Exhibit 10.2

EXECUTION VERSION

EMPLOYMENT AND SEVERANCE AGREEMENT

THIS EMPLOYMENT AND SEVERANCE AGREEMENT (this “Agreement”) is entered into
between Overland Storage, Inc., a California corporation (“Employer” or the
“Company”) and Kurt L. Kalbfleisch (“Executive”) on September 29, 2009 (the
“Effective Date”). This Agreement has been negotiated by and between the parties
and is effective on the Effective Date.

The parties agree as follows:

1. Positions And Duties. Executive will be employed by the Company initially in
the position of Vice President and Chief Financial Officer (“CFO”), reporting to
the Chief Executive Officer (“CEO”), and shall do and perform all services, acts
or things necessary or advisable to support the business of the Company.
Executive shall also perform such duties that are normally associated with the
position of CFO consistent with the bylaws of the Company and such other duties
as may be requested by the CEO. Termination of Executive as an officer of the
Company for any reason shall also constitute the resignation by Executive,
effective upon such termination, of any and all officers or positions with the
Company or any affiliate of the Company. Upon request, Executive shall provide
the Company with additional written evidence of any such resignation.

1.1. Best Efforts/Full-Time. During the Employment Term (as defined in
Section 1.2 herein), Executive will act in the best interests of Employer and
devote his full business time and best efforts to the performance of his duties
under this Agreement. Executive agrees to be available to render such services
at all reasonable times and places and in accordance with Employer’s directives.
Executive shall be assigned to work in the Company’s corporate offices in San
Diego, California, but may be required to travel in connection with his duties.
Executive will abide by all policies, procedures, and decisions made by
Employer, as well as all federal, state and local laws, regulations or
ordinances applicable to his employment. During his employment, Executive must
not engage in any work, paid or unpaid, that creates an actual or potential
conflict of interest with Employer’s business interests and if, in the opinion
of the CEO or the Company’s Board of Directors (the “Board”), an actual or
potential conflict exists, the CEO or Board may in its sole discretion require
Executive to choose either to (i) discontinue the other work or (ii) resign
without Good Reason from his employment with Employer. The foregoing restriction
shall not preclude Executive from engaging in civic, charitable or religious
activities, or from serving on boards of directors of companies or organizations
so long such services do not pose a material conflict or materially interfere
with his responsibilities to Employer. It is anticipated that Executive will
generally devote no less than 40 hours per week to his duties for Employer
unless he is on vacation or a leave of absence in accordance with the terms of
this Agreement or the Company’s policies as in effect from time to time.

1.2. Term Of Employment. This Agreement shall commence on the Effective Date,
and, unless terminated by either party in accordance with Section 5 herein,
shall continue until the third anniversary of the Effective Date. Thereafter,
unless Executive’s employment is terminated in accordance with Section 4 or
unless one party provides the

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

other party with written notice of non-renewal of the Agreement at least 30 days
prior to the applicable end date, this Agreement shall automatically renew for
an additional one year term on such date and on each anniversary thereof (the
period of employment hereunder shall be referred to herein as the “Employment
Term”). This Agreement shall continue during the Employment Term to govern the
terms and conditions of Executive’s employment, unless modified by the parties
hereto in writing.

1.3. Termination. Executive reaffirms that Executive’s employment relationship
with the Company is at-will and is terminable at any time and for any reason by
either the Company or Executive, subject to the provisions hereof.

2. Compensation.

2.1. Base Salary. As of the Effective Date and as compensation for the proper
and satisfactory performance of all duties under this Agreement, Executive shall
earn a gross annual base salary of $225,000 ($9,375 gross per bi-weekly payroll
period), less applicable state and federal taxes and other authorized payroll
deductions, payable in accordance with Employer’s normal payroll practices but
in no event less frequently than once per month (the “Base Salary”).
Notwithstanding the foregoing, the Base Salary will be reduced by 10%
immediately upon the Effective Date and will remain at such reduced level until
such time as the 10% salary reduction is lifted for the other Vice Presidents of
the Company who are executive officers and subject to such reduction. For
purposes of calculation of the severance pursuant to Section 4, the original
Base Salary is deemed to be $225,000.

