Exhibit 10.5

 

OVERLAND STORAGE, INC.

SUMMARY SHEET
OF

DIRECTOR AND EXECUTIVE OFFICER COMPENSATION

 

Non-Employee Director Compensation

 

Our compensation plan for non-employee directors consists of both a cash
component and an equity component. We pay each non-employee director $5,000 per
quarter, plus $2,500 for each Board meeting attended ($1,250 if held
telephonically), plus reimbursement for expenses. The Chairman of the Board
receives an additional $2,500 per quarter in addition to the non-employee
director fee of $5,000 per quarter.  Members of the Audit Committee and the
Compensation Committee receive a retainer of $500 per quarter in lieu of a fee
for committee meetings attended during a quarter and members of the Nominating
and Governance Committee receive $500 for each committee meeting attended ($250
if held telephonically and no fee if held the same day as a Board meeting).

 

In addition to the cash component of compensation, each non-employee director
receives stock options.  Effective November 13, 2007, under our 2003 Equity
Incentive Plan, which we refer to as the 2003 Incentive Plan, each non-employee
director receives a six-year nonqualified stock option to purchase 18,000 shares
on the same date as the company’s annual meeting of shareholders.  Prior to
November 13, 2007, the non-employee director options granted under the 2003
Incentive Plan had ten-year terms.  These options are exercisable at fair market
value on the date of grant and vest in equal monthly installments over a
12-month period, as measured from the grant date.  When a new non-employee
director joins the board, such director will be awarded a new option for a
number of shares determined by multiplying 1,500 by the number of months
remaining until the next scheduled annual meeting date, giving credit for any
partial month.  Such option will vest at the rate of 1,500 shares per month and
will be fully vested at the next annual meeting date, at which time the director
will receive the normal annual grant.

 

On November 13, 2007, the date of our last annual meeting of shareholders,
Robert Degan, Nora Denzel, Eric Kelly, Bill Miller, Scott McClendon and Michael
Norkus each received an option for 18,000 shares.

 

Compensation of Executive Officers

 

Our executive officers serve at the discretion of the Board of Directors. From
time to time, the Compensation Committee of the Board of Directors reviews and
determines the salaries that are paid to our executive officers. The following
table sets forth the annual salary rates for our current executive officers as
of the date of this report:

 

Robert Farkaly

 

$

280,000

*

W. Michael Gawarecki

 

$

270,000

 

Kurt L. Kalbfleisch

 

$

225,000

 

Vernon A. LoForti

 

$

400,000

 

Ravi Pendekanti

 

$

250,000

 

 

--------------------------------------------------------------------------------

   * $140,000 of this amount is tied to performance and is paid in the form of a
sales commission.

 

Employment Arrangements with Current Executive Officers

 

The following discussion summarizes the employment arrangements between us and
our current executive officers as of the date of this report on Form 10-Q:

 

Robert Farkaly.  As our Vice President of Worldwide Sales, Mr. Farkaly is an
at-will employee and may be terminated by us for any reason, with or without
notice.  He currently earns an annual salary of $280,000, with $140,000 of that
amount guaranteed as base salary and $140,000 tied to performance.  On
August 13, 2007, he received an option to purchase up to 125,000 shares of our
common stock at the purchase price of $1.62 per share (the closing price of our
common stock on the date of grant) pursuant to the 2003 Incentive Plan.  The
option will vest over one year in equal monthly installments. The option will
accelerate upon a “Change in Control” as defined in the 2003 Incentive Plan. 
The option has a three-year life, subject to continuous service.

 

--------------------------------------------------------------------------------

 

W. Michael Gawarecki.   As our Vice President of Operations and New Product
Delivery, Mr. Gawarecki is an at-will employee and may be terminated by us for
any reason, with or without notice.  On February 14, 2008, Mr. Gawarecki was
appointed to the additional position of Vice President of New Product Delivery. 
In connection with this expanded role, his annual salary was increased from
$246,500 to 270,000. On August 13, 2007, he received an option to purchase up to
100,000 shares of our common stock at the purchase price of $1.62 per share (the
closing price of our common stock on the date of grant) pursuant to the 2003
Incentive Plan.  The option will vest over one year in equal monthly
installments. The option will accelerate upon a “Change in Control” as defined
in the 2003 Incentive Plan.  The option has a three-year life, subject to
continuous service.

