**Exhibit 10.44**

 

 

4820 Overland Ave.

San Diego, CA 92123-1599

(858) 571-5555

(858) 495-4267 fax

 

**EMPLOYMENT AGREEMENT**

 

This Employment Agreement (“Agreement”), which shall become effectiveon May 16, 2005, sets forth the terms and conditions of employment agreedupon by and between Overland Storage, Inc. (“Employer” or the “Company”)and W. Michael Gawarecki (“Executive”).

 

The parties agree asfollows:

 

1.**                                       Positionsand Duties**.  Executive will beemployed by the Company in the position of Vice President reporting to theCompany’s Chief Executive Officer (the “CEO”), and shall do and perform allservices, acts or things necessary or advisable to manage and conduct thebusiness of the Company consistent with the bylaws of the Company and asrequired by the CEO.

 

## 1.1**                                 BestEfforts/Full-Time**.  During theEmployment Term (as defined in paragraph 1.2 herein), Executive will act in thebest interests of Employer and devote his full business time and best effortsto the performance of his duties under this Agreement.  Executive agrees to be available to rendersuch services at all reasonable times and places and in accordance withEmployer’s directives.

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

##  

## During his employment, Executive must not engage in any work, paid orunpaid, that creates an actual or potential conflict of interest with Employer’sbusiness interests and if, in the opinion of the Company’s Board of Directors,an actual or potential conflict exists, the Board may in its sole discretionrequire Executive to choose to either (i) discontinue the other work or (ii) resignfrom his employment with Employer.  It isanticipated that Executive shall generally devote no less than 40 hours perweek to his duties for Employer.

 

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## 1.2                                 **Term of Employment**. This Agreement shall commence on the effective date and, unlessterminated by either party in accordance with paragraph 5 herein, shallcontinue until June 30, 2006.  Theperiod of employment hereunder shall be referred to herein as the “EmploymentTerm”.  Except as provided in paragraph6, this Agreement shall continue during the Employment Term to govern the termsand conditions of Executive’s employment, unless modified by the parties heretoin writing.  Except as otherwise providedherein, all rights and obligations hereunder shall terminate upon theexpiration of the Employment Term.  TheEmployment Term shall not be deemed extended or renewed without the expresswritten consent of the parties hereto.

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## 1.3                                 **“At Will” Employment**. Executive’s employment with the Company is at will and may be terminatedby Executive or by the Company at any time for any reason, with or withoutCause, subject to the terms and conditions of this Agreement.

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# 2.               **Compensation**.

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## 2.1                                 **Base Salary**.  Ascompensation for the proper and satisfactory performance of all duties underthis Agreement, Executive shall earn an initial gross annual base salary of $246,500($9,480.77 gross per bi-weekly payroll period), less all legally requiredpayroll deductions and withholdings, payable in accordance with Employer’snormal payroll practices (“Base Salary”). The Base Salary is subject to increase from time to time in the solediscretion of the Compensation Committee.

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## 2.2                                 **Discretionary MBO Bonus**. In addition, Executive will be eligible to participate in the Company’sExecutive Management By Objective (“MBO”) Bonus Plan and to receive, in thesole discretion of the Compensation Committee of the Board, a quarterly bonus foreach quarter of the Employment Term of up to forty percent (40%) of hisquarterly Base Salary, or such other amount as determined by the CompensationCommittee of the Board, based on (1) successful achievement by Executive ofMBO performance objectives to be determined by the Compensation Committee ofthe Board, AND (2) successful achievement by the Company of quarterlyearnings per share goals established by the Board of Directors.

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## 2.3                                 **Outsourcing Project Bonus**. In addition, conditioned upon (1) the successful completion of theCompany’s manufacturing outsourcing project (the “Project”) no later than July 3,2005, whereby all of the Company’s manufacturing activity taking place in SanDiego, California will be relocated to Sanmina-SCI Corporation in Rapid City,South Dakota, AND (2) maintenance of satisfactory product quality anddelivery times during the six months following completion of the Project inaccordance with Exhibit B hereto, Executive will receive anadditional, one-time, bonus equal to $100,000.00 (the “Outsourcing ProjectBonus**”**). The determination of whether or not the performance objectives for theOutsourcing Project Bonus have been achieved shall be made at the solediscretion of the Compensation Committee of the Board.  The Outsourcing Project Bonus, if earned,will be paid to Executive within thirty (30) days following the end of thesixth month following completion of the Project.