2.2. Bonus. Executive will be eligible to receive potential quarterly or annual
cash bonuses solely as determined (if any) from time to time by the Board or
duly authorized committee thereof (and in each case in the sole discretion of
the Board or duly authorized committee thereof). Any such bonuses will be based
on the Company’s fiscal quarters or fiscal year, and will be paid to Executive
within 74 days following the end of such fiscal quarter or year. If Executive’s
employment terminates before the end of a fiscal quarter or year under
Section 4.2, Section 4.3 or Section 4.5, Executive shall be eligible to receive
a prorated amount of any target bonus that may be established and in effect
(“Target Bonus”) for the fiscal quarter or year in which Executive’s employment
with the Company terminates. If Executive’s employment terminates before the end
of a fiscal quarter or year under Section 4.4, Executive shall be eligible to
receive a prorated amount of bonus actually earned in accordance with the terms
and conditions of the Company’s bonus program for the fiscal quarter or year in
which Executive’s employment with the Company terminates. If Executive’s
employment terminates before the end of a fiscal quarter or year under
Section 4.1, Executive shall not be eligible to receive a bonus for that fiscal
quarter or year.

2.3. Equity Incentives. Executive will be eligible to receive stock options or
other equity incentives as determined from time to time by the Board or duly
authorized committee thereof, and in each case in its sole discretion and in
accordance with terms and conditions determined by the Board or duly authorized
committee thereof.

 

-2-

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

2.4. Unilateral Modification of Compensation. Subject to Executive’s right to
resign for Good Reason under Section 4.3 of this Agreement, Employer reserves
the right to modify Executive’s cash compensation, at any time, at its sole and
absolute discretion.

3. Customary Fringe Benefits. Executive shall be eligible for customary and
usual benefits generally available to executive level employees of Employer,
subject to the terms and conditions set forth in the applicable benefit plan or
policy, including reimbursement for all eligible out of pocket expenses
currently covered under the Company’s executive reimbursement policy. Employer
reserves the right to change or eliminate any of the fringe benefits provided to
executive level employees on a prospective basis at any time, at Employer’s sole
and absolute discretion; provided, however, that Executive may, in his
discretion, retain, or obtain, his personal life, accident, medical, dental,
vision and/or other insurance plans and benefits, the costs of which shall be
reimbursed by the Company to Executive (not to exceed the total cost of
comparable benefits offered by the Company to Executive and his dependents
through the Company’s plans). Executive understands that all benefits provided
in this section may be reduced by, or subject to, all applicable taxes.
Executive shall be eligible for paid annual flexible time off and all paid
Employer holidays, each in accordance with the Employer’s standard policies as
apply to other executive employees of the Company. Executive will be reimbursed
for all reasonable, out-of-pocket business expenses incurred in the performance
of his duties on behalf of Employer subject to Executive’s compliance with the
Company’s established expense reimbursement policy. Reimbursement for air travel
shall be subject to the Employer’s generally applicable travel expense
reimbursement policies.

4. Termination.

4.1. Termination For Cause By Employer. Employer may terminate Executive’s
employment under this Agreement immediately at any time for “Cause,” which shall
include, but is not limited to: (a) acts or omissions constituting reckless or
willful misconduct on the part of Executive with respect to his obligations or
otherwise relating to the business of Employer that causes material harm to the
Company or its reputation; (b) Executive’s material breach of this Agreement,
which breach Executive fails to cure within 30 days after receiving written
notice from the Board that specifies the specific conduct giving rise to the
alleged breach; (c) Executive’s conviction or entry of a plea of nolo contendere
for fraud, theft or embezzlement, or any felony or crime of moral turpitude; or
(d) Executive’s willful neglect of duties as determined in the sole and
exclusive discretion of Employer, which Executive fails to cure within 30 days
after receiving written notice from the Board that specifies the specific duties
that Executive has failed to perform.

