<PAGE>


                                  EXHIBIT 10.1

                                 [OVERLAND LOGO]

                               Overland Data, Inc.
                               8975 Balboa Avenue
                            San Diego, CA 92123-1599
                                 (858) 571-5555
                               (858) 495-4267 fax


                              EMPLOYMENT AGREEMENT


This Employment Agreement ("Agreement"), which shall become effective on January
1, 2001, finalizes the terms and conditions of employment agreed upon by and
between Overland Data, Inc. ("Employer" or the "Company") and Scott McClendon
("Executive").

The parties agree as follows:

1.       POSITIONS AND DUTIES. Executive will be employed by the Company in the
positions of President and Chief Executive Officer ("CEO"), reporting to the
Company's Board of Directors (the "Board"), and shall do and perform all
services, acts or things necessary or advisable to manage and conduct the
business of the Company and which are normally associated with the positions of
President and CEO consistent with the bylaws of the Company and as required by
the Board.

If the Company hires a new President and CEO on or before June 30, 2001, then
the Company shall appoint Executive to the position of Chairman of the Board.

         1.1      BEST EFFORTS/FULL-TIME. During the Employment Term (as defined
in paragraph 1.2 herein), Executive will act in the best interests of Employer
and devote his full business time and best efforts to the performance of his
duties under this Agreement. Executive agrees to be available to render such
services at all reasonable times and places and in accordance with Employer's
directives.

Executive shall be assigned to work in the Company's corporate offices in San
Diego, California, but may be required to travel in connection with his duties.
Executive will abide by all policies, procedures, and decisions made by
Employer, as well as all federal, state and local laws, regulations or
ordinances applicable to his employment.

During his employment, Executive must not engage in any work, paid or unpaid,
that creates an actual or potential conflict of interest with Employer's
business interests and if, in the opinion of the Board, an actual or potential
conflict exists, the Board may in its sole discretion require Executive to
choose to either (i) discontinue the other work or (ii)


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resign from his employment with Employer. The foregoing restriction shall not
preclude Executive from engaging in civic, charitable or religious activities,
or from serving on boards of directors of companies or organizations so long as
he notifies the Board of such services in writing, and such services do not pose
a conflict or interfere with his responsibilities to Employer. It is anticipated
that Executive shall generally devote no less than 40 hours per week to his
duties for Employer.

         1.2      TERM OF EMPLOYMENT. This Agreement shall commence on January
1, 2001, and, unless terminated by either party in accordance with paragraph 5
herein, shall continue until January 1, 2002. Thereafter, unless terminated by
either party in accordance with paragraph 5, Executive's employment shall
automatically renew for an additional one year term on such date and on each
anniversary thereof (the period of employment hereunder shall be referred to
herein as the "Employment Term"). Except as provided in paragraph 6, this
Agreement shall continue during the Employment Term to govern the terms and
conditions of Executive's employment, unless modified by the parties hereto in
writing.

2.       COMPENSATION.

         2.1      BASE SALARY. As compensation for the proper and satisfactory
performance of all duties under this Agreement, Executive shall earn a gross
annual base salary of $325,000.00 ($12,500.00 gross per bi-weekly payroll
period), less all legally required payroll deductions, payable in accordance
with Employer's normal payroll practices ("Base Salary").

         2.2      BONUS. In addition, Executive will be eligible to receive
potential annual bonus earnings of up to $195,000 or such other amount as
determined by the Board, based on reasonable and obtainable performance criteria
to be determined by the Board. This bonus will be based on the Company's June 30
fiscal year.

