Exhibit 10.1


 


Overland Storage


Corporate MBO & Bonus Programs


-Executives-


Fiscal Year 2005


 





















 


Letter
from the President


 


 


 


Overland Storage is committed to excellence
in everything we do.  To remain a strong
competitor and continue to build a company that stands out in the industry we
want to recognize those executives who help make that happen.  The effort of each individual Overland
Storage executive is critical to the overall success of this Company.  To ensure executives are recognized and
rewarded for their part in helping to achieve our corporate goals the Board of
Directors has approved the Management-By-Objectives (MBO) Bonus Program.


 


The Overland MBO Bonus Program will be a
quarterly based program allowing eligible executives to potentially receive up
to four bonus payments in fiscal year 2005. The CEO will communicate bonus
opportunities to each executive after receiving board approval.  The bonus opportunity will be a percentage of
base salary actually paid in a quarter.


 


MBO programs that are linked to individual
and corporate performance are an excellent way to reward performance.  Many successful high technology growth
companies have adopted MBO programs as they have proven to be a successful way
to highlight the contributions made by executives at all levels and to quickly
reward them for their contribution to the Company’s success.  A performance based bonus program focuses
everyone in the company to do their individual best so that the company and all
executives may share in the successes achieved.


 


I want to stress my personal commitment in
striving for excellence in everything we do, and to building a superior work
environment for all Overland executives.


 


 


Regards,


Christopher Calisi


President & Chief Executive Officer


Overland Storage, Inc.


 


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MANAGEMENT-BY-OBJECTIVES


AND QUARTERLY BONUS PROGRAM


 


Overland Storage, Inc. (“Overland Storage” or
the “Company”) will recognize executive contributions by implementing a bonus
program that is based on the Company’s financial performance and individual
executive performance.  Achievements will
be evaluated on a quarterly basis (fiscal quarter) and the corresponding bonus
will be paid in the following quarter. 
The Board of Directors of Overland Storage reserves the right to modify
this program at any time.


 


Under the MBO Bonus Program, the executive
management staff will within 30 days of the close of each quarter calculate the
bonus pool percentage for such quarter based on the Company’s financial performance
during such quarter.  Each executive also
will receive a Management-By-Objectives (MBO) rating for the quarter from the
CEO.  These factors determine the final
quarterly bonus payout.  Bonuses will
not be paid if the Company performs at less than 90% of planned profitability
targets.


 


MBO Bonus
Program Process


 


1.               Prior to the
start of the fiscal year the projected bonus pool is calculated and budgeted
based on headcount projections and the percentage of salaries targeted for
bonuses.


2.               Prior to the
start of the fiscal year the executive management team will determine the
annual and quarterly financial objectives for the Company.


3.               Prior to the
start of each quarter each executive will establish personal objectives that
are mutually agreed upon with the CEO.


4.               At the end of a
quarter the actual bonus pool percentage is calculated based on the Company’s
actual financial performance. 
Additionally, each executive will receive an individual quarterly rating
on his/her MBO performance (110%-0%).  This
rating will be used to determine the actual bonus payout.


5.               No executive
receiving an individual quarterly rating of less than 80% is eligible to
receive a bonus.


6.               This program
supersedes any previous bonus plan.


 


In order to receive a bonus, executives must
be employed by the Company at the time bonuses are actually paid.  Bonuses will not be paid retroactively or in
advance to any executive.  Executives on
performance improvement plans at the time of the bonus payment are not eligible
to receive any bonus.  Bonuses 


 


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will be pro-rated for those executives who
join the Company within the first 30 days of a new quarter.  Anyone joining after the first 30 days of a
new quarter will enter the bonus program in the following quarter.  Bonuses will be pro-rated accordingly for
those executives on part-time schedules. 
The decision to give bonuses and the amount of the bonus are at the sole
discretion of Overland Storage.  Bonuses
will not be made pursuant to any contract, agreement, or promise and any past
bonus agreements or arrangements are hereby terminated in place of this new
program.


 


EPS
Calculation


 


Our EPS target is pre-defined before the
start of each quarter.   It represents
our expected net income divided by the number of shares outstanding.  The ‘cents above plan’ accounts for each cent
that we exceed the EPS target stated at the beginning of the quarter.  The board reserves the right to adjust the
EPS target for unplanned or extraordinary events that may impact either our net
income or the number of outstanding shares.


 


The Board of Directors reserves the right to
forego payment of any bonus in any quarter for any reason.


 


This program does not constitute a promise to
employ any individual for a specific length of time.  Employment continues according to the Company’s
At-Will Employment Policy.


 


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Annual
Bonus Pool Percentage


 


The bonus pool percentage is a factor used in
calculating individual bonus payouts is determined prior to the start of the
fiscal year. The bonus pool percentage is budgeted at 100% for achieving 100%
of the Company’s profitability goals. 
The bonus pool is established by calculating the eligibility percentage
for each executive (at 100% of target). 
If the Company reaches 100% of its earnings goal the pool is sufficient
to potentially pay each executive a pre-determined percentage of his/her salary
paid per quarter.