 

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# 3.               **Customary Fringe Benefits**.  Executiveshall be eligible for all customary and usual benefits generally available toall executive level employees of Employer, as determined in the sole andabsolute discretion of Employer and subject to the terms and conditions setforth in the applicable benefit plan or policy. Employer reserves the right to change or eliminate any of the fringebenefits provided to executive level employees on a prospective basis at anytime, at Employer’s sole and absolute discretion.  Executive understands that all benefits providedin this paragraph may be reduced by, or subject to, all legally required taxes.

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# 4.               **Business Expenses**.  Executivewill be reimbursed for all reasonable, out-of-pocket business expenses incurredin the performance of his duties on behalf of Employer as permitted by and subjectto Executive’s compliance with the Company’s established expense reimbursementpolicy.

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# 5.               **Termination**.

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## 5.1                                 **Termination for Cause by Employer**.  Employer may terminate Executive’s employment under thisAgreement immediately at any time for “Cause”, which shall include, but is notlimited to:  (a) acts or omissionsconstituting gross negligence, recklessness or willful misconduct on the partof Executive with respect to his obligations or otherwise relating to thebusiness of Employer; (b) Executive’s material breach of this Agreement; (c) Executive’sconviction or entry of a plea of nolo contendere for fraud, misappropriation orembezzlement, or any felony or crime of moral turpitude; (d) Executive’sdishonesty or involvement in any conduct that adversely affects Employer’s nameor public image or is otherwise detrimental to Employer’s business interests; (e) Executive’swillful neglect of duties as determined in the sole and exclusive discretion ofEmployer; or (f) Executive’s death.

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5.1.1.                     **Entitlements Upon Termination for Cause**.  In the event that Executive’s employment isterminated for Cause in accordance with paragraph 5.1, Executive shall beentitled to receive:  (a) the BaseSalary then in effect, prorated to the date of termination; (b) anyperformance bonuses earned prior to the date of termination; and (c) anyexpense reimbursements to which Executive is entitled by virtue of his prioremployment with Employer (collectively, (a), (b) and (c) above arereferred to herein as the “Standard Entitlements”).  In the event of such termination for Cause,Executive shall not be entitled to receive (i) the Severance Payment (asdefined in paragraph 5.2 below), or any part thereof, (ii) anyunearned bonus amounts or (iii) any further vesting of stock options; andall other obligations of Employer to Executive pursuant to this Agreement shallautomatically terminate and be completely extinguished.

 

## 5.2                                 **Termination Without Cause by Employer**.  Employer may terminate Executive’s employment withoutCause at any time.  If Employerterminates Executive’s employment without Cause, Executive shall be entitled toreceive the Standard Entitlements and, if earned as of the date of terminationand unpaid, the Outsourcing Project Bonus. In addition to the above, in the event that, prior to theexpiration of the Employment Term, (i) Employer terminates Executive’s employmentwithout Cause and

 

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## (ii) Executive complies with the conditions inparagraph 5.2.1 below, Executive will be entitled to an aggregate severancepayment equal to 100% of Executive’s then annual Base Salary (the “SeverancePayment”), payable at Executive’s choice in either a lump-sum amount orin 12 equal monthly payments without interest. ** **Upon Executive’s terminationwithout Cause, subject to the conditions of any stock options previouslygranted relating to any shares of the Employer’s Common Stock, all of Employer’s otherobligations pursuant to this Agreement shall terminate automatically andextinguish completely following the date of such termination without Cause.

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5.2.1.                     **Conditions to Receive Severance Payments**.  The Severance Payment will be paid providedthat Executive executes a full general release in the form attached hereto as Exhibit A,releasing all claims, known or unknown, that Executive may have againstEmployer arising out of or in any way related to Executive’s employment ortermination of employment with Employer. The payment will be made after expiration of the rescission period referenced in Section 3 of Exhibit A.

