**EXHIBIT 2.1**

 

**AGREEMENT AND PLAN OF MERGER**

 

**by and among**

 

**OVERLAND STORAGE, INC.,**

 

**OKAPI ACQUISITION CO., INC.,**

 

**OKAPI SOFTWARE, INC.**

 

**and**

 

**THE SHAREHOLDERSIDENTIFIED ON SCHEDULE 2.3ATTACHED HERETO**

 

 

**Dated as of June 20, 2003**

 

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**TABLE OF CONTENTS**

 
|                                                                             | **Page**                                      |
|----------------------------------------------------------------------------------|-----------------------------------------------|
|                                                                             |
| **ARTICLE 1. THE MERGER**                                                        | 1                                             |
|                                                                             |                                          |   |
| **1.1**                                                                          | The  Merger                                   | 1 |
| **1.2**                                                                          | Effective  Time                               | 1 |
| **1.3**                                                                          | Effect of the Merger                          | 2 |
| **1.4**                                                                          | Articles  of Incorporation and Bylaws         | 2 |
| **1.5**                                                                          | Directors  and Officers                       | 2 |
|                                                                             |                                          |
| **ARTICLE 2. MERGER CONSIDERATION; EXCHANGE OF CERTIFICATES**                    | 2                                             |
|                                                                             |                                          |
| **2.1**                                                                          | Conversion of Target Common Stock             | 2 |
| **2.2**                                                                          | Merger Consideration                          | 2 |
| **2.3**                                                                          | Delivery of Merger Consideration              | 3 |
| **2.4**                                                                          | No  Fractional Shares                         | 3 |
|                                                                             |                                          |
| **ARTICLE 3. CLOSING AND CLOSING DELIVERIES**                                    | 3                                             |
|                                                                             |                                          |
| **3.1**                                                                          | Closing; Time and Place                       | 3 |
| **3.2**                                                                          | Deliveries  by Target and Target Shareholders | 3 |
| **3.3**                                                                          | Deliveries  by Overland and Acquisition Sub   | 4 |
|                                                                             |                                          |
| **ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF TARGET AND TARGET  SHAREHOLDERS** | 4                                             |
|                                                                             |                                          |
| **4.1**                                                                          | Organization,  Good Standing, Qualification   | 4 |
| **4.2**                                                                          | Charter  Documents; Books and Records         | 5 |
| **4.3**                                                                          | Capitalization                                | 5 |
| **4.4**                                                                          | Authority;  Binding Nature of Agreements      | 6 |
| **4.5**                                                                          | No  Conflicts; Required Consents              | 6 |
| **4.6**                                                                          | Subsidiaries                                  | 6 |
| **4.7**                                                                          | Financial Statements                          | 6 |
| **4.8**                                                                          | Absence  of Undisclosed Liabilities           | 7 |
| **4.9**                                                                          | Absence of Changes                            | 7 |
| **4.10**                                                                         | Transactions with Affiliates                  | 7 |
| **4.11**                                                                         | Accounts Receivable                           | 7 |
| **4.12**                                                                         | Inventory                                     | 8 |
| **4.13**                                                                         | Material Contracts                            | 8 |
| **4.14**                                                                         | Insurance                                     | 10 |
| **4.15**                                                                         | Title;  Sufficiency; Condition of Assets      | 10 |
| **4.16**                                                                         | Real  Property Leases                         | 11 |
| **4.17**                                                                         | Intellectual Property                         | 11 |
| **4.18**                                                                         | Customers,  Distributors and Suppliers        | 14 |
| **4.19**                                                                         | Target  Products and Product Warranty         | 15 |
| **4.20**                                                                         | Employees  and Consultants                    | 16 |
| **4.21**                                                                         | Target  Benefit Plans                         | 17 |
|                                                                                  |                                               |  |  |  |  |  |

 

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| **4.22**                                                  | Compliance  with Laws                                                          | 19     |
|-----------------------------------------------------------|--------------------------------------------------------------------------------|--------|
| **4.23**                                                  | Governmental  Approvals                                                        | 19     |
| **4.24**                                                  | Proceedings  and Orders                                                        | 19     |
| **4.25**                                                  | Environmental  Matters                                                         | 20     |
| **4.26**                                                  | Taxes                                                                          | 20     |
| **4.27**                                                  | Brokers                                                                        | 21     |
| **4.28**                                                  | No Other  Agreement                                                            | 21     |
| **4.29**                                                  | Full Disclosure                                                                | 21     |
| **4.30**                                                  | Additional  Target Shareholder Representations                                 | 22     |
| **4.31**                                                  | Securities  Law Representations                                                | 22     |
|                                                      |                                                                           |
| **ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF OVERLAND** | 25                                                                             |
|                                                      |                                                                           |
| **5.1**                                                   | Organization and Good Standing                                                 | 25     |
| **5.2**                                                   | Authority; Binding Nature of Agreements                                        | 25     |
| **5.3**                                                   | No Brokers  or Finders                                                         | 25     |
| **5.4**                                                   | Disclosure                                                                     | 25     |
|                                                      |                                                                           |
| **ARTICLE 6. PRE-CLOSING COVENANTS**                      | 25                                                                             |
|                                                      |                                                                           |
| **6.1**                                                   | Target’s  Conduct of the Business Prior to Closing                        | 25     |
| **6.2**                                                   | Restrictions  on Target’s Conduct of the Business Prior to Closing        | 26     |
| **6.3**                                                   | No Solicitation                                                                | 28     |
| **6.4**                                                   | Certain  Notifications                                                         | 29     |
| **6.5**                                                   | Updating  the Target Disclosure Schedule                                       | 29     |
| **6.6**                                                   | Access  to Information                                                         | 29     |
| **6.7**                                                   | Best  Efforts                                                                  | 30     |
| **6.8**                                                   | HSR Act  Filing                                                                | 30     |
| **6.9**                                                   | Consents                                                                       | 30     |
| **6.10**                                                  | Board  Recommendation                                                          | 30     |
| **6.11**                                                  | Exercise  or Termination of All Outstanding Options                            | 30     |
|                                                      |                                                                           |   |
| **ARTICLE 7. POST-CLOSING COVENANTS**                     | 30                                                                             |
|                                                      |                                                                           |
| **7.1**                                                   | Target  Intellectual Property                                                  | 30     |
| **7.2**                                                   | Cooperation                                                                    | 30     |
| **7.3**                                                   | Non-Disclosure  and Non-Compete                                                | 31     |
| **7.4**                                                   | Registration  of Overland Merger Shares                                        | 34     |
|                                                      |                                                                           |   |
| **ARTICLE 8. EMPLOYEES**                                  | 35                                                                             |
|                                                      |                                                                           |
| **8.1**                                                   | Transferred  Employees                                                         | 35     |
| **8.2**                                                   | Employee  Benefit Arrangements                                                 | 35     |
| **8.3**                                                   | Compliance with Legal Requirements and  Other Obligations                      | 35     |
| **8.4**                                                   | No  Benefit to the Target Employees Intended                                   | 36     |
|                                                      |                                                                           |
| **ARTICLE 9. CONDITIONS TO CLOSING**                      | 36                                                                             |
|                                                      |                                                                           |
| **9.1**                                                   | Conditions  to Overland’s Obligation to Close                             | 36     |
| **9.2**                                                   | Conditions  to Target’s and Target Shareholders’ Obligation to Close | 37     |
|                                                      |                                                                           |
| **ARTICLE 10. TERMINATION**                               | 38                                                                             |
|                                                           |                                                                                |        |  |  |  |  |

 

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| **10.1**                                 | Circumstances  for Termination                   | 38 |
|------------------------------------------|--------------------------------------------------|----|
| **10.2**                                 | Effect  of Termination                           | 38 |
|                                     |                                             |
| **ARTICLE 11. INDEMNIFICATION**          | 38                                               |
|                                     |                                             |
| **11.1**                                 | Survival  of Representations and Warranties      | 38 |
| **11.2**                                 | Indemnification by the Target Shareholders       | 39 |
| **11.3**                                 | Indemnification by Overland and Acquisition  Sub | 39 |
| **11.4**                                 | Procedures  for Indemnification                  | 40 |
| **11.5**                                 | No Contribution                                  | 40 |
| **11.6**                                 | Remedies  Cumulative                             | 41 |
|                                     |                                             |
| **ARTICLE 12. MISCELLANEOUS PROVISIONS** | 41                                               |
|                                     |                                             |
| **12.1**                                 | Public  Announcement                             | 41 |
| **12.2**                                 | Expenses                                         | 41 |
| **12.3**                                 | Interpretation; Representation                   | 41 |
| **12.4**                                 | Notices                                          | 41 |
| **12.5**                                 | Further  Assurances                              | 42 |
| **12.6**                                 | Governing  Law                                   | 43 |
| **12.7**                                 | Amendment;  Waiver                               | 43 |
| **12.8**                                 | Entire  Agreement                                | 43 |
| **12.9**                                 | Captions  and Headings                           | 43 |
| **12.10**                                | Counterparts                                     | 43 |
|                                          |                                                  |    |  |

 

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**SCHEDULES AND EXHIBITS**

 

Schedules

 
| Schedule 2.2 |   | Deductions from Cash Consideration Payable to Certain Target  Shareholders |
|-------------------|--------|----------------------------------------------------------------------------|
| Schedule 2.3 |   | Target Shareholders’ Pro Rata Interest in Merger Consideration        |
| Schedule 3.3 |   | Final Calculation of Merger Consideration                                  |
| Schedule 4   |   | Target Disclosure Schedule                                                 |
| Schedule 5   |   | Overland Disclosure Schedule                                               |
| Schedule 8.1 |   | Transferred Employees                                                      |
|              |   |                                                                       |
| Exhibits          |   |                                                                       |
|              |   |                                                                       |
| Exhibit A    |   | Certain  Definitions                                                       |
| Exhibit B    |   | Agreement  of Merger                                                       |
| Exhibit C    |   | Shareholder  Release                                                       |
| Exhibit D    |   | Opinion  of Counsel to Target                                              |
| Exhibit E    |   | Opinion  of Counsel to Overland                                            |

 

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**AGREEMENT AND PLAN OF MERGER**

 

**THIS AGREEMENT****AND PLAN OF MERGER**(this “Agreement”)is made and entered into as of June 20, 2003, by and among: (i) OverlandStorage, Inc., a California corporation (“Overland”); (ii) OkapiAcquisition Co., Inc., a California corporation and a wholly-owned subsidiaryof Overland (“Acquisition Sub”); (iii) Okapi Software, Inc., aCalifornia corporation (“Target”); and (iv) the shareholders of Target,each of which is identified on Schedule 2.3 attached hereto (each,a “Target Shareholder,” and collectively, the “Target Shareholders”).  Certain capitalized terms used in thisAgreement are defined on Exhibit A hereto.  Each of Overland, Acquisition Sub, Targetand the Target Shareholders is referred to herein as a “Party,” and,collectively, as the “Parties.”

 

**RECITALS**

 

**WHEREAS**, Target isengaged in the business of developing and commercializing disk to disk storageappliances in the backup and recovery market for small to medium sizebusinesses (the “Business”);

 

**WHEREAS,**Overlanddesires to acquire Target through the merger of Target with and intoAcquisition Sub (the “Merger”); and

 

**WHEREAS,**the Partiesintend, by executing this Agreement, to adopt a plan of reorganization withinthe meaning of Section 368 of the Internal Revenue Code of 1986, asamended (the “Code”), and to cause the Merger to qualify as areorganization under Section 368 of the Code;

 

**NOW, THEREFORE**, inconsideration of the foregoing recitals and the mutual representations,warranties, covenants and promises contained herein, the adequacy andsufficiency of which are hereby acknowledged, the Parties agree as follows:

 

**AGREEMENT**

 

# **ARTICLE 1**.  THE MERGER

# ** **

**1.1 The Merger.**  Subject to and upon the terms and conditionsof this Agreement and the applicable provisions of the General Corporation Lawof the State of California, at the Effective Time (as defined below), Targetshall be merged with and into Acquisition Sub, the separate corporate existenceof Target shall cease and Acquisition Sub shall continue as the survivingcorporation.  Acquisition Sub as thesurviving corporation after the Merger is referred to hereinafter sometimes asthe “Surviving Corporation.”

 

**1.2 Effective Time.**  Subject to the terms and conditions of thisAgreement, as soon as practicable on the Closing Date (as defined below), theParties shall cause the Merger to be consummated by the filing with theSecretary of State of the State of California of an agreement of mergersubstantially in the form attached hereto as Exhibit B (the “Agreementof Merger”), in accordance with Sections 1101 and 1103 of the GeneralCorporation Law of the State of California (the time of acceptance of suchfiling by the Secretary of State of the State of

 

1

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California, or such later timeas may be agreed in writing by the Parties and specified in the Agreement ofMerger, being the “Effective Time”).

 

**1.3 Effect of theMerger.**  Atthe Effective Time, the effect of the Merger shall be as provided in thisAgreement and the applicable provisions of the General Corporation Law of theState of California.  Without limitingthe generality of the foregoing, and subject thereto, at the Effective Time,except as otherwise provided by this Agreement, all the property, rights,privileges, powers and franchises of Target shall vest in Acquisition Sub, andall debts, liabilities and duties of Target shall become the debts, liabilitiesand duties of Acquisition Sub.

 

**1.4 Articles ofIncorporation and Bylaws.**  Unless otherwise determined by Overland prior to the EffectiveTime, the Articles of Incorporation ofAcquisition Sub as in effect immediately prior to the Effective Time shall bethe Articles of Incorporation of the Surviving Corporation, and the Bylaws ofAcquisition Sub in effect immediately prior to the Effective Time shall be theBylaws of the Surviving Corporation.

 

**1.5 Directors andOfficers.** Unless otherwise determined by Overland prior to the Effective Time, the directors of Acquisition Sub immediately priorto the Effective Time shall be the directors of the Surviving Corporation, eachto hold office in accordance with the Articles of Incorporation and Bylaws ofthe Surviving Corporation, and the officers of Acquisition Sub immediatelyprior to the Effective Time shall be the officers of the Surviving Corporation,in each case until their respective successors are duly elected and qualified.

 

# **ARTICLE 2**.  MERGER CONSIDERATION; EXCHANGE OF CERTIFICATES

# ** **

**2.1Conversion of Targ****et Common Stock.**  Atthe Effective Time, by virtue of the Merger and without any action on the partof any Person, each share of Target Common Stock issued and outstandingimmediately prior to the Effective Time (the “Outstanding Target CommonStock”), shall be canceled and automatically converted into the right toreceive, upon surrender of the certificates representing such shares, a prorata portion of the Merger Consideration (as defined below).  At the Effective Time, all rights in respectof the Outstanding Target Common Stock shall cease to exist, other than theright to receive a pro rata portion of the Merger Consideration.  Any share of Target Common Stock held in thetreasury of Target shall be canceled and retired without payment of any considerationtherefor.

 

**2.2 MergerConsideration.**  The merger consideration (the “MergerConsideration”) shall consist of the Overland Merger Shares and the CashConsideration.  The term “OverlandMerger Shares” shall mean the number of shares of Overland Common Stockthat are valued in the aggregate at Two Million Five Hundred Thousand Dollars($2,500,000), with the value of such shares to be determined based on theaverage closing price of Overland Common Stock on the Nasdaq National MarketSystem during the twenty (20) trading days immediately preceding the date ofthis Agreement; provided, however, that the number of OverlandMerger Shares shall not exceed One Hundred and Sixty Thousand (160,000)shares.  The term “Cash Consideration”shall mean Two Million Five Hundred Thousand Dollars ($2,500,000), minus: (i)the aggregate amount of principal and accrued interest outstanding as of theClosing Date under any promissory notes payable by Target to John Matze; (ii)the aggregate amount of Target’s payroll accrual for John Matze as of theClosing Date; and (iii) the aggregate amount owed by Target to

 

2

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Garage Securities, Inc. as ofthe Closing Date.  As detailed on Schedule 2.2attached hereto, Overland and certain of the Target Shareholders hereby agreethat Overland shall withhold, and pay over to the appropriate taxingauthorities in a timely manner, from the respective portions of the CashConsideration otherwise payable to such Target Shareholders: (A) certain incomeand payroll taxes (and related FICA and FUTA withholding taxes) required to bepaid in connection with the acceleration of the vesting of shares ofOutstanding Target Common Stock held by such Target Shareholders and/or theexercise by such Target Shareholders of certain Target Options (the “TargetShareholder Closing Taxes”); and (B) to effect the cashless exercise ofsuch Target Options, the aggregate exercise price of such Target Options.

 

**2.3 Delivery ofMerger Consideration.**  At the Closing, Target shall deliver to Overland all certificatesrepresenting shares of Outstanding Target Common Stock, and Overland shall: (i)deliver to each Target Shareholder a certificate representing his or her prorata portion of the Overland Merger Shares, in accordance with the TargetShareholders’ respective pro rata interests set forth on Schedule 2.3(“Pro Rata Interests”); and (ii) pay to each Target Shareholder a prorata portion of the Cash Consideration, in accordance with the TargetShareholders’ Pro Rata Interests, less any amounts to be withheld by Overlandpursuant to the last sentence of Section 2.2.  As provided below in Section 6.11,the Parties shall amend Schedule 2.3 to reflect any additionalshares of Target Common Stock that Target issues prior to the ClosingDate.  Immediately following theEffective Time, Overland shall pay to John Matze: (i) the aggregate amount ofprincipal and accrued interest outstanding as of the Closing Date under anypromissory notes payable by Target to John Matze; and (ii) the aggregate amountof Target’s payroll accrual for John Matze as of the Closing Date.

 

**2.4 No Fractional Shares.**  In lieu of fractional shares of OverlandCommon Stock that would otherwise be issued to any Target Shareholder underthis Agreement, each Target Shareholder who would have been entitled to receivea fractional share shall receive instead an amount in cash equal to the fairmarket value of such fractional share, as determined by Overland in accordancewith Section 407 of the General Corporation Law of the State ofCalifornia.

 

# **ARTICLE 3**.  CLOSING AND CLOSING DELIVERIES

# ** **

**3.1 Closing; Timeand Place.** The closing (the “Closing”) of the Merger shall occur at theoffices of Morrison & Foerster LLP, 3811 Valley Centre Drive, Suite 500, at10:00 A.M. on June 24, 2003, or at such other date, time or place asOverland and Target may agree (the “Closing Date”).

 

**3.2 Deliveries by Target andTarget Shareholders.** On the Closing Date, Target and the Target Shareholders shall deliverthe following items, all of which shall be in a form and substance reasonablyacceptable to Overland and Overland’s counsel:

 

### (a)          Agreement of Merger.  The Agreement of Merger, duly executed byTarget;

###  

### (b)         Stock Certificates.  All certificates representing shares of OutstandingTarget Common Stock;

###  

### (c)          Releases.  Releases from all Target Shareholders substantially in the formattached hereto as Exhibit C;

###  

3

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### (d)         Books and Records.  The Books and Records;

###  

### (e)          Certificate of Representations andWarranties.  A certificate executedon behalf of Target by its Chief Executive Officer, certifying to the mattersin Section 9.1(a);

###  

### (f)            Certificate of Good Standing.  A certificate from the Secretary of State ofthe State of California as to the Target’s good standing and payment of allapplicable taxes;

###  

### (g)         Opinion of Counsel.  An opinion of Target’s counsel,substantially in the form attached hereto as Exhibit D; and

###  

### (h)         Additional Documents.  Such other certificates, instruments ordocuments required pursuant to the provisions of this Agreement or otherwisenecessary or appropriate to consummate the Merger.

###  

**3.3 Deliveries byOverland and Acquisition Sub.**  On the Closing Date, Overland andAcquisition Sub shall deliver to the Target Shareholders: (i) a certificateexecuted on behalf of Overland and Acquisition Sub by their respective ChiefExecutive Officers, certifying to the matters in Section 9.2(a);(ii) the Cash Consideration, less the respective portions of the Cash Considerationto be withheld by Overland pursuant to the last sentence of Section 2.2;(iii) certificates representing the Overland Merger Shares; and (iv) an opinionof Overland’s counsel, substantially in the form attached hereto as ExhibitE.  The Parties agree to the finalcalculation of the Cash Consideration and the Overland Merger Shares that isreflected on Schedule 3.3 attached hereto.