 

Kurt L. Kalbfleisch.  As our Vice President of Finance and Chief Financial
Officer, Mr. Kalbfleisch is an at-will employee and may be terminated by us for
any reason, with or without notice.  Mr. Kalbfleisch was appointed as our Chief
Financial Officer on February 14, 2008.  He had been serving as our Interim
Chief Financial Officer since August 7, 2007.  In connection with his
appointment as Chief Financial Officer, his annual salary was increased from
$200,000 to 225,000 and he received a stock option as described below.
Mr. Kalbfleisch earned cash bonuses of $10,000 each in October 2007,
January 2008 and April 2008 and will earn an additional cash bonus of $10,000 in
July 2008, subject to his continued employment at our company.  On August 13,
2007, he received an option to purchase up to 75,000 shares of the company’s
common stock at the purchase price of $1.62 per share (the closing price of our
common stock on the date of grant) and on February 14, 2008 he received an
option to purchase up to 25,000 shares of the company’s common stock at the
purchase price of $1.32 per share (the closing price of our common stock on the
date of grant).  Both options (i) were granted pursuant to the 2003 Incentive
Plan, (ii) will vest over one year in equal monthly installments, (iii) will
accelerate upon a “Change in Control” as defined in the 2003 Incentive Plan, and
(iv) have a three-year life, subject to continuous service.

 

Vernon A. LoForti.  In connection with his appointment as President and Chief
Executive Officer on August 7, 2007, Mr. LoForti’s annual base salary was
increased from $297,750 to $400,000.  We entered into an amended and restated
employment agreement with Mr. LoForti on September 27, 2007.  The amended and
restated employment agreement has a one-year term, automatically renews for
successive one-year terms, and provides that our Board may unilaterally modify
Mr. LoForti’s compensation at any time.  If we terminate Mr. LoForti’s
employment without cause, then we are obligated to pay him a severance payment
equal to his base salary, payable on a pro-rated basis according to our normal
payroll cycle for the 12 months following his termination. In addition, he is
entitled to receive accelerated vesting for any stock options that would
otherwise have vested during the 12-month period following his termination. He
is also entitled to receive the cash severance payment if he resigns for good
reason because of any of the following events: (i) reduction in compensation of
more than 10%; (ii) change in position or duties so that his duties are no
longer consistent with his previous position; or (iii) change in principal place
of work to more than 50 miles from our current facility without his approval. 
On August 13, 2007, he received an option to purchase up to 250,000 shares of
our common stock at the purchase price of $1.62 per share (the closing price of
our common stock on the date of grant) pursuant to the 2003 Incentive Plan.  The
option will vest over one year in equal monthly installments. The option will
accelerate upon a “Change in Control” as defined in the 2003 Incentive Plan. 
The option has a three-year life, subject to continuous service.

 

Ravi Pendekanti.  Mr. Pendekanti joined our company on April 21, 2008 as our
Vice President of Worldwide Marketing. Mr. Pendekanti is an at-will employee and
may be terminated by us for any reason, with or without notice.  He currently
earns an annual salary of $250,000.  In connection with his employment, he
received a $50,000 one-time signing bonus and a relocation allowance of $50,000,
subject to a pro-rated reimbursement if he voluntarily terminates his employment
within the first 12 months of his hire date.  In connection with the relocation,
we will pay for temporary housing, one round-trip flight per week from San Diego
to San Francisco, and the services of a relocation advisor.  If Mr. Pendekanti
is terminated without cause within the first 12 months of employment, we have
agreed to provide severance in the amount of six months base pay and 12 months
medical COBRA coverage in exchange for a general release of claims against our
company.  These severance benefits will not apply if Mr. Pendekanti is
terminated within two years following the consummation of a change of control,
in which case he would receive the severance set forth in the retention
agreement we signed with Mr. Pendekanti as described below.  On April 28, 2008,
Mr. Pendekanti  received an option to purchase up to 100,000 shares of the
company’s common stock at the purchase price of $1.18 per share (the closing
price of our common stock on the date of grant) pursuant to the 2003 Incentive
Plan.  The option will vest over one year in equal monthly installments. The
option will accelerate upon a “Change in Control” as defined in the 2003
Incentive Plan.  The option has a three-year life, subject to continuous
service.