 

## 5.3                                 **Voluntary Resignation by Executive for Good Reason**.Executive may voluntarily resign his position with Employer at any timeprovided that he delivers to the Board at least thirty (30) days’ advancewritten notice of his resignation. In the event that his resignation is forGood Reason (as defined below), Executive will be entitled to receive the Standard Entitlementsand, if earned as of the date of termination and unpaid, the OutsourcingProject Bonus.  In addition to the above,in the event that, prior to the expiration of the Employment Term, (i) Executivevoluntarily resigns for Good Reason and (ii) Executive complies with theconditions in paragraph 5.2.1 above, Executive will be entitled to receive theSeverance Payment. In the event of such resignation for Good Reason, allof Employer’s other obligations pursuant to this Agreement shall terminateautomatically and extinguish completely following the date of such resignationfor Good Reason. Executive will be deemed to have resigned for “Good Reason” inthe following circumstances: (a) Employer reduces Executive’s Base Salaryby more than twenty percent (20%), unless the reduction is made as part of, andis generally consistent with, a general reduction of other senior executivesalaries; or (b) Employer relocates Executive’s principal place of work toa location more than fifty (50) miles from Employer’s current location withouthis prior written approval.

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## 5.4                                 **Voluntary Resignation by Executive Without Good Reason**.  In the event that Executive’s resignation iswithout Good Reason, Executive will be entitled to receive the StandardEntitlements, but Executive shall not be entitled to receive (i) theSeverance Payment, or any part thereof, (ii) any unearned bonus amounts or(iii) any further vesting of stock options; and all other obligations ofEmployer to Executive pursuant to this Agreement shall automatically terminateand be completely extinguished.

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6.                                       **Termination Upon Change of Control.**  In the event of a “Change of Control” (asdefined in Executive’s existing Retention Agreement with the Company), Employer’sobligations to Executive pursuant to paragraph 5 above shall terminateautomatically and extinguish completely.

 

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# 7.                                       **Confidentiality/IntellectualProperty Agreement and Insider Trading Policy**.  Executive agrees that he hasread, signed, and will abide by the terms and conditions of Employer’sConfidentiality/Intellectual Property Agreement and Employer’s Insider TradingPolicy.

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Executive recognizes thathis employment with the Company will involve contact with information ofsubstantial value to the Company which gives the Company an advantage over itscompetitors who do not know or use it, including but not limited to,techniques, designs, drawings, processes, inventions, developments, equipment,prototypes, sales and customer information, and business and financialinformation relating to the business, products, practices and techniques of theCompany (hereinafter referred to as “Confidential and Proprietary Information”).  Executive will at all times regard andpreserve as confidential such Confidential and Proprietary Information obtainedby Executive from whatever source and will not, either during his employmentwith the Company or thereafter, publish or disclose any part of suchConfidential and Proprietary Information in any manner at any time, or use thesame except on behalf of the Company, without the prior written consent of the Company.

 

# 8.               **Non-Competition**.  Duringthe Employment Term, Executive shall devote Executive’s full business energies,interest, abilities and productive time to the proper and efficient performanceof Executive’s duties under this Agreement.

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

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Except as permittedherein, Executive agrees not to acquire, assume or participate in, directly orindirectly, any position, investment or interest known by Executive to beadverse or antagonistic to Employer, its business or prospects, financial orotherwise. Ownership by Executive, as a passive investment, of less than onepercent (1%) of the outstanding shares of capital stock of any corporation withone or more classes of its capital stock listed on a national securitiesexchange or publicly traded in the over-the-counter market shall not constitutea breach of this paragraph 8.

 

# 9.               **Nonsolicitation**.  Duringthe Employment Term and for a period of one year thereafter, irrespective ofthe manner of termination of employment, Executive agrees not to, directly orindirectly, separately, or in association with others:  (a) interfere with, impair, disrupt, ordamage Employer’s relationship with any of its customers or prospectivecustomers by soliciting, encouraging, or causing others to solicit or encourageany of them, for the purpose of diverting or taking away the business suchcustomers have with Employer; or (b) interfere with, impair, disrupt, ordamage Employer’s business by soliciting, encouraging, or causing others tosolicit or

 

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# encourage, any of Employer’s employees todiscontinue their employment with Employer.