 

# **ARTICLE 4**.  REPRESENTATIONS AND WARRANTIES OF TARGET AND TARGET SHAREHOLDERS

# ** **

Except as specifically set forth on Schedule 4 (the “TargetDisclosure Schedule”) attached to this Agreement (the parts of which arenumbered to correspond to the individual section numbers of this Article 4),Target and each of the Key Shareholders hereby represent and warrant, jointlyand severally, and each of the Non-Key Shareholders hereby represents andwarrants severally, to Overland and Acquisition Sub that on the date of thisAgreement and as of the Closing Date as though the following representationsand warranties were made on the Closing Date:

 

**4.1 Organization,Good Standing, Qualification.**Target: (i) is acorporation duly organized, validly existing and in good standing under thelaws of the State of California; (ii) is duly qualified to conductbusiness and is in corporate and tax good standing under the laws of eachjurisdiction in which the nature of its business (including, withoutlimitation, the Business), the operation of its assets or the ownership orleasing of its properties (including, without limitation, all real and personalproperty) requires such qualification, except where the failure to qualifywould not have a Material Adverse Effect; and (iii) has the power andauthority required to own, lease and operate its assets and to carry on itsbusiness (including, without limitation, the Business) as now being conducted.

 

4

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## **4.2 Charter Documents; Books and Records.**

 

### (a)          Target has delivered to Overland accurate,correct and complete copies of: (i) Target’s Articles of Incorporation andBylaws, including all amendments thereto, as presently in effect; (ii) allstock records of Target, including Target’s stock ledger and copies of anystock certificates issued by Target; (iii) all minutes and other recordsof all meetings and other proceedings (including, without limitation, anyactions taken by written consent or otherwise without a meeting) of Target’sshareholders and Target’s Board and all committees thereof (collectively, the “Resolutions”);and (iv) all books of account and other financial records of Target.

###  

### (b)         Target’s minute book accurately and completelyreflects all material corporate actions of Target’s shareholders and Target’sBoard and all committees thereof. Target’s books of account and other financial records are accurate andcomplete and have been maintained in accordance with reasonably sound businesspractices.

###  

### (c)          Target is not in violation of any of theprovisions of its Articles of Incorporation, Bylaws or the Resolutions, and nocondition or circumstance exists that likely would (with or without notice orlapse of time) constitute or result directly or indirectly in such a violation.

###  

## **4.3 Capitalization.**

## ** **

### (a)          The authorized capital stock of Targetconsists of One Hundred Fifty Million (150,000,000) shares of capital stock,consisting of One Hundred Million (100,000,000)****shares of authorized Common Stock, no par value per share (“TargetCommon Stock”), and Fifty Million (50,000,000) shares of authorizedPreferred Stock, no par value per share (“Target Preferred Stock”).  Target has issued and outstanding EightMillion Three Hundred Thousand (8,300,000) shares of Target Common Stock and noshares of Target Preferred Stock.  Schedule 2.3sets forth the name of each holder of capital stock of Target and the respectivenumber and class of shares held by such holder.  No other shares of capital stock are issued or outstanding.  All issued and outstanding shares of capitalstock of, or beneficial interests in, Target have been duly authorized andvalidly issued, are fully paid and nonassessable, have been issued in fullcompliance with all applicable securities laws and other applicable LegalRequirements and are free and clear of all Encumbrances.

###  

### (b)         Except as set forth on Schedule 4.3(b),there is no: (i) outstanding preemptive right, subscription, option, call,warrant or other right to acquire any securities of Target;(ii) outstanding security, instrument or obligation that is or may becomeconvertible into or exchangeable for any securities of Target; (iii) Contractunder which Target is or may become obligated to sell, issue or otherwisedispose of or redeem, purchase or otherwise acquire any of its securities; or(iv) shareholder agreement, voting trust or other agreement, arrangementor understanding that may affect the exercise of voting or any other rightswith respect to the capital stock of Target. Except as set forth on Schedule 4.3(b), the execution ofthis Agreement and the consummation of the Merger will not give any rise to anyacceleration or change in the award, grant, vesting or determination ofoptions, warrants, rights, severance payments or other contingent obligationsof any nature whatsoever of Target in favor of any Person, in any such case asa result of the change in control of Target or otherwise resulting from theMerger.

###  

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**4.4 Authority; BindingNature of Agreements.** Target has all requisite power and authority to execute and deliver thisAgreement and all other Transaction Documents to which it is a party and tocarry out the provisions of this Agreement and the other TransactionDocuments.  The execution, delivery andperformance by Target of this Agreement and the other Transaction Documentshave been approved by all requisite action on the part of Target.  This Agreement has been duly and validlyexecuted and delivered by Target.  Eachof this Agreement and the other Transaction Documents to which Target is aparty constitutes, or upon execution and delivery, will constitute, the legal,valid and binding obligation of Target, enforceable against Target inaccordance with its terms, except as may be limited by bankruptcy, insolvency,reorganization, moratorium and other similar laws and equitable principlesrelated to or limiting creditors’ rights generally and by general principles ofequity.

 

**4.5 No Conflicts;Required Consents.**The execution, delivery andperformance of this Agreement or any other Transaction Document do not and willnot (with or without notice or lapse of time):

 

### (a)          conflict with, violate or result in anybreach of: (i) any of the provisions of Target’s Articles of Incorporationor Bylaws; (ii) any of the Resolutions; (iii) any of the terms orrequirements of any Governmental Approval held by Target or any of Target’s employeesor that otherwise relates to the Business or Target; or (iv) any provisionof any Target Contract;

###  

### (b)         give any Governmental Authority or otherPerson the right to: (i) challenge the Merger; (ii) exercise anyremedy or obtain any relief under any Legal Requirement or any Order to whichTarget or the Business is subject; (iii) declare a default of, exerciseany remedy under, accelerate the performance of, cancel, terminate, modify orreceive any payment under any Target Contract; or (iv) revoke, suspend ormodify any Governmental Approval;

###  

### (c)          cause Target, Overland or Acquisition Sub tobecome subject to, or to become liable for the payment of, any Tax of Target,except for the Target Shareholder Closing Taxes;

###  

### (d)         result in the imposition or creation of anyEncumbrance upon or with respect to any of the assets of Target; or

###  

### (e)          require Target to obtain any Consent or makeor deliver any filing or notice to a Governmental Authority.

###  

**4.6 Subsidiaries.**  Target does not own any shares of capital stock,other securities or other interest in any Entity, does not have the right toacquire any such interest, and does not control, directly or indirectly, anyEntity.

 

## **4.7 Financial Statements.**

 

### (a)          Target has previously delivered to Overlandthe following financial statements (collectively, the “Financial Statements”):  (i) the unaudited balance sheet and therelated unaudited statement of operations of Target as of and for the fiscalyear ended December 31, 2002, together with the notes thereto; and(ii) the unaudited balance sheet and the related unaudited statement ofoperations of Target (the “Interim Balance Sheet”) as of and for thefive months ended May 31, 2003 (the “Interim Balance Sheet Date”).

###  

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### (b)         All of the Financial Statements: (i) aretrue, accurate and complete in all respects; (ii) are consistent with theBooks and Records; and (iii) present fairly and accurately the financialcondition of Target as of the respective dates thereof and the results ofoperations of Target for the periods covered thereby.  All reserves established by Target and set forth in the InterimBalance Sheet are adequate for the purposes for which they were established.

###  

### (c)          The Target Disclosure Schedule setsforth an accurate, correct and complete breakdown and aging of each of theaccounts payable of Target (including, without limitation, to all of itssuppliers) as of the end of the most recent calendar month.

###  

**4.8 Absence ofUndisclosed Liabilities.**  Target does not have any Liabilities other than: (i) thoseset forth in the Interim Balance Sheet; (ii) those incurred in theOrdinary Course of Business and not required to be set forth in the InterimBalance Sheet under GAAP; (iii) those incurred in the Ordinary Course ofBusiness since the date of the Interim Balance Sheet; (iv) those incurredby virtue of Target’s execution of the Transaction Documents; and (v) those setforth in the Target Disclosure Schedule.

 

**4.9 Absence ofChanges.** Since the Interim Balance Sheet Date: (i) Target has conducted itsoperations and its business (including, without limitation, the Business) inthe Ordinary Course of Business; (ii) no event or circumstance hasoccurred that could reasonably have a Material Adverse Effect on Target; and(iii) Target has not taken any action, agreed to take any action, oromitted to take any action that would constitute a breach of Section 6.1or 6.2 if such action or omission were taken between the date of thisAgreement and the Closing Date.

 

**4.10****                        Transactions with Affiliates.**  Except as set forth in the FinancialStatements, no Affiliate of Target: (a) owns, directly or indirectly, anydebt, equity or other interest in any Entity with which Target is affiliated,has a business relationship or competes, other than Affiliates that own lessthan five percent (5%) of the issued and outstanding capital stock of apublicly-traded competitor of Target; (b) is indebted to Target, nor isTarget indebted (or committed to make loans or extend or guarantee credit) toany Affiliate other than with respect to any of the obligations of Target topay accrued salaries, reimbursable expenses or other standard employeebenefits; (c) has any direct or indirect interest in any asset, propertyor other right used in the conduct of or otherwise related to the Business orTarget; (d) has any claim or right against Target, and no event hasoccurred, and no condition or circumstance exists, that might (with or withoutnotice or lapse of time) directly or indirectly give rise to or serve as abasis for any claim or right in favor of any Affiliate against Target;(e) is a party to any Target Contract or has had any direct or indirectinterest in, any Target Contract, transaction or business dealing of any natureinvolving Target; or (f) received from or furnished to Target any goods orservices (with or without consideration) since the Interim Balance Sheet Date.

 

**4.11****                        Accounts Receivable.**  Schedule 4.11 sets forth an accurate and completelist of all Receivables existing as of May 31, 2003.  Each Receivable is: (i) a valid andlegally binding obligation of the account debtor enforceable in accordance withits terms, free and clear of all Encumbrances, and not subject to setoffs,adverse claims, counterclaims, assessments, defaults, prepayments, defenses,and conditions precedent; (ii) a true and correct statement of the accountfor merchandise actually sold and delivered to, or for services actuallyperformed for and accepted by, such account debtor; and (iii) fullycollectible and will be collected within sixty (60)

 

7

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days, subject to tradediscounts provided in the Ordinary Course of Business and any allowance fordoubtful accounts contained in the Interim Balance Sheet.

 

**4.12****                        Inventory.**  All ofthe items in Target’s Inventory are: (a) of good and merchantable quality,fit for the purpose for which they are intended, and saleable and useable inthe Ordinary Course of Business; (b) free of material defects and damage;and (c) in quantities adequate and not excessive in relation to thecircumstances of the business of Target (including, without limitation, theBusiness) and in accordance with the past inventory stocking practices ofTarget.  All of the items in Target’sInventory meet the current standards and specifications of Target.

 

## **4.13**                 Material Contracts.

## ** **

### (a)          Schedule 4.13 sets forth anaccurate, correct and complete list of all Target Contracts to which any of thedescriptions set forth below may apply (the “Material Contracts”):

###  

#### (i)                                     RealProperty Leases, Personal Property Leases, Insurance Policies, Contractsaffecting any Target Intellectual Property or Target’s information systems orsoftware, Contracts with Contractors, the Target Benefit Plans and GovernmentalApprovals;

####  

#### (ii)                                  AnyContract for capital expenditures or for the purchase of goods or services inexcess of $10,000, except those incurred in the Ordinary Course of Business andto be performed in three (3) months or less;

####  

#### (iii)                               AnyContract obligating Target to sell or deliver any product or service at a pricewhich does not cover the cost (including, without limitation, labor, materialsand production overhead) plus the customary profit margin associated with suchproduct or service;

####  

#### (iv)                              AnyContract involving financing or borrowing of money, or evidencing indebtedness,any liability for borrowed money, any obligation for the deferred purchaseprice of property in excess of $10,000 (excluding normal trade payables) orguaranteeing in any way any Contract in connection with any Person;

####  

#### (v)                                 Anyjoint venture, partnership, cooperative arrangement or any other Contractinvolving a sharing of profits;

####  

#### (vi)                              Anyadvertising Contract not terminable without payment or penalty onthirty (30) days (or less) notice;

####  

#### (vii)                           AnyContract affecting any right, title or interest in or to real property;

####  

#### (viii)                        AnyContract with any Governmental Authority;

####  

#### (ix)                                AnyContract with respect to the discharge, storage or removal of effluent, wasteor pollutants;

####  

#### 8

#### 

####  

#### (x)                                   AnyContract relating to any license or royalty arrangement;

####  

#### (xi)                                Anypower of attorney, proxy or similar instrument;

####  

#### (xii)                             AnyContract among any shareholders of Target;

####  

#### (xiii)                          AnyContract for the manufacture, service or maintenance of any product of Target;

####  

#### (xiv)                         AnyContract for the purchase or sale of any assets other than in the OrdinaryCourse of Business or for the option or preferential rights to purchase or sellany assets;

####  

#### (xv)                            Anyrequirement or output Contract;

####  

#### (xvi)                         AnyContract to indemnify any Person or to share in or contribute to the liabilityof any Person;

####  

#### (xvii)                      AnyContract for the purchase or sale of foreign currency or otherwise involvingforeign exchange transactions;

####  

#### (xviii)                   AnyContract containing covenants not to compete in any line of business or withany Person in any geographical area;

####  

#### (xix)                           AnyContract related to the acquisition of a business or the equity of any otherEntity;

####  

#### (xx)                              Anyother Contract which (i) provides for payment or performance by eitherparty thereto having an aggregate value of $10,000 or more; (ii) is notterminable without payment or penalty on thirty (30) days (or less)notice; or (iii) is between, *inter alia*,Target and any of its Affiliates;

####  

#### (xxi)                           Anyother Contract that involves future payments, performance of services ordelivery of goods or materials to or by Target of an aggregate amount or valuein excess of $10,000, on an annual basis, or that otherwise is material to thebusiness or prospects of Target; and

####  

#### (xxii)                        Anyproposed arrangement of a type that, if entered into, would be a Contractdescribed in any of (i) through (xxi) above.

####  

### (b)         Target has delivered to Overland accurate,correct and complete copies of all Material Contracts (or written summaries ofthe material terms thereof, if not in writing), including, without limitation,all amendments, supplements, modifications and waivers thereof.  All nonmaterial contracts of Target do not,in the aggregate, represent a material portion of the Liabilities of Target.

###  

### (c)          Each Target Contract is currently valid andin full force and effect, and is enforceable in accordance with its terms(assuming that each such Target Contract is enforceable

###  

9

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### in accordancewith its terms against all parties thereto other than Target), except as may belimited by bankruptcy, insolvency, reorganization, moratorium and other similarlaws and equitable principles related to or limiting creditors’ rightsgenerally and by general principles of equity. No Material Contract contains any term or provision that isextraordinary or that is otherwise not customarily found in Contracts enteredinto by comparable Entities.

###  

### (d) (i)                Targetis not in default, and no Person has notified Target that it is in default,under any Target Contract.  No event hasoccurred, and no circumstance or condition exists, that might (with or withoutnotice or lapse of time): (a) result in a violation or breach of any ofthe provisions of any Target Contract by Target; (b) give any Person theright to declare a default or exercise any remedy under any Target Contract;(c) give any Person the right to accelerate the maturity or performance ofany Target Contract or to cancel, terminate or modify any Target Contract; or(d) otherwise have a Material Adverse Effect on Target in connection withany Target Contract; and

###  

(ii)                                  Targethas not waived any of its rights under any Target Contract.

 

### (e)          To the Knowledge of Target and the TargetShareholders, each Person against which Target has or may acquire any rightsunder any Target Contract is (i) solvent and (ii) able to satisfysuch Person’s material obligations and liabilities to Target.

###  

### (f)            The performance of the Target Contractswill not result in any violation of or failure by Target to comply with anyLegal Requirement.

###  

### (g)         The Material Contracts constitute all of theContracts reasonably necessary to enable Acquisition Sub to conduct Target’sbusiness (including, without limitation, the Business) in the manner in whichsuch business currently is being conducted.

###  

**4.14****                        Insurance.** Target has not obtained any insurance policies.

 

**4.15****                        Title; Sufficiency; Condition of Assets.**

## ** **

### (a)          Target has good and marketable title to, isthe exclusive legal and equitable owner of, and has the unrestricted power andright to sell, assign and deliver all of its personal property, interests inpersonal property and assets reflected in the Financial Statements or acquiredafter the Interim Balance Sheet Date (collectively, the “Target Assets”).  All of the Target Assets with a book valueof $10,000 or more are listed on Schedule 4.15.  The Target Assets are free and clear of allEncumbrances of any kind or nature, except: (a) restrictions imposed inany Governmental Approval; and (b) Encumbrances disclosed on Schedule 4.15that will be removed and released at or prior to the Closing Date.  At the Effective Time, Acquisition Sub willacquire exclusive, good and marketable title or license to or a valid leaseholdinterest in (as the case may be) the Target Assets and no restrictions willexist on Acquisition Sub’s right to resell, license or sublicense any of theTarget Assets or engage in the Business.

###  

### (b)         The Target Assets include all the assetsreasonably necessary to permit Acquisition Sub to conduct the business ofTarget (including, without limitation, the Business) in a manner substantiallyequivalent to the manner as it is being conducted on the date of this Agreementin compliance with all Legal Requirements.

###  

10

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### (c)          All tangible Target Assets are: (i) ingood operating condition and repair, ordinary wear and tear excepted;(ii) suitable and adequate for continued use in the manner in which theyare presently being used; (iii) adequate to meet all present andreasonably anticipated future requirements of Target; and (iv) free ofmaterial defects (latent and patent).

###  

**4.16****                        Real Property Leases.**  Target neither owns nor has it ever owned, since its inception,any real property and has not entered into any Real Property Leases.

 

**4.17****                        Intellectual Property.**

## ** **

### (a)          Schedule 4.17(a) lists all TargetIntellectual Property, specifying in each case whether such Target IntellectualProperty is owned or controlled by or for, licensed to, or otherwise held by orfor the benefit of Target, including, without limitation, all RegisteredIntellectual Property Rights owned by, filed in the name of or applied for byTarget (the “Target Registered Intellectual Property Rights”).

###  

### (b)         Each item of Target Intellectual Property:(i) is valid, subsisting and in full force and effect; (ii) has notbeen abandoned or passed into the public domain; and (iii) is free andclear of any Encumbrances, except for non-exclusive licenses granted to end-usercustomers in the Ordinary Course of Business.

###  

### (c)          The Target Intellectual Property constitutesall the Intellectual Property Rights used in and/or reasonably necessary to theconduct of the Business as it is currently conducted, and as it is currentlyplanned or contemplated to be conducted by Target prior to the Effective Time,including, without limitation, the design, development, manufacture, use,import and sale of the Target Products (including, without limitation, thosecurrently under development).

###  

### (d)         Each item of Target Intellectual Propertyeither: (i) is owned exclusively by Target and was written and createdsolely by employees of Target acting within the scope of their employment or bythird parties, all of which employees and third parties have validly andirrevocably assigned all of their rights, including, without limitation,Intellectual Property Rights therein, to Target, and no third party owns or hasany rights to any such Target Intellectual Property; or (ii) is duly andvalidly licensed to Target for use in the manner currently used by Target inthe conduct of the Business and, as it is currently planned or contemplated tobe used by Target in the conduct of the Business prior to the Effective Time.

###  

### (e)          In each case in which Target has acquired anyIntellectual Property Rights from any Person, Target has obtained a valid andenforceable assignment sufficient to irrevocably transfer to Target all rightsin such Intellectual Property Rights (including, without limitation, the rightto seek past and future damages with respect thereto).  Without limiting the generality of theforegoing, all right, title and interest in and to the software code known as“CGI Parser” has been assigned to Target by CrossWare Development Corporationby an assignment in form and substance satisfactory to Overland and Overland’scounsel.  No Person who has licensedIntellectual Property Rights to Target has ownership rights or license rightsto improvements made by Target in such Intellectual Property Rights.  Target has not transferred to any Personownership of, or granted any exclusive license of or right to use, orauthorized the

###  

11

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### retention ofany exclusive rights to use or joint ownership of, any Intellectual PropertyRight that is or was included within the Target Intellectual Property.

###  

### (f)            There exist no facts, circumstances orinformation that: (i) would render any Target Intellectual Propertyinvalid or unenforceable; (ii) would adversely affect any pending applicationfor any Target Registered Intellectual Property Right; or (iii) wouldadversely affect or impede the ability of Target to use any Target IntellectualProperty in the conduct of the Business as it is currently conducted or as itis currently planned or contemplated to be conducted by Target prior to theEffective Time.  Target has notmisrepresented, or failed to disclose, and neither Target nor any of the TargetShareholders has any Knowledge of any misrepresentation of or failure todisclose, any fact or circumstances in any application for any TargetRegistered Intellectual Property Right that would constitute fraud or amisrepresentation with respect to such application or that would otherwiseaffect the validity or enforceability of any Target Registered IntellectualProperty Right.