4.1.1. Entitlements Upon Termination For Cause. In the event that Executive’s
employment is terminated for Cause in accordance with Section 4.1, Executive
shall be entitled to receive: (a) the Base Salary then in effect through the
date of termination; (b) the amount of any unpaid bonus to which Executive is
then entitled pursuant to Section 2.2, if any; and (c) any expense
reimbursements to which Executive is entitled by virtue of his prior employment
with Employer (collectively, (a), (b) and (c) above are referred to herein as
the “Standard

 

-3-

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

Entitlements”). The Standard Entitlements shall be paid to such Executive within
30 days following termination or earlier if required by law. In the event of
such termination for Cause, Executive shall not be entitled to receive (i) the
Severance Payment or Accelerated Vesting and Extended Exercise Period Severance
Benefit (as each are defined in Section 4.2 below) or any portion thereof, or
(ii) any further vesting of stock options, and all other obligations of Employer
to Executive pursuant to this Agreement shall automatically terminate and be
completely extinguished.

4.2. Termination Without Cause By Employer. Employer may terminate Executive’s
employment without Cause at any time and for any (or no) reason. If Employer
terminates Executive’s employment without Cause, Executive shall be entitled to
receive the Standard Entitlements, which shall be paid to Executive within 30
days following termination or earlier if required by law. In addition to the
above, so long as Executive timely complies with all of the conditions in
Section 4.2.1 below, Executive will be entitled to an aggregate severance
payment equal to the sum of (i) an amount equal to 100% of the greater of
Executive’s then Base Salary or original Base Salary, plus (ii) a portion of the
Target Bonus prorated based on the number of days Executive was employed during
the period on which the Target Bonus is based, plus (iii) an amount equal to the
premiums Executive would be required to pay to continue life, accident, medical,
dental and vision insurance coverage under the Company’s insurance plans for
Executive and his eligible dependents pursuant to the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended (“COBRA”) for a period of
twelve(12) months following the date of termination, plus (iv) the amount
necessary for Executive to continue life, accident, medical and dental insurance
benefits for Executive and his eligible dependents for insurance coverage that
he personally maintained in amounts substantially similar to those which
Executive was entitled to receive under Section 3 of this Agreement immediately
prior to the date of termination for a period of twelve(12) months following the
date of termination (collectively, the “Severance Payment”). Subject to Sections
5 and 10, the Severance Payment shall be paid to Executive (less applicable
state and federal taxes or other payroll deductions) in standard payroll cycles
until the end of the twelfth month following the date of termination, provided
that such payments shall not commence before Executive has satisfied the Release
requirements specified in Section 4.2.1 and provided, further, that the initial
payment shall commence sixty days after the Executive’s Separation from Service
occurs. As used herein, a “Separation from Service” occurs when Executive dies,
retires, or otherwise has a termination of employment with the Company that
constitutes a “separation from service” within the meaning of Treasury
Regulation Section 1.409A-1(h)(1), without regard to the optional alternative
definitions available thereunder. Upon Executive’s termination of employment by
the Company without Cause, subject to Section 5 and also subject to Executive
timely satisfying the conditions specified in Section 4.2.1, any unvested
portion of Executive’s then outstanding stock options and other equity-based
awards granted by the Company that would otherwise vest during the twelve
(12) months following the date of such termination shall vest in full as of the
date of such termination, and, in the case of such vested stock options
(including those stock options whose vesting was accelerated pursuant to the
preceding clause), may be exercised in whole or in part at any time

 

-4-

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

within one (1) year of the date of such termination without Cause, subject to
earlier termination upon the expiration of the maximum term of the applicable
options or in connection with a corporate transaction involving the Company to
the extent provided in the Plan and/or the award agreements that evidence such
options (collectively, the “Accelerated Vesting and Extended Exercise Period
Severance Benefit”). In the event of such termination without Cause, all of
Employer’s other obligations pursuant to this Agreement except as provided in
this Section 4.2 shall terminate automatically and extinguish completely
following the date of such termination without Cause.

4.2.1. Conditions to Receive Severance Payment and the Accelerated Vesting and
Extended Exercise Period Severance Benefit. The Severance Payment and the
Accelerated Vesting and Extended Exercise Period Severance Benefit will be paid
provided that all of the following conditions are timely met: (i) Executive
complies with all surviving provisions of this Agreement as specified in
Section 12.8 below; and (ii) within not more than 55 days of his termination of
employment, the Company has received from the Executive an executed and
effective (meaning that any time period for the Executive to revoke a release of
claims has lapsed without revocation) full general release substantially in the
form attached hereto as Exhibit A, releasing all claims, known or unknown, that
Executive may have against Employer and Employer’s affiliates arising out of or
in any way related to Executive’s employment or termination of employment with
Employer (the “Release”).