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# 10.         **Agreement to Arbitrate**.  Theparties agree that any and all disputes, claims or controversies arising out ofor relating to this Agreement, the employment relationship between the parties,the terms or conditions of employment, or the termination of the employmentrelationship, that are not resolved by their mutual agreement shall be resolvedby final and binding arbitration as the exclusive remedy in accordance with theJAMS Employment Arbitration Rules and Procedures in effect at the timearbitration is initiated.  **THE PARTIES HEREBY WAIVE THEIR RIGHT TO HAVE ANYDISPUTE, CLAIM OR CONTROVERSY DECIDED BY A JUDGE OR JURY IN A COURT. **Either party may commence thearbitration process by filing a written demand for arbitration with JAMS andsending a copy to the other party.  Thearbitration shall be conducted by one neutral arbitrator selected by theparties from a list of arbitrators provided by JAMS, or its successor, in SanDiego, California.  If the parties areunable to agree upon an arbitrator from the list provided, the parties shallalternate in striking names of arbitrators from the list until one is left whoshall be the arbitrator.  The partiesshall be entitled to be represented by counsel in the arbitration proceeding.  The arbitrator shall have the authority toorder such discovery, by way of deposition, interrogatory, document production,or otherwise, as the arbitrator considers necessary to a full and fairexploration of the issues in dispute, consistent with the expedited nature ofarbitration.  The arbitrator isauthorized to award any remedy or relief that the arbitrator deems just andequitable, including any remedy or relief that would have been available to theparties had the matter been heard in court. The arbitrator shall have the authority to provide for the award ofattorney’s fees and costs in accordance with applicable law.  Executive shall not be required to pay anycost or expense of the arbitration that he or she would not be required to payif the matter had been heard in court. The decision of the arbitrator shall be in writing and shall provide thereasons for the award unless the parties agree otherwise.  Proceedings to enforce, confirm, modify, setaside or vacate an award or decision rendered by the arbitrator will be controlledby and conducted in conformity with the Federal Arbitration Act, 9 U.S.C. Sec 1et. seq. or applicable state law. Nothing in this paragraph shall prohibit or limit the parties fromseeking provisional remedies under California Code of Civil Procedure section 1281.8,including, but not limited to, injunctive relief from a court of competentjurisdiction.  The parties agree thatshould either party initiate litigation in a court in violation of thisparagraph, the party who successfully compels arbitration shall be entitled torecover its/his/her attorney’s fees and costs incurred in compellingarbitration from the party who violated this paragraph, and that a court mayrequire the payment of such attorney’s fees and costs as part of its ordercompelling arbitration.  If the courtdeclines to order the payment of the attorney’s fees and costs to the party whosuccessfully compels arbitration, then the parties agree that the arbitratorshall have the authority to make such an order.

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# 11.         **General Provisions**.

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## 11.1                           **Successors and Assigns**. The rights and obligations of Employer under this Agreement shall inureto the benefit of and shall be binding upon the successors and assigns ofEmployer.  Executive shall not beentitled to assign any of Executive’s

 

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## rights or obligationsunder this Agreement, but this Agreement shall inure to the benefit of andshall be binding upon the heirs of Executive.

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## 11.2                           **Indemnification**.  Theindemnification provisions for Officers and Directors under Employer’s Bylawswill (to the maximum extent permitted by law) be extended to Executive.

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## 11.3                           **Waiver**.  ThisAgreement may not be modified or amended except by an instrument in writing,signed by Executive and by a duly authorized representative of Employer otherthan Executive.  Either party’s failureto enforce any provision of this Agreement shall not in any way be construed asan amendment or waiver of any such provision, or prevent that party thereafterfrom enforcing each and every other provision of this Agreement.

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## 11.4                           **Severability**.  If anyprovision of this Agreement is held by an arbitrator or a court of law to beillegal, invalid or unenforceable, then: (a) that provision shall be deemed amended to achieve as nearly aspossible the same economic effect as the original provision; and (b) thelegality, validity and enforceability of the remaining provisions of thisAgreement shall not be affected or impaired thereby.

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

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## 11.6                           **Governing Law**.  ThisAgreement will be governed by and construed in accordance with the laws of theState of California.

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11.7                           **Notices**.  All noticesor demands of any kind required or permitted to be given by the Company orExecutive under this Agreement shall be given in writing and shall bepersonally delivered (and receipted for) or mailed by certified mail, return receiptrequested, postage prepaid, addressed as follows:

 
| **If to  the Company:**        |   | **If to  Executive:**   |
|--------------------------------|--------|-------------------------|
|                           |   |                    |
| Overland Storage  Inc.         |   | Michael  Gawarecki      |
| 4820 Overland  Ave.            |   | 3631 Brandywine  Street |
| San Diego, CA  92123-1599      |   | San Diego, CA 92117     |
| Attn: Chief  Financial Officer |   |                    |

 

Any such written noticeshall be deemed received when personally delivered or three (3) days afterits deposit in the United States mail as specified above.  Either party may change its address fornotices by giving notice to the other party in the manner specified in thisparagraph 11.7.