###  

### (g)         All necessary registration, maintenance andrenewal fees in connection with each item of Target Registered IntellectualProperty Rights have been paid and all necessary documents and certificates inconnection with such Target Registered Intellectual Property Rights have beenfiled with the relevant patent, copyright, trademark or other authorities inthe United States, for the purposes of maintaining such Target RegisteredIntellectual Property Rights.  There areno actions that must be taken within one hundred twenty (120) days followingthe Closing Date, including, without limitation, the payment of anyregistration, maintenance or renewal fees or the filing of any responses tooffice actions, documents, applications or certificates for the purposes ofobtaining, maintaining, perfecting, preserving or renewing any RegisteredIntellectual Property Rights.  To themaximum extent provided for by, and in accordance with, applicable laws andregulations, Target has recorded in a timely manner each such assignment of aRegistered Intellectual Property Right assigned to Target with the relevantGovernmental Authority, including, without limitation, the United States Patentand Trademark Office (the “PTO”) and the United States Copyright Office.

###  

### (h)         Target has taken all reasonably necessaryaction to maintain and protect: (i) the Target Intellectual Property; and(ii) the secrecy, confidentiality and value of, and Target’s rights in,the Confidential Information and Trade Secrets of Target and those provided byany Person to Target, including, without limitation, by having and enforcing apolicy requiring all current and former employees, consultants and contractorsof Target to execute appropriate confidentiality and assignmentagreements.  All copies thereof shall bedelivered to Overland prior to the Closing Date.  Neither Target nor any of the Target Shareholders has Knowledgeof any unauthorized disclosure of any Trade Secret or Confidential Informationof Target or any violation of obligations of confidentiality with respect tosuch.  Only the individuals named in theTarget Disclosure Schedule, which describes their relationship with Target,have had access to such Trade Secrets and Confidential Information, and eachsuch Person has signed a confidentiality agreement with respect thereto.

###  

### (i)             The operation of the Business as it iscurrently conducted, or as it is currently planned or contemplated to beconducted by Target prior to the Effective Time, including but not limited tothe design, development, use, import, branding, advertising, promotion,marketing, manufacture and sale of the Target Products (including, withoutlimitation, any Target Products 

###  

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### currently underdevelopment), does not and will not, and will not when conducted by AcquisitionSub substantially in the same manner following the Closing Date, infringe ormisappropriate any Intellectual Property Rights of any Person, violate anyright of any Person (including, without limitation, any right to privacy orpublicity), defame or libel any Person or constitute unfair competition ortrade practices under the laws of any jurisdiction, and Target has not receivednotice from any Person claiming that such operation of the Business or anyTarget Product (including, without limitation, any currently under development)infringes or misappropriates any Intellectual Property Rights of any Person(including, without limitation, any right of privacy or publicity), or defamesor libels any Person or constitutes unfair competition or trade practices underthe laws of any jurisdiction (nor does Target or the Target Shareholders haveKnowledge of any basis therefor).

###  

### (j)             To the Knowledge of Target and the TargetShareholders, no Person is violating, infringing or misappropriating any TargetIntellectual Property Right.

###  

### (k)          There are no Proceedings before anyGovernmental Authority (including, without limitation, before the PTO) anywherein the world related to any of the Target Intellectual Property, including,without limitation, any Target Registered Intellectual Property Rights.

###  

### (l)             No Target Intellectual Property or TargetProduct is subject to any Proceeding or any outstanding decree, order,judgment, office action or settlement agreement or stipulation that restrictsin any manner the use, transfer or licensing thereof by Target or that mayaffect the validity, use or enforceability of such Target IntellectualProperty.

###  

### (m)       Schedule 4.17(m) lists all TargetContracts affecting any Intellectual Property Rights.  Target is not in breach of, and Target has not failed to performunder, any such Target Contracts and, to Target’s and the Target Shareholders’Knowledge, no other party to any such Target Contracts is in breach thereof orhas failed to perform thereunder.

###  

### (n)         Schedule 4.17(n) lists all TargetContracts under which Target has agreed to, or assumed, any obligation or dutyto warrant, indemnify, reimburse, hold harmless, guaranty or otherwise assumeor incur any obligation or liability, or provide a right of rescission, withrespect to the infringement or misappropriation by Target or such other personof the Intellectual Property Rights of any Person other than Target.

###  

### (o)         There is no Target Contract affecting anyTarget Intellectual Property under which there is any dispute regarding thescope of such Target Contract, or performance under such Target Contract,including, without limitation, with respect to any payments to be made orreceived by Target thereunder.

###  

### (p)         Following the Closing Date, all TargetIntellectual Property will be fully transferable, alienable or licensable byAcquisition Sub without restriction and without payment of any kind to anythird party.  The consummation of theMerger as contemplated hereby will not result in any loss of, or thediminishment in value of, any Target Intellectual Property or the right to useany Target Intellectual Property.

###  

13

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### (q)         Neither this Agreement nor the Merger,including, without limitation, the assignment to Acquisition Sub, by operationof law or otherwise, of any Target Contracts, will result in: (i) thegrant to any third party of any right to, or with respect to, any IntellectualProperty Right owned by, or licensed to, Target, Overland or Acquisition Sub;(ii) Target, Overland or Acquisition Sub being bound by, or subject to,any non-compete or other restriction on the operation or scope of its business,including, without limitation, the Business; or (iii) Target, Overland orAcquisition Sub being obligated to pay any royalties or other amounts to anythird party.

###  

**4.18****                        Customers, Distributors and Suppliers.**

## ** **

### (a)          Customers.  All Target Contracts with customers were entered into by or onbehalf of Target and were entered into in the Ordinary Course of Business forTarget’s customary prices.  Each suchTarget Contract with a customer involves commitments of not less than theTarget’s published list price.  TheTarget Disclosure Schedule sets forth an accurate, correct and complete:

###  

#### (i)                                     listof Target’s customers since inception;

####  

#### (ii)                                  breakdownof the revenues from each customer since inception; and

####  

#### (iii)                               breakdownof any customer deposits held by Target as of the date of this Agreement.

####  

### (b)         Suppliers.  All Target Contracts with suppliers were entered into by or onbehalf of Target and were entered into in the Ordinary Course of Business forusual quantities and at what Target believes were normal prices.  The Target Disclosure Schedule setsforth an accurate, correct and complete:

###  

#### (i)                                     listof Target’s suppliers since inception;

####  

#### (ii)                                  breakdownof the amounts paid to each supplier since inception; and

####  

#### (iii)                               listof all sole source suppliers of Target.

####  

### (c)          The Target Disclosure Schedule setsforth a true, accurate and complete list of each reseller and distributorthrough which Target currently distributes the Target Products.  Such list indicates: (i) the totalsales of the Target Products to each such reseller or distributor;(ii) the product shipment volumes of the Target Products to each suchreseller or distributor, broken down by product; (iii) the average sellingprices of the Target Products to each such reseller or distributor broken downby product; and (iv) the contact information for each such reseller ordistributor.  The Target DisclosureSchedule also sets forth (A) the pricing arrangements and othermaterial terms related to the Target Products under existing volume purchaseagreements to which Target is a party and (B) the current reseller ordistributor policies of Target covering the Target Products with each currentreseller or distributor.

###  

14

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### (d)         Target has not entered into any Contract underwhich Target is restricted from selling, licensing or otherwise distributingany Target Products to any class of customers, in any geographic area, duringany period of time or in any segment of the market.  There is no purchase commitment which provides that any supplierwill be the exclusive supplier of Target. There is no purchase commitment requiring Target to purchase the entireoutput of a supplier.

###  

### (e)          Target has not received any notice or othercommunication or information indicating, and neither Target nor any of theTarget Shareholders has any Knowledge, that any current customer, supplier ordistributor identified in the Target Disclosure Schedule may cease dealingwith Target, may otherwise materially reduce the volume of business transactedby such Person with Target or otherwise is materially dissatisfied with theservice Target provides such Person. Target does not have any reason to believe that any such Person will notdo business with Overland or Acquisition Sub after, or as a result of, consummationof the Merger, or that such Person is threatened with bankruptcy orinsolvency.  Neither Target nor any ofthe Target Shareholders has any Knowledge of any fact, condition or event whichmay, by itself or in the aggregate, adversely affect its relationship with anysuch Person.  Since the Interim BalanceSheet Date, there has been no cancellation of backlogged orders in excess ofthe average rate of cancellation prior to such date.

###  

### (f)            Target has not, and none of Target’sofficers or employees has, directly or indirectly given or agreed to give anyrebate, gift or similar benefit to any customer, supplier, distributor, broker,governmental employee or other Person, who was, is or may be in a position tohelp or hinder Target (or assist in connection with any actual or proposedtransaction) that could subject Target (or Overland or Acquisition Sub afterconsummation of the Merger) to any damage or penalty in any civil, criminal orgovernmental litigation or proceeding or which would have a Material AdverseEffect on Target (or Overland or Acquisition Sub after consummation of theMerger).

###  

**4.19****                        Targe****t Products and Product Warranty.**  All products manufactured, processed,distributed, shipped or sold by Target and any services rendered by Target havebeen in conformity with all applicable contractual commitments and allexpressed or implied warranties.  Noliability exists or, to the Knowledge of Target and the Target Shareholders,will arise for repair, replacement or damage in connection with such sales ordeliveries.  The Target Disclosure Schedule setsforth an accurate, correct and complete statement of all written warranties,warranty policies, service and maintenance agreements of Target.  No products heretofore manufactured,processed, distributed, sold, delivered or leased by Target are now subject toany guarantee, written warranty, claim for product liability, or patent orother indemnity.  All warranties are inconformity with the labeling and other requirements of the Magnuson-MossWarranty Act and other applicable laws. The Target Disclosure Schedule sets forth an accurate, correct andcomplete list and summary description of all service or maintenance agreementsunder which Target is obligated, indicating the terms of such agreement and anyamounts paid or payable thereunder.  Theproduct warranty and return experience for the fiscal year endedDecember 31, 2002 and the interim period through the date hereof is setforth in the Target Disclosure Schedule.

 

15

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**4.20****                        Employees and Consultants.**

## ** **

### (a)          Employees and Contracts.  No employee of Target has been granted theright to continued employment by Target or to any material compensationfollowing termination of employment with Target.  Neither Target nor any of the Target Shareholders has anyKnowledge that any officer, director, employee or consultant of Target(collectively, the “Contractors”) intends to terminate his or heremployment or other engagement with Target, nor does Target have a presentintention to terminate the employment or engagement of any Contractor.

###  

### (b)         Compensation.  The Target Disclosure Schedule sets forth an accurate,correct and complete list of all: (i) employees of Target, including eachemployee’s name, title or position, present annual compensation (including,without limitation, bonuses, commissions and deferred compensation), accruedand unused paid vacation and other paid leave, years of service, interests inany incentive compensation plan, and estimated entitlements to receivesupplementary retirement benefits or allowances (whether pursuant to acontractual obligation or otherwise); and (ii) individuals who arecurrently performing services for Target who are classified as “consultants” or“independent contractors.”  The TargetDisclosure Schedule sets forth all: (i) bonuses, severance payments,termination pay and other special compensation of any kind paid to, accruedwith respect to, or that would be payable to (as a result of the Merger), anypresent or former Contractor since the Interim Balance Sheet Date;(ii) increases in any employee’s wage or salary since the Interim BalanceSheet Date; or (iii) increases or changes in any other benefits orinsurance provided to any employees since the Interim Balance Sheet Date.  No employee of Target is eligible forpayments that would constitute “parachute payments” under Section 280G ofthe Code.

###  

### (c)          Disputes.  There are no claims, disputes or controversies pending or, to theKnowledge of Target or any of the Target Shareholders, threatened involving anyemployee or group of employees.  Targethas not suffered or sustained any work stoppage and no such work stoppage isthreatened.

###  

### (d)         Compliance with Legal Requirements.  Target has complied with all LegalRequirements related to the employment of its employees, including, withoutlimitation, provisions related to wages, hours, leaves of absence, equalopportunity, occupational health and safety, workers’ compensation, severance,employee handbooks or manuals, collective bargaining and the payment of socialsecurity and other Taxes.  Target doesnot have any Liability under any Legal Requirements related to employment.

###  

### (e)          WARN Act.  The Worker Readjustment and Notification Act (the “WARN Act”)(29 USC §2101) does not apply to Target. The Target Disclosure Schedule sets forth an accurate, correct andcomplete list of all employees terminated (except with cause, by voluntarilydeparture or by normal retirement), laid off or subjected to a reduction ofmore than 50% in hours or work during the two full calendar months and thepartial month preceding this representation and warranty.

###  

### (f)            Unions.  Target does not have any collective bargaining agreements withany of its employees.  There is no laborunion organizing or election activity pending or, to the Knowledge of Target orany of the Target Shareholders, threatened with respect to Target.

###  

16

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**4.21****                        Target Benefit Plans.**

## ** **

### (a)          The Target Disclosure Schedule lists(i) all “employee benefit plans” within the meaning of Section 3(3)of ERISA; (ii) all employment agreements, including, but not limited to,any individual benefit arrangement, policy or practice with respect to anycurrent or former employee or director of Target or Member of the ControlledGroup; and (iii) all other employee benefit, bonus or other incentivecompensation, stock option, stock purchase, stock appreciation, severance pay,lay-off or reduction in force, change in control, sick pay, vacation pay,salary continuation, retainer, leave of absence, educational assistance,service award, employee discount, fringe benefit plans, arrangements, policiesor practices, whether legally binding or not, which Target or any Member of theControlled Group maintains, to which any of them contributes, or for which anyof them has any obligation or liability (collectively, the “Target BenefitPlans”).

###  

### (b)         None of the Target Benefit Plans is a DefinedBenefit Plan, and neither Target nor any Member of the Controlled Group hasever sponsored, maintained or contributed to, or ever been obligated tocontribute to, a Defined Benefit Plan.

###  

### (c)          None of the Target Benefit Plans is aMultiemployer Plan, and neither Target nor any Member of the Controlled Grouphas ever contributed to, or ever been obligated to contribute to, aMultiemployer Plan.

###  

### (d)         Target does not maintain or contribute to anyplan that provides health benefits to an employee after the employee’stermination of employment or retirement except as required underSection 4980B of the Code and Sections 601 through 608 of ERISA.

###  

### (e)          Each Target Benefit Plan that is an “employeebenefit plan,” as defined in Section 3(3) of ERISA, complies by its termsand in operation with the requirements provided by any and all statutes, ordersor governmental rules and regulations currently in effect and applicable to theTarget Benefit Plan, including but not limited to ERISA and the Code.

###  

### (f)            All reports, forms and other documentsrequired to be filed with any government entity or furnished to employees,former employees or beneficiaries with respect to any Target Benefit Plan(including, without limitation, summary plan descriptions, Forms 5500 andsummary annual reports) have been timely filed and furnished and are accurate.

###  

### (g)         Each of the Target Benefit Plans  that is intended to qualify underSection 401(a) of the Code has been determined by the IRS so to qualifyafter January 1, 1989, and each trust maintained pursuant thereto has beendetermined by the IRS to be exempt from taxation under Section 501 of theCode.  Nothing has occurred since thedate of the IRS’s favorable determination letter that could adversely affectthe qualification of the Target Benefit Plan and its related trust.  Target and each Member of the ControlledGroup have timely amended and operated each of the Target Benefit Plans tocomply with the Small Business and Job Protection Act of 1996 and subsequentlegislation enacted through the date hereof, and Section 501 of the Code.

###  

17

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### (h)         All contributions for all periods ending priorto the Closing Date (including, without limitation, periods from the first dayof the current plan year to the Closing Date) have been made prior to theClosing Date by Target.

###  

### (i)             All insurance premiums have been paid infull, subject only to normal retrospective adjustments in the ordinary course,with regard to the Target Benefit Plans for plan years ending on or before theClosing Date.

###  

### (j)             With respect to each Target Benefit Plan:

###  

#### (i)                                     noprohibited transactions (as defined in Section 406 or 407 of ERISA orSection 4975 of the Code) have occurred for which a statutory exemption isnot available;

####  

#### (ii)                                  noaction or claims (other than routine claims for benefits made in the ordinarycourse of the Target Benefit Plan administration for which the Target BenefitPlan administrative review procedures have not been exhausted) are pending,threatened or imminent against or with respect to the Target Benefit Plan, anyemployer who is participating (or who has participated) in any Target BenefitPlan or any fiduciary (as defined in Section 3(21) of ERISA), of theTarget Benefit Plan;

####  

#### (iii)                               noneof Target, the Target Shareholders or any fiduciary has any Knowledge of anyfacts that could give rise to any such action or claim; and

####  

#### (iv)                              itprovides that it may be amended or terminated at any time and, except forbenefits protected under Section 411(d) of the Code, all benefits payableto current, terminated employees or any beneficiary may be amended orterminated by Target at any time without liability.

####  

### (k)          Neither Target nor any Member of theControlled Group has any liability or is threatened with any liability (whetherjoint or several) (i) for any excise tax imposed by Sections 4971,4975, 4976, 4977 or 4979 of the Code or (ii) to a fine underSection 502 of ERISA.

###  

### (l)             All of the Target Benefit Plans, to theextent applicable, are in compliance with the continuation of group healthcoverage provisions contained in Section 4980B of the Code and Sections601 through 608 of ERISA.

###  

### (m)       True, correct and complete copies of alldocuments creating or evidencing any Target Benefit Plan have been delivered toOverland, and true, correct and complete copies of all reports, forms and otherdocuments required to be filed with any governmental entity or furnished toemployees, former employees or beneficiaries (including, without limitation,summary plan descriptions, Forms 5500 and summary annual reports for allplans subject to ERISA, but excluding individual account statements and tax forms)have been delivered to the Overland. There are no negotiations, demands or proposals which are pending orhave been made which concern matters now covered, or that would be covered, bythe type of agreements required to be listed in the Target Disclosure Schedule.

###  

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**4.22****                        Compliance with Laws.**

## ** **

### (a)          Target is, and at all times since itsinception has been, in full compliance, with each Legal Requirement that isapplicable to Target or Target’s properties, assets (including, withoutlimitation, the Target Assets), operations or businesses (including, withoutlimitation, the Business), and no event has occurred, and no condition orcircumstance exists, that might (with or without notice or lapse of time)constitute, or result directly or indirectly in, a default under, a breach orviolation of, or a failure comply with, any such Legal Requirement.  Target has not received any notice from anythird party regarding any actual, alleged or potential violation of any LegalRequirement.

###  

### (b)         To the Knowledge of Target and the TargetShareholders, no Governmental Authority has proposed or is considering anyLegal Requirement that may affect Target or Target’s properties, assets(including, without limitation, the Target Assets), operations or businesses(including, without limitation, the Business), or Target’s rights thereto.

###  

**4.23****                        Governmental Approvals.**

## ** **

### (a)          Target has all Governmental Approvals thatare necessary or appropriate in connection with Target’s ownership and use ofits properties or assets (including, without limitation, the Target Assets) orTarget’s operation of its businesses (including, without limitation, theBusiness).  Except for any filingrequired under the HSR Act, Target has made all filings with, and given allnotifications to, all Government Authorities as required by all applicableLegal Requirements.  Schedule 4.23(a)contains an accurate, correct and complete list and summary description of eachsuch Governmental Approval, filing or notification.  Each such Governmental Approval, filing and notification is validand in full force and effect, and there is not pending or threatened anyProceeding which could result in the suspension, termination, revocation,cancellation, limitation or impairment of any such Governmental Approval,filing or notification.  No violationshave been recorded in respect of any Governmental Approvals, and Target knowsof no meritorious basis therefor.  Nofines or penalties are due and payable in respect of any Governmental Approvalor any violation thereof.

###  

### (b)         Target has delivered to Overland accurate andcomplete copies of all of the Governmental Approvals, filings and notificationsidentified in Schedule 4.23(a), including, without limitation, allrenewals thereof and all amendments thereto. All Governmental Approvals are freely assignable to Acquisition Sub.

###  

**4.24****                        Proceedings and Orders.**

## ** **

### (a)          There is no Proceeding pending or threatenedagainst or affecting Target or Target’s respective properties, assets (including,without limitation, the Target Assets), operations or businesses (including,without limitation, the Business), or Target’s rights relating thereto.  To Target’s and the Target Shareholders’Knowledge, no event has occurred, and no condition or circumstance exists, thatmight directly or indirectly give rise to or serve as a basis for thecommencement of any such Proceeding. Target has delivered to Overland true, accurate and complete copies ofall pleadings, correspondence and other documents relating to any such

###  

19

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Proceeding.  No insurance company has asserted in writingthat any such Proceeding is not covered by the applicable policy relatedthereto.

###  

### (b)         Neither Target, nor Target’s officers,directors, agents or employees, nor any of Target’s properties, assets(including, without limitation, the Target Assets), operations or businesses(including, without limitation, the Business), nor Target’s rights relating toany of the foregoing, is subject to any Order or any proposed Order.