4.3. Voluntary Resignation by Executive for Good Reason. If Executive notifies
Employer in writing within 60 days following the initial existence of one of the
circumstances constituting “Good Reason” (as defined in Section 4.3.1), Employer
will be given 30 days from the receipt of such notice in which Employer may
remedy or cure such condition. For purposes of the foregoing, if Executive does
not timely provide notice to Employer, then Executive is deemed to have waived
this right. If Employer fails to remedy or cure the condition set forth in
Executive’s notice within 30 days from the receipt of such notice, then provided
Executive timely resigns his employment for Good Reason as provided in
Section 4.3.1, Executive shall be entitled to receive the Standard Entitlements,
which shall be paid to Executive within 30 days following termination or earlier
if required by law. In addition, so long as Executive timely complies with all
of the conditions set forth in Sections 4.2.1 and 4.3.1, Executive will be
entitled to receive the Severance Payment and the Accelerated Vesting and
Extended Exercise Period Severance Benefit with payments being provided at the
times specified in Section 4.2. In the event of such resignation for Good
Reason, all of Employer’s other obligations pursuant to this Agreement except as
provided in this Section 4.3 shall terminate automatically and extinguish
completely following the date of such resignation for Good Reason.

4.3.1. Executive will be deemed to have resigned for “Good Reason” if Executive
voluntarily terminates employment with the Company within one year after the
initial occurrence of one or more of the following: (a) Employer reduces
Executive’s Base Salary by more than ten percent (10%), (b) Executive’s
authority, title, responsibilities and/or duties are materially reduced so that
his

 

-5-

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

duties are no longer consistent with the position of Vice President and Chief
Financial Officer; (c) a material breach of this Agreement by the Company; or
(d) Employer relocates Executive’s principal place of work to a location more
than fifty (50) miles from Employer’s current office location as of the
Effective Date without his prior written approval

4.4. Voluntary Resignation By Executive without Good Reason. In the event
Executive’s resignation is without Good Reason, Executive shall be entitled to
receive the Standard Entitlements (to be paid within 30 days following such
resignation or earlier as required by law), but shall not be entitled to receive
(i) the Severance Payment or the Accelerated Vesting and Extended Exercise
Period Severance Benefit or any portion thereof, or (ii) any further vesting of
stock options; and all other obligations of Employer to Executive pursuant to
this Agreement shall automatically terminate and be completely extinguished.

4.5. Termination Due to Executive’s Death or Disability. Executive’s employment
shall terminate immediately upon Executive’s death or Disability. Upon
Executive’s death or Disability, the Company shall pay Executive (or his estate,
as applicable) within 30 days after the date of termination (or earlier to the
extent required by law) the Standard Entitlements and shall allow Executive (or
his estate, as applicable) to exercise any vested but unexercised portion of
Executive’s outstanding stock options as of the date of termination of
Executive’s employment within twelve (12) months after the termination of
Executive’s employment with the Company, subject to earlier termination upon the
expiration of the maximum term of the applicable options or in connection with a
corporate transaction involving the Company to the extent provided in the Plan
and/or the award agreements that evidence such options. For purposes of this
Agreement, “Disability” shall mean Executive’s inability because of illness or
incapacity substantiated by appropriate medical authority selected by the
Company, to render the essential functions of Executive’s job as contemplated by
this Agreement over a period of 180 consecutive days after taking into account
any reasonable accommodations that would not cause an undue burden on the
Company.

5. Effect of Change Of Control. In the event Executive’s employment is
terminated by him for Good Reason or by the Company without Cause during the two
year period following a “Change of Control” (as defined in Section 5.1), then
the Severance Payment shall instead be paid to Executive in a single lump sum 60
days after his termination of employment provided such accelerated timing of the
Severance Payment does not violate Internal Revenue Code (“Code”) Section 409A
and any unvested portion of Executive’s then outstanding stock options and other
equity-based awards granted by the Company shall vest in full as of the date of
such termination.