 


The bonus pool for executives becomes
available provided the Company achieves at least 90% of its quarterly earnings
target and scales up in linear proportion
with earnings achievement.  No bonus
will be paid for earnings performance less than 90%.


 


 


Quarterly
Bonus Target Eligibility


 


Each
executive has a pre-determined ‘target’ bonus level that is set based upon job
definition/classification.  The table
below shows the bonus targets for all officer positions at Overland.  This bonus target is used, along with several
other factors, in determining the final bonus amount to be paid at the end of
each quarter.  The full description of
how bonuses are calculated follows.


 


 


Target Bonus Levels — Officers


 




	
  President & Chief
  Executive Officer

  	
   

  	
  75%

  
	
  Vice-Presidents (Executive
  Officers)

  	
   

  	
  40%

  
	
  Vice-Presidents
  (Non-executive Officers)

  	
   

  	
  30%

  
	
   

  	
   

  	
  Table 1.

  






 


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Bonus
Payout Calculation


 


The
final quarterly bonus payout is determined in part by your individual rating
and the corporate rating.  These ratings,
together with your quarterly base salary and bonus target, are used to
determine the final bonus amount (before taxes).  This calculation is described below with an
example following.


 


Quarterly
Base Salary x Bonus Target % x Bonus Pool
Percentage x MBO Rating % = BONUS


 


Quarterly
Base Salary


This
is the amount of your annual salary at the end of the quarter divided by four.


 


Bonus Target


Each
executive, based on job classification, is given a ‘target’ bonus percentage
amount (see Table 1 above).


 


Bonus Pool Percentage


The
Company performance in EPS earnings determines the ultimate size of the total
pool from which bonuses will be paid (see examples).  This pool has been developed on a decreasing
acceleration model (see chart).  It is
the intent to reward performance of 90% -130% 
of target at a 1:1 acceleration, 
130%-150% at a 1:.5 acceleration and 150%-175% at a 1:.25 acceleration.


 





 


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MBO Rating


This
is the rating percentage that the CEO gives to you based on your ability to
accomplish the mutually agreed upon goals for that quarter.


 


APPENDIX ‘A’


Examples:  Corporate Target & Actual


 


	
   

  	
   

  	
  Target

  	
   

  	
  Actual

  	
   

  	
   

  
	
  EPS

  	
   

  	
  10 cents

  	
   

  	
  9 cents

  	
   

  	
  (90% of Plan)

  
	
  Executive:

  	
   

  	
  Vice President (Executive
  Officer), Mary Smith

  
	
  Base Salary:

  	
   

  	
  $135,000

  	
   

  	
   

  	
   

  	
   

  
	
  Bonus Target as

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  % of Base Salary:

  	
   

  	
  40%

  	
   

  	
   

  	
   

  	
   

  



 


	
  Quarterly Base Salary

  	
   

  	
  x

  	
   

  	
  Bonus Target%

  	
   

  	
  x

  	
   

  	
  Bonus Pool% 

  	
   

  	
  x

  	
   

  	
  MBO Rating%

  
	
  $33,750

  	
   

  	
  x

  	
   

  	
  40%

  	
   

  	
  x

  	
   

  	
  90%

  	
   

  	
  x

  	
   

  	
  100%

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Quarterly Bonus = $12,150

  	
   

  	
   

  
															



 


	
   

  	
   

  	
  Target

  	
   

  	
  Actual

  	
   

  	
   

  
	
  EPS

  	
   

  	
  10 cents

  	
   

  	
  14 cents

  	
   

  	
  (140% of Plan)

  
	
  Executive:

  	
   

  	
  Vice President (Executive
  Officer), Mary Smith

  
	
  Base Salary:

  	
   

  	
  $135,000

  	
   

  	
   

  	
   

  	
   

  
	
  Bonus Target as

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  % of Base Salary:

  	
   

  	
  40%

  	
   

  	
   

  	
   

  	
   

  



 


	
  Quarterly Base Salary

  	
   

  	
  x

  	
   

  	
  Bonus Target%

  	
   

  	
  x

  	
   

  	
  Bonus Pool% 

  	
   

  	
  x

  	
   

  	
  MBO Rating%

  
	
  $33,750

  	
   

  	
  x

  	
   

  	
  40%

  	
   

  	
  x

  	
   

  	
  135%*

  	
   

  	
  x

  	
   

  	
  100%

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Quarterly Bonus = $ 18,225

  	
   

  	
   

  
															



 


	
   

  	
   

  	
  Target

  	
   

  	
  Actual

  	
   

  	
   

  
	
  EPS

  	
   

  	
  10 cents

  	
   

  	
  16 cents

  	
   

  	
  (160%
  of Plan)

  
	
  Executive:

  	
   

  	
  Vice President (Executive
  Officer), Mary Smith

  
	
  Base Salary:

  	
   

  	
  $135,000

  	
   

  	
   

  	
   

  	
   

  
	
  Bonus Target as

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  % of Base Salary:

  	
   

  	
  40%

  	
   