###  

**4.25****                        Environmental Matters.**

## ** **

### (a)          Target is and has been at all times incompliance with Environmental and Safety Laws. Target has all necessary permits required under Environmental and SafetyLaws for the operation of its business (including, without limitation, theBusiness), and is not and has not been in violation of any of the terms andconditions of any of such permits. Target has not received any notice that alleges that Target is not incompliance with any Environmental and Safety Law.

###  

### (b)         Target has not generated, manufactured,produced, transported, imported, used, treated, refined, processed, handled,stored, discharged, released or disposed of any Hazardous Materials (whetherlawfully or unlawfully).  To theKnowledge of Target and the Target Shareholders: (i) there are not andhave not been any releases or threatened releases of any Hazardous Materialsat, on or from Target’s facilities, and (ii) no former owner or user ofTarget’s facilities engaged in any type of manufacturing or commercial activitythat might be reasonably expected to generate, manufacture, produce, transport,import, use, treat, refine, process, handle, store, discharge, release ordispose of any Hazardous Materials (whether lawfully or unlawfully) on Target’sfacilities.

###  

**4.26****                        Taxes.**

## ** **

### (a)          Target has timely filed all Tax Returns thatit was required to file, and such Tax Returns are true, correct and complete inall material respects.  All Taxes shownto be payable on such Tax Returns or on subsequent assessments with respectthereto have been paid in full on a timely basis, and no other Taxes arepayable by Target with respect to any period ending prior to the date of thisAgreement, whether or not shown due or reportable on such Tax Returns, otherthan Taxes for which adequate accruals have been provided in its FinancialStatements.  Target has withheld andpaid all Taxes required to have been withheld and paid in connection withamounts paid or owing to any employee, independent contractor, creditor,shareholder, or other third party. Target has no liability for unpaid Taxes accruing after the date of theFinancial Statements, except for Taxes incurred in the Ordinary Course ofBusiness.  There are no liens for Taxeson the properties of Target, other than liens for Taxes not yet due andpayable.  At all times Target and theTarget Shareholders have valued the Target Common Stock in a manner that isappropriate and reasonable for purposes of calculating any Taxes.  Overland will prepare and file with the IRSa short year Tax Return for the period commencing January 1, 2003 to theClosing Date and, prior to the filing of such Tax Return, will provide to JohnMatze a copy of such Tax Return for his review and approval, which approval shallnot be unreasonably withheld or delayed.

###  

20

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### (b)         The Target Disclosure Schedule lists allTax Returns filed by Target for all taxable periods since its inception,indicates those Tax Returns that have been audited, and indicates those TaxReturns that currently are subject of audit. To the Knowledge of Target and the Target Shareholders, no other auditof any Tax Return is currently pending or threatened.  No claim has ever been made by any Governmental Authority in ajurisdiction where Target does not file Tax Returns that Target is or may besubject to taxation by that jurisdiction. Target has delivered or made available to Overland correct and completecopies of all Tax Returns filed, examination reports, and statements ofdeficiencies assessed or agreed to by Target since its inception.  Target has not waived any statute oflimitations in respect of any Tax or agreed to an extension of time withrespect to any Tax assessment or deficiency.

###  

### (c)          Target is not a party to or bound by any taxindemnity agreement, tax sharing agreement or similar contract.  Target is not a party to any joint venture,partnership, or other arrangement or contract which could be treated as apartnership or “disregarded entity” for United States federal income taxpurposes.

###  

### (d)         Target is not obligated under any agreement,contract or arrangement that may result in the payment of any amount that wouldnot be deductible by reason of Section 280G or Section 404 of theCode.

###  

### (e)          Target has treated itself as owner of each ofits assets for Tax purposes.  None ofthe Target Assets is the subject of a “safe-harbor lease” within the provisionsof former Section 168(f)(8) of the Code, as in effect prior to amendmentby the Tax Equity and Fiscal Responsibility Act of 1982.  None of the Target Assets directly orindirectly secures any debt the interest on which is tax exempt underSection 103(a) of the Code.  Noneof the Target Assets is “tax-exempt use property” within the meaning ofSection 168(h) of the Code.

###  

### (f)            Target has at all times qualified as an “Scorporation” for federal income tax purposes, and each Target Shareholder is a“United States person” within the meaning of Section 7701(a)(30) of theCode.

###  

**4.27****                        Brokers.**  NeitherTarget nor any Target Shareholder has retained any broker or finder or incurredany liability or obligation for any brokerage fees, commissions or finders feeswith respect to this Agreement or the Merger.

 

**4.28****                        No Other Agreement.** Other than for sales of assets in the Ordinary Course of Business,neither Target, nor any of Target’s Representatives, has entered into anyContract with respect to the sale or other disposition of any assets(including, without limitation, the Target Assets) or capital stock of Target,except as set forth in this Agreement.

 

**4.29****                        Full Disclosure.**

## ** **

### (a)          Neither this Agreement nor any of the otherTransaction Documents, (i) contains or will contain as of the Closing Dateany untrue statement of fact or (ii) omits or will omit to state anymaterial fact necessary to make any of the representations, warranties or otherstatements or information contained herein or therein (in light of thecircumstances under which they were made) not misleading.  Target has delivered to Overland alldocuments and

###  

### 21

### 

###  

other materials necessary forTarget to provide a complete and accurate response to the Preliminary DueDiligence Request List provided to Target by Overland.

###  

### (b)         To the Knowledge of Target and the TargetShareholders, there is no fact (other than publicly known facts relatedexclusively to political or economic matters of general applicability that willadversely affect all Entities comparable to Target) that may have a MaterialAdverse Effect on Target.

###  

### (c)          All of the information set forth in theTarget Disclosure Schedule, and all other information regarding Target orTarget’s properties, assets (including, without limitation, the Target Assets),operations, businesses (including, without limitation, the Business),Liabilities, financial performance, net income and prospects that has beenfurnished to Overland or any of its Representatives by or on behalf of Targetor any of Target’s Representatives, is accurate, correct and complete in allrespects.

###  

### (d)         Each representation and warranty set forth inthis Article 4 is not qualified in any way whatsoever except asexplicitly provided therein, will not merge on Closing or by reason of theexecution and delivery of any Contract on the Closing Date, will remain inforce on and immediately after the Closing Date, is given with the intentionthat liability is not limited to breaches discovered before Closing, isseparate and independent, and is made and given with the intention of inducing Overlandand Acquisition Sub to enter into this Agreement.

###  

**4.30****                        Additional Target Shareholder Representations.**  Each Target Shareholder hereby representsand warrants to Overland and Acquisition Sub as follows:

 

### (a)          The Target Shareholder has the power and authorityto execute and deliver this Agreement and the other Transaction Documents towhich he or she is a party, to perform his obligations hereunder and toconsummate the transactions contemplated hereby.

###  

### (b)         This Agreement has been duly executed and deliveredby the Target Shareholder and constitutes, and the other Transaction Documentswhen executed and delivered will constitute, the legal, valid and bindingobligation of such Target Shareholder, enforceable against him or her inaccordance with its terms, except as may be limited by bankruptcy,insolvency, reorganization, moratorium and other similar laws and equitableprinciples related to or limiting creditors’ rights generally and by generalprinciples of equity.

###  

### (c)          As of the close of business on the date of thisAgreement and on the Closing Date, the Target Shareholder owns and will owndirectly or indirectly with respect to Target, the number of Shares of TargetCommon Stock set forth next to the Target Shareholder’s name on Schedule 2.3free and clear of all Encumbrances, restrictions and claims of any kind, otherthan restrictions imposed by state or federal securities laws.

###  

**4.31****                        Securities Law Representations.**  Each Target Shareholder hereby representsand warrants to Overland and Acquisition Sub as follows:

 

### (a)          The Target Shareholder is acquiring theOverland Common Stock to be received in the Merger (collectively, the “Securities”)for investment for the Target Shareholder’s own account, not as a nominee oragent and not with a view to the resale or 

###  

### 22

### 

###  

distribution of any partthereof, and the Target Shareholder has no present intention of selling,granting any participation in, or otherwise distributing the same.

###  

### (b)         The Target Shareholder has received andreviewed copies of: (i) Overland’s Annual Report on Form 10-K for the fiscalyear ended June 30, 2002; (ii) Overland’s Quarterly Reports on Form 10-Qfor the fiscal quarters ended September 30, 2002, December 31, 2002and March 31, 2003; and (iii) Overland’s Current Reports on Form 8-K filedwith the SEC since June 30, 2002 (the “Public Reports”).  The Target Shareholder has received all theinformation it considers necessary or appropriate for deciding whether toobtain the Securities as consideration in this Transaction.  The Target Shareholder has had anopportunity to ask questions and receive answers from Overland and AcquisitionSub regarding the rights, preferences and privileges under the Securities andthe business, properties, prospects and financial condition of Overland andAcquisition Sub.

###  

### (c)          The Target Shareholder acknowledges that heor she is able to fend for himself or herself, can bear the economic risk ofowning the Securities, and has such knowledge and experience in financial orbusiness matters that he or she is capable of evaluating the merits and risksof owning Overland Common Stock.  TheTarget Shareholder acknowledges that his or her ownership of the Securitiesinvolves a high degree of risk and that the Target Shareholder is able, withoutmaterially impairing his or her financial condition, to hold the Securities foran indefinite period of time and to suffer a complete loss of his or herinvestment.

###  

### (d)         Except as set forth on Schedule 4.31(d),the Target Shareholder is an “accredited investor” within the meaning of Rule501 of Regulation D promulgated under the Securities Act, as presently ineffect.

###  

### (e)          The Target Shareholder understands that theSecurities are characterized as “restricted securities” under the federalsecurities laws in that they are being acquired from Overland in a transactionnot involving a public offering and that under such laws and applicableregulations such that the Securities may be resold without registration underthe Securities Act only in certain limited circumstances.  In this connection, the Target Shareholderis familiar with Rule 144 promulgated under the Securities Act, as presently ineffect, and understands the resale limitations imposed thereby and by theSecurities Act.  **THE TARGET SHAREHOLDER UNDERSTANDS AND ACKNOWLEDGESHEREIN THAT AN INVESTMENT IN THE SECURITIES INVOLVES AN EXTREMELY HIGH DEGREEOF RISK AND MAY RESULT IN A COMPLETE LOSS OF HIS OR HER INVESTMENT.**  The Target Shareholder understands that theSecurities have not been and (except as provided below in Section 7.4)will not be registered under the Securities Act and have not been and will notbe registered or qualified in any state in which they are offered, and thus theTarget Shareholder will not be able to resell or otherwise transfer theSecurities unless they are registered under the Securities Act and registeredor qualified under applicable state securities laws, or an exemption from suchregistration or qualification is available. The Target Shareholder has no immediate need for liquidity in connectionwith this investment, and does not anticipate that the Target Shareholder willbe required to sell the Securities in the foreseeable future.

###  

### (f)            During the six (6)-month period immediatelyfollowing the Closing Date, the Target Shareholder agrees not to: (i) directlyor indirectly, sell, offer to sell, solicit offers to buy, 

###  

### 23

### 

###  

dispose of, loan, pledge orgrant any right with respect to (collectively, a “Disposition”), any ofthe Securities, or any securities convertible into or exercisable orexchangeable for any of the Securities; (ii) engage in any hedging or othertransaction that is designed to or could reasonably be expected to lead to orresult in a Disposition of the Securities, or any securities convertible intoor exercisable or exchangeable for the Securities, or any other derivativesecurity transaction the purpose or effect of which is to hedge or transfer toa third party all or any part of the risk of loss associated with the ownershipof the Securities.  Such prohibitedhedging or other transactions include, without limitation, effecting any shortsale or equity swap transaction or having in effect any short position (whetheror not such sale or position is against the box and regardless of when suchposition was entered into) or any purchase, sale or grant of any right(including, without limitation, any put or call option) with respect to theSecurities, or any securities convertible into or exercisable or exchangeablefor the Securities.  Without in any waylimiting the foregoing, the Target Shareholder further agrees not to make anyDisposition of all or any portion of the Securities unless and until thetransferee has agreed in writing for the benefit of Overland to be bound bythis Section 4.31, and:

###  

(i)                                     There is then ineffect a registration statement under the Securities Act covering such proposedDisposition and such Disposition is made in accordance with such registrationstatement; or

 

(ii)                                  (a)                                  The TargetShareholder shall have notified Overland of the proposed Disposition and shallhave furnished Overland with a detailed statement of the circumstancessurrounding the proposed Disposition and (b) if reasonably requested byOverland, shall have furnished to Overland an opinion of counsel reasonablysatisfactory to Overland that such Disposition will not require registration ofsuch shares under the Securities Act.

 

### (g)         It is understood that the certificatesevidencing the Securities may bear one or all of the following legends orsubstantially similar legends:

###  

#### (i)                                     “THESESECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, ASAMENDED.  THEY MAY NOT BE SOLD,OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATIONSTATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINIONOF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.”

####  

#### (ii)                                  Anyother legend required by the Bylaws of Overland or by law, including, withoutlimitation, applicable state securities laws.

####  

### (h)         The Target Shareholder understands that therepresentations, warranties, covenants and acknowledgements set forth in this Section 4.31constitute a material inducement to Overland and Acquisition Sub to enter intothis Agreement.

###  

### (i)             The Target Shareholder acknowledges thathe or she is not relying upon any other Person in making his or her investmentor decision to acquire the Securities.

###  

### 24

### 

###  

# **ARTICLE 5**.  REPRESENTATIONS AND WARRANTIES OF OVERLAND

# ** **

Except asspecifically set forth on the Schedule 5 (the “OverlandDisclosure Schedule”) attached to this Agreement (the parts of which arenumbered to correspond to the applicable section numbers of this Agreement),Overland and Acquisition Sub hereby represent and warrant, jointly andseverally, to Target and the Target Shareholders that on the date of thisAgreement and as of the Closing Date as though the following representationsand warranties were made on the Closing Date:

 

**5.1 Organizationand Good Standing.**  Overland and Acquisition Sub are corporations duly organized,validly existing and in good standing under the laws of the State ofCalifornia.

 

**5.2 Authority;Binding Nature of Agreements.**  Overland and Acquisition Sub have allrequisite power and authority to execute and deliver this Agreement and allother Transaction Documents to which they are parties and to carry out theprovisions of this Agreement and the other Transaction Documents.  The execution, delivery and performance ofthis Agreement and the other Transaction Documents have been approved by allrequisite action on the part of Overland and Acquisition Sub.  This Agreement has been duly and validlyexecuted and delivered by Overland and Acquisition Sub.  Each of this Agreement and the otherTransaction Documents constitutes, or upon execution and delivery, willconstitute, the legal, valid and binding obligation of Overland and AcquisitionSub, enforceable against Overland and Acquisition Sub in accordance with itsterms, except as may be limited by bankruptcy, insolvency, reorganization,moratorium and other similar laws and equitable principles related to orlimiting creditors’ rights generally and by general principles of equity.

 

**5.3 No Brokers or Finders.**  Neither Overland nor Acquisition Sub, norany of their directors, officers, employees or agents, has retained, employedor used any broker or finder in connection with the Merger or the negotiationthereof.

 

**5.4 Disclosure.**  No representation or warranty by Overlandand Acquisition Sub in this Agreement, nor any statement, certificate,schedule, document or exhibit hereto furnished or to be furnished by or onbehalf of Overland and Acquisition Sub pursuant to this Agreement or in connectionwith the Merger contains (or when furnished pursuant to this Agreement shallcontain) any untrue statement of material fact or omits (or when furnishedpursuant to this Agreement shall omit) a material fact necessary to make thestatements contained therein not misleading. None of the Public Reports when filed with the SEC contained any untruestatement of material fact or omitted a material fact necessary to make thestatements contained therein not misleading.

 

# **ARTICLE 6**.  PRE-CLOSING COVENANTS

# ** **

**6.1 Targe****t’s Conduct of the Business Prior to Closing.**  From the date of this Agreement until theClosing Date, Target shall, and the Target Shareholders shall cause Target to:

 

### (a)          Operate and conduct Target’s business(including, without limitation, the Business) in the Ordinary Course ofBusiness;

###  

25

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### (b)         Pay all of Target’s Liabilities and Taxes whendue (other than as provided in this Agreement), subject to good faith disputesover such Liabilities or Taxes; and

###  

### (c)          Use best efforts to (i) preserve intactall rights of Target to retain its employees and (ii) maintain goodrelationships with employees, licensors, licensees, suppliers, contractors,distributors, customers, and others having business dealings with Target.

###  

**6.2 Restrictions onTarget’s Conduct of the Business Prior to Closing.**  From the date of this Agreement until theClosing Date, Target shall not, and the Target Shareholders shall not permitTarget to:

 

### (a)          Enter into, create, incur or assume(i) any borrowings under capital leases or (ii) any obligations whichwould have a Material Adverse Effect on Target or the conduct of the Businessas it is currently conducted, and as it is currently planned or contemplated tobe conducted by Target prior to the Effective Time;

###  

### (b)         Acquire by merging or consolidating with, orby purchasing any equity securities or assets (which are material, individuallyor in the aggregate, to Target) of, or by any other manner, any business or anyEntity;

###  

### (c)          Sell, transfer, lease, license or otherwiseencumber any of its assets (including, without limitation, the Target Assets),except for the sale of Inventory in the Ordinary Course of Business;

###  

### (d)         Take any action not announced prior to thedate of this Agreement to the customers, suppliers or distributors of Target,including, without limitation, providing promotions, coupons, discounts orprice increases;

###  

### (e)          Enter into any agreements or commitments withanother Person, except on commercially reasonable terms in the Ordinary Courseof Business;

###  

### (f)            Violate any Legal Requirement applicable toTarget; provided, however, that Target shall not be required tocure any violation of any Legal Requirement that is disclosed in the TargetDisclosure Schedule on the date of this Agreement;

###  

### (g)         Change or announce any change to the TargetProducts or any services sold by Target;

###  

### (h)         Violate, terminate or amend any TargetContract or Governmental Approval, except as requested by Overland;

###  

### (i)             Commence a Proceeding;

###  

### (j)             Declare, authorize or pay any dividendson, make any other distributions with respect to, or redeem, repurchase orotherwise acquire any of its capital stock;

###  

### (k)          Purchase, lease, license or otherwise acquireany assets, except for supplies and other assets acquired by Target in theOrdinary Course of Business;

###  

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### (l)             Make any capital expenditure in excess of$5,000, individually or in the aggregate;

###  

### (m)       Write off as uncollectible, or establish anyextraordinary reserve with respect to, any Receivable or other indebtedness inexcess of $5,000, individually or in the aggregate;

###  

### (n)         Provide any credit, loan, advance, guaranty,endorsement, indemnity, warranty or mortgage to any Person, including, withoutlimitation, any of the customers, shareholders, officers, employees ordirectors of Target, other than those made in the Ordinary Course of Business;

###  

### (o)         Borrow from any Person by way of a loan,advance, guaranty, endorsement, indemnity, or warranty;

###  

### (p)         Discharge any Encumbrance, indebtedness orother Liability in excess of $5,000, individually or in the aggregate, exceptfor Liabilities reflected or reserved against in the Financial Statements andaccounts payable in the Ordinary Course of Business or other than ascontemplated by this Agreement;

###  

### (q)         Change its credit practices, accountingmethods or practices or standards used to maintain the Books and Records;

###  

### (r)            Change the terms of its accounts or otherpayables or Receivables or take any action directly or indirectly to cause orencourage any acceleration or delay in the payment, collection or generation ofits accounts or Receivables;

###  

### (s)          Incur or become subject to any Liability,contingent or otherwise, except current Liabilities in the Ordinary Course ofBusiness;

###  

### (t)            Make any material change affecting Target,including, without limitation: (i) changes in wholesaler alignments,inventory levels, management organization or personnel arrangements with salesbrokers, advertising agencies, market research projects, advertising andpromotion budgets or the content of advertisements or working capital levels(payables, receivables and inventory); (ii) changes in discretionarycosts, such as advertising, maintenance and repairs, research and development,and training; (iii) any capital expenditures or deferrals of capitalexpenditures; (iv) deviations from operating budgets or plans on sales andprofitability; or (v) other than in the Ordinary Course of Business,changes in any of its business policies, including, without limitation,advertising, investments, marketing, pricing, purchasing, production,personnel, sales, returns, budget or product acquisition policies;

###  

### (u)         Amend its Articles of Incorporation or Bylaws;

###  

### (v)         Split, combine or reclassify any of itscapital stock or issue or authorize the issuance of any other securities inlieu of, or in substitution for, shares of its capital stock;

###  

### (w)       Accelerate, amend or change the period ofexercisability or vesting of the Target Options or other rights granted underthe Target Equity Incentive Plan, except as specifically contemplated in thisAgreement;

###  

27

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### (x)           Issue, sell, dispose of or encumber, orauthorize the issuance, sale, disposition or encumbrance of, any shares of itscapital stock (other than the issuance of Target Common Stock upon the exerciseof Target Options granted prior to the date of this Agreement) or grant, enterinto or accept any options, warrants, convertible securities or other rights toacquire any shares of such capital stock or any other ownership interest inTarget;

###  

### (y)         Hire any new employee other than in theOrdinary Course of Business, terminate any officer or key employee of Target,increase the annual level of compensation of any existing employee, establishor adopt any Employee Benefit Plan, or grant any unusual or extraordinarybonuses, benefits or other forms of direct or indirect compensation to anyemployee, officer, director or consultant;

###  

### (z)           Make any severance payments to any employee,officer or director, except payments made pursuant to written agreementsoutstanding as of the date of this Agreement;

###  

(aa)                            Makeor change any election in respect of Taxes, adopt or change any accountingmethod in respect of Taxes, file any amendment to a Tax Return, enter into anyclosing agreement, settle any claim or assessment in respect of Taxes, orconsent to any extension or waiver of the limitation period applicable to anyclaim or assessment in respect of Taxes;

###  

(bb)                          Fail to maintainall Inventory at current levels or fail to maintain the Target Assets in goodrepair, order and condition, reasonable wear and tear excepted; or

###  

(cc)                            Enterinto any Contract or agree, in writing or otherwise, to take any of the actionsdescribed in Section 6.2(a) through (bb) above, or anyaction that would make any of its representations or warranties contained inthis Agreement untrue or incorrect in any material respect or prevent it fromperforming or cause it not to perform its covenants hereunder.

