Exhibit 10.7


 


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.  Under our 2003 Equity
Incentive Plan, which we refer to as the 2003 Incentive Plan, each non-employee
director receives a ten-year nonqualified stock option to purchase 18,000
shares on the same date as the company’s annual meeting of shareholders. 
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. If the proposal related to the 2003 Incentive Plan that has been
submitted to a vote of shareholders at our 2007 annual meeting is approved, the
formula stock options granted to non-employee directors on the 2007 annual
meeting date and thereafter will have six-year terms.


 


On
November 14, 2006, the date of our last annual meeting of shareholders, Robert
Degan, Bill Miller and Michael Norkus each received an option for 18,000 shares.


 


On
December 20, 2006, in connection with his appointment as our Interim President
and Chief Executive Officer, Scott McClendon received an option to purchase up
to 75,000 shares of our common stock at the purchase price of $4.29 per share
(the closing price of our common stock on the date of grant) pursuant to the
2003 Incentive Plan.  The option was immediately vested as to 6,250 shares
(reflecting the commencement of service as Interim President and Chief
Executive Officer on November 1, 2006), with the remainder vesting at a rate of
6,250 shares on the first day of each month commencing January 1, 2007 through
November 1, 2007, so long as Mr. McClendon is providing services to the
Company.  The option has a ten-year life, subject to continuous service to
us. Mr. McClendon resigned as Interim President and Chief Executive Officer on
August 7, 2007, but continues to serve as Chairman of the Board.


 

















 


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 on Form 10-Q:


 


	
  Vernon A. LoForti

  	
   

  	
  $

  	
  400,000

  	
   

  
	
  Robert Farkaly

  	
   

  	
  $

  	
  280,000

  	
  *

  
	
  W. Michael Gawarecki

  	
   

  	
  $

  	
  246,500

  	
   

  
	
  Kurt L. Kalbfleisch

  	
   

  	
  $

  	
  200,000

  	
   

  
	
  Robert J. Scroop

  	
   

  	
  $

  	
  220,500

  	
   

  



 






   *
$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 our 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, Mr.
Gawarecki 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 $246,500. 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 Interim Chief Financial Officer and Vice President of Finance, Mr. Kalbfleisch
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 $200,000 per year
and will earn cash bonuses of $10,000 each in October 2007, January 2008, April
2008 and July 2008, subject to his continued employment at our company at those
times. 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 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.


 


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.


 


Robert J. Scroop.  As our Vice President, New Product Delivery,
Mr. Scroop is an at-will employee and may be terminated by us for any reason,
with or without notice.  Mr. Scroop currently earns an annual salary of
$220,500 per year. 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 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.


 


Retention Agreements


 


We
entered into amended and restated retention agreements with Messrs. Farkaly,
Gawarecki, Kalbfleisch, LoForti and Scroop effective September 27, 2007. 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 Scroop 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.