  	
   

  	
   

  	
   

  



 


	
  Quarterly Base Salary

  	
   

  	
  x

  	
   

  	
  Bonus Target%

  	
   

  	
  x

  	
   

  	
  Bonus Pool% 

  	
   

  	
  x

  	
   

  	
  MBO Rating%

  
	
  $33,750

  	
   

  	
  x

  	
   

  	
  40%

  	
   

  	
  x

  	
   

  	
  146.5%

  	
   

  	
  x

  	
   

  	
  100%

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Quarterly Bonus = $ 19,777.50

  	
   

  	
   

  
															



 


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APPENDIX
‘B’


 


Instructions for filling in Quarterly MBO Form


 


Instructions


 


1.                                       Establish 1-6
quantifiable quarterly objectives with the approval of CEO.

Examples:


                                                a.)            Complete the marketing
communications plan for product X by the end of Q1.  This will include advertising plan, PR plan,
trade show attendance schedule, and budget.


                                                b.)           Complete the firmware design of
product Y by the middle of Q1.  This
includes functional testing, QA sign-off, documentation, and delivery to
manufacturing development.


 


2.                                       Meet with CEO
to discuss objectives, make modifications, and sign form within 5 business days
after the start of a quarter.


 


3.                                       CEO to submit
form to Human Resources by the 10th business day after the start of the
quarter.


 


4.                                       Meet with CEO
periodically throughout the quarter to review progress against objectives and
make any necessary adjustments.


 


5.                                       Within 5
business days after the close of the quarter, complete a narrative
self-assessment of performance on each objective and submit to CEO.


 


6.                                       CEO will review
form and narrative assessment of performance; meet with you to discuss
performance against objectives; make necessary changes; and provide overall
rating by averaging the achievements of all the goals.


 


7.                                       Executive and
CEO to sign form and CEO will submit form, along with assessment of
performance, to Human Resources by the 10th business day after the close of the
quarter.


 


8.                                       Human Resources
will calculate bonus payments by using the formula in the guidelines and submit
bonus list to Payroll for processing.


 


Rating Equivalents:


	
  110%

  	
   

  	
  =

  	
   

  	
  Far exceeded expectations/requirements of the objective. Results
  obtained far exceeded what was expected. Individual put in far more effort
  than was expected. Results were exceptional.

  
	
  105%

  	
   

  	
  =

  	
   

  	
  Exceeded expectations of the objective. Results were superior.

  
	
  100%

  	
   

  	
  =

  	
   

  	
  Met expectations of the objective. Planned objective was accomplished
  within the required timeframe.

  
	
  95%

  	
   

  	
  =

  	
   

  	
  Met all but a small portion of the objective. Results were
  acceptable.

  
	
  90%

  	
   

  	
  =

  	
   

  	
  Met most of the requirements of the objective within the expected
  timeframe.

  
	
  85%

  	
   

  	
  =

  	
   

  	
  Met some of the requirements of the objectives.

  
	
  80%

  	
   

  	
  =

  	
   

  	
  Needed assistance in order to complete the objective. Had difficulty
  meeting normal expectations.

  
	
  0-79%

  	
   

  	
  =

  	
   

  	
  Unsatisfactory. Objective was not accomplished even though it could
  have been completed.

  



 


Think
“SMART” when writing your objectives.


specific.....measurable.....achievable.....relevant.....timely


 


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Quarterly MBO Form


	
   

  	
   

  	
  MBO
  / BONUS PROGRAM

  
	
   

  	
   

  	
  (Management-By-Objectives)

  
	
   

  	
   

  	
   

  
	
  Executive
  Name:

  	
   

  	
  Executive
  Title:

  
	
   

  	
   

  	
   

  
	
  CEO Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Department
  Name:

  	
   

  	
  Department
  #:

  
	
   

  	
   

  	
   

  
	
  MBO
  Period (Fiscal Quarter/Year):

  	
   

  	
  Date
  Established:

  



Quarterly Statement of Objectives (1-6)


 


	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Rating

  
	
   

  	
   

  	
  Supporting 

  	
   

  	
  Complete

  	
   

  	
  (0% - 

  
	
  Objective

  	
   

  	
  Goal *

  	
   

  	
  By

  	
   

  	
  110%)

  
	
  1.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Quarterly Rating (to be completed at end of
  quarter)

  (Average
  of all objectives ratings)

  	
   

  	
   

  



The “Supporting Goal” column should type of
goal this task supports (i.e. personal, department, CEO, Corporate).


 


	
  Start of
  quarter

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Objectives agreed upon

  	
   

  	
  Date: 

  	
   

  	
  Executive: 

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Date: 

  	
   

  	
  CEO: 

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Provide soft copy to HR

  



 


End of
quarter (attach narrative self-assessment of performance objectives to form):


	
   

  	
   

  
	
  Executive Signature:

  	
  Date:

  
	
   

  	
   

  
	
  CEO Signature:

  	
  Date:

  
	
   

  	
   

  
	
  Human Resources Signature:

  	
  Date:

  



 


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