###  

**6.3 No Solicitation.**  Until the earlier of: (a) the ClosingDate; and (b) the termination of this Agreement pursuant to its terms,Target and the Target Shareholders shall not, and Target and the TargetShareholders shall cause their respective Representatives not to, directly orindirectly: (i) initiate, solicit or encourage (including, withoutlimitation, by way of furnishing information regarding the Target) anyinquiries, or make any statements to third parties which may reasonably be expectedto lead to any proposal concerning the sale of Target, its businesses(including, without limitation, the Business), or the Target Assets (whether byway of merger, purchase of capital shares, purchase of assets or otherwise) (a“Competing Transaction”); or (ii) hold any discussions or enterinto any agreements with, or provide any information or respond to, any thirdparty concerning a proposed Competing Transaction or cooperate in any way with,agree to, assist or participate in, solicit, consider, entertain, facilitate orencourage any effort or attempt by any third party to do or seek any of theforegoing.  If at any time prior to theearlier of (x) the Closing Date and (y) the termination of this Agreementpursuant to its terms, Target or its Representatives are approached in anymanner by a third party concerning a Competing Transaction (a “CompetingParty”), Target promptly shall inform Overland regarding such contact andfurnish Overland with a copy of any inquiry or proposal, or, if not in writing,a description thereof, including, without limitation, the name of suchCompeting Party, and Target

 

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shall keep Overland informed ofthe status and details of any future notices, requests, correspondence orcommunications related thereto.

 

**6.4 CertainNotifications.** From the date of this Agreement until the Closing Date, Target shallconfer on a regular and frequent basis with one or more designatedRepresentatives of Overland to report material operational matters and thegeneral status of on-going operations of Target.  Target promptly shall notify Overland of any material change inthe financial condition, results of operations, properties, business orprospects of Target and shall keep Overland fully informed of such events andpermit Overland’s Representatives to participate in all discussions relatedthereto.  In addition to, and withoutlimiting, the foregoing, Target shall promptly notify Overland in writing regardingany:

 

### (a)          Action taken by Target not in the OrdinaryCourse of Business and any circumstance or event that could reasonably beexpected to have a Material Adverse Effect on Target;

###  

### (b)         Fact, circumstance, event, or action byTarget: (i) which, if known on the date of this Agreement, would have beenrequired to be disclosed in or pursuant to this Agreement; or (ii) theexistence, occurrence, or taking of which would result in any of therepresentations and warranties of Target contained in this Agreement or in anyTransaction Document not being true and correct when made or at Closing;

###  

### (c)          Breach of any covenant or obligation ofTarget hereunder; and

###  

### (d)         Circumstance or event which will result in, orcould reasonably be expected to result in, the failure of Target to timelysatisfy any of the closing conditions specified in Article 9 ofthis Agreement.

###  

**6.5 Updating the TargetDisclosure Schedule.** If any event, condition, fact or circumstance that is required to bedisclosed pursuant to Section 6.4 would require a change to theTarget Disclosure Schedule if the Target Disclosure Schedule weredated as of the date of the occurrence, existence or discovery of such event,condition, fact or circumstance, then Target shall promptly deliver to Overlandan update to the Target Disclosure Schedule specifying such change andshall use its best efforts to remedy same, as applicable.

 

**6.6 Access toInformation.** From the date of this Agreement until the Closing Date, Target shall:(i) permit Overland and its Representatives to have free and complete accessto all premises, properties, personnel, Persons having business relationshipswith Target (including, without limitation, suppliers, licensees, customers anddistributors), books, records (including, without limitation, Tax records),contracts, and documents of or pertaining to Target; (ii) furnish Overlandwith all financial, operating and other data and information related to Targetand its business (including copies thereof), as Overland may request; and(iii) otherwise cooperate and assist, to the extent requested by Overland,with Overland’s investigation of Target. No information or knowledge obtained in any investigation pursuant tothis Section 6.6 shall affect or be deemed to modify anyrepresentation or warranty contained herein or the conditions to theobligations of the Parties to consummate the Merger.  Overland and Target, for themselves and their respectiveRepresentatives: (i) confirm their obligations of confidentiality under, and

 

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incorporate by reference herein the terms of, the MutualConfidentiality Agreement, dated as of May 22, 2003 (the “NDA”),between Overland and Target, as though set forth in full herein; and (ii)confirm and agree that all written and other information, including tax andfinancial information, provided by Overland to Target or by Target to Overlandis deemed to be confidential within the meaning of Section 1 of the NDAwithout further action on the part of Overland or Target or their respective Representatives.

 

**6.7 Best Efforts.**  From the date of this Agreement until theClosing Date, each of the Parties shall use its best efforts to cause to befulfilled and satisfied all of each other Party’s conditions to Closing setforth in Article 9.

 

**6.8 HSR Act Filing.**  As promptly as possible after the date ofthis Agreement, but in any event not later than ten (10) days thereafter,if required by any Legal Requirement, each of Target and Overland shall filewith the Federal Trade Commission (the “FTC”) and the Antitrust Divisionof the United States Department of Justice (the “Antitrust Division”) apre-merger notification in accordance with the HSR Act with respect to theMerger.  Each of the Parties shallfurnish promptly to the FTC and the Antitrust Division any additionalinformation requested by either of them pursuant to the HSR Act in connectionwith such filings.  Overland shall paythe applicable HSR Act filing fee.

 

**6.9 Consents.**  As promptly as possible after the date ofthis Agreement, Target shall use best efforts to obtain all Consents and makeand deliver all filings and notices listed or required to be listed on Schedule 4.5(e).

 

**6.10****        BoardRecommendation.**  Prior to theClosing Date, the Target’s Board will recommend to the Target Shareholders thatthey approve this Agreement and the consummation of the Merger.

 

**6.11****        Exerciseor Termination of All Outstanding Options.** Prior to the Closing Date, Target shall cause all options, warrants orother rights to acquire shares of Target’s capital stock to be exercised orterminated.  Target shall cause anyPerson exercising any such option, warrant or other right to execute acounterpart signature page to this Agreement, and such Person shall be deemedto be a Target Shareholder for all purposes of this Agreement as if such Personhad executed this Agreement concurrently with the execution of this Agreementby the other Target Shareholders.  TheParties shall amend Schedule 2.3 to reflect any additional sharesof Target Common Stock that Target issues prior to the Closing Date.  Any such amendment to Schedule 2.3shall require the signatures only of Target and Overland.

 

# **ARTICLE 7**.  POST-CLOSING COVENANTS

# ** **

**7.1 Targe****t Intellectual Property.**  The Target Shareholders agree that, from andafter the Closing Date, they shall not, and they shall cause their respectiveRepresentatives not to, use any of the Target Intellectual Property.

 

**7.2 Cooperation.**  After the Closing Date, upon the request ofOverland, Target and the Target Shareholders shall: (i) execute and deliverany and all further materials, documents and instruments of conveyance,transfer or assignment as may reasonably be requested by Overland to effect,record or verify the transfer to and vesting in Acquisition Sub of Target’sright, title 

 

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and interest in and to theTarget Assets, free and clear of all Encumbrances, in accordance with the termsof this Agreement; and (ii) cooperate with Overland and Acquisition Sub,to enforce the terms of any Target Contracts, including, without limitation,terms relating to confidentiality and Intellectual Property Rights, and tocontest or defend against any Proceeding relating to the Merger or to theoperation of Target’s business before the Closing Date.  After the Closing Date, the TargetShareholders shall: (a) cooperate with Overland in its efforts to continue andmaintain for the benefit of Overland those business relationships of Targetexisting prior to the Closing Date; (b) refer to Overland all inquiriesrelating to the Target; and (c) promptly deliver to Overland (i) any mail,packages and other communications addressed to Target and (ii) any cash orother property that any of the Target Shareholders receives and that properlybelongs to Acquisition Sub, including, without limitation, any insuranceproceeds, payments with respect to Receivables, and interest payablethereon.  Neither the TargetShareholders nor any of their respective Representatives, as applicable, shalltake any action that would tend to interfere with the business of Overland orAcquisition Sub after the Closing Date, including, without limitation,disparaging the name or business of Overland or Acquisition Sub.

 

## **7.3 Non-Disclosure and Non-Compete.**

## ** **

### (a)          For and in consideration of the Merger,during the Noncompetition Period (as defined below), the Target Shareholdersshall not engage in any Competitive Activity in the Restricted Territory (asboth are defined below).  The term “NoncompetitionPeriod” shall mean: (i) in the case of John Matze, the period commencingwith the Closing Date and ending on the third anniversary of the Closing Date;and (ii) in the case of the Target Shareholders other than John Matze, theperiod commencing with the Closing Date and ending on the second anniversary ofthe Closing Date.  Notwithstanding theforegoing, in the case of each of the Target Shareholders, including, withoutlimitation, John Matze, if (A) such Target Shareholder becomes an employee ofOverland in connection with the Merger, and (B) Overland terminates such TargetShareholder’s employment other than for Cause (as defined below) or such TargetShareholder terminates his or her employment for Good Reason (as defined below)prior to the second anniversary of the Closing Date (or prior to the thirdanniversary of the Closing Date, in the case of John Matze), then theNoncompetition Period shall end on the date of such termination.  For these purposes, Overland’s terminationof a Target Shareholder’s employment shall be for “Cause” if such TargetShareholder: (A) commits a crime involving dishonestly, breach of trust orphysical harm to any Person; (B) willfully engages in conduct that isinjurious to Overland, such as misappropriation of trade secrets, fraud orembezzlement; (C) willfully refuses to implement or follow a lawful,written policy or directive of Overland; (D) engages in gross misconduct,habitually neglects his or her duties, performs incompetently or otherwisecommits a material breach of this Agreement or his or her duties as an employeeof Overland or its Affiliates; or (E) exhibits unsatisfactory performance, asdetermined by Overland’s Chief Executive Officer, in his sole and absolutediscretion, and fails to cure such unsatisfactory performance within thirty(30) days after receiving notice thereof. For these purposes, a Target Shareholder’s termination of his or heremployment shall be for “Good Reason” if Overland: (A) makes afundamental change in the nature of such Target Shareholder’s initial positionand responsibilities with Overland; (B) requires such Target Shareholder toengage in any unlawful conduct; or (C) requires such Target Shareholder to movehis or her office to a location that is more than fifty (50) miles from thelocation of Overland’s principal executive offices on the date of thisAgreement.

###  

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(b)                                 “CompetitiveActivity” shall mean directly or indirectly (or having any interest in, orperforming any services for, any Person directly or indirectly): (i) engagingin any activity that is the same as, similar to, or competitive with theBusiness; (ii) engaging in the development or distribution of any productthat is the same as, similar to, or competitive with any Target Product beingdeveloped or distributed by Overland or Acquisition Sub during theNoncompetition Period; (iii) soliciting for employment or recommending foremployment any Person then employed by Overland, Acquisition Sub or anyAffiliate of Overland or Acquisition Sub during such Person’s employment withOverland or Acquisition Sub (or any Affiliate of Overland or Acquisition Sub)or for one (1) year thereafter; or (iv) diverting or attempting to divertfrom Overland, Acquisition Sub or any Affiliate of Overland or Acquisition Subany business of any kind in which they are engaged, including, withoutlimitation, the solicitation of or interference with any suppliers,contractors, or customers. Notwithstanding the foregoing, the term “Competitive Activity” shall notinclude any activities conducted on behalf of Overland or Acquisition Sub by aTarget Shareholder in connection with his or her employment by Overland orAcquisition Sub, nor shall legal representation of any Person by Harry J.Proctor, Esq. or Solomon Ward Seidenwurm & Smith, LLP be considered“Competitive Activity.”

 

(c)                                  “RestrictedTerritory” shall mean every state, territory, country or jurisdiction inwhich Target has carried on business prior to the Closing Date.

 

(d)                                 Notwithstanding theforegoing, the provisions of this Section 7.3 shall not prevent theTarget Shareholders from beneficially owning up to one percent (1%), on afully-diluted basis, of the total shares of all classes of stock outstanding ofany corporation having securities listed on the New York Stock Exchange, the AmericanStock Exchange, or traded on Nasdaq.

 

### (e)          It is the understanding of the Parties thatthe scope of the covenants contained in this Section 7.3, both asto time and area covered, are necessary to protect the rights of Overland andthe goodwill that is a part of Target to be acquired by Acquisition Sub.  It is the Parties’ intention that thesecovenants be enforced to the greatest extent (but to no greater extent) intime, area, and degree of participation as is permitted by the law of thatjurisdiction whose law is found to be applicable to any acts in breach of thesecovenants.  It being the purpose of thisAgreement to govern competition by the Target Shareholders in the RestrictedTerritory, these covenants shall be governed by and construed according to thatlaw (from among those jurisdictions arguably applicable to this Agreement andthose in which a breach of this Agreement is alleged to have occurred or to bethreatened) that best gives them effect. The prohibitions in each of subsections (a)-(d) in Section 7.3above shall be deemed, and shall be construed as separate and independentagreements between Overland and Acquisition Sub on the one hand, and eachTarget Shareholder respectively, on the other. If any such agreement or any part of such agreement is held invalid,void or unenforceable by any court of competent jurisdiction, such invalidity,voidness, or unenforceability shall in no way render invalid, void, orunenforceable any other part of them or any separate agreement not declared invalid,void or unenforceable; and this Agreement shall in such case be construed as ifthe invalid, void, or unenforceable provisions were omitted.

###  

### (f)            The Parties agree that the covenants of theTarget Shareholders not to compete contained in this Section 7.3may be assigned by Overland and/or Acquisition Sub to any Person

###  

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to whom may be transferred theBusiness or any portion thereof after the Closing Date.  It is the Parties’ intention that these covenantsof the Target Shareholders shall inure to the benefit of any Person that maysucceed to Target or any portion thereof with the same force and effect as ifthese covenants were made directly with such successor.

###  

### (g)         After the Closing Date, except as may berequired for tax purposes or other regulatory purposes, neither the TargetShareholders nor any of their respective successors, heirs, assigns orRepresentatives, as applicable, shall: (a) retain any document, databasesor other media embodying any confidential or proprietary know-how of Target oruse, publish or disclose to any third person any such confidential orproprietary know-how; or (b) use, publish or disclose any confidential orproprietary information concerning Overland, Acquisition Sub or theirAffiliates.  In the event of anytermination of this Agreement: (i) each Target Shareholder shall treat asconfidential and proprietary and shall not disclose or use, directly orindirectly, in any manner whatsoever, or permit others under his or her controlto disclose or to use, any information concerning Overland, Acquisition Sub ortheir respective businesses or products obtained pursuant to or in connectionwith the Merger or which are the subject matter of this Agreement, unless suchinformation is or becomes a matter of public knowledge through no fault of theTarget Shareholders or can be shown to have been in the possession of theTarget Shareholders prior to disclosure by Overland; and (ii) the TargetShareholders shall promptly return to Overland upon written request all writteninformation and documents received from Overland, Acquisition Sub, or theirAffiliates, accountants or counsel, in connection with the Merger, includingall copies thereof.  The Partiesacknowledge that, effective immediately upon commencement of discussions amongthem with respect to the Merger, each of them (and each of their employees,representatives, or other agents) has been and is authorized to disclose to anyand all Persons, without limitation of any kind, the federal tax treatment andfederal tax structure of the Merger and all materials of any kind (includingopinions or other tax analyses) that are or have been provided to any Party byanother Party relating to such federal tax treatment and federal tax structure;provided, however, that, with respect to any document or similaritem that in either case contains information concerning the federal taxtreatment or federal tax structure of the Merger as well as other information,this authorization shall only apply to such portions of the document or similaritem that relate to the federal tax treatment or federal tax structure of theMerger.  Any information relating to thefederal tax treatment or federal tax structure shall remain subject to theconfidentiality provisions hereof (and the foregoing sentence shall not apply)to the extent reasonably necessary to enable the Parties, their Affiliates,directors, officers and employees to comply with applicable securitieslaws.  This provision is intended tocomply with Section 1.6011-4(b)(3)(iii) of the Treasury Regulations andshall be interpreted consistently therewith. The Parties acknowledge that this written authorization does notconstitute a waiver by any Party of any privilege held by such Party pursuantto the attorney-client privilege or the confidentiality privilege ofSection 7525(a) of the Code.

###  

### (h)         “Confidential Information” shall meanall Trade Secrets and other confidential and/or proprietary information of aPerson, including, without limitation, information derived from reports,investigations, research, work in progress, codes, marketing and salesprograms, financial projections, cost summaries, pricing formula, contractanalyses, financial information, projections, confidential filings with anystate or federal agency, and all other confidential concepts, methods of doingbusiness, ideas, materials or information prepared or performed for, by or onbehalf of such Person by its employees, officers, directors, agents,representatives, or 

###  

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### 

###  

consultants.  Information shall not be deemed ConfidentialInformation hereunder if: (i) such information becomes available to orknown by the public generally through no fault of Target or the Target Shareholders;or (ii) disclosure is required by law or the order of any GovernmentalAuthority under color of law, provided, however, that prior todisclosing any information pursuant to this clause (ii), Target or therespective Target Shareholder, as applicable, shall, if possible, give priorwritten notice thereof to Overland and, at Overland’s election, either provideOverland with the opportunity to contest such disclosure or seek to obtain aprotective order narrowing the scope of such disclosure and/or use of theConfidential Information.  Nothingherein shall be construed as prohibiting Overland from pursuing any otheravailable remedy for such breach or threatened breach, including, withoutlimitation, the recovery of damages.

###  

### (i)             The Parties agree that, in the event ofbreach or threatened breach of the Target Shareholders’ covenants in this Section 7.3,the damage or imminent damage to the value and the goodwill of Overland andAcquisition Sub will be irreparable and extremely difficult to estimate, makingany remedy at law or in damages inadequate. Accordingly, the Parties agree that Overland and Acquisition Sub shallbe entitled to injunctive relief against the Target Shareholders in the eventof any breach or threatened breach of any of such covenants by the TargetShareholders, in addition to any other relief (including, without limitation,damages) available to Overland and Acquisition Sub under this Agreement orunder applicable law.

###  

## **7.4**       Registration of Overland Merger Shares.

## ** **

### (a)          On or beforethe six (6) month anniversary of the Closing Date, Overland shall file with theSecurities and Exchange Commission (the “SEC”) a registration statement(the “Registration Statement”) on Form S-3 (or other available form ifForm S-3 is not available) to register the resale of the Overland Merger Sharesby the Target Shareholders.  Overlandshall use reasonable efforts, subject toreceipt of necessary information from the Target Shareholders, to cause theRegistration Statement to be declared effective under the Securities Act assoon as practicable after the filing thereof.

###  

### (b)         During theperiod of time from the date on which the Registration Statement is declaredeffective under the Securities Act until the second anniversary of the ClosingDate, Overland shall: (i) use reasonableefforts to prepare and file with the SEC such amendments and supplements to theRegistration Statement as may be necessary or appropriate to keep theRegistration Statement current and continuously effective; and (ii) cause theprospectus used in connection with the Registration Statement to besupplemented by any required prospectus supplement, and as so supplemented tobe filed pursuant to Rule 424 (or any similar provisions then in force) underthe Securities Act.