 

-6-

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

5.1. Change of Control Definition. A “Change of Control” is defined to have
occurred if, and only if, during the Employment Term:

(a) any individual, partnership, firm, corporation, association, trust,
unincorporated organization or other entity or person, or any syndicate or group
deemed to be a person under Section 14(d)(2) of the Securities Exchange Act of
1934 (“Exchange Act”) is or becomes the “Beneficial Owner” (as defined in Rule
13d-3 of the General Rules and Regulations under the Exchange Act), directly or
indirectly, of securities of the Company representing 30% or more of the
combined voting power of the Company’s then outstanding securities entitled to
vote in the election of directors of the Company;

(b) there occurs a reorganization, merger, consolidation or other corporate
transaction involving the Company (“Transaction”), in each case, with respect to
which the shareholders of the Company immediately prior to such Transaction do
not, immediately after the Transaction, own more than fifty (50) percent of the
combined voting power of the Company or other corporation resulting from such
Transaction; or

(c) all or substantially all of the assets of the Company are sold, liquidated
or distributed.

6. Confidentiality/Intellectual Property Agreement And Insider Trading Policy.
Executive agrees that he has read, signed, and will abide by the terms and
conditions of Employer’s Confidentiality/Intellectual Property Agreement and
Employer’s Insider Trading Policy.

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

7. Non-Competition. Except with the prior written consent of Employer, Executive
will not, during the Employment Term, engage in competition with Employer,
either directly or indirectly, in any manner or capacity, as adviser, principal,
agent, partner, officer, director, employee, member of any association or
otherwise, in any phase of the business of developing, manufacturing and
marketing of products which are in the same field of use or which otherwise
compete with the product or products actively under development by Employer.
Except as permitted herein, Executive agrees not to acquire, assume or
participate in, directly or indirectly, any position, investment or interest
known by Executive to be adverse or antagonistic to Employer, its business or
prospects, financial or otherwise. Ownership by Executive, as a passive
investment, of less than one percent (1%) of the outstanding shares of capital
stock of any corporation with one or more classes of its capital stock listed on
a national securities exchange or publicly traded in the over-the-counter market
shall not constitute a breach of this Section 7.

 

-7-

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

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

9. Agreement To Arbitrate. Executive and Employer agree to arbitrate any claim
or dispute (“Dispute”) arising out of or in any way related to this Agreement,
the employment relationship between Employer and Executive or the termination of
Executive’s employment, except as provided in Section 9.1, to the fullest extent
permitted by law. Except as provided in Section 9.1, this method of resolving
Disputes shall be the sole and exclusive remedy of the parties. Accordingly, the
parties understand that, except as provided herein, they are giving up their
rights to have their disputes decided in a court of law and, if applicable, by a
jury, and instead agree that their disputes shall be decided by an arbitrator.

9.1. Scope of the Agreement. A Dispute shall include all disputes or claims
between Executive and Employer arising out of, concerning or relating to
Executive’s employment by Employer, including, without limitation: claims for
breach of contract, tort, discrimination, harassment, wrongful termination,
demotion, discipline, failure to accommodate, compensation or benefits claims,
constitutional claims and claims for violation of any local, state or federal
law, or common law, to the fullest extent permitted by law. A Dispute shall not
include any dispute or claim, whether brought by either Executive or Employer,
for: (a) workers’ compensation or unemployment insurance benefits; or (b) the
exclusions from arbitration specified in the California Arbitration Act,
California Code of Civil Procedure section 1281.8. For the purpose of this
Section 9, references to “Employer” include Employer and all related or
affiliated entities and their employees, supervisors, officers, directors,
owners, shareholders, agents, pension or benefit plans, pension or benefit plan
sponsors, fiduciaries, administrators, and the successors and assigns of any of
them, and this Section 9 shall apply to them to the extent that Executive’s
claims arise out of or relate to their actions on behalf of Employer.

9.2. Consideration. The parties agree that their mutual promise to arbitrate any
and all disputes between them, except as provided in Section 9.1, rather than
litigate them before the courts or other bodies, provides adequate consideration
for this Section 9.

