Exhibit 10.3


 


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:


 


	
  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 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, 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 Vice President of Finance and Interim Chief Financial Officer,
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.


 

















 


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 current 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