###  

### (c)          The TargetShareholders shall comply with all Legal Requirements applicable to theirresale of Overland Merger Shares pursuant to the Registration Statement.  In theevent: (i) of any request by the SEC or any other Governmental Authority foramendments or supplements to the Registration Statement or related prospectusor for additional information; (ii) of the issuance by the SEC or any otherGovernmental Authority of any stop order suspending the effectiveness of theRegistration Statement or the initiation of any proceedings for that purpose;(iii) of the receipt by Overland of any notification with respect to thesuspension of the qualification (or exemption from qualification) of any of theOverland Merger Shares for sale in

###  

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### 

###  

anyjurisdiction in which they have been qualified for sale or the initiation ofany proceeding for such purpose; or (iv) of any event or circumstance thatnecessitates the making of any changes in the Registration Statement or relatedprospectus, or any document incorporated or deemed to be incorporated thereinby reference, so that, in the case of the Registration Statement, it will notcontain any untrue statement of a material fact or any omission to state amaterial fact required to be stated therein or necessary to make the statementstherein not misleading, and that in the case of the related prospectus, it willnot contain any untrue statement of a material fact or any omission to state amaterial fact required to be stated therein or necessary to make the statementstherein, in the light of the circumstances under which they were made, notmisleading; then Overland shall deliver a certificate in writing to each of theTarget Shareholders (the “Suspension Notice”) to the effect of the foregoingand, upon receipt of the Suspension Notice, the Target Shareholders shallrefrain from selling any Overland Merger Shares pursuant to the RegistrationStatement until the Target Shareholders receive from Overland copies of asupplemented or amended prospectus prepared and filed by Overland, or untilOverland notifies the Target Shareholders in writing that the then currentprospectus may be used.

###  

# **ARTICLE 8**.  EMPLOYEES

# ** **

**8.1 TransferredEmployees.** Overland or Acquisition Sub may, but shall have no obligation to, offeremployment, to be effective as of the Closing Date and contingent upon theclosing of the Merger, on terms to be determined by Overland, to thoseemployees of Target who are listed on Schedule 8.1 (collectively,the “Transferred Employees”). Target shall terminate the employment, to be effective as of the ClosingDate, of any employees of the Business who are not Transferred Employees.  The Parties acknowledge and agree that it isnot the intention of the Parties that any contracts of employment of anyemployees of Target shall be assumed by Overland or Acquisition Sub as a resultof the Merger.  Target shall use bestefforts to (i) encourage the Transferred Employees to continue theiremployment with Target until the Closing Date and thereupon to acceptemployment with Overland or Acquisition Sub and (ii) assist Overland orAcquisition Sub in employing Transferred Employees.

 

**8.2 Employee BenefitArrangements.** In order to secure an orderly and effective transition of the employeebenefit arrangements for Transferred Employees and their respectivebeneficiaries and dependents, Target and the Target Shareholders shallcooperate, both before and after the Closing Date, to (i) provide toOverland information related to the Transferred Employees, including, withoutlimitation, employment records, benefits information, and financial statementsand (ii) take any other actions requested by Overland with respect to theTransferred Employees and their respective beneficiaries and dependents.

 

**8.3 Compliance with LegalRequirements and Other Obligations.**  Prior to the Closing Date, at its sole costand expense, Target shall take all actions necessary to comply with allappropriate Legal Requirements in connection with Target’s employment of itsemployees, including, without limitation, any Legal Requirements under the WARNAct.  Target shall be solelyresponsible, before and after the Closing Date, for the payment of any amountsrequired to be paid under any Legal Requirement, including, without limitation,the WARN Act and any similar state laws, as a result of the termination orlayoff of any employee of Target who is not a Transferred Employee inconnection with the Merger, and the Target Shareholders shall indemnifyOverland and Acquisition Sub for the payment of any such amounts pursuant to 

 

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Article 11hereof.  Prior to the Closing Date,Target shall perform all of its contractual and other obligations in connectionwith the employment of its employees.

 

**8.4 No Benefit to theTarget Employees Intended.**  This Article 8 is not intended to, and does not,create any rights or obligations to or for the benefit of anyone other thanOverland and Acquisition Sub.

 

# **ARTICLE 9**.  CONDITIONS TO CLOSING

# ** **

**9.1 Conditions toOverland’s Obligation to Close.**The obligations ofOverland and Acquisition Sub to consummate the Merger shall be subject to thesatisfaction, on or prior to the Closing Date, of each of the followingconditions, any of which may be waived by Overland and Acquisition Sub inwriting:

 

### (a)          Representations, Warranties and Covenants.  (i) All of the representations andwarranties of Target and the Target Shareholders in this Agreement shall havebeen true and correct in all material respects (considered collectively andindividually) as of the date of this Agreement and shall be true and correct inall material respects (considered collectively and individually) as of theClosing Date (or, to the extent such representations and warranties speak only asof an earlier date, they shall be true and correct in all material respects asof such earlier date); and (ii) Target and the Target Shareholders shallhave performed, in all material respects (considered collectively andindividually), all covenants and obligations in this Agreement required to beperformed by Target and the Target Shareholders as of the Closing Date;

###  

### (b)         Documents.  Target shall have delivered to Overland all of the documents andagreements set forth in Section 3.2;

###  

### (c)          Shareholder Approval.  All of Target’s shareholders shall haveapproved this Agreement, the Merger and the transactions contemplated herebyand thereby, in accordance with the requirements of the General Corporation Lawof the State of California;

###  

### (d)         Consents.  Target shall have delivered to Overland all Consents required:(i) for the consummation of the Merger; or (iii) to prevent a breachor termination of any Target Contract that Overland wishes to continue ineffect after the Effective Time and for which Overland shall have notifiedTarget of its intention no later than June 20, 2003;

###  

### (e)          Opinion of Counsel.  The Target shall have delivered to Overlandan opinion of Target’s counsel, substantially in the form attached hereto as Exhibit D;

###  

### (f)            Stock Certificates.  Target and the Target Shareholders shallhave delivered to Overland certificates representing all shares of OutstandingTarget Common Stock, including, without limitation, shares issued upon theexercise of any Target Options on or prior to the Closing Date;

###  

### (g)         No Legal Impediments to Closing.  No Proceeding shall have been commenced orthreatened against any of the Parties, or against any of their respectiveRepresentatives: (a) involving any challenge to, or seeking Damages orother relief in connection with, the Merger; or (b) that may have theeffect of preventing, delaying, making illegal,

###  

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### 

###  

imposing limitations orconditions on or otherwise interfering with the Merger.  There shall not be in effect any Orderissued by any Governmental Authority preventing the consummation of the Mergeror seeking any Damages as a result of the Merger.  There shall not be any Legal Requirement that makes thisAgreement or the consummation of the Merger illegal;

###  

### (h)         No Material Change.  There shall not have occurred any materialchange in the financial condition, results of operations, properties, businessor prospects of Target; and

###  

### (i)             Due Diligence.  Overland shall have completed its duediligence review of Target and shall have been satisfied with the resultsthereof.

###  

**9.2 Conditions toTarget’s and Target Shareholders’ Obligation to Close.**  The obligations of Target and the TargetShareholders to consummate the Merger shall be subject to the satisfaction, onor prior to the Closing Date, of each of the following conditions, any of whichmay be waived by Target and the Target Shareholders in writing:

 

### (a)          Representations, Warranties and Covenants.  (i) All of the representations andwarranties of Overland and Acquisition Sub in this Agreement shall have beentrue and correct in all material respects (considered collectively andindividually) as of the date of this Agreement and shall be true and correct inall material respects (considered collectively and individually) as of theClosing Date (or, to the extent such representations and warranties speak as ofan earlier date, they shall be true and correct in all material respects as ofsuch earlier date); and (ii) Overland and Acquisition Sub shall haveperformed, in all material respects (considered collectively and individually),all covenants and obligations in this Agreement required to be performed byOverland as of the Closing Date;

###  

### (b)         Certificates.  Overland and Acquisition Sub shall have delivered to Target andthe Target Shareholders the certificates described in Section 3.3;

###  

### (c)          Consideration.  Overland shall have delivered to the TargetShareholders the Merger Consideration, with the respective adjustments providedunder Section 2.2;

###  

### (d)         Opinion of Counsel.  Overland shall have delivered to Target anopinion of Overland’s counsel, substantially in the form attached hereto as ExhibitE;

###  

### (e)          No Material Change.  There shall not have occurred any materialchange in the financial condition, results of operations, properties, businessor prospects of Overland; and

###  

### (f)            No Legal Impediments to Closing.  No Proceeding shall have been commenced orthreatened against any of the Parties, or against any of their respectiveRepresentatives (a) involving any challenge to, or seeking Damages orother relief in connection with, the Merger; or (b) that may have theeffect of preventing, delaying, making illegal, imposing limitations orconditions on or otherwise interfering with the Merger.  There shall not be in effect any Orderissued by any Governmental Authority preventing the consummation of the Mergeror seeking any Damages as a result of the Merger.  There shall not be any Legal Requirement that makes thisAgreement or the consummation of the Merger illegal.

###  

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### 

###  

# **ARTICLE 10**.  TERMINATION

# ** **

**10.1****                        Circumstances for Termination.**  At any time prior to the Effective Time,this Agreement may be terminated by written notice explaining the reason forsuch termination (without prejudice to other remedies which may be available tothe Parties under this Agreement, at law or in equity):

 

### (a)          by the mutual written consent of Overland andTarget;

###  

### (b)         by Overland if: (i) Target or any of theTarget Shareholders is in material breach of any material provision of thisAgreement; and (ii) Overland and Acquisition Sub are not, on the date oftermination, in material breach of any material provision of this Agreement;

###  

### (c)          by Target if: (i) Overland orAcquisition Sub is in material breach of any material provision of thisAgreement; and (ii) Target and the Target Shareholders are not, on thedate of termination, in material breach of any material provision of thisAgreement;

###  

### (d)         by either Overland or the Target if:(i) the closing of the Merger has not occurred on or prior to July 1,2003 for any reason; and (ii) the terminating Party is not, on the date oftermination, in material breach of any material provision of this Agreement;and

###  

### (e)          by either Overland or the Target if:(i) satisfaction of a closing condition of the terminating Party in Article 9is impossible; and (ii) the terminating Party is not, on the date oftermination, in material breach of any material provision of this Agreement.

###  

**10.2****                        Effect of Termination.** If this Agreement is terminated in accordance with Section 10.1,all obligations of the Parties hereunder shall terminate, except for theobligations set forth in this Article 10 and Section 7.3(g),as well as the obligations in Section 6.6 relating to the NDA; provided,however, that nothing herein shall relieve any Party from liability forthe breach of any of its representations, warranties, covenants or agreementsset forth in this Agreement.

 

# **ARTICLE 11**.  INDEMNIFICATION

# ** **

**11.1****                        Survival of Representations and Warranties.**  All representations and warranties of theParties in this Agreement or any other Transaction Document shall survive theclosing of the Merger until the second anniversary of the Closing Date (the “SurvivalDate”); provided, however, that (a) all representationsand warranties relating to Taxes shall survive until expiration of allapplicable statutes of limitations relating to such Taxes; (b) allrepresentations and warranties of Target and the Target Shareholders containedin Section 4.3 (Capitalization), 4.15(a) (Title;Sufficiency; Condition of Assets), 4.17 (Intellectual Property) and 4.31(Securities Law Representations) shall survive until expiration of theapplicable statute of limitations; and (c) any claim for indemnificationbased upon a breach of any such representation or warranty and asserted priorto the Survival Date by written notice in accordance with Section 11.3shall survive until final resolution of such claim.  The representations and warranties contained in this Agreement(and any right to indemnification for breach thereof) shall not be affected byany investigation, verification or examination by any Party or by anyRepresentative of any such

 

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Party or by any such Party’sKnowledge of any facts with respect to the accuracy or inaccuracy of any suchrepresentation or warranty.

 

**11.2****                        Indemnification by the Target Shareholders.**  The Key Shareholders, jointly and severally,and the Non-Key Shareholders severally, shall indemnify, defend and holdharmless Overland and Acquisition Sub and their respective Representatives fromand against any and all Damages, whether or not involving a third-party claim,including, without limitation, attorneys’ fees (collectively, “OverlandDamages”), arising out of, relating to or resulting from: (a) anybreach of a representation or warranty of Target or the Target Shareholderscontained in this Agreement or in any other Transaction Document; (b) anybreach of a covenant of Target or the Target Shareholders contained in thisAgreement or in any other Transaction Document; or (c) any Liability relatingto Target or the Business that (i) arises from facts, events, conditions orcircumstances existing on or before the Closing Date, and (ii) is not disclosedin the Target Disclosure Schedule. Notwithstanding anything herein to the contrary, the Target Shareholdersshall not be obligated to indemnify Overland and Acquisition Sub under this Article 11unless the aggregate amount of all Overland Damages exceeds Fifty ThousandDollars ($50,000) (the “Indemnity Basket”), in which case Overland andAcquisition Sub shall be entitled to recover all Overland Damages in excess ofthe Indemnity Basket.  In determiningwhether a breach of any representation, warranty or covenant shall haveoccurred, any materiality or Knowledge standard contained in a representation,warranty or covenant shall be taken into account.  It is the intent of the Parties that all indemnification obligationsof the Target Shareholders set forth in this Agreement shall apply withoutregard to whether or not (x) the Target Shareholders are negligent or otherwiseat fault in any respect with regard to the existence or occurrence of any ofthe matters covered by any such indemnification obligation and (y) the TargetShareholders otherwise caused or created, or are claimed to have caused orcreated, the existence or occurrence of any of the matters covered by any suchindemnification obligation, whether through their own acts or omissions orotherwise.  Notwithstanding theforegoing, the indemnification obligation of the Target Shareholders shall bereduced to the extent that Overland or Acquisition Sub receives insuranceproceeds or other payment from a third party that specifically covers theDamages for which the Target Shareholders otherwise would be required toindemnify Overland and Acquisition Sub pursuant to this Section 11.2.  If Overland or Acquisition Sub receivesinsurance proceeds or other payment from a third party that specifically coversDamages for which one or more Target Shareholders previously paid Overland orAcquisition Sub pursuant to this Section 11.2, then Overland orAcquisition Sub shall refund to such Target Shareholders an amount equal to thelesser of (i) the amount that such Target Shareholders previously paid toOverland or Acquisition Sub relating to such Damages, or (ii) the amount ofsuch insurance proceeds or other payment.

 

**11.3****                        Indemnification by Overland and Acquisition Sub.**  Overland and Acquisition Sub, jointly and severally,shall indemnify, defend and hold harmless the Target Shareholders and theirrespective Representatives from and against any and all Damages, whether or notinvolving a third-party claim, including, without limitation, attorneys’ fees(collectively, “Target Shareholder Damages”), arising out of, relatingto or resulting from: (a) any breach of a representation or warranty ofOverland or Acquisition Sub contained in this Agreement or in any otherTransaction Document; (b) any breach of a covenant of Overland orAcquisition Sub contained in this Agreement or in any other TransactionDocument; or (c) any Liability relating to the Business that results fromfacts, events, conditions or circumstances arising after the

 

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Closing Date, except to theextent caused by or resulting from, directly or indirectly, any acts oromissions of any of the Target Shareholders. In determining whether a breach of any representation, warranty or covenantshall have occurred, any materiality or Knowledge standard contained in arepresentation, warranty or covenant shall be taken into account.  It is the intent of the Parties that allindemnification obligations of Overland and Acquisition Sub set forth in thisAgreement shall apply without regard to whether or not (x) Overland andAcquisition Sub are negligent or otherwise at fault in any respect with regardto the existence or occurrence of any of the matters covered by any suchindemnification obligation and (y) Overland and Acquisition Sub otherwisecaused or created, or are claimed to have caused or created, the existence oroccurrence of any of the matters covered by any such indemnificationobligation, whether through their own acts or omissions or otherwise.  Notwithstanding the foregoing, theindemnification obligation of Overland and Acquisition Sub shall be reduced tothe extent that the Target Shareholders receive insurance proceeds or otherpayment from a third party that specifically covers the Damages for whichOverland and Acquisition Sub otherwise would be required to indemnify theTarget Shareholders pursuant to this Section 11.3.  If any of the Target Shareholders receivesinsurance proceeds or other payment from a third party that specifically coversDamages for which Overland or Acquisition previously paid such TargetShareholder pursuant to this Section 11.3, then such TargetShareholder shall refund to Overland or Acquisition Sub, as applicable, anamount equal to the lesser of (i) the amount that Overland or Acquisition Subpreviously paid to such Target Shareholder relating to such Damage, or (ii) theamount of such insurance proceeds or other payment.

 

**11.4****                        Procedures for Indemnification.**  Promptly after receipt by a Party entitledto indemnification hereunder (the “Indemnitee”) of written notice of theassertion or the commencement of any Proceeding by a third-party with respectto any matter referred to in Section 11.2, the Indemnitee shallgive written notice thereof to the Party obligated to indemnify Indemnitee (the“Indemnitor”), and thereafter shall keep the Indemnitor reasonablyinformed with respect thereto; provided, however, that failure ofthe Indemnitee to give the Indemnitor notice as provided herein shall notrelieve the Indemnitor of its obligations hereunder except to the extent thatthe Indemnitor is prejudiced thereby.  Aclaim for indemnification for any matter not involving a third-party Proceedingmay be asserted by notice to the Party from whom indemnification is sought andshall be paid promptly after such notice.

 

**11.5****                        No Contribution.** Each of the Target Shareholders hereby waives and acknowledges andagrees that it shall not have and shall not exercise or assert, against Target,Overland, Acquisition Sub or their respective Representatives, or attempt toexercise or assert, any right of contribution or right of indemnity or anyother right or remedy (but not defenses) in connection with any indemnificationobligation to Overland, Acquisition Sub or their respective Representatives towhich the Target Shareholders may become subject under this Agreement.  Each of Overland and Acquisition Sub herebywaives and acknowledges and agrees that it shall not have and shall notexercise or assert, against the Target Shareholders or their respectiveRepresentatives, or attempt to exercise or assert, any right of contribution orright of indemnity or any other right or remedy (but not defenses) inconnection with any indemnification obligation to the Target Shareholders ortheir respective Representatives to which Overland and Acquisition Sub maybecome subject under this Agreement.

 

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**11.6****                        Remedies Cumulative.**The remedies provided in thisAgreement shall be cumulative and shall not preclude any Party from assertingany other right, or seeking any other remedies, against the other Party.

 

# **ARTICLE 12**.  MISCELLANEOUS PROVISIONS

# ** **

**12.1****                        Public Announcement.** Any public announcement or similar publicity with respect to thisAgreement or the transactions contemplated hereby will be issued, if at all, atsuch time and in such manner as Overland determines, in its solediscretion.  Target and each of theTarget Shareholders shall keep this Agreement and the transactions contemplatedhereby strictly confidential and shall not make any disclosure of thisAgreement or the transactions contemplated hereby to any Person other than theTarget Shareholders’ Representatives. The Parties hereto shall consult with each other concerning the means bywhich Target’s employees, customers and suppliers and other Persons havingdealings with Target will be informed of the transactions contemplated herebyand Overland will have the right to have a Representative present for any suchcommunication.

 

**12.2****                        Expenses.**  If theMerger is not consummated, Overland and Target, as the case may be, shall payit own costs and expenses in connection with this Agreement and the Merger(including, without limitation, the fees and expenses of its advisers,accountants and legal counsel).  If theMerger is consummated, Overland, as successor to Target, shall bear the costsand expenses of Target incurred in connection with this Agreement and theMerger (including, without limitation, the fees and expenses of its advisers,accountants and legal counsel).

 

**12.3****                        Interpretation; Representation.**  Whenever the words “include,” “includes” or“including” are used in this Agreement, they shall be deemed, as the contextindicates, to be followed by the words “but (is/are) not limited to.”  Each Target Shareholder acknowledges thatSolomon Ward Seidenwurm & Smith, LLP and George Pecoraro represent onlyTarget and John Matze, and not any other individual Target Shareholder, each ofwhom is advised to consult with his own legal and tax advisors with respect tothe Merger and this Agreement.

 

**12.4****                        Notices.**  Allnotices made pursuant to this Agreement shall be in writing and shall be deemedto have been duly given (a) when delivered by hand to the respective Party, (b)three business days after being deposited in the U.S. mail certified,return-receipt requested addressed to the respective Party at such Party’saddress set forth below, or (c) the next business day after deposit with anational overnight delivery service, postage prepaid, addressed to the respectiveParty at such Party’s address set forth below. The Parties’ initial addresses for notices shall be as set forthbelow.  Any Party may change its or hisaddress given above by providing to each of the other Parties written notice ofthe new address in the manner set forth above.