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

 

-8-

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

9.4. Arbitration Procedure. The arbitration will be conducted by JAMS pursuant
to its Rules for the Resolution of Employment Disputes in San Diego, California
by a single, neutral arbitrator. The parties are entitled to representation by
an attorney or other representative of their choosing. The arbitrator shall have
the power to enter any award that could be entered by a judge of the Superior
Court of the State of California, as applicable to the cause of action, and only
such power. The arbitrator shall issue a written and signed statement of the
basis of the arbitrator’s decision, including findings of fact and conclusions
of law. The parties agree to abide by and perform any award rendered by the
arbitrator. Judgment on the award may be entered in any court having
jurisdiction thereof.

9.5. Costs of Arbitration. If Executive initiates arbitration against the
Employer, Executive must pay a filing fee equal to the current filing fee in the
appropriate court had Executive’s claim been brought there, and the Employer
shall bear the remaining costs of the filing fees and arbitration forum,
including arbitrator fees, case management fees, and forum hearing fees (the
“Arbitration Fees”). If the Employer initiates arbitration against Executive,
the Employer shall bear the entire cost of the Arbitration Fees. (Such costs do
not include costs of attorneys, discovery, expert witnesses, or other costs
which Executive would have been required to bear had the matter been filed in a
court.) The arbitrator may award attorneys’ fees and costs to the prevailing
party, except that Executive shall have no obligation to pay any of the
Arbitration Fees even if Employer is deemed the prevailing party. If there is
any dispute as to whether the Employer or Executive is the prevailing party, the
arbitrator will decide that issue. Any postponement or cancellation fee imposed
by the arbitration service will be paid by the party requesting the postponement
or cancellation, unless the arbitrator determines that such fee would cause
undue hardship on the party. At the conclusion of the arbitration, each party
agrees to promptly pay any arbitration award imposed against that party.

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

9.7. Discovery. The parties may obtain discovery in aid of the arbitration to
the fullest extent permitted under law, including California Code of Civil
Procedure Section 1283.05. All discovery disputes shall be resolved by the
arbitrator.

10. Code Section 409A. Notwithstanding anything to the contrary, if, at the time
of his separation of service from Employer, Executive is a “specified employee”
as defined pursuant to Code Section 409A, and if the amounts that Executive is
entitled to receive pursuant to this Agreement are not otherwise exempt from
Code Section 409A, then to the extent necessary to comply with Code
Section 409A, no payments for such non-exempt amounts may be made under this
Agreement before the date which is six (6) months after Executive’s separation
from service from Employer or, if earlier, Executive’s date of death. All such

 

-9-

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

amounts, which would have otherwise been required to be paid during such six
(6) months after Executive’s separation from service shall instead be paid
(without interest) to Executive in one lump sum payment on the first business
day of the seventh month after Executive’s separation from service from Employer
or, if earlier, Executive’s date of death. All such remaining payments shall be
made pursuant to their original terms and conditions. This Agreement is intended
to comply with the applicable requirements of Code Section 409A and shall be
construed and interpreted in accordance therewith. Employer may at any time
amend this Agreement, or any payments to be made hereunder, as necessary to be
in compliance with Code Section 409A and avoid the imposition on Executive of
any potential excise taxes relating to Code Section 409A. Any reimbursements
pursuant to the foregoing provisions of this Agreement shall be paid as soon as
reasonably practicable and in all events not later than the end of Executive’s
taxable year following the taxable year in which the related expense was
incurred. Executive’s rights to reimbursement hereunder are not subject to
liquidation or exchange for another benefit and the amount of expenses eligible
for reimbursement in one taxable year shall not affect the amount of expenses
eligible for reimbursement in any other taxable year.

11. Limitation on Payments. In the event that it is determined that any payment
or distribution of any type to or for Executive’s benefit made by the Company,
by any of its affiliates, by any person who acquires ownership or effective
control or ownership of a substantial portion of the Company’s assets (within
the meaning of Section 280G of the Internal Revenue Code of 1986, as amended,
and the regulations thereunder (the “Code”)) or by any affiliate of such person,
whether paid or payable or distributed or distributable pursuant to the terms of
an employment agreement or otherwise, would be subject to the excise tax imposed
by Section 4999 of the Code or any interest or penalties with respect to such
excise tax (such excise tax, together with any such interest or penalties, are
collectively referred to as the “Excise Tax”), then such payments or
distributions or benefits shall be payable either:

(i) in full; or

(ii) in a reduced amount with such reduced amount equal to the maximum amount
payable that would result in no portion of such reduced payments or
distributions or benefits being subject to the Excise Tax.