         2.3      STOCK OPTIONS. Subject to the approval of the Board, Executive
will be granted an option to purchase 50,000 shares of Employer's Common Stock
under Employer's 2000 Stock Option Plan (the "2000 Plan"). The option exercise
price will be equal to the closing market price of the Company's Common Stock on
January 15, 2001. Except as otherwise provided in this Agreement, shares subject
to this option will be governed by the terms and conditions of the 2000 Plan and
the standard form of Stock Option Agreement that Executive will be required to
sign as a condition of receiving this option. This option will be an incentive
stock option to the maximum amount allowable by the Internal Revenue Code of
1986, as amended; the remainder of this option will be a non-qualified stock
option. The shares of Common Stock underlying this option shall vest on a
monthly basis over the first thirty-six (36) months following the effective date
of this Agreement; PROVIDED, HOWEVER, that all outstanding shares underlying
this option shall vest in full and be fully exercisable in the event that the
Company hires a new President and CEO on or before June 30, 2001; and PROVIDED,
FURTHER, that all outstanding shares underlying this option shall vest in full
and be fully exercisable upon a "Change of Control" as defined in Section 1.2 of
the


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Retention Agreement, dated as of January 27, 2000 (the "Retention Agreement"),
by and between the Company and Executive.

         2.4      UNILATERAL MODIFICATION OF COMPENSATION. Employer reserves the
right to modify Executive's compensation, at any time, at its sole and absolute
discretion.

3.       CUSTOMARY FRINGE BENEFITS. Executive shall be eligible for all
customary and usual benefits generally available to all executive level
employees of Employer, as determined in the sole and absolute discretion of
Employer and subject to the terms and conditions set forth in the applicable
benefit plan or policy. Employer reserves the right to change or eliminate any
of the fringe benefits provided to executive level employees on a prospective
basis at any time, at Employer's sole and absolute discretion. Executive
understands that all benefits provided in this paragraph may be reduced by, or
subject to, all legally required taxes.

4.       BUSINESS EXPENSES. Executive will be reimbursed for all reasonable,
out-of-pocket business expenses incurred in the performance of his duties on
behalf of Employer subject to Executive's compliance with the Company's
established expense reimbursement policy.

5.       TERMINATION.

         5.1      TERMINATION FOR CAUSE BY EMPLOYER. Employer may terminate
Executive's employment under this Agreement immediately at any time for "Cause",
which shall include, but is not limited to: (a) acts or omissions constituting
gross negligence, recklessness or willful misconduct on the part of Executive
with respect to his obligations or otherwise relating to the business of
Employer; (b) Executive's material breach of this Agreement; (c) Executive's
conviction or entry of a plea of nolo contendere for fraud, misappropriation or
embezzlement, or any felony or crime of moral turpitude; (d) Executive's
dishonesty or involvement in any conduct that adversely affects Employer's name
or public image or is otherwise detrimental to Employer's business interests;
(e) Executive's willful neglect of duties as determined in the sole and
exclusive discretion of Employer; or (f) Executive's death.

                  5.1.1.   ENTITLEMENTS UPON TERMINATION FOR CAUSE. In the event
that Executive's employment is terminated for Cause in accordance with paragraph
5.1, Executive shall be entitled to receive: (a) the Base Salary then in effect,
prorated to the date of termination; (b) any performance bonuses earned prior to
the date of termination; and (c) any expense reimbursements to which Executive
is entitled by virtue of his prior employment with Employer (collectively, (a),
(b) and (c) above are referred to herein as the "Standard Entitlements"). In the
event of such termination for Cause, Executive shall not be entitled to receive
(i) the Severance Payment (as defined in paragraph 5.2 below), or any part
thereof, or (ii) any further vesting of stock options; and all other obligations
of Employer to Executive pursuant to this Agreement shall automatically
terminate and be completely extinguished.