 

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11.8                           **Survival**.  The rightsand obligations contained in paragraph 9 (“Nonsolicitation”) shall survive anytermination or expiration of this Agreement for a period of one year, andparagraphs 7 (“Confidentiality/Intellectual Property Agreement and InsiderTrading Policy”), 10 (“Agreement to Arbitrate”) and 11 (“General Provisions”)shall survive any termination or expiration of this Agreement.

 

11.9                           **Entire Agreement**. This Agreement constitutes the entire agreement between the partiesrelating to the subject matter herein and supersedes all prior or simultaneousrepresentations, discussions, negotiations, and agreements, whether written ororal.

 

11.10                     **Counterparts**.  ThisAgreement may be executed in one or more counterparts, each of which shall bedeemed an original, but all of which together shall constitute one and the sameinstrument.

 

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

 

Executive:

 

 
| /s/ W. Michael Gawarecki |   | Dated:  September 9, 2005 |
|--------------------------|--------|--------------------------------|
| W. Michael  Gawarecki    |   |

 

 

Company:

 

*Overland Storage, Inc.*

 

 
| /s/ Christopher P. Calisi |   | Dated:  September 9, 2005 |
|---------------------------|--------|-------------------------------------|
| Christopher P.  Calisi    |   |

President and Chief ExecutiveOfficer

 

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**EXHIBIT A**

 

GENERAL RELEASE

 

This GENERAL RELEASE (“Release”)is entered into effective as of                           ,(the “Effective Date”) by and between Overland Storage Inc., aCalifornia corporation, having its principal offices at 4820 Overland Ave. ,San Diego, California 92123-1599 (the “Company”) and W. Michael Gawarecki,an individual residing at **[                          ]**(“Employee”) with reference to the following facts:

 

RECITALS

 

A.                                   Theparties entered into an Employment Agreement (the “Agreement”) dated asof October 20, 2004, by which the parties agreed that upon the occurrenceof certain conditions, Employee would become eligible for the Severance Paymentas defined in the Agreement in exchange for Employee’s release of the Companyfrom all claims which Employee may have against the Company as of the date ofthe termination of Employee’s employment.

 

B.                                     Theparties desire to dispose of, fully and completely, all claims which Employeemay have against the Company in the manner set forth in this Release.

 

AGREEMENT

 

1.               Release.  Employee, for himself and his heirs,successors and assigns, fully releases and discharges the Company, itsofficers, directors, employees, shareholders, attorneys, accountants, otherprofessionals, insurers and agents (collectively, “Agents”), and all entitiesrelated to each party, including, but not limited to, heirs, executors,administrators, personal representatives, assigns, parent, subsidiary andsister corporations, affiliates, partners and co-venturers (collectively, “RelatedEntities”), from all rights, claims, demands, actions, causes of action,liabilities and obligations of every kind, nature and description whatsoever,Employee now has, owns or holds or has at anytime had, owned or held or mayhave against the Company, Agents or Related Entities from any sourcewhatsoever, whether or not arising from or related to the facts recited in thisRelease.  Employee specifically releasesand waives any and all claims arising under any express or implied contract,rule, regulation or ordinance, including, without limitation, Title VII of theCivil Rights Act of 1964, the Civil Rights Act of 1991, the Americans withDisabilities Act, the California Fair Employment and Housing Act, and the AgeDiscrimination in Employment Act, as amended (“ADEA”).

 

2.               Section 1542Waiver.  This Release is intended asa full and complete release and discharge of any and all claims that Employeemay have against the Company, Agents or Related Entities.  In making this release, Employee intends torelease each of the Company, Agents and Related Entities from liability of anynature whatsoever for any claim of damages or injury or for equitable ordeclaratory relief of any kind, whether the claim, or any facts on which suchclaim might be based, is known

 

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

 

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

 

Employeeacknowledges that he may discover facts different from or in addition to thosethat he now believes to be true with respect to this Release.  Employee agrees that this Release shallremain effective notwithstanding the discovery of any different or additionalfacts.