Executive shall receive the greater, on an after-tax basis, of (i) or
(ii) above.

Unless Executive and the Company agree otherwise in writing, any determination
required under this section shall be made in writing by an independent
accountant (which may be the Company’s audit firm) selected by the Company (the
“Accountant”) whose determination shall be conclusive and binding. Executive and
the Company shall furnish the Accountant such documentation and documents as the
Accountant may reasonably request in order to make a determination. The Company
shall bear all costs that the Accountant may reasonably incur in connection with
performing any calculations contemplated by this section.

 

-10-

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

12. General Provisions.

12.1. Successors And Assigns. The rights and obligations of Employer under this
Agreement shall inure to the benefit of and shall be binding upon the successors
and assigns of Employer. Executive shall not be entitled to assign any of
Executive’s rights or obligations under this Agreement.

12.2. Indemnification. The indemnification provisions for officers and directors
under Employer’s Bylaws will (to the maximum extent permitted by law) be
extended to Executive. During the period of Executive’s employment by the
Company and for a period of six years thereafter, the Company shall keep in
place a directors’ and officers’ liability insurance policy (or policies)
providing comprehensive coverage to Executive to the extent that the Company
provides such coverage for any other present or former senior executive or
director of the Company.

12.3. Waiver. Except as provided in Section 2.4, this Agreement may not be
modified or amended except by an instrument in writing, signed by Executive and
by a duly authorized representative of Employer other than Executive. Either
party’s failure to enforce any provision of this Agreement shall not in any way
be construed as an amendment or waiver of any such provision, or prevent that
party thereafter from enforcing each and every other provision of this
Agreement.

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

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

12.6. Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of California.

12.7. Notices. All notices or demands of any kind required or permitted to be
given by the Company or Executive under this Agreement shall be given in writing
and shall be personally delivered (and receipted for) or mailed by certified
mail, return receipt requested, postage prepaid, addressed as follows:

 

IF TO THE COMPANY:    IF TO EXECUTIVE:

Overland Storage, Inc.

4820 Overland Avenue

San Diego, CA 92123

Attn: Chief Executive Officer

  

Kurt Kalbfleisch

(At the address most recently
provided to the Company)

 

-11-

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

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

12.8. Survival. The rights and obligations contained in Section 8
(“Non-Solicitation”) shall survive any termination or expiration of this
Agreement for a period of one (1) year, and Sections 4 (“Termination”), 6
(“Confidentiality/Intellectual Property Agreement and Insider Trading Policy”),
9 (“Agreement to Arbitrate”), 10 (“Code Section 409A”) and 11 (“General
Provisions”) shall survive any termination or expiration of this Agreement.

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

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

12.11. Recovery of Attorney’s Fees and Expenses. If any litigation shall occur
between Executive and Employer which arises out of or as a result of this
Agreement, or which seeks an interpretation of this Agreement, the prevailing
party shall be entitled to recover reasonable attorneys’ fees and costs.

12.12. Tax Consequences. The Company makes no representations regarding the tax
consequence of any provision of this Agreement. Executive is advised to consult
with his own tax advisor with respect to the tax treatment of any payment
contained in this Agreement. All payments made by the Company under this
Agreement to Executive or Executive’s estate or beneficiaries will be subject to
tax withholding pursuant to any applicable laws or regulations.