 

If to Overland or Acquisition Sub (or to Target following the ClosingDate), to:

 

Overland Storage, Inc.4820 Overland AvenueSan Diego, California  92123Attention:  Vernon A. LoForti, VicePresident, Chief Financial Officer & Secretary

 

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with a copy to:

 

Morrison & Foerster LLP3811 Valley Centre Drive, Suite 500San Diego, California  92130Attention:  Carlos D. Heredia, Esq.

 

If to Target prior to or on the Closing Date, to:

 

Okapi Software, Inc.18060 Old Coach DrivePoway, California  92064Attention:  John Matze, President &Chief Executive Officer

 

with a copy to:

 

Solomon Ward Seidenwurm & Smith, LLP401 B Street, Suite 1200San Diego, California  92101Attention:  Harry J. Proctor, Esq.

 

If to any of the Target Shareholders, to their respective addresses setforth on Schedule 2.3.

 

**12.5****                        Further Assurances.** Each Party agrees (a) to furnish upon request to each other Partysuch further information, (b) to execute and deliver to each other Partysuch other documents, and (c) to do such other acts and things, all asanother Party may reasonably request for the purpose of carrying out the intentof this Agreement and the Merger.

 

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**12.6****                        Governing Law.** This Agreement shall be construed in accordance with and governed by theinternal laws of the State of California, without giving effect to any choiceof law rule that would cause the application of the laws of any jurisdictionother than the internal laws of the State of California to the rights andduties of the Parties.

 

**12.7****                        Amendment; Waiver.** This Agreement shall not amended except by a writing executed by all ofthe Parties, except for the amendment to Schedule 2.3 provided in Section 6.11,which shall require only the signatures of Target and Overland.  Any Party may waive compliance by the otherParty with any of the covenants or conditions herein, but no waiver shall bebinding unless such waiver is in a writing executed by the Party making suchwaiver.  No waiver of any of theprovisions of this Agreement shall be deemed, or shall constitute, a waiver ofany other provision, whether or not similar, nor shall any waiver constitute acontinuing waiver.

 

**12.8****                        Entire Agreement.** This Agreement constitutes the entire agreement of the Parties relatingto the subject matter hereof.  Any priororal or written agreements, promises, negotiations or representations notexpressly set forth in this Agreement are hereby rendered void and of no forceor effect.

 

**12.9****                        Captions and Headings.** The captions or headings of the provisions of this Agreement are forreference only and are not to be construed in any way as part of thisAgreement.

 

**12.10****                 Counterparts.** This Agreement may be executed in two or more counterparts, each ofwhich shall be deemed an original, but all of which shall constitute one andthe same instrument.  A Party mayexecute and deliver this Agreement by transmitting a facsimile copy of theexecuted signature page to the Parties.

 

**[Signatures Follow On a Separate Page]**

 

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**IN WITNESS WHEREOF,**each of the Parties has caused this Agreement to be executed as of the datefirst above written.

 
|   | **OVERLAND STORAGE, INC.**              |
|--------|-----------------------------------------|
|   |                                    |
|   |                                    |
|   | By:                                     |   |   |
|   | Christopher P. Calisi                   |
|   | President & Chief Executive Officer |
|   |                                    |
|   |                                    |
|   | **OKAPI ACQUISITION CO., INC.**         |
|   |                                    |
|   |                                    |
|   | By:                                     |   |   |
|   | Christopher P. Calisi                   |
|   | President & Chief Executive Officer |
|   |                                    |
|   |                                    |
|   | **OKAPI SOFTWARE, INC.**                |
|   |                                    |
|   |                                    |
|   | By:                                     |   |   |
|   | John E. G. Matze                        |
|   | President & Chief Executive Officer |
|   |                                    |
|   |                                    |
|   | **TARGET SHAREHOLDERS:**                |
|   |                                    |
|   |                                    |
|   |                                    |   |
|   | John E. G. Matze                        |
|   |                                    |
|   |                                    |
|   |                                    |   |
|   | Michael Reider                          |
|   |                                    |
|   |                                    |
|   |                                    |   |
|   | Robert Farkaly                          |
|   |                                    |
|   |                                    |
|   |                                    |   |
|   | Ross Rattray                            |
|        |                                         |  |  |  |  |  |  |  |

 

[SIGNATURE PAGE TO AGREEMENT AND PLAN OFMERGERDATED AS OF JUNE 20, 2003]

 

 

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|   |             |   |
|--------|------------------|--------|
|   | Robert Fisher    |
|   |             |
|   |             |
|   |             |   |
|   | Harry J. Proctor |
|   |             |
|   |             |
|   |             |   |
|   | Jerry Puda       |
|        |                  |        |  |

 

 

[SIGNATURE PAGE TO AGREEMENT AND PLAN OFMERGERDATED AS OF JUNE 20, 2003]

 

 

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**EXHIBIT A**

 

**CERTAIN****DEFINITIONS**

 

“Acquisition Sub” shall mean Okapi Acquisition Co., Inc., aCalifornia corporation.

 

“Affiliate” shall mean, with respect to any Person, any memberof the immediate family (including, without limitation, spouse, brother,sister, descendant, ancestor or in-law) of any officer, director or shareholderof such Person or any corporation, partnership, trust or other entity in whichsuch Person or any such family member has a five percent (5%) or greaterinterest or is a director, officer, partner or trustee.  The term Affiliate also shall also include anyEntity which controls, or is controlled by, or is under common control with anyof the individuals or entities described in the preceding sentence.

 

“Agreement” shall mean the Agreement and Plan of Merger to whichthis Exhibit A is attached (including the Target DisclosureSchedule, the Overland Disclosure Schedule and all other schedules andexhibits attached hereto), as it may be amended from time to time.

 

“Agreement of Merger” shall have the meaning specified in Section 1.2.

 

“Antitrust Division” shall have the meaning specified in Section 6.8.

 

“Books and Records” shall mean all books, files, papers,agreements, correspondence, databases, information systems, programs, software,documents, records and documentation thereof used in the conduct of thebusiness of, or otherwise relating to, Target, on whatever medium.

 

“Business” shall have the meaning set forth in the firstRecital.

 

“Business Day” shall mean any day other than (i) a Saturdayor a Sunday or (ii) a day on which banking and savings and loaninstitutions in San Diego, California are authorized or required by law to beclosed.

 

“Cash Consideration” shall have the meaning specified in Section 2.2.

 

“Closing” shall have the meaning specified in Section 3.1.

 

“Closing Date” shall have the meaning specified in Section 3.1.

 

“Code” shall have the meaning set forth in the third Recital.

 

“Competing Party” shall have the meaning specified in Section 6.3.

 

“Competing Transaction” shall have the meaning specified in Section 6.3.

 

“Competitive Activity” shall have the meaning specified in Section 7.3(b).

 

“Confidential Information” shall have the meaning specified in Section 7.3(h).

 

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“Consent” shall mean any approval, consent, ratification,permission, waiver or authorization (including, without limitation, anyGovernmental Approval).

 

“Contract” shall mean any agreement, contract, consensualobligation, promise, understanding, arrangement, commitment or undertaking ofany nature (whether written or oral and whether express or implied), whether ornot legally binding.

 

“Contractors” shall have the meaning specified in Section 4.20(a).

 

“Copyrights” shall mean all copyrights, including, withoutlimitation, in and to works of authorship and all other rights correspondingthereto throughout the world, whether published or unpublished, including,without limitation, rights to prepare, reproduce, perform, display anddistribute copyrighted works and copies, compilations and derivative worksthereof.

 

“Damages” shall mean and include any actual loss, damage,injury, Liability, claim, demand, settlement, judgment, award, fine, penalty,Tax, fee (including, without limitation, any legal fee, accounting fee, expertfee or advisory fee), charge, cost (including, without limitation, any cost ofinvestigation) or expense of any nature, except for decline in value, lostopportunity, lost profits, punitive damages or special and consequentialdamages of any nature.

 

“Defined Benefit Plan” shall mean either a plan described inSection 3(35) of ERISA or a plan subject to the minimum funding standardsset forth in Section 302 of ERISA and Section 412 of the Code.

 

“Disposition” shall have the meaning specified in Section 4.31(f).

 

“Effective Time” shall have the meaning specified in Section 1.2.

 

“Employee Benefit Plan” shall have the meaning specified inSection 3(3) of ERISA.

 

“Encumbrance” shall mean any lien, pledge, hypothecation,charge, mortgage, security interest, encumbrance, equity, trust, equitableinterest, claim, preference, right of possession, lease, tenancy, license,encroachment, covenant, infringement, interference, Order, proxy, option, rightof first refusal, preemptive right, community property interest, legend,defect, impediment, exception, reservation, limitation, impairment, imperfectionof title, condition or restriction of any nature (including, withoutlimitation, any restriction on the voting of any security, any restriction onthe transfer of any security or other asset, any restriction on the receipt ofany income derived from any asset, any restriction on the use of any asset andany restriction on the possession, exercise or transfer of any other attributeof ownership of any asset).

 

“Entity” shall mean any corporation (including, withoutlimitation, any non-profit corporation), general partnership, limitedpartnership, limited liability partnership, joint venture, estate, trust orcompany (including, without limitation, any limited liability company or jointstock company).

 

“Environmental and Safety Law” shall mean any federal, state orlocal laws, ordinances, codes, regulations, rules, policies and orders that areintended to assure the protection of the environment, or that classify,regulate, call for the remediation of, require reporting with respect to, orlist or define air, water, groundwater, solid waste, hazardous or toxicsubstances, materials,

 

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wastes, pollutants or contaminants, or which are intended to assure thesafety of employees, workers or other persons, including, without limitation,the public.

 

“ERISA” shall mean the Employee Retirement Income Security Actof 1974, as amended.

 

“Financial Statements” shall have the meaning specified in Section 4.7(a).

 

“FTC” shall have the meaning specified in Section 6.8.

 

“GAAP” shall mean United States generally accepted accountingprinciples in effect on the date on which they are to be applied pursuant tothis Agreement, applied consistently throughout the relevant periods.

 

“Governmental Approval” shall mean any:  (a) permit, license, certificate,concession, approval, consent, ratification, permission, clearance,confirmation, exemption, waiver, franchise, certification, designation, rating,registration, variance, qualification, accreditation or authorization issued,granted, given or otherwise made available by or under the authority of anyGovernmental Authority or pursuant to any Legal Requirement; or (b) rightunder any Contract with any Governmental Authority.

 

“Governmental Authority” shall mean any:  (a) nation, principality, state,commonwealth, province, territory, county, municipality, district or otherjurisdiction of any nature; (b) federal, state, local, municipal, foreignor other government; (c) Governmental Authority or quasi governmentalauthority of any nature (including, without limitation, any governmentaldivision, subdivision, department, agency, bureau, branch, office, commission,council, board, instrumentality, officer, official, representative,organization, unit, body or Entity and any court or other tribunal);(d) multinational organization or body; or (e) individual, Entity or bodyexercising, or entitled to exercise, any executive, legislative, judicial,administrative, regulatory, police, military or taxing authority or power ofany nature.

 

“Hazardous Materials” shall mean any toxic or hazardoussubstance, material or waste or any pollutant or contaminant, or infectious orradioactive substance or material, including without limitation, thosesubstances, materials and wastes defined in or regulated under anyEnvironmental and Safety Laws, but excluding ordinary office and cleaningsupplies and solvents.

 

“HSR Act” shall mean the Hart Scott Rodino AntitrustImprovements Act of 1976, as amended, and the rules and regulations thereunder.

 

“Indemnitee” shall have the meaning specified in Section 11.4.

 

“Indemnitor” shall have the meaning specified in Section 11.4.

 

“Indemnity Basket” shall have the meaning specified in Section 11.2.

 

“Intellectual Property Rights” shall mean any or all rights inand to intellectual property and intangible industrial property rights,including, without limitation: (i) Patents, Trade Secrets,

 

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Copyrights, Mask Works and Trademarks; and (ii) any rightssimilar, corresponding or equivalent to any of the foregoing anywhere in theworld.

 

“Interim Balance Sheet” shall have the meaning specified in Section 4.7(a).

 

“Interim Balance Sheet Date” shall have the meaning specified inSection 4.7(a).

 

“Inventory” shall mean all inventory of the Target Products andits components, wherever located and whether held by Target or third parties,including, without limitation, all raw materials, work in process, samples,packaging, supplies, service parts, purchased parts and goods, damaged orfragmented inventory and the finished goods.

 

“IRS” shall mean the Internal Revenue Service.

 

“Key Shareholders” shall mean John Matze, Michael Reider, RossRattray and Robert Farkalay.

 

“Knowledge”  Anindividual shall be deemed to have “Knowledge” of a particular fact or othermatter if:  (i) such individualactually is aware of such fact or other matter; or (ii) a prudentindividual could be expected to discover or otherwise become aware of such factor other matter as the result of his or her position and duties.  An Entity shall be deemed to have“Knowledge” of a particular fact or other matter if any of its directors,officers or employees with the authority to establish policy for such Entityhas Knowledge of such fact or other matter.

 

“Legal Requirement” shall mean any federal, state, local,municipal, foreign or other law, statute, legislation, constitution, principleof common law, resolution, ordinance, code, Order, edict, decree, proclamation,treaty, convention, rule, regulation, permit, ruling, directive, pronouncement,requirement (licensing or otherwise), specification, determination, decision,opinion or interpretation that is, has been or may in the future be issued,enacted, adopted, passed, approved, promulgated, made, implemented or otherwiseput into effect by or under the authority of any Governmental Authority.

 

“Liability” shall mean any debt, obligation, duty or liabilityof any nature (including, without limitation, any unknown, undisclosed,unmatured, unaccrued, unasserted, contingent, indirect, conditional, implied,vicarious, derivative, joint, several or secondary liability), regardless ofwhether such debt, obligation, duty or liability would be required to bedisclosed on a balance sheet prepared in accordance with generally acceptedaccounting principles and regardless of whether such debt, obligation, duty orliability is immediately due and payable.

 

“Machinery and Equipment” shall mean all tools, dies, jigs,molds, patterns, machinery and equipment (including, without limitation,manufacturing assembly and test equipment), wherever located and whether heldby the Target or third parties.

 

“Mask Works” shall mean all mask works, mask work registrationsand applications therefor, and any equivalent or similar rights in semiconductormasks, layouts, architectures or topology.

 

“Material Adverse Effect” shall mean: (i) with respect toOverland and the Acquisition Sub, any event, change or effect that, when takenindividually or together with all other adverse events, changes and effects, isor is reasonably likely (a) to be materially adverse to the condition 

 

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(financial or otherwise), properties, assets, liabilities, business,operations, results of operations or prospects of Overland or its subsidiaries,taken as a whole or (b) to prevent or materially delay consummation of theMerger or otherwise to prevent Overland or its subsidiaries from performingtheir obligations under this Agreement; and (ii) with respect to Target, anyevent, change or effect that, when taken individually or together with allother adverse events, changes and effects, is or is reasonably likely(a) to be materially adverse to the condition (financial or otherwise),properties, assets (including, without limitation, the Target Assets),liabilities, business (including, without limitation, the Business),operations, results of operations or prospects of the Target, or (b) toprevent or materially delay consummation of the Merger or otherwise to prevent theTarget from performing its obligations under this Agreement.

 

“Material Contracts” shall have the meaning specified in Section 4.13(a).

 

“Member of the Controlled Group” shall mean each trade orbusiness, whether or not incorporated, that would be treated as a singleemployer with Target under Section 4001 of ERISA or Section 414(b),(c), (m) or (o) of the Code.

 

“Merger” shall have the meaning specified in the second Recital.

 

“Merger Consideration” shall have the meaning specified in Section 2.2.

 

“Multiemployer Plan” shall mean a plan described inSection 3(37) of ERISA.

 

“NDA” shall have the meaning specified in Section 6.6.

 

“Noncompetition Period” shall have the meaning specified in Section 7.3(a).

 

“Non-Key Shareholders” shall mean the Target Shareholders otherthan the Key Shareholders.

 

“Order” shall mean any: (a) temporary, preliminary or permanent order, judgment,injunction, edict, decree, ruling, pronouncement, determination, decision,opinion, verdict, sentence, stipulation, subpoena, writ or award that is or hasbeen issued, made, entered, rendered or otherwise put into effect by or underthe authority of any court, administrative agency or other GovernmentalAuthority or any arbitrator or arbitration panel; or (b) Contract with anyGovernmental Authority that is or has been entered into in connection with anyProceeding.

 

“Ordinary Course of Business” shall describe any action taken bya Person if: (a) such action is consistent with such Person’s pastpractices and is taken in the ordinary course of such Person’s normal day today operations; (b) such action is taken in accordance with sound andprudent business practices; (c) such action is not required to beauthorized by such Person’s shareholders, board of directors or any committeethereof and does not require any other separate or special authorization of anynature; and (d) such action is similar in nature and magnitude to actionscustomarily taken, without any separate or special authorization, in theordinary course of the normal day to day operations of other Entities that areengaged in businesses similar to such Person’s business.

 

“Outstanding Target Common Sock” shall have the meaningspecified in Section 2.1.

 

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“Overland” shall mean Overland Storage, Inc., a Californiacorporation.

 

“Overland Common Stock” shall mean Overland’s Common Stock, nopar value.

 

“Overland Damages” shall have the meaning specified in Section 11.2.

 

“Overland Disclosure Schedule” shall have the meaning specifiedin Article 5.

 

“Overland Merger Shares” shall have the meaning specified in Section 2.2.

 

“Party” and “Parties” shall have the meanings specifiedin the first paragraph of this Agreement.

 

“Patents” shall mean all United States and foreign patents andutility models and applications therefor and all reissues, divisions,re-examinations, renewals, extensions, provisionals, continuations andcontinuations-in-part thereof, and equivalent or similar rights anywhere in theworld in inventions and discoveries, including, without limitation, inventiondisclosures related to the Business or any Target Assets.

 

“Person” shall mean any individual, Entity or GovernmentalAuthority.

 

“Personal Property” shall mean all personal property, officefurnishings and furniture, display racks, shelves, decorations, supplies andother tangible personal property.

 

“Personal Property Leases” shall mean all leases of personalproperty to which Target is a party.

 

“Proceeding” shall mean any action, suit, litigation, arbitration,proceeding (including, without limitation, any civil, criminal, administrative,investigative or appellate proceeding), prosecution, contest, hearing, inquiry,inquest, audit, examination or investigation that is, has been or may in thefuture be commenced, brought, conducted or heard at law or in equity or beforeany Governmental Authority or any arbitrator or arbitration panel.

 

“Pro Rata Interests” shall have the meaning specified in Section 2.3.

 

“PTO” shall have the meaning specified in Section 4.17(g).

 

“Public Reports” shall have the meaning specified in Section 4.31(b).

 

“Real Property Leases” shall mean all leases of real property towhich Target is a party.

 

“Receivables” shall mean all accounts and notes receivable,checks, negotiable instruments and chattel papers.

 

“Registered Intellectual Property Rights” shall mean all UnitedStates, international and foreign: (i) Patents, including applications therefor; (ii) registeredTrademarks, applications to register Trademarks, including intent-to-useapplications, or other registrations or applications related to Trademarks;(iii) Copyright registrations and applications to register Copyrights;(iv) Mask Work registrations and applications to register Mask Works; and(v) any other Intellectual Property Rights that is the subject of anapplication, certificate, filing, registration or other

 

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document issued by, filed with, or recorded by, any state, governmentor other public legal authority at any time.

 

“Registration Statement” shall have the meaning specified in Section 7.4(a).

 

“Representatives” shall mean Affiliates, officers, directors,employees, attorneys, accountants, advisors, agents, distributors, licensees,shareholders, subsidiaries and lenders of a Party.

 

“Resolutions” shall have the meaning specified in Section 4.2(a)(iii).

 

“Restricted Territory” shall have the meaning specified in Section 7.3(c).

 

“SEC” shall have the meaning specified in Section 7.4(a).

 

“Securities” shall have the meaning specified in Section 4.31(a).

 

“Securities Act” shall mean the Securities Act of 1933, asamended.

 

“Survival Date” shall have the meaning specified in Section 11.1.

 

“Surviving Corporation” shall have the meaning specified in Section 1.1.

 

“Suspension Notice” shall have the meaning specified in Section 7.4(c).

 

“Target” shall mean Okapi Software, Inc., a Californiacorporation.

 

“Target Assets” shall have the meaning specified in Section 4.15(a).

 

“Target Benefit Plans” shall have the meaning specified in Section 4.21(a).

 

“Target Common Stock” shall have the meaning specified in Section 4.3(a).

 

“Target Contract” shall include any written or oral agreement,contract, understanding, arrangement, instrument, note, guaranty, mortgage,indenture, lease, indemnity, deed, assignment, power of attorney, commitment,covenant, assurance, obligation, promise or undertaking of any nature that isbinding on Target or any of the properties or assets of Target.

