**Exhibit 10.43**

 

**OVERLANDSTORAGE, INC.SUMMARY SHEETOFDIRECTOR AND EXECUTIVE OFFICER COMPENSATION**

 

**Non-Employee Director Compensation**

 

Ourcompensation plan for non-employee directors consists of both a cash componentand 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 anadditional $2,500 per quarter in addition to the non-employee director fee of$5,000 per quarter.  Members of the AuditCommittee and the Compensation Committee receive a retainer of $500 per quarterin lieu of a fee for committee meetings attended during a quarter and membersof the Nominating and Governance Committee receive $500 for each committeemeeting attended ($250 if held telephonically and no fee if held the same dayas a Board meeting).  Members of theSpecial Committee on Shareholder Value will receive $500 for each committeemeeting attended (whether telephonically or in person) since formation of thecommittee.  Such fee will not be paid forcommittee meeting in joint session with the full board.

 

In addition to thecash component of compensation, each non-employee director receives stockoptions.  Before November 2003, eachnon-employee director received a ten-year nonqualified stock option to purchase50,000 shares at the fair market value upon appointment to the Board (Old DirectorOption Program).  These options vested atthe rate of 3,000 shares for each Board meeting held.  To the extent option shares were availablefor grant, a new option to purchase 50,000 shares was granted when options heldby a currently serving non-employee director fully vested.  On November 17, 2003, upon shareholderapproval of the company’s 2003 Equity Incentive Plan (2003 Incentive Plan), ourmethodology for options and other equity awards granted to non-employeedirectors changed to a formula methodology (Current Director OptionProgram).  Under the Current DirectorOption Program, each non-employee director receives a ten-year nonqualifiedstock option to purchase 18,000 shares on the same date as the company’s annualmeeting of shareholders.  These optionsare exercisable at fair market value on the date of grant and vest in equalmonthly installments over a 12-month period, as measured from the grantdate.  Non-employee directors who haveexisting unvested options granted under the Old Director Option Plan on anannual meeting date will not receive a new grant under the Current DirectorOption Program.  Under the Current DirectorOption Program, Messrs. McClendon, Preuss and Norkus each received anoption for 18,000 shares on November 15, 2004.  Mr. Degan did not receive an optionunder the Current Director Option Program since he had unvested options grantedunder the Old Director Option Program. Under the Current Director Option Program, when a new non-employeedirector joins the board, or when an existing director’s option fully vestsunder the Old Director Option Program, such director will be awarded a newoption for a number of shares determined by multiplying 1,500 by the number ofmonths remaining until the next scheduled annual meeting date, giving creditfor any partial month.  Such option willvest at the rate of 1,500 shares per month and will be fully vested at the nextannual meeting date, at which time the director will receive the normal annualgrant.  In connection with his electionto the Board, pursuant to the Current Director Option Program, Mr. Norkusreceived an option for 4,500 shares on August 11, 2004.  Mr. Degan was granted an option for12,000 shares on March 3, 2005 under the Current Director Option Programwhen his option under the Old Director Option Program vested in full on thesame date.

 

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**Compensation of Executive Officers**

 

Our executive officers serve at the discretion ofthe Board of Directors. From time to time, the Compensation Committee of theBoard of Directors reviews and determines the salaries that are paid to ourexecutive officers. The following table sets forth the annual salary rates forthe our current executive officers as of the date of this report on Form 10-K:

 
| Christopher  Calisi  |   | $ | 500,000 |   |
|----------------------|--------|---|---------|--------|
| Diane N. Gallo       |   | $ | 199,500 |   |
| W. Michael Gawerecki |   | $ | 246,500 |   |
| Christie Huff        |   | $ | 195,000 |   |
| George Karabatsos    |   | $ | 350,000 | (1)    |
| Michael S. Kerman    |   | $ | 225,000 |   |
| Vernon A.  LoForti   |   | $ | 297,750 |   |
| Robert J. Scroop     |   | $ | 220,500 |   |

 

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(1) Of this amount,$175,000 is tied to performance as described more fully in EmploymentArrangements with Current Executive Officers below.