 

--------------------------------------------------------------------------------

 

Retention Agreements

 

We entered into amended and restated retention agreements with Messrs. Farkaly,
Gawarecki, Kalbfleisch and LoForti effective September 27, 2007.  We entered
into a retention agreement with Mr. Pendekanti on April 21, 2008.  These
agreements provide that the officer will receive a lump sum severance payment
if, within two years of the consummation of a change in control of our company,
he is terminated without cause or resigns with good reason. These severance
payments are based on the officer’s base salary at the time of the consummation
of the change in control or the termination date, whichever is higher, plus his
or her target bonus for the year prior to the consummation of the change in
control, or in the case of Mr. Farkaly, the target sales commission he is
eligible to receive, prior to a change of control, in the event targeted revenue
is achieved for the year. The agreements provide that, upon a change in control,
Mr. LoForti would be entitled to receive an amount equal to 2.0 times his base
salary plus target bonus; and Messrs. Farkaly, Gawarecki, Kalbfleisch, and
Pendekanti each would be entitled to an amount equal to his respective base
salary plus target bonus (or in the case of Mr. Farkaly, target sales
commission). If any portion of any payment under any of the agreements would
constitute an “excess parachute payment” within the meaning of Section 280G of
the Internal Revenue Code, then that payment will be reduced to an amount that
is one dollar less than the threshold for triggering the tax imposed by
Section 4999 of the Internal Revenue Code.

 

Cancellation of Certain Stock Options

 

In November 2007, our shareholders approved the cancellation of stock options
with an exercise price of $10 per share or more held by our officers and
directors as described in Proposal 2 of our definitive proxy statement filed
with the SEC on October 10, 2007, which description is incorporated herein by
reference.  The stock options cancelled include the following:

 

 

 

Option

 

Number

 

Per Share

 

 

Optionee Name

 

Grant Date

 

of Shares

 

Exercise Price

 

Plan Name

Robert Degan

 

1/20/2003

 

22,000

 

$

14.75

 

2000 Stock Option Plan

 

 

3/3/2005

 

12,000

 

$

14.67

 

2003 Equity Incentive Plan

Robert Farkaly

 

6/25/2003

 

5,000

 

$

20.25

 

2000 Stock Option Plan

 

 

11/18/2004

 

5,000

 

$

13.98

 

2003 Equity Incentive Plan

Mike Gawarecki

 

4/21/2000

 

20,000

 

$

10.00

 

1997 Stock Option Plan

 

 

7/10/2002

 

52,500

 

$

13.50

 

2000 Stock Option Plan

 

 

11/17/2003

 

10,000

 

$

19.33

 

2003 Equity Incentive Plan

 

 

11/15/2004

 

31,400

 

$

14.29

 

2003 Equity Incentive Plan

Kurt Kalbfleisch

 

4/21/2000

 

8,000

 

$

10.00

 

1995 Stock Option Plan

 

 

7/2/2003

 

10,000

 

$

20.13

 

1995 Stock Option Plan

 

 

11/18/2004

 

3,500

 

$

13.98

 

2003 Equity Incentive Plan

Vernon LoForti

 

4/21/2000

 

20,000

 

$

10.00

 

1997 Stock Option Plan

 

 

7/10/2002

 

60,000

 

$

13.50

 

2000 Stock Option Plan

 

 

11/17/2003

 

10,000

 

$

19.33

 

2003 Equity Incentive Plan

 

 

11/15/2004

 

29,700

 

$

14.29

 

2003 Equity Incentive Plan

Scott McClendon

 

1/20/2003

 

11,000

 

$

14.75

 

2000 Stock Option Plan

 

 

11/17/2003

 

18,000

 

$

19.33

 

2003 Equity Incentive Plan

 

 

11/15/2004

 

18,000

 

$

14.29

 

2003 Equity Incentive Plan

Michael Norkus

 

8/11/2004

 

4,500

 

$

11.05

 

2003 Equity Incentive Plan

 

 

11/15/2004

 

18,000

 

$

14.29

 

2003 Equity Incentive Plan

Robert Scroop

 

7/10/2002

 

60,000

 

$

13.50

 

2000 Stock Option Plan

 

 

11/17/2003

 

10,000

 

$

19.33

 

2003 Equity Incentive Plan

 

 

11/15/2004

 

29,700

 

$

14.29

 

2003 Equity Incentive Plan

 

 

 

 

 

 

 

 

 

Total Shares Cancelled

 

 

 

468,300

 

 

 

 

 

--------------------------------------------------------------------------------