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<PAGE>


         5.2      TERMINATION WITHOUT CAUSE BY EMPLOYER. Employer may terminate
Executive's employment without Cause at any time. If Employer terminates
Executive's employment without Cause, Executive shall be entitled to receive the
Standard Entitlements. In addition to the above, in the event that (i) Executive
complies with all of the conditions in paragraph 5.2.1 below and (ii) Employer
terminates Executive's employment without Cause prior to the date on which a new
President and CEO that is hired by the Company commences his employment as
President and CEO (the "New CEO Hire Date"), then Executive will be entitled to
an aggregate severance payment equal to Executive's then Base Salary, payable on
a pro-rated basis in accordance with Employer's regular payroll practices, for
the twelve (12) months immediately following such termination date (the
"Severance Payment"); PROVIDED, HOWEVER, that, if Executive is removed from his
positions as President and CEO as a result of the hiring of a new President and
CEO by the Company, then such removal shall not constitute termination without
Cause hereunder and Executive shall not be entitled to the Severance Payment. In
addition, if (i) Employer has appointed Executive as Employer's Chairman of the
Board, and (ii) Employer terminates Executive from such position without Cause
on or before the Final Severance Date (as defined below), then Executive will be
entitled to receive the Severance Payment provided that Executive complies with
all of the conditions in paragraph 5.2.1 below. Upon Executive's termination
without Cause, subject to the conditions specified above, any shares of Common
Stock underlying Executive's then outstanding stock options that otherwise would
vest during the twelve (12) months following the date of such termination shall
vest in full and shall be immediately exercisable as of the date of such
termination, and such stock options may be exercised in whole or in part at any
time within thirty (30) days of the date of such termination without Cause. In
the event of such termination without Cause, all of Employer's other obligations
pursuant to this Agreement shall terminate automatically and extinguish
completely following the date of such termination without Cause. As used herein,
the "Final Severance Date" shall mean the first anniversary of the New CEO Hire
Date.

                  5.2.1.   CONDITIONS TO RECEIVE SEVERANCE PAYMENTS. The
Severance Payment will be paid provided that the following conditions are met:

                           (a)      Executive complies with all surviving
provisions of this Agreement as specified in paragraph 11.8 below; and

                           (b)      Executive executes a full general release in
the form attached hereto as EXHIBIT A, releasing all claims, known or unknown,
that Executive may have against Employer arising out of or in any way related to
Executive's employment or termination of employment with Employer.

         5.3      VOLUNTARY RESIGNATION BY EXECUTIVE FOR GOOD REASON. Executive
may voluntarily resign his position with Employer at any time provided that he
delivers to the Board at least thirty (30) days' advance written notice of his
resignation. In the event that (i) Executive complies with all of the conditions
in paragraph 5.2.1 above, and (ii) Executive resigns for Good Reason prior to
the New CEO Hire Date, Executive will be entitled to receive the Severance
Payment. In the event of such resignation for Good


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Reason, all of Employer's other obligations pursuant to this Agreement shall
terminate automatically and extinguish completely following the date of such
resignation for Good Reason. In addition, if Employer has appointed Executive as
Employer's Chairman of the Board, and if Executive resigns for Good Reason from
such position on or before the Final Severance Date, then Executive will be
entitled to receive the Severance Payment provided that Executive complies with
all of the conditions in paragraph 5.2.1 above. Executive will be deemed to have
resigned for "Good Reason" in the following circumstances: (a) Employer reduces
Executive's Base Salary and potential annual bonus earnings by more than ten
percent (10%), unless the reduction is made as part of, and is generally
consistent with, a general reduction of other senior executive salaries and
incentive compensation; (b) Executive's position and/or duties are modified so
that his duties are no longer consistent with the position of President and CEO,
PROVIDED, HOWEVER, that if Executive is removed from his positions as President
and CEO as a result of the hiring of a new President and CEO by the Company,
then such removal shall not constitute Good Reason hereunder; (c) if Employer
has appointed Executive as Employer's Chairman of the Board, Executive's
position and/or duties are modified so that his duties are no longer consistent
with the position of Chairman of the Board; or (d) Employer relocates
Executive's principal place of work to a location more than fifty (50) miles
from Employer's current location without his prior written approval.

         5.4      VOLUNTARY RESIGNATION BY EXECUTIVE WITHOUT GOOD REASON. In the
event that Executive's resignation is without Good Reason, Executive will be
entitled to receive the Standard Entitlements, but Executive shall not be
entitled to receive (i) the Severance Payment, or any part thereof, or (ii) any
further vesting of stock options; and all other obligations of Employer to
Executive pursuant to this Agreement shall automatically terminate and be
completely extinguished.

         5.5      TERMINATION WITHOUT CAUSE OR RESIGNATION FOR GOOD REASON AFTER
THE FINAL SEVERANCE DATE. If Executive is terminated without Cause after the
Final Severance Date, or if Executive resigns for Good Reason after the Final
Severance Date, then Executive shall not be entitled to the Severance Payment or
any part thereof.

6.       TERMINATION UPON CHANGE OF CONTROL. In the event of a "Change of
Control" (as defined in the Retention Agreement), Employer's obligations to
Executive pursuant to paragraph 5 above shall terminate automatically and
extinguish completely, and the consequences of any termination or resignation of
Executive following a Change of Control will be governed by the Retention
Agreement.

7.       CONFIDENTIALITY/INTELLECTUAL PROPERTY AGREEMENT AND INSIDER TRADING
POLICY. Executive agrees that he has read, signed, and will abide by the terms
and conditions of Employer's Confidentiality/Intellectual Property Agreement and
Employer's Insider Trading Policy.

Executive recognizes that his employment with the Company will involve contact
with information of substantial value to the Company which gives the Company an
advantage over its competitors who do not know or use it, including but not
limited to, techniques, designs, drawings, processes, inventions, developments,
equipment,


                                       5
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prototypes, sales and customer information, and business and financial
information relating to the business, products, practices and techniques of the
Company (hereinafter referred to as "Confidential and Proprietary Information").
Executive will at all times regard and preserve as confidential such
Confidential and Proprietary Information obtained by Executive from whatever
source and will not, either during his employment with the Company or
thereafter, publish or disclose any part of such Confidential and Proprietary
Information in any manner at any time, or use the same except on behalf of the
Company, without the prior written consent of the Company.

8.       NON-COMPETITION. During the Employment Term, Executive shall devote
Executive's full business energies, interest, abilities and productive time to
the proper and efficient performance of Executive's duties under this Agreement.
The foregoing requirement shall not preclude Executive from engaging in civic,
charitable or religious activities, or from serving on boards of directors of
companies or organizations which will not present any direct conflict with the
interest of Employer or affect the performance of Executive's duties hereunder.

Except with the prior written consent of Employer, Executive will not, during
the Employment Term, or any period during which Executive is receiving
compensation or any other consideration from Employer, engage in competition
with Employer, either directly or indirectly, in any manner or capacity, as
adviser, principal, agent, partner, officer, director, employee, member of any
association or otherwise, in any phase of the business of developing,
manufacturing and marketing of products which are in the same field of use or
which otherwise compete with the product or products actively under development
by Employer.

Except as permitted herein, Executive agrees not to acquire, assume or
participate in, directly or indirectly, any position, investment or interest
known by Executive to be adverse or antagonistic to Employer, its business or
prospects, financial or otherwise. Ownership by Executive, as a passive
investment, of less than one percent (1%) of the outstanding shares of capital
stock of any corporation with one or more classes of its capital stock listed on
a national securities exchange or publicly traded in the over-the-counter market
shall not constitute a breach of this paragraph 8.

9.       NONSOLICITATION. During the Employment Term and for a period of one
year thereafter, irrespective of the manner of termination of employment,
Executive agrees not to, directly or indirectly, separately, or in association
with others: (a) interfere with, impair, disrupt, or damage Employer's
relationship with any of its customers or prospective customers by soliciting,
encouraging, or causing others to solicit or encourage any of them, for the
purpose of diverting or taking away the business such customers have with
Employer; or (b) interfere with, impair, disrupt, or damage Employer's business
by soliciting, encouraging, or causing others to solicit or encourage, any of
Employer's employees to discontinue their employment with Employer.

10.      AGREEMENT TO ARBITRATE. Executive and Employer agree to arbitrate any
claim or dispute ("Dispute") arising out of or in any way related to this
Agreement, the


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employment relationship between Employer and Executive or the termination of
Executive's employment, except as provided in paragraph 10.1 below, to the
fullest extent permitted by law. Except as provided above, this method of
resolving Disputes shall be the sole and exclusive remedy of the parties.
Accordingly, the parties understand that, except as provided herein, they are
giving up their rights to have their disputes decided in a court of law and, if
applicable, by a jury, and instead agree that their disputes shall be decided by
an arbitrator.

         10.1     SCOPE OF THE AGREEMENT. A Dispute shall include all disputes
or claims between Executive and Employer arising out of, concerning or relating
to Executive's employment by Employer, including, without limitation: claims for
breach of contract, tort, discrimination, harassment, wrongful termination,
demotion, discipline, failure to accommodate, compensation or benefits claims,
constitutional claims and claims for violation of any local, state or federal
law, or common law, to the fullest extent permitted by law. A Dispute shall not
include any dispute or claim, whether brought by either Executive or Employer,
for: (a) workers' compensation or unemployment insurance benefits; or (b) the
exclusions from arbitration specified in the California Arbitration Act,
California Code of Civil Procedure section 1281.8. For the purpose of this
paragraph 10, references to "Employer" include Employer and all related or
affiliated entities and their employees, supervisors, officers, directors,
owners, stockholders, agents, pension or benefit plans, pension or benefit plan
sponsors, fiduciaries, administrators, and the successors and assigns of any of
them, and this paragraph 10 shall apply to them to the extent that Executive's
claims arise out of or relate to their actions on behalf of Employer.

         10.2     CONSIDERATION. The parties agree that their mutual promise to
arbitrate any and all disputes between them, except as provided in paragraph
10.1, rather than litigate them before the courts or other bodies, provides
adequate consideration for this paragraph 10.

         10.3     INITIATION OF ARBITRATION. Either party may initiate an
arbitration proceeding by providing the other party with written notice of any
and all claims forming the basis of such proceeding in sufficient detail to
inform the other party of the substance of such claims. In no event shall the
request for arbitration be made after the date when institution or legal or
equitable proceedings based on such claims would be barred by the applicable
statute of limitations.

         10.4     ARBITRATION PROCEDURE. The arbitration will be conducted by
the American Arbitration Association pursuant to its Commercial Arbitration
Rules in San Diego, California by a single, neutral arbitrator. The parties are
entitled to representation by an attorney or other representative of their
choosing. The arbitrator shall have the power to enter any award that could be
entered by a judge of the Superior Court of the State of California, as
applicable to the cause of action, and only such power. The parties agree to
abide by and perform any award rendered by the arbitrator. Judgment on the award
may be entered in any court having jurisdiction thereof.


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<PAGE>


         10.5     COSTS OF ARBITRATION. Each of the parties hereto shall
initially pay fifty percent (50%) of the arbitration filing, hearing fees and
costs of the arbitrator. The arbitrator, as part of its final award, shall have
the power to reallocate such fees and costs in favor of the prevailing party in
the arbitration. In addition, each party will bear its own attorneys' fees,
unless otherwise required or allowed by law and awarded by the arbitrator.

         10.6     GOVERNING LAW. All Disputes between the parties shall be
governed, determined and resolved by the internal laws of the State of
California, including the California Arbitration Act, California Code of Civil
Procedure 1280 et seq.

11.      GENERAL PROVISIONS.

         11.1     SUCCESSORS AND ASSIGNS. The rights and obligations of Employer
under this Agreement shall inure to the benefit of and shall be binding upon the
successors and assigns of Employer. Executive shall not be entitled to assign
any of Executive's rights or obligations under this Agreement.

         11.2     INDEMNIFICATION. The indemnification provisions for Officers
and Directors under Employer's Bylaws will (to the maximum extent permitted by
law) be extended to Executive.

         11.3     WAIVER. This Agreement may not be modified or amended except
by an instrument in writing, signed by Executive and by a duly authorized
representative of Employer other than Executive. Either party's failure to
enforce any provision of this Agreement shall not in any way be construed as an
amendment or waiver of any such provision, or prevent that party thereafter from
enforcing each and every other provision of this Agreement.

         11.4     SEVERABILITY. If any provision of this Agreement is held by an
arbitrator or a court of law to be illegal, invalid or unenforceable, then: (a)
that provision shall be deemed amended to achieve as nearly as possible the same
economic effect as the original provision; and (b) the legality, validity and
enforceability of the remaining provisions of this Agreement shall not be
affected or impaired thereby.

         11.5     INTERPRETATION; CONSTRUCTION. This Agreement has been drafted
by Employer, but Executive has participated in the negotiation of its terms.
Furthermore, Executive acknowledges that he has had an opportunity to review and
revise the Agreement and have it reviewed by legal counsel, if desired.
Therefore, the normal rule of construction to the effect that any ambiguities
are to be resolved against the drafting party shall not be employed in the
interpretation of this Agreement.

         11.6     GOVERNING LAW. This Agreement will be governed by and
construed in accordance with the laws of the State of California.

         11.7     NOTICES. All notices or demands of any kind required or
permitted to be given by the Company or Executive under this Agreement shall be
given in writing and


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shall be personally delivered (and receipted for) or mailed by certified mail,
return receipt requested, postage prepaid, addressed as follows:

IF TO THE COMPANY:                                   IF TO EXECUTIVE:
-----------------                                    ---------------

Overland Data, Inc.                                  Scott McClendon
8975 Balboa Avenue                                   1 East Roseland Drive
San Diego, CA  92123-4124                            La Jolla, CA  92037
Attn: Chief Financial Officer

Any such written notice shall be deemed received when personally delivered or
three (3) days after its deposit in the United States mail as specified above.
Either party may change its address for notices by giving notice to the other
party in the manner specified in this paragraph 11.7.

         11.8     SURVIVAL. The rights and obligations contained in paragraph 9
("Nonsolicitation") shall survive any termination or expiration of this
Agreement for a period of one year, and paragraphs 7 ("Confidentiality/
Intellectual Property Agreement and Insider Trading Policy"), 10 ("Agreement to
Arbitrate") and 11 ("General Provisions") shall survive any termination or
expiration of this Agreement.

         11.9     ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties relating to the subject matter herein and
supersedes all prior or simultaneous representations, discussions, negotiations,
and agreements, whether written or oral.

         11.10    COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.


THE PARTIES TO THIS AGREEMENT HAVE READ THE FOREGOING AGREEMENT IN ITS ENTIRETY
AND FULLY UNDERSTAND EACH AND EVERY PROVISION CONTAINED HEREIN, WHEREFORE, THE
PARTIES HAVE FREELY AND VOLUNTARILY EXECUTED THIS AGREEMENT AS OF THE DATE FIRST
ABOVE WRITTEN.


EXECUTIVE:
---------



/s/ Scott McClendon
------------------------------------------
Scott McClendon


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<PAGE>


COMPANY:
-------

OVERLAND DATA, INC.



/s/ Vernon A. LoForti
------------------------------------------
Vernon A. LoForti
Vice President and Chief Financial Officer


                                       10
<PAGE>


                                    EXHIBIT A

                                 GENERAL RELEASE

This GENERAL RELEASE ("RELEASE") is entered into effective as of ______________,
____, (the "EFFECTIVE DATE") by and between Overland Data, Inc., a California
corporation, having its principal offices at 8975 Balboa Avenue, San Diego,
California 92123-1599 (the "COMPANY") and Scott McClendon, an individual
residing at [_______________] ("EMPLOYEE") with reference to the following
facts:

                                    RECITALS

         A.       The parties entered into an Employment Agreement (the
"AGREEMENT") dated as of January 1, 2001 by which the parties agreed that upon
the occurrence of certain conditions, Employee would become eligible for the
Severance Payment as defined in the Agreement in exchange for Employee's release
of the Company from all claims which Employee may have against the Company as of
the date of the termination of Employee's employment.

         B.       The parties desire to dispose of, fully and completely, all
claims which Employee may have against the Company in the manner set forth in
this Release.

                                    AGREEMENT

         1.       RELEASE. Employee, for himself and his heirs, successors and
assigns, fully releases and discharges the Company, its officers, directors,
employees, shareholders, attorneys, accountants, other professionals, insurers
and agents (collectively, "Agents"), and all entities related to each party,
including, but not limited to, heirs, executors, administrators, personal
representatives, assigns, parent, subsidiary and sister corporations,
affiliates, partners and co-venturers (collectively, "Related Entities"), from
all rights, claims, demands, actions, causes of action, liabilities and
obligations of every kind, nature and description whatsoever, Employee now has,
owns or holds or has at anytime had, owned or held or may have against the
Company, Agents or Related Entities from any source whatsoever, whether or not
arising from or related to the facts recited in this Release. Employee
specifically releases and waives any and all claims arising under any express or
implied contract, rule, regulation or ordinance, including, without limitation,
Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the
Americans with Disabilities Act, the California Fair Employment and Housing Act,
and the Age Discrimination in Employment Act, as amended ("ADEA").

         2.       SECTION 1542 WAIVER. This Release is intended as a full and
complete release and discharge of any and all claims that Employee may have
against the Company, Agents or Related Entities. In making this release,
Employee intends to release each of the Company, Agents and Related Entities
from liability of any nature whatsoever for any claim of damages or injury or
for equitable or declaratory relief of any kind, whether the claim, or any facts
on which such claim might be based, is known


                                       11
<PAGE>


or unknown to him. Employee expressly waives all rights under Section 1542 of
the California Civil Code, which Employee understands provides as follows:


                  A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
                  DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
                  EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE
                  MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

Employee acknowledges that he may discover facts different from or in addition
to those that he now believes to be true with respect to this Release. Employee
agrees that this Release shall remain effective notwithstanding the discovery of
any different or additional facts.

         3.       WAIVER OF CERTAIN CLAIMS. Employee acknowledges that he has
been advised in writing of his right to consult with an attorney prior to
executing the waivers set out in this Release, and that he has been given a
21-day period in which to consider entering into the release of ADEA claims, if
any. In addition, Employee acknowledges that he has been informed that he may
revoke a signed waiver of the ADEA claims for up to seven (7) days after
executing this Release.

         4.       NO UNDUE INFLUENCE. This Release is executed voluntarily and
without any duress or undue influence. Employee acknowledges that he has read
this Release and executed it with his full and free consent. No provision of
this Release shall be construed against any party by virtue of the fact that
such party or its counsel drafted such provision or the entirety of this
Release.

         5.       GOVERNING LAW. This Release is made and entered into in the
State of California and accordingly the rights and obligations of the parties
hereunder shall in all respects be construed, interpreted, enforced and governed
in accordance with the laws of the State of California as applied to contracts
entered into by and between residents of California to be wholly performed
within California.

         6.       SEVERABILITY. If any provision of this Release is held to be
invalid, void or unenforceable, the balance of the provisions of this Release
shall, nevertheless, remain in full force and effect and shall in no way be
affected, impaired or invalidated.

         7.       COUNTERPARTS. This Release may be executed simultaneously in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. This Release may be
executed by facsimile, with originals to follow by overnight courier.

         8.       DISPUTE RESOLUTION PROCEDURES. Any dispute or claim arising
out of this Release shall be subject to final and binding arbitration. The
arbitration will be conducted by one arbitrator who is a member of the American
Arbitration Association ("AAA") or of the Judicial Arbitration and Mediation
Services ("JAMS") and will be


                                       12
<PAGE>


governed by the Model Employment Arbitration rules of AAA. The arbitration shall
be held in San Diego, California. The arbitrator shall have all authority to
determine the arbitrability of any claim and enter a final and binding judgment
at the conclusion of any proceedings in respect of the arbitration. Any final
judgment only may be appealed on the grounds of improper bias or improper
conduct of the arbitrator. Notwithstanding any rule of AAA to the contrary, the
parties will be entitled to conduct discovery (i.e. investigation of facts
through depositions and other means) which shall be governed by California Code
of Civil Procedure Section 1283.05 (the "CCP"). The arbitrator shall have all
power and authority to enter orders relating to such discovery as are allowed
under the CCP. The arbitrator will apply California substantive law in all
respects. The party prevailing in the resolution of any such claim will be
entitled, in addition to such other relief as may be granted, to an award of all
actual attorneys fees and costs incurred in pursuit of the claim, without regard
to any statute, schedule, or rule of court purported to restrict such award.

         9.       ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter of this Agreement,
and supersedes all prior and contemporaneous negotiations, agreements and
understandings between the parties, oral or written.

         10.      MODIFICATION; WAIVERS. No modification, termination or
attempted waiver of this Agreement will be valid unless in writing, signed by
the party against whom such modification, termination or waiver is sought to be
enforced.

         11.      AMENDMENT. This Agreement may be amended or supplemented only
by a writing signed by Employee and the Company.



Dated:
      ---------------------------------   --------------------------------------
                                          Scott McClendon



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