 

**Employment Arrangements withCurrent Executive Officers**

 

The following discussion summarizes the employmentarrangements between us and our current executive officers as of the date ofthis report on Form 10-K:

 

**Mr. Christopher Calisi.**  We entered into an employmentagreement with Mr. Calisi on March 12, 2001, pursuant to which Mr. Calisiis employed as our President and Chief Executive Officer. The employmentagreement has a one-year term, automatically renews for successive one-yearterms, and provides that our Board may unilaterally modify Mr. Calisi’scompensation at any time.  If weterminate Mr. Calisi’s employment without cause, then we are obligated topay him a severance payment equal to his base salary, payable on a pro-ratedbasis according to our normal payroll cycle for the 12 months followinghis termination. In addition, he is entitled to receive accelerated vesting forany stock options that would otherwise have vested during the 12-month periodfollowing his termination. He is also entitled to receive the cash severancepayment if he resigns for good reason because of any of the following events: (i) reductionin compensation of more than 10%; (ii) change in position or duties sothat his duties are no longer consistent with his previous position; or (iii) changein principal place of work to more than 50 miles from our current facilitywithout his approval.

 

In addition, on April 28, 2005, the annualsalary of Mr. Calisi was increased by the Compensation Committee to$500,000 effective immediately.  On that day, Mr. Calisi alsoreceived (1) a cash bonus of $21,500 effective immediately, (2) agrant of 50,000 restricted shares of our common stock pursuant to the 2003Incentive Plan, which vest in installments of 16,667, 16,667 and 16,666 shareson January 1, 2006, January 1, 2007 and January 1, 2008,respectively, (3) an option to purchase up to 100,000 shares of ourcommon stock at the purchase price of $11.00 per share pursuant to the 2003Incentive Plan, which option is immediately vested as to 11,200 shares, withthe remainder vesting at a rate of 2,775 option shares on the last day of themonth commencing May 31, 2005 through December 31, 2007, and (4) agrant of an additional 50,000 restricted shares of our common stock (which willvest as to 12,500, 12,500 and 25,000 shares, respectively, if the volumeweighted daily average stock price for ten consecutive trading days reaches$20, $25 and $30, respectively, on or before January 1, 2008, providedthat Mr. Calisi is employed by us as Chief Executive Officer on suchdates(s)).  Mr. Calisi continues to be eligible to receive aperformance bonus equivalent to 75% of his base salary pursuant to our MBO andBonus Program.  The above referencedstock option grant to Mr. Calisi accelerates upon a Change in Control asdefined in the 2003 Incentive Plan.  The vesting of shares underling thestock option and restricted stock grants pursuant to the 2003 Incentive Plandescribed above will cease upon termination of  Service to Overland, asdefined in the 2003 Incentive Plan.

 

**Ms. Diane N. Gallo. **Ms. Gallo, our Vice President, HumanResources, is an at-will employee and may be terminated by us for any reason,with or without notice.  Ms. Gallocurrently earns an annual salary of $199,500. On

 

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November 15,2004, Ms. Gallo was granted a stock option to purchase up to 37,500 sharesof our common stock at the purchase price of $14.29 per share pursuant to the 2003Incentive Plan, which option became fully vested under the Stock OptionAcceleration Program described below, subject to sale restrictions describedbelow.

 

**Mr. W. Michael Gawarecki.   **On September 9,2005, we entered into an employment agreement with Mr. W. MichaelGawarecki, our Vice President of Operations, which was effective as of May 16,2005.  Under the agreement, Mr. Gawareckiis entitled to a base salary of $246,500 per year and is eligible fordiscretionary quarterly bonuses under our MBO and Bonus Plan, which bonuses maynot exceed 40% of Mr. Gawarecki’s quarterly base salary.  Mr. Gawarecki was also eligible toreceive a special bonus related to outsourcing of $100,000, but the conditionsfor receiving that bonus were not satisfied. Mr. Gawarecki’s current base salary is $246,500.  The term of the agreement will continue untilJune 30, 2006 and will not renew unless agreed by the parties inwriting.  Mr. Gawarecki’s employmentis at-will and may be terminated by us or by him at any time and for anyreason, with or without cause.  If Mr. Gawareckiis terminated without cause or resigns with good reason, he will be entitled toreceive a severance payment equal to 100% of his then annual base salary,subject to the execution by him of a general release of claims against us.  This severance will be paid in either alump-sum amount or in twelve equal monthly installments without interest, atthe election of Mr. Gawarecki.  Our obligationto pay severance