Exhibit 10.38


 


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:


 


	
  W. Michael Gawarecki

  	
   

  	
  $

  	
  270,000

  	
   

  
	
  Kurt L. Kalbfleisch

  	
   

  	
  $

  	
  225,000

  	
   

  
	
  Vernon A. LoForti

  	
   

  	
  $

  	
  400,000

  	
   

  
	
  Ravi Pendekanti

  	
   

  	
  $

  	
  250,000

  	
   

  



 


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-K:


 


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
vested over one year in equal monthly installments and 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
assumed the permanent role of 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, April 2008 and July 2008.  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) 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 vested
over one year in equal monthly installments and 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. In August 2008, his role was
expanded to include Vice President of Worldwide Sales, replacing Robert Farkaly
who left the company in August 2008. 
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.  Pending relocation, the company will pay for
temporary housing, one round-trip flight per week to San Francisco, and the
services of a relocation advisor.  In
addition, if Mr. Pendekanti is terminated without cause within the first
12 months of employment, the company has agreed to provide severance in the
amount of six months base pay and 12 months medical COBRA coverage.  These severance benefits are not in addition
to the benefits provided under his Retention Agreement described below.  On April 28, 2008, he 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. 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.  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. Gawarecki,
Kalbfleisch, and Pendekanti each would be entitled to an amount equal to his
respective base salary plus target bonus. 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