 

-12-

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

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

 

Executive: /s/ Kurt L. Kalbfleisch

Kurt L. Kalbfleisch

Vice President and Chief Financial Officer

Company: OVERLAND STORAGE, INC. /s/ Eric Kelly

Eric Kelly

Chief Executive Officer

 

-13-

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

EXHIBIT A

GENERAL RELEASE

THIS GENERAL RELEASE (“Release”) is entered into effective as of the date set
forth below by and between Overland Storage, Inc., a California corporation,
having its principal offices at 4820 Overland Avenue, San Diego, California
92123 (the “Company”) and Kurt L. Kalbfleisch, an individual (“Employee”), with
reference to the following facts:

RECITALS

A. The parties entered into an Employment and Severance Agreement (the
“Agreement”) effective as of September 29, 2009, pursuant to which the parties
agreed that upon the occurrence of certain conditions, Employee would become
eligible for the Severance Payment and Accelerated Vesting and Extended Exercise
Period Severance Benefit as each are defined therein in exchange for Employee’s
release of the Company from all claims which Employee may have against the
Company as of the date of the termination of Employee’s employment. All
capitalized terms that are not defined herein shall have the meaning set forth
in the Agreement.

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

RELEASES

1. Consideration: The Employer shall provide Employee the Severance Payment and
the Accelerated Vesting and Extended Exercise Period Severance Benefit in
accordance with the provisions of Sections 4 and 5 of the Agreement.

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

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

and/or payment of related expenses under (i) any applicable law and/or (ii) the
Company’s by laws or articles of incorporation; (b) Employee’s ownership of any
Company vested stock, vested stock units or vested stock options, and/or
Employee’s rights as an existing shareholder of the Company; (c) any rights
Employee has under any applicable stock option plan of the Company and/or any
vested stock option, stock unit, stock purchase or other shareholder agreements
with Company; (d) any vested rights or claims Employee may have under any
Company-sponsored benefit plans (including, without limitation, any medical,
dental, disability, life insurance or retirement plans); (e) any rights Employee
may have to obtain continued health insurance coverage or other benefits
pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended (“COBRA”), and/or any similar state law; (f) any claims Employee may
have against the Company for reimbursement of business or other expenses
incurred in connection with Employee’s employment with Company; (g) any other
claims which as a matter of law cannot be waived; or (h) any obligation of the
Company to Employee pursuant to Sections 4 or 5 of the Agreement.

3. Section 1542 Waiver. This Release is intended as a full and complete release
and discharge of any and all claims that Employee may have against the Company,
Agents or Related Entities. In making this release, Employee intends to release
each of the Company, Agents and Related Entities from liability of any nature
whatsoever for any claim of damages or injury or for equitable or declaratory
relief of any kind, whether the claim, or any facts on which such claim might be
based, is known or unknown to him. Employee expressly waives all rights under
Section 1542 of the California Civil Code, which Employee understands provides
as follows:

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

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

4. Waiver of Certain Claims. Employee acknowledges that he has been advised in
writing of his right to consult with an attorney prior to executing the waivers
set out in this Release, and that he has been given a 21 day period in which to
consider entering into the release of ADEA claims, if any. If Employee does not
consider this Release for the full 21-day period, but instead signs and returns
it earlier, Employee has done so voluntarily with the full understanding that
Employee waived Employee’s right to the full 21-day period. In addition,
Employee is hereby informed that Employee has seven (7) days following the date
of signing of this Agreement in which to revoke this Release. Employee can
revoke the Release by sending notice of his revocation to the attention of the
Chairman of the Board of the Company. If Employee does not send such written
notice of revocation via U.S. Mail postmarked within 7 days, this Release shall
become effective and irrevocable at 12:01 a.m. on the eighth (8th) day after
Employee signs it (the “Effective Date”).

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

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

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

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

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

9. Dispute Resolution Procedures. Any dispute or claim arising out of this
Release shall be subject to final and binding arbitration in accordance with the
procedures, terms and conditions set forth Section 9 of the Agreement, which
terms are incorporated herein by reference.

10. Entire Agreement. This Release constitutes the entire agreement of the
parties with respect to the subject matter of this Release, and supersedes all
prior and contemporaneous negotiations, agreements and understandings between
the parties, oral or written; provided, however, that this Release shall not
terminate the Company’s obligations under Section 4, 9, 11.2 and 11.11 of the
Agreement.

11. Modification; Waivers. No modification, termination or attempted waiver of
this Release will be valid unless in writing, signed by the party against whom
such modification, termination or waiver is sought to be enforced.

12. Amendment. This Release may be amended or supplemented only by a writing
signed by Employee and the Company.

 

Date:               Kurt L. Kalbfleisch           OVERLAND STORAGE, INC. Date:  
  By:         Name:       Title: