year 1999 to $3.1
million in the third quarter of fiscal year 2000. Sales of LoaderXpress
products increased 48.0% from $2.1 million in the third quarter of fiscal
year 1999 to $3.1 million in the third quarter of fiscal year 2000. Sales of
9-track and 18-track products, which contributed $544,000 in revenues in the
third quarter of fiscal year 1999, were discontinued at the end of fiscal
year 1999 and, therefore, no sales of these products were recorded in the
third quarter of fiscal year 2000. Sales of
14
<PAGE>
distributed DLT drives of $1.3 million were flat with the same quarter of the
prior fiscal year, and the Company also recorded revenue of $719,000 in the
quarter just completed through its recently established Tecmar subsidiary,
which sells Travan, Ditto and DAT products worldwide. Tecmar recorded lower
than expected sales of its Ditto-Registered Trademark- products.
A summary of the sales mix by product for the periods presented in the statement
of operations follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
2000 1999 2000 1999
------ ------ ----- ------
<S> <C> <C> <C> <C>
Company products:
LibraryXpress ...................... 71.7% 55.8% 67.0% 47.3%
LoaderXpress ....................... 9.0 9.4 9.8 8.2
36-track ........................... 9.1 19.6 11.6 28.0
18-track ........................... -- -- -- 0.1
9-track ............................ -- 2.4 0.1 4.7
Spare parts, controllers, other .... 4.4 6.1 5.6 5.7
Travan/Ditto/DAT ................... 2.1 -- 0.9 --
VR2 ................................ -- 1.0 0.2 0.3
Other products:
DLT distributed product ........... 3.7 5.7 4.8 5.7
----- ----- ----- -----
100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
</TABLE>
GROSS PROFIT. The Company's gross profit for the third quarter of fiscal
year 2000 was $8.8 million, up 35.3% from $6.5 million in the third quarter
of fiscal year 1999. As a percentage of net revenues, the gross margin of
25.7% in the third quarter of fiscal year 2000 was lower than the gross
margin of 29.3% in the comparable quarter of the prior fiscal year. This
decline was primarily the result of three factors: (1) a higher concentration
of lower margin Compaq sales in the third quarter of fiscal year 2000
compared to the third quarter of fiscal year 1999; (2) an expected decline in
sales of higher margin legacy products; and (3) reduced sales of the
Company's branded products in its other sales channels.
SALES AND MARKETING EXPENSE. Sales and marketing expense amounted to $3.6
million or 10.4% of net revenues in the third quarter of fiscal year 2000
compared to $3.0 million or 13.3% of net revenues in the third quarter of fiscal
year 1999. The increased expenses in the current quarter are due primarily to
higher sales personnel costs and promotional spending, as well as the
consolidation of expenses at Tecmar.
RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense
amounted to $2.0 million or 5.9% of net revenues in the third quarter of
fiscal year 2000 compared to $1.3 million or 5.9% of net revenues in the
third quarter of fiscal year 1999. The increased expenses in the current
quarter primarily reflect personnel
15
<PAGE>
additions, including the operations of Tecmar, and higher development
material costs related to new product development programs, especially the
next-generation Travan tape drive that will use the Company's patented VR(2)
technology.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense
amounted to $1.5 million or 4.4% of net revenues in the third quarter of
fiscal year 2000 compared to $1.3 million or 5.8% of net revenues in the
third quarter of fiscal year 1999. The increased expenses in the third
quarter of fiscal year 2000 primarily reflect personnel additions and higher
consulting and legal fees, as well as the expenses of Tecmar. These increases
were partially offset by a $260,000 reduction in the Company's reserve for
doubtful accounts due to an improvement in the quality of the Company's
accounts receivable given the growing percentage of sales to OEM customers.
OTHER INCOME, NET. In the third quarter of fiscal year 2000, net other
income amounted to $208,000, comprised primarily of interest income of $153,000
plus $50,000 from the sale of a discontinued product line. Net other income in
the third quarter of fiscal year 1999 was $244,000, consisting of interest
income of $188,000 and foreign currency gains of $56,000.
INCOME TAXES. The Company's effective tax rate in the third quarter of
fiscal year 2000 was 39.5% compared to 39.3% in the third quarter of fiscal year
1999. The effective tax rate for all of fiscal year 1999 was 39.5% and is
expected to remain unchanged for fiscal year 2000.
NET INCOME. Net income amounted to $1.2 million in the third quarter of
fiscal year 2000 compared to $736,000 in the third quarter of fiscal year
1999. Included in net income for the third quarter of fiscal year 2000 was a
net loss of approximately $209,000, or $.02 per share, at the Company's new
subsidiary, Tecmar, Inc. Tecmar's net loss was attributable to lower than
expected sales of Tecmar's line of Ditto-Registered Trademark- products and
higher R&D expenses associated with the development of next generation
Travan-TM- tape drives. Diluted and basic net income per share for the third
quarter of fiscal year 2000 was $0.11, up $0.04 for both measures from the
comparable quarter of the prior fiscal year.
FOR THE NINE MONTHS ENDED MARCH 31, 2000 AND 1999
NET REVENUES. The Company's net revenues of $84.7 million in the first
nine months of fiscal year 2000 grew by $13.8 million or 19.5% over revenues
of $70.9 million in the comparable period of the prior fiscal year. Sales of
the Company's LibraryXpress products grew from $33.5 million in the first
nine months of fiscal year 1999 to $56.8 million in the first nine months of
fiscal year 2000, an increase of 69.3%. Sales of the Company's mature
36-track products declined from $19.8 million in the first nine months of
fiscal year 1999 to $9.8 million in the first nine months of fiscal year
2000. Sales of the Company's LoaderXpress products grew from $5.9 million in
the first nine months of fiscal year 1999 to $8.2 million in the first nine
months of fiscal year 2000, an increase of 40.7%. Sales of 9-track and
18-track
16
<PAGE>
products, which contributed $3.4 million in revenues in the first nine months
of fiscal year 1999, were discontinued at the end of fiscal year 1999.
Therefore, sales of these products amounted to only $81,000 in the first nine
months of fiscal year 2000.
In total, the OEM business comprised 58.0% of revenues for the first nine
months of fiscal year 2000 compared to 47.2% of revenues for the comparable
period of the prior fiscal year, due primarily to increased sales to Compaq
Computer Corp. During the first nine months of fiscal year 2000 sales of
controllers, spare parts, software and other products amounted to $4.8
million, an increase of 18.5% from sales of $4.0 million during the first
nine months of fiscal year 1999. The Company also recorded in the quarter
just completed revenue of $719,000 through its recently established Tecmar
subsidiary, which sells Travan, Ditto and DAT products worldwide. Finally, as
expected, these gains were partially offset by declines in sales of the
Company's mature 36-track, 18-track and 9-track products, which fell by a
combined 57.5% from $23.2 million in the first nine months of fiscal year
1999 to $9.9 million in the same period in fiscal year 2000.
GROSS PROFIT. The Company's gross profit for the first nine months of
fiscal year 2000 was $22.0 million, a 3.7% increase from the $21.3 million
reported in the first nine months of fiscal year 1999. The gross margin
percentage declined from 30.0% in the first nine months of fiscal year 1999
to 26.0% in the first nine months of fiscal year 2000. This decline was due
primarily to: (1) a higher concentration of lower margin Compaq sales in the
first nine months of fiscal year 2000 versus the comparable period of the
prior fiscal year; (2) an expected decline in sales of higher margin legacy
products; and (3) reduced sales of the Company's branded products in its
other sales channels.
SALES AND MARKETING EXPENSE. Sales and marketing expense amounted to $10.0
million or 11.8% of net revenues in the first nine months of fiscal year 2000,
compared to $8.8 million or 12.4% of net revenues in the comparable period of
the prior fiscal year. Growth in sales expenses of $632,000 was due primarily to
wages for new sales personnel hired to generate demand through our existing
domestic and expanding European channels. The $560,000 increase in marketing
expenses resulted primarily from increased advertising and promotion costs for
new products, as well as higher marketing consulting fees.
RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense
amounted to $5.3 million or 6.2% of net revenues in the first nine months of
fiscal year 2000, compared to $3.9 million or 5.5% of net revenues in the
comparable period of the prior fiscal year. The increased expenses primarily
reflect personnel additions, including the operations of Tecmar, and higher
development material costs related to new product development programs,
especially the next-generation Travan tape drive, which will use the
Company's patented VR(2) technolgoy.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense
amounted to $4.5 million or 5.3% of net revenues in the first nine months of
fiscal year 2000, compared to $3.8 million or 5.4% of net revenues in the
comparable period of the prior fiscal year. The increased expenses reflect
additional legal and consulting fees, personnel additions and increased costs
associated with the production of the
17
<PAGE>
Company's annual report. These increases were partially offset by a $237,000
reduction in the Company's reserve for doubtful accounts because of the
higher percentage of sales to OEM customers.
OTHER INCOME, NET. In the first nine months of fiscal year 2000, net other
income amounted to $646,000, comprised primarily of $528,000 in interest income
and $91,000 from the sale of a discontinued product line. Net other income was
$813,000 in the first nine months of fiscal year 1999, consisting of $645,000 in
interest income and $168,000 in foreign currency gains.
INCOME TAXES. The Company's effective tax rate in the first nine
months of fiscal year 2000 was 39.5% compared to 39.2% in the comparable
period of the prior fiscal year.
NET INCOME. Net income amounted to $1.8 million in the first nine months of
fiscal year 2000, compared to $3.4 million in the comparable period of the prior
fiscal year. Diluted net income per share decreased to $0.17 in the first nine
months of fiscal year 2000, compared to $0.32 in the comparable period of the
prior fiscal year. Basic net income per share decreased from $0.33 to $0.18 in
the same time periods.
LIQUIDITY AND CAPITAL RESOURCES
During the first nine months of fiscal year 2000, the Company used $2.2 million
in cash. Primary uses of cash included the $3.4 million purchase of Tecmar
assets, an increase of $8.9 million in accounts receivable, and a $1.2 million
investment in capital equipment. Cash was provided primarily by $3.0 million in
earnings before depreciation and amortization, a $1.7 million decrease in
inventories, and a $6.7 million increase in payables and accrued liabilities.
The Company's cash reserves fell to $14.0 million at March 31, 2000, compared to
$16.2 million at June 30, 1999. The Company's working capital amounted to $41.7
million, and it had no outstanding funded debt. Although the Company's current
outlook does not require additional debt funding, on November 10, 1999, the
Company renewed its bank line of credit of $5.0 million. The Company believes
that these resources will be sufficient to fund its operations and to provide
for its growth into the foreseeable future.
YEAR 2000 COMPLIANCE
THIS STATEMENT IS INTENDED AS A YEAR 2000 READINESS DISCLOSURE.
The Company completed its year 2000 readiness work and to date has not
experienced any material problems incident to the date rollover. The
foregoing statement is based on management's best estimates at the present
time, which were derived using numerous assumptions of future events and
conditions, including third party modification plans, third party assurances
of year 2000 compliance and other factors. There can be no assurance that
these assumptions will be accurate, that the estimates will be achieved, and
actual results could differ materially from those anticipated.
18
<PAGE>
ITEM 3. -- QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's market risk exposures are related to its cash, cash equivalents
and foreign operations. The Company invests its excess cash in highly liquid
short-term investments with maturities of less than one-year. The Company is
also exposed to foreign currency exchange rate risk inherent in its sales
commitments, anticipated sales and assets and liabilities denominated in
currencies other than the U.S. dollar. The Company does not believe that either
of these items present any significant market risk.
19
<PAGE>
PART II -- OTHER INFORMATION
ITEM 1. -- LEGAL PROCEEDINGS
The Company, its directors and certain of its officers were named as defendants
in two class action lawsuits filed on April 21, 1997 and May 2, 1997 in the U.S.
District Court for the Southern District of California. In both cases, the
plaintiffs purported to represent a class of all persons who purchased the
Company's Common Stock between February 21, 1997 and March 14, 1997. The
complaints alleged that the defendants violated various federal securities laws
through material misrepresentations and omissions in connection with the
Company's initial public offering and its Registration Statement on Form S-1,
which the Securities and Exchange Commission declared effective on February 21,
1997.
On September 24, 1999, the lead plaintiff and the defendants reached an
agreement in principle to settle the entire litigation. At a hearing held on
March 6, 2000, the court determined the settlement was fair and reasonable to
the class members, and approved settlement. Given that no appeal was filed by
April 6, 2000, the lawsuits have concluded.
The Company maintains directors' and officers' liability insurance to cover
the settlement payment, as well as all costs of defense, less certain
unreimbursed defense costs. As a result, the Company incurred a one-time,
pre-tax charge of $248,000 for the fiscal quarter ended September 30, 1999.
In July 1998, a lawsuit was filed in the U.S. District Court for the District
of Massachusetts alleging infringement by the Company related to its use of
the "GUTS" and "Guaranteed Up Time Service" trademarks. All discovery in the
lawsuit has now closed. The Company has filed a pending motion for summary
judgment. The court has not yet set a hearing date for that motion.
Management believes that the disposition of this matter will not have a
material adverse effect on the Company's financial position or results of
operations.
ITEM 4. -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the third quarter
of fiscal year 2000.
20
<PAGE>
ITEM 6. -- EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Officer's Retention Agreement, dated as of January 27,
2000, by and between the Company and Scott McClendon.
10.2 Officer's Retention Agreement, dated as of January 27,
2000, by and between the Company and Frank R. Kirchhoff.
10.3 Officer's Retention Agreement, dated as of January 27,
2000, by and between the Company and Steven E.
Richardson.
10.4 Officer's Retention Agreement, dated as of January 27,
2000, by and between the Company and Robert J. Scroop.
27.0 Financial Data Schedule
(b) Reports on Form 8-K
(i.) Current report on Form 8-K dated as of January 21,
2000, regarding the Company's signing of an asset
purchase agreement with Tecmar Technologies
International, Inc. and related entities, under which
Overland acquired from Tecmar substantially all
inventories, fixed assets, supplies, intellectual
property, trademarks and Internet addresses for
approximately $3 million in cash in a pre-packaged
bankruptcy plan.
(ii.) Current report on Form 8-K dated as of March 8, 2000
regarding the Company's purchase of certain
inventories, fixed assets, supplies, intellectual
property, trademarks and Internet addresses from
Tecmar Technologies International, Inc. and related
entities.
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 17, 2000 By: /s/ Vernon A. LoForti
----------------------
Vernon A. LoForti
Vice President and
Chief Financial Officer
21
<PAGE>
Exhibit 10.1
RETENTION AGREEMENT
THIS RETENTION AGREEMENT (the "AGREEMENT"), dated January 27,
2000, 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 Scott McClendon ("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.
<PAGE>
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
<PAGE>
2. TITLE AND DUTIES. Employee will hold the position of President & Chief
Executive Officer. His primary duties will include such duties as are assigned
or delegated to Employee by the Board of Directors of the Company (the "BOARD").
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
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
<PAGE>
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 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 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
<PAGE>
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
<PAGE>
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: January 27, 2000 By: /s/ Vernon A. LoForti
---------------------- ---------------------------------------------
Vernon A. LoForti, Vice President, Chief
Financial Officer and Secretary
Dated: January 27, 2000 /s/ Scott McClendon
---------------------- ---------------------------------------------
Scott McClendon, Employee
6
<PAGE>
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 Scott McClendon, an individual
residing at ________________ ("EMPLOYEE") with reference to the following facts:
RECITALS
A. The parties entered into a Retention Agreement ("the Agreement")
dated January 27, 2000, 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
Section 1542 of the California Civil Code, which Employee understands provides
as follows:
1
<PAGE>
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
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<PAGE>
discovery (i.e. investigation of facts through depositions and other means)
which shall be governed by the 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, Employee
<PAGE>
Exhibit 10.2
RETENTION AGREEMENT
THIS RETENTION AGREEMENT (the "AGREEMENT"), dated January 27,
2000, 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 Frank R. Kirchhoff ("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.
<PAGE>
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.
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<PAGE>
2. TITLE AND DUTIES. Employee will hold the position of Vice President of Sales.
His primary duties will include such duties as are assigned or delegated to
Employee by the President and Chief Executive Officer of the Company (the
"PRESIDENT"). 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 President and 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, 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 SECTION 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.
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<PAGE>
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.
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
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<PAGE>
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.
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: January 27, 2000 By: /s/ Scott McClendon
--------------------- --------------------------------------------
Scott McClendon, President and Chief
Executive Officer
Dated: January 27, 2000 /s/ Frank R. Kirchhoff
--------------------- --------------------------------------------
Frank R. Kirchhoff, Employee
5
<PAGE>
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 Frank R. Kirchhoff, an individual
residing at ____________________ ("EMPLOYEE") with reference to the following
facts:
RECITALS
A. The parties entered into a Retention Agreement ("the Agreement")
dated January 27, 2000, 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
Section 1542 of the California Civil Code, which Employee understands provides
as follows:
1
<PAGE>
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 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 Code
2
<PAGE>
of Civil Procedure ("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. 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:
--------------------------- --------------------------------------
Frank R. Kirchhoff, Employee
3
<PAGE>
Exhibit 10.3
RETENTION AGREEMENT
THIS RETENTION AGREEMENT (the "AGREEMENT"), dated January 27,
2000, 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 Steven E. Richardson ("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.
<PAGE>
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.
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<PAGE>
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. TITLE AND DUTIES. Employee will hold the position of Vice President of
Marketing. His primary duties will include such duties as are assigned or
delegated to Employee by the President and Chief Executive Officer of the
Company (the "PRESIDENT"). 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 President and 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, 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 SECTION 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.
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<PAGE>
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.
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
4
<PAGE>
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.
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: January 27, 2000 By: /s/ Scott McClendon
---------------------- ----------------------------------------
Scott McClendon, President and Chief
Executive Officer
Dated: January 27, 2000 /s/ Steven E. Richardson
---------------------- ----------------------------------------
Steven E. Richardson, Employee
5
<PAGE>
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 Steven E. Richardson, an individual
residing at ________________ ("EMPLOYEE") with reference to the following facts:
RECITALS
A. The parties entered into a Retention Agreement ("the Agreement")
dated January 27, 2000, 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
Section 1542 of the California Civil Code, which Employee understands provides
as follows:
1
<PAGE>
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 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 Code
2
<PAGE>
of Civil Procedure ("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. 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:
---------------------------- -------------------------------------
Steven E. Richardson, Employee
3
<PAGE>
Exhibit 10.4
RETENTION AGREEMENT
THIS RETENTION AGREEMENT (the "AGREEMENT"), dated January 27,
2000, 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 Robert J. Scroop ("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.
<PAGE>
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
<PAGE>
2. TITLE AND DUTIES. Employee will hold the position of Vice President of
Engineering. His primary duties will include such duties as are assigned or
delegated to Employee by the President and Chief Executive Officer of the
Company (the "PRESIDENT"). 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 President and 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, 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 SECTION 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.
3
<PAGE>
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.
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
4
<PAGE>
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.
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: January 27, 2000 By: /s/ Scott McClendon
-------------------- --------------------------------------
Scott McClendon, President and Chief
Executive Officer
Dated: January 27, 2000 /s/ Robert J. Scroop
-------------------- --------------------------------------
Robert J. Scroop, Employee
5
<PAGE>
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 Robert J. Scroop, an individual
residing at ________________ ("EMPLOYEE") with reference to the following facts:
RECITALS
A. The parties entered into a Retention Agreement ("the Agreement")
dated January 27, 2000, 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
Section 1542 of the California Civil Code, which Employee understands provides
as follows:
1
<PAGE>
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 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 Code
2
<PAGE>
of Civil Procedure ("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. 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, Employee
3
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS FOR THE 9 MONTHS ENDED MAR. 31,
2000, THE CONSOLIDATED CONDENSED BALANCE SHEET AS OF MAR. 31, 2000 AND THE
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS FOR THE 9 MONTHS ENDED MAR. 31,
2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 13,994
<SECURITIES> 0
<RECEIVABLES> 22,770
<ALLOWANCES> 0
<INVENTORY> 19,439
<CURRENT-ASSETS> 60,108
<PP&E> 4,702
<DEPRECIATION> 0
<TOTAL-ASSETS> 65,220
<CURRENT-LIABILITIES> 16,618
<BONDS> 0
0
0
<COMMON> 31,197
<OTHER-SE> 15,583
<TOTAL-LIABILITY-AND-EQUITY> 65,220
<SALES> 84,668
<TOTAL-REVENUES> 84,668
<CGS> 62,625
<TOTAL-COSTS> 62,625
<OTHER-EXPENSES> 19,699
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (545)
<INCOME-PRETAX> 2,990
<INCOME-TAX> 1,181
<INCOME-CONTINUING> 1,809
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,809
<EPS-BASIC> .18
<EPS-DILUTED> .17
</TABLE>