 

3.               Waiverof Certain Claims.  Employeeacknowledges that he has been advised in writing of his right to consult withan attorney prior to executing the waivers set out in this Release, and that hehas been given a 21-day period in which to consider entering into the releaseof ADEA claims, if any.  In addition,Employee acknowledges that he has been informed that he may revoke a signedwaiver of the ADEA claims for up to seven (7) days after executing thisRelease.

 

4.               NoUndue Influence.  This Release isexecuted voluntarily and without any duress or undue influence.  Employee acknowledges that he has read thisRelease and executed it with his full and free consent.  No provision of this Release shall beconstrued against any party by virtue of the fact that such party or itscounsel drafted such provision or the entirety of this Release.

 

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

 

6.               Severability.  If any provision of this Release is held tobe invalid, void or unenforceable, the balance of the provisions of thisRelease shall, nevertheless, remain in full force and effect and shall in noway be affected, impaired or invalidated.

 

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

 

8.               DisputeResolution Procedures.  Any disputeor claim arising out of this Release shall be subject to arbitration inaccordance with the Agreement.

 

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9.               EntireAgreement.  This Agreementconstitutes the entire agreement of the parties with respect to the subjectmatter of this Agreement, and supersedes all prior and contemporaneousnegotiations, agreements and understandings between the parties, oral orwritten.

 

10.         Modification;Waivers.  No modification,termination or attempted waiver of this Agreement will be valid unless inwriting, signed by the party against whom such modification, termination orwaiver is sought to be enforced.

 

11.         Amendment.  This Agreement may be amended or supplementedonly by a writing signed by Employee and the Company.

 

 
| Dated: |   |                 |   |   |
|--------|--------|----------------------|--------|--------|
|   |   | W. Michael Gawarecki |
|   |
|   |

 

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**EXHIBIT B**

 

**Outsource Project Metrics**

 
| **Metric**         | ** ** | **Description**                                                                                                                  | ** ** | **Baseline**                                                                                                        | ** ** | **Post Outsource**                                                                                                  |
|--------------------|------------|----------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------|
| On Time Delivery   |       | Measures actual  Overland performance to commit dates                                                                            |       | 96.5%                                                                                                               |       | > 96.5%                                                                                                          |
| Out of Box Audit   |       | 10% sample of  finished goods. Checks for power-up and correct configuration                                                     |       | REO: 97.7%  WGS: 100%  NEO 8000: 95.5%  NEO 2000: 9.5%  NEO 4000: 99.2%  MSL Lite: TBD                              |       | All metrics post-outsource will be equal to or  greater than the last Overland measures                             |
| Product Lead Times |       | Delivery lead  times. Varies by product line.                                                                                    |       | REO: 3-5 Days  WGS: 3 Days  NEO 8000: 10 Days  NEO 2000: 3 Days  NEO 4000: 5 Days  MSL Lite: 5 Days  Spares: 5 Days |       | REO: 3-5 Days  WGS: 3 Days  NEO 8000: 10 Days  NEO 2000: 3 Days  NEO 4000: 5 Days  MSL Lite: 5 Days  Spares: 5 Days |
| 1st Pass Yields    |       | Product yields  associated with operator error. A measure of how well SCI has trained and  where they are on the learning curve. |       | REO: 99.2%  WGS: 99.7%  NEO 8000: 91.3%  NEO 2000: 98.9%  NEO 4000: 96.7%  MSL Lite: TBD                            |       | All metrics post-outsource will be equal to or  greater than the last Overland measures                             |
| Shipping Accuracy  |       | Errors made by  shipping personnel when processing orders (wrong product, quantity,  addresses, etc)                             |       | 99.7%                                                                                                               |       | 99.7%                                                                                                               |
| Inventory Accuracy |       | A measure for  those parts consigned by Overland to SCI. Currently will include tape drives  and fiber channel boards            |       | 99%                                                                                                                 |       | 99%                                                                                                                 |
| Cost Reduction     |       | We will measure  actual cost savings by product line. Our estimates were a minimum of $3.5  million annual savings               |       | FY05 costs at time of transfer                                                                                      |       | We expect to be at the minimum run rate by end of  Q3, FY06                                                         |

 

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