**Exhibit 10.38**

 

**OVERLAND STORAGE, INC.**

 

**SUMMARY SHEETOF**

**DIRECTOR AND EXECUTIVE OFFICER COMPENSATION**

 

**Non-Employee Director Compensation**

 

Our compensation plan fornon-employee directors consists of both a cash component and an equitycomponent. We pay each non-employee director $5,000 per quarter, plus $2,500for each Board meeting attended ($1,250 if held telephonically), plusreimbursement 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 perquarter.  Members of the Audit Committee and the Compensation Committeereceive a retainer of $500 per quarter in lieu of a fee for committee meetingsattended during a quarter and members of the Nominating and Governance Committeereceive $500 for each committee meeting attended ($250 if held telephonicallyand no fee if held the same day as a Board meeting).

 

Inaddition to the cash component of compensation, each non-employee directorreceives stock options.  Effective November 13, 2007, under our 2003Equity Incentive Plan, which we refer to as the 2003 Incentive Plan, eachnon-employee director receives a six-year nonqualified stock option to purchase18,000 shares on the same date as the company’s annual meeting of shareholders. Prior to November 13, 2007, the non-employee director options grantedunder the 2003 Incentive Plan had ten-year terms.  These options are exercisable at fair marketvalue on the date of grant and vest in equal monthly installments over a12-month period, as measured from the grant date.  When a new non-employeedirector joins the board, such director will be awarded a new option for anumber of shares determined by multiplying 1,500 by the number of monthsremaining until the next scheduled annual meeting date, giving credit for anypartial month.  Such option will vest at the rate of 1,500 shares permonth and will be fully vested at the next annual meeting date, at which timethe director will receive the normal annual grant.

 

On November 13, 2007, the dateof our last annual meeting of shareholders, Robert Degan, Nora Denzel, EricKelly, Bill Miller, Scott McClendon and Michael Norkus each received an optionfor 18,000 shares.

 

**Compensation of Executive Officers**

 

Our executive officers serve at thediscretion of the Board of Directors. From time to time, the CompensationCommittee of the Board of Directors reviews and determines the salaries thatare paid to our executive officers. The following table sets forth the annualsalary 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 summarizesthe employment arrangements between us and our current executive officers as ofthe date of this report on Form 10-K:

 

**W. MichaelGawarecki.   **As our Vice Presidentof Operations and New Product Delivery, Mr. Gawarecki is an at-will employeeand 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 VicePresident of New Product Delivery.  Inconnection with this expanded role, his annual salary was increased from$246,500 to 270,000. On August 13, 2007, he received an option to purchaseup to 100,000 shares of our common stock at the purchase price of $1.62 pershare (the closing price of our common stock on the date of grant) pursuant tothe 2003 Incentive Plan.  The optionvested over one year in equal monthly installments and has a three-year life,subject to continuous service.

 

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**Kurt L.Kalbfleisch**.  As our Vice President of Finance and ChiefFinancial Officer, Mr. Kalbfleisch is an at-will employee and may beterminated by us for any reason, with or without notice.  Mr. Kalbfleischassumed the permanent role of Chief Financial Officer on February 14,2008.  He had been serving as our InterimChief Financial Officer since August 7, 2007.  In connection with his appointment as ChiefFinancial Officer, his annual salary was increased from $200,000 to 225,000 andhe 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 anoption to purchase up to 75,000 shares of the company’s common stock at thepurchase price of $1.62 per share (the closing price of our common stock on thedate of grant) and on February 14, 2008 he received an option to purchaseup 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 ofgrant).  Both options (i) weregranted pursuant to the 2003 Incentive Plan, (ii) vest over one year inequal monthly installments, (iii) will accelerate upon a “Change inControl” as defined in the 2003 Incentive Plan, and (iv) have a three-yearlife, subject to continuous service.

 

**Vernon A. LoForti.**  In connection with hisappointment as President and Chief Executive Officer on August 7, 2007, Mr. LoForti’sannual base salary was increased from $297,750 to $400,000.  We entered into an amended and restatedemployment agreement with Mr. LoForti on September 27, 2007.  The amended and restated employment agreementhas a one-year term, automatically renews for successive one-year terms, andprovides that our Board may unilaterally modify Mr. LoForti’s compensationat 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 the12 months following his termination. In addition, he is entitled toreceive accelerated vesting for any stock options that would otherwise havevested during the 12-month period following his termination. He is alsoentitled to receive the cash severance payment if he resigns for good reasonbecause of any of the following events: (i) reduction in compensation of morethan 10%; (ii) change in position or duties so that his duties are nolonger consistent with his previous position; or (iii) change in principalplace of work to more than 50 miles from our current facility without hisapproval.  On August 13, 2007, he received an option to purchase upto 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 the2003 Incentive Plan.  The option vestedover one year in equal monthly installments and has a three-year life, subjectto continuous service.

 

**Ravi Pendekanti**. Mr. Pendekanti joined our company on April 21, 2008 as ourVice President of Worldwide Marketing. In August 2008, his role wasexpanded to include Vice President of Worldwide Sales, replacing Robert Farkalywho left the company in August 2008. Mr. Pendekanti is an at-will employee and may be terminated by usfor any reason, with or without notice.  He currently earns an annualsalary of $250,000.  In connection withhis employment, he received a $50,000 one-time signing bonus and a relocationallowance of $50,000 subject to a pro-rated reimbursement if he voluntarilyterminates his employment within the first 12 months of his hire date.  Pending relocation, the company will pay fortemporary housing, one round-trip flight per week to San Francisco, and theservices of a relocation advisor.  Inaddition, if Mr. Pendekanti is terminated without cause within the first12 months of employment, the company has agreed to provide severance in theamount of six months base pay and 12 months medical COBRA coverage.  These severance benefits are not in additionto the benefits provided under his Retention Agreement described below.  On April 28, 2008, he received an optionto purchase up to 100,000 shares of the company’s common stock at the purchaseprice of $1.18 per share (the closing price of our common stock on the date ofgrant) pursuant to the 2003 Incentive Plan. The option will vest over one year in equal monthly installments. Theoption will accelerate upon a “Change in Control” as defined in the 2003Incentive Plan.  The option has a three-year life, subject to continuousservice.

 

**Retention Agreements**

 

We entered into amended and restatedretention agreements with Messrs. Gawarecki, Kalbfleisch and LoFortieffective September 27, 2007.  Weentered into a retention agreement with Mr. Pendekanti on April 21,2008.  These agreements provide that theofficer will receive a lump sum severance payment if, within two years of theconsummation of a change in control of our company, he is terminated withoutcause or resigns with good reason. These severance payments are based on theofficer’s base salary at the time of the consummation of the change in controlor the termination date, whichever is higher, plus his or her target bonus forthe year prior to the consummation of the change in control.  The agreements provide that, upon a change incontrol, Mr. LoForti would be entitled to receive an amount equal to 2.0times his base salary plus target bonus; and Messrs. Gawarecki,Kalbfleisch, and Pendekanti each would be entitled to an amount equal to hisrespective base salary plus target bonus. If any portion of any payment underany of the agreements would constitute an “excess parachute payment” within themeaning of Section 280G of the Internal Revenue Code, then that paymentwill be reduced to an amount that is one dollar less than the threshold fortriggering the tax imposed by Section 4999 of the Internal Revenue Code.

 

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**Cancellation ofCertain Stock Options**

 

In November 2007,our shareholders approved the cancellation of stock options with an exerciseprice of $10 per share or more held by our officers and directors as describedin 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 thefollowing:

 
| ** **             | ** ** | **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       |       |               |       |          |                       |

 

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