 

“Target Disclosure Schedule” shall have the meaning specified inArticle 4.

 

“Target Equity Incentive Plan” shall mean the Equity IncentivePlan of Target.

 

“Target Intellectual Property” shall mean all IntellectualProperty Rights of Target, whether owned or controlled, licensed, owned orcontrolled by or for, licensed to, or otherwise held by or for the benefit ofTarget, including, without limitation, the Target Registered IntellectualProperty Rights.

 

“Target Options” shall mean all outstanding options, whethervested or unvested, granted, awarded or issued from or under the Target EquityIncentive Plan.

 

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“Target Preferred Stock” shall have the meaning specified in Section 4.3(a).

 

“Target Products” shall mean all products and servicesmanufactured, made, designed, maintained, supported, developed, sold, licensed,marketed, or otherwise distributed or provided (or planned to be manufactured,made, designed, maintained, supported, developed, sold, licensed, marketed, orotherwise distributed or provided) by or for Target (including, withoutlimitation, all versions and releases thereof, whether already distributed orprovided, under development or planned), together with any related materials,information or data, including, without limitation, the names, numbers (e.g.,part numbers) and packaging associated with such products and services.

 

“Target Registered Intellectual Property Rights” shall have themeaning specified in Section 4.17(a).

 

“Target’s Board” shall mean the Board of Directors of the Target.

 

“Target Shareholder” and “Target Shareholders” shall meanthe individuals identified on Schedule 2.3.

 

“Target Shareholder Closing Taxes” shall have the meaningspecified in Section 2.2.

 

“Target Shareholder Damages” shall have the meaning specified inSection 11.3.

 

“Tax” (and, with correlative meaning, “Taxable”) shallmean any net income, alternative or add-on minimum tax, gross income, grossreceipts, sales, use, ad valorem, transfer, franchise, profits, license,withholding, payroll, employment, excise, severance, stamp, occupation,premium, property, environmental or windfall profit tax, custom, duty or othertax, governmental fee or other assessment or charge of any kind whatsoever,together with any interest or any penalty, addition to tax or additional amountand any interest on such penalty, addition to tax or additional amount, imposedby any Tax Authority.

 

“Tax Authority” shall mean Governmental Authority responsiblefor the imposition, assessment or collection of any Tax (domestic or foreign).

 

“Tax Return” shall mean any return, statement, declaration,notice, certificate or other document that is or has been filed with orsubmitted to, or required to be filed with or submitted to, any GovernmentalAuthority in connection with the determination, assessment, collection orpayment of any Tax or in connection with the administration, implementation orenforcement of or compliance with any Legal Requirement related to any Tax.

 

“Trademarks” shall mean any and all trademarks, service marks,logos, trade names, corporate names, Internet domain names and addresses andgeneral-use e-mail addresses, and all goodwill associated therewith throughoutthe world.

 

“Trade Secrets” shall mean all trade secrets under applicablelaw and other rights in know-how and confidential or proprietary information,processing, manufacturing or marketing information, including, withoutlimitation, new developments, inventions, processes, ideas or other proprietaryinformation that provide Target with advantages over competitors who do notknow

 

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or use it and documentation thereof (including, without limitation,related papers, blueprints, drawings, chemical compositions, formulae, diaries,notebooks, specifications, designs, methods of manufacture and data processingsoftware, compilations of information) and all claims and rights relatedthereto.

 

“Transaction Documents” shall mean this Agreement and all otheragreements, certificates, instruments, documents and writings delivered by anyof the Parties in connection with the Merger.

 

“Transferred Employees” shall have the meaning specified in Section 8.1.

 

“Treasury Regulations” shall mean the regulations promulgatedunder the Code.

 

“WARN Act” shall have the meaning specified in Section 4.20(e).

 

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**EXHIBITB**

 

**AGREEMENT****OF MERGER**

 

**THIS AGREEMENT OF MERGER**(this “Agreement”) is executed and delivered as ofJune        , 2003, by and betweenOkapi Acquisition Co., Inc., a California corporation (the “SurvivingCorporation”), and Okapi Software, Inc., a California corporation (the “MergingCorporation”).  The SurvivingCorporation is a wholly-owned subsidiary of Overland Storage, Inc., aCalifornia corporation (the “Parent Corporation”).

 

1.  The Merging Corporationshall be merged into the Surviving Corporation.

 

2.  Each outstanding share ofthe Merging Corporation shall be converted into$                       in cash and                   shares of the Common Stock of the Parent Corporation.

 

3.  In lieu of fractional sharesof the Common Stock of the Parent Corporation that would otherwise be issued toany shareholder of the Merging Corporation, each shareholder of the MergingCorporation who would have been entitled to receive a fractional share shallreceive instead an amount in cash equal to the fair market value of suchfractional share, as determined by the Parent Corporation in accordance withSection 407 of the General Corporation Law of the State of California.

 

4.  The Merging Corporationshall from time to time, as and when requested by the Surviving Corporation,execute and deliver all such documents and instruments and take all such actionnecessary or desirable to evidence or carry out the merger described above (the“Merger”).

 

5.  The effect of the Merger andthe effective date of the Merger are as prescribed by law.

 

**IN WITNESS WHEREOF,**the parties have executed this Agreement as of the date first above written.

 
| **OKAPI ACQUISITION CO., INC.**  | **OKAPI SOFTWARE, INC.** |
|----------------------------------|--------------------------|
|                             |                     |
|                             |                     |
| By:                              |                     |   | By: |   |   |
| Christopher P. Calisi, President | John Matze, President    |
|                             |                     |
|                             |                     |
| By:                              |                     |   | By: |   |   |
| Vernon A. LoForti, Secretary     | Dawn Matze, Secretary    |
|                                  |                          |  |  |  |  |  |

 

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**CERTIFICATE OF APPROVALOFAGREEMENT OF MERGER**

 

Christopher P. Calisi and Vernon A. LoForti certify that:

 

1.  They are the President andSecretary, respectively, of Okapi Acquisition Co., Inc., a Californiacorporation (the “Corporation”). The Corporation is a wholly-owned subsidiary of Overland Storage, Inc.,a California corporation (the “Parent Corporation”).

 

2.  The Agreement of Merger inthe form attached was duly approved by the Board of Directors of theCorporation.

 

3.  The Agreement of Merger wasentitled to be and was approved by the Board of Directors of the Corporationalone, pursuant to Section 1201 of the General Corporation Law of theState of California.

 

4.  No vote of the shareholdersof the Parent Corporation was required.

 

We further declare under penalty of perjury under the laws of the Stateof California that the matters set forth in this certificate are true andcorrect of our own knowledge.

 

 
|   | Dated:   June       , 2003 |
|--------|--------------------------------------------------------------------|
|   |                                                               |
|   |                                                               |
|   |                                                               |   |
|   | Christopher P. Calisi, President                                   |
|   |                                                               |
|   |                                                               |
|   |                                                               |   |
|   | Vernon A. LoForti, Secretary                                       |
|        |                                                                    |  |  |

 

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**CERTIFICATE OF APPROVALOFAGREEMENT OF MERGER**

 

John Matze and Dawn Matze certify that:

 

1.  They are the President andSecretary, respectively, of Okapi Software, Inc., a California corporation (the“Corporation”).

 

2.  The Agreement of Merger inthe form attached was duly approved by the Board of Directors and shareholdersof the Corporation.

 

3.  The shareholder approval wasby the holders of 100% of the outstanding shares of Common Stock of theCorporation.

 

4.  The Corporation hasauthorized One Hundred Fifty Million (150,000,000) shares of capital stock,consisting of One Hundred Million (100,000,000)****shares of authorized Common Stock, and Fifty Million(50,000,000) shares of authorized Preferred Stock.  The Corporation has issued and outstanding Eight Million ThreeHundred Thousand (8,300,000) shares of Common Stock and no shares of PreferredStock.

 

We further declare under penalty of perjury under the laws of the Stateof California that the matters set forth in this certificate are true andcorrect of our own knowledge.

 

 
|   | Dated:   June       , 2003 |
|--------|--------------------------------------------------------------------|
|   |                                                               |
|   |                                                               |
|   |                                                               |   |
|   | John Matze, President                                              |
|   |                                                               |
|   |                                                               |
|   |                                                               |   |
|   | Dawn Matze, Secretary                                              |

 

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**EXHIBITC**

 

**SHAREHOLDER****RELEASE**

 

**THIS SHAREHOLDER RELEASE**(this “Release”) is executed and delivered as of June 20, 2003 (the“Effective Date”), by and between Okapi Software, Inc., a Californiacorporation (“Target”), and the shareholders of Target identified on thesignature page hereof (the “Target Shareholders”).  Each of Target and the Target Shareholdersis referred to herein as a “Party,” and, collectively, the “Parties”.

 

**RECITALS**

 

**WHEREAS,**the Partieshave executed and delivered an Agreement and Plan of Merger, dated as ofJune 20, 2003 (the “Merger Agreement”), by and among the Parties,Overland Storage, Inc., a California corporation (“Overland”), and OkapiAcquisition Co., Inc., a California corporation (“Acquisition Sub”); and

 

**WHEREAS,**pursuant toSection 3.2(c) of the Merger Agreement, the Parties have agreed to executeand deliver this Release as one of the conditions to the closing of the Merger(as defined in the Merger Agreement);

 

**NOW, THEREFORE,**inconsideration of the mutual promises set forth herein, and for other good andvaluable consideration, the receipt and sufficiency of which are acknowledgedhereby, the Parties hereby agree as follows:

 

1.  Each of the TargetShareholders does hereby unconditionally, irrevocably and absolutely releaseand discharge Target, and Target’s affiliates, directors, officers, employees,agents, successors and/or assigns, from any and all loss, liability, claims,costs (including, without limitation, attorneys’ fees), demands, causes ofaction, or suits of any type, whether in law and/or in equity, related directlyor indirectly or in any way connected with any transaction, affairs oroccurrences arising on or prior to the Effective Time (as defined in the MergerAgreement); provided, however, that Harry J. Proctor does notrelease or discharge Target, its successors and assigns, from legal fees orcosts owed by Target to Solomon Ward Seidenwurm & Smith, LLP at theEffective Time (as defined in the Merger Agreement).

 

2.  Each of the TargetShareholders irrevocably and absolutely agrees that he or she will not prosecutenor allow to be prosecuted on his or her behalf in any administrative agency,whether federal or state, or in any court, whether federal or state, any claimor demand of any type related to any of the matters released above, it beingthe intention of the Parties that, with the execution by the Parties of thisRelease, Target will be absolutely, unconditionally and forever discharged ofand from all obligations related in any way to the matters released above.

 

3.  Each of the TargetShareholders expressly waives all of the benefits and rights granted to him orher pursuant to California Civil Code Section 1542 and any other law orregulation to the effect that:

 

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“A general release does not extend to claims which the creditor doesnot know of or suspect to exist in his favor at the time of executing therelease, which if known by him must have materially affected his settlementwith the debtor.”

 

4.  Each of the Partiescertifies that such Party has read all of this Release, and that such Partyfully understands all of the same.  Eachof the Parties hereby expressly agrees that this Release shall extend and applyto all unknown, unsuspected and unanticipated injuries and damages, as well asthose that are now known.

 

5.  Each of the Parties furtherdeclares and represents that no promise, inducement or agreement not hereinexpressed has been made to such Party and that this Release contains the fulland entire agreement among the Parties relating to the Parties’ release ofclaims.

 

6.  This Release may be pleadedas a full and complete defense and may be used as the basis for an injunctionagainst any action, suit or proceeding that may be prosecuted, instituted orattempted by any of the Target Shareholders against Target.

 

7.  Each Party acknowledges thatsuch Party has had the opportunity to consult legal counsel concerning thisRelease and that such Party has entered into this Release freely based on suchParty’s own judgment and not on any representations or promises other thanthose contained in this Release.

 

8.  This Release may be amendedonly by means of a written amendment executed by the Parties.

 

9.  This Release shall inure tothe benefit of (and be binding on and enforceable against) each Party’stransferees, assignees, heirs and successors, including, without limitation,Overland and Acquisition Sub.

 

10.  This Release is to beconstrued in accordance with and governed by the internal laws of the State ofCalifornia without giving effect to any choice of law rule that would cause theapplication of the laws of any jurisdiction other than the internal laws of theState of California to the rights and duties of the Parties.  All disputes and controversies arising outof or in connection with this Release shall be resolved exclusively by thestate and federal courts located in San Diego County in the State ofCalifornia, and each Party agrees to submit to the jurisdiction of said courtsand agrees that venue shall lie exclusively with such courts.

 

11.  The Parties agree that eachprovision of this Release shall be interpreted in such a manner as to beeffective and valid under applicable law. In the event that any of the provisions of this Release shall be held bya court or other tribunal of competent jurisdiction to be invalid orunenforceable, the remaining portions hereof shall remain in full force andeffect and such provision shall be enforced to the maximum extent possible soas to effect the intent of the Parties and shall be reformed to the extentnecessary to make such provision valid and enforceable.

 

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12.  This Release constitutesthe entire agreement among the Parties concerning the subject matter hereof andsupersedes all prior or contemporaneous representations, discussions,proposals, negotiations, conditions, communications and agreements, whetheroral or written, among the Parties relating to the subject matter hereof andall past courses of dealing or industry custom.

 

13.  This Release may beexecuted in one or more counterparts, each of which shall for all purposes bedeemed to be an original and all of which shall constitute the same instrument.

 

**[Signature page follows]**

 

 

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**IN WITNESS WHEREOF,**theParties hereby execute this Release as of the Effective Date.

 
|   | **OKAPI SOFTWARE, INC.**                |
|--------|-----------------------------------------|
|   |                                    |
|   |                                    |
|   | By:                                     |   |   |
|   | John Matze                              |
|   | President & Chief Executive Officer |
|   |                                    |
|   | **TARGET SHAREHOLDERS:**                |
|   |                                    |
|   |                                    |
|   |                                    |   |
|   | John Matze                              |
|   |                                    |
|   |                                    |
|   |                                    |   |
|   | Mike Reider                             |
|   |                                    |
|   |                                    |
|   |                                    |   |
|   | Bob Farkaly                             |
|   |                                    |
|   |                                    |
|   |                                    |   |
|   | Ross Rattray                            |
|   |                                    |
|   |                                    |
|   |                                    |   |
|   | Robert Fisher                           |
|   |                                    |
|   |                                    |
|   |                                    |   |
|   | Harry J. Proctor                        |
|   |                                    |
|   |                                    |
|   |                                    |   |
|   | Jerry Puda                              |
|        |                                         |  |  |  |  |  |

 

 

**[SIGNATURE PAGE TO SHAREHOLDER RELEASE DATEDAS OF JUNE 20, 2003]**

 

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**EXHIBIT D**

 

**OPINION****OF COUNSEL TO TARGET**

 

1.                                       Targetis a corporation duly organized, validly existing, and in good standing underthe laws of the State of California, and has the corporate power and authorityto conduct its business as presently conducted.  Except as noted in the Target Disclosure Schedule, Target isqualified to do business as a foreign corporation in each state or jurisdictionof the United States where its failure to so qualify would have a materialeffect on its business.

 

2.                                       Targethas the corporate power and authority to execute, deliver, perform, and observeits obligations under the agreements to which Target is a party, executed incontemplation of the Transactions.

 

3.                                       TheTransaction Documents to which Target is a party have been duly authorized, executed,and delivered by Target, and constitute valid and binding obligations ofTarget, enforceable against Target in accordance with their respective terms.

 

4.                                       Theauthorized capital stock of Target consists of One Hundred Million(100,000,000) shares of Common Stock, no par value (“Common Stock”), andFifty Million (50,000,000) shares of Preferred Stock, no par value (“PreferredStock”).  There are issued andoutstanding Eight Million Three Hundred Thousand (8,300,000) shares of CommonStock and no shares of Preferred Stock. All of the issued and outstanding shares of Common Stock have been dulyauthorized and validly issued and are fully paid and nonassessable.  There are no presently outstanding options,warrants, or other securities of Target which contain or create the right topurchase or acquire from Target any shares of Target’s capital stock.  Target’s Articles of Incorporation andBylaws do not provide for preemptive rights to subscribe for or purchase anyshares of Target’s capital stock.

 

5.                                       Exceptas noted in the Target Disclosure Schedule, the execution, delivery, andperformance of the Transaction Documents by Target will not violate or resultin a breach of any terms of or constitute a default under or result in thecreation of any lien, charge, or encumbrance on any property or assets ofTarget, pursuant to the terms of (1) any indenture, mortgage, deed of trust orother agreement that Target is a party to and that is identified in the TargetDisclosure Schedule, or (2) any judgment, writ, decree, or order, of which wehave knowledge.

 

6.                                       Theexecution, delivery, and performance of the Transaction Documents by Target donot violate any provision of Target’s Articles of Incorporation or Bylaws.

 

7.                                       Toour knowledge, all consents, approvals, orders or authorizations of, and allqualifications, registrations, or filings with, any federal or stategovernmental authority on the part of Target required for the execution,delivery or performance by Target of the Transaction Documents have been made orobtained.

 

8.                                       Toour knowledge, the execution, delivery, and performance of the TransactionDocuments by Target will not violate any federal or state law, rule orregulation applicable to Target.

 

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9.                                       Exceptas noted in the Target Disclosure Schedule, based on the Officer’s Certificate,there is no litigation or proceeding pending or, threatened against Targetbefore any court or administrative agency which (1) is likely to have amaterial adverse effect on Target’s business or Target’s ability to perform itsobligations under the Transaction Documents, or (2) seeks to prevent theconsummation of the transactions contemplated by the Transaction Documents.

 

10.                                 TheAgreement of Merger has been duly adopted by the Board of Directors of Targetand approved by the shareholders of Target. Upon the filing of the Agreement of Merger with the Secretary of Stateof the State of California, we know of no reason why the Merger will not becomeeffective in accordance with the terms of the Transaction Documents and theGeneral Corporation Law of the State of California.

 

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**EXHIBIT E**

 

**OPINION****OF COUNSEL TO OVERLAND**

 

1.                                       Eachof Overland and Acquisition Sub is a corporation duly organized, validlyexisting and in good standing under the laws of the State of California.  Each of Overland and Acquisition Sub has therequisite corporate power and authority to own its properties and to conductits business as it is currently being conducted.

 

2.                                       Eachof Overland and Acquisition Sub has the corporate power and authority toexecute and deliver and to perform and observe its obligations under theTransaction Agreements.  The TransactionAgreements have been duly authorized by all necessary corporate action andconstitute valid and binding obligations of Overland and Acquisition Sub,enforceable against Overland and Acquisition Sub in accordance with theirrespective terms.

 

3.                                       TheOverland Merger Shares have been duly authorized and, upon issuance anddelivery in accordance with the terms of the Transaction Agreements, will bevalidly issued, fully paid and nonassessable.

 

4.                                       Theexecution, delivery and performance of the Transaction Agreements by Overlandand Acquisition Sub and the consummation of the Merger: (i) do not violateany provision of the Articles of Incorporation or the Bylaws of Overland andAcquisition Sub; (ii) to our knowledge, do not violate any law, rule orregulation applicable to Overland and Acquisition Sub or their properties; and(iii) to our knowledge, do not violate or constitute a default under theprovisions of any judgment, writ, decree or order to which Overland orAcquisition Sub is a party.

 

5.                                       Theoffer and sale of the Overland Merger Shares pursuant to the terms of theTransaction Agreements are exempt from registration under the Securities Act of1933, as amended (the “Securities Act”).

 

6.                                       Toour knowledge, all consents, approvals, orders or authorizations of, and allqualifications, registrations or filings with, any federal or stategovernmental authority on the part of Overland and Acquisition Sub required inconnection with the execution and delivery of the Transaction Agreements andthe consummation of the Merger have been made or obtained, except for: (i) thefiling of a Form D in accordance with Regulation D under theSecurities Act; (ii) any consents, approvals, orders, authorizations,qualifications, registrations or filings required under state securities laws;and (iii) the filing of the Agreement of Merger with the California Secretaryof State.

 

7.                                       Toour knowledge, there is no litigation or proceeding pending or threatenedagainst Overland or Acquisition Sub before any court or administrative agencywhich (1) is likely to have a material adverse effect on Overland’s orAcquisition Sub’s business or Overland’s or Acquisition Sub’s ability toperform its obligations under the Transaction Agreements, or (2) seeks toprevent the consummation of the transactions contemplated by the TransactionAgreements.

 

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8.                                       TheAgreement of Merger has been duly adopted by the Board of Directors of Overlandand the Board of Directors of Acquisition Sub. Upon the filing of the Agreement of Merger with the Secretary of Stateof the State of California, we know of no reason why the Merger will not becomeeffective in accordance with the terms of the Transaction Agreements and theGeneral Corporation Law of the State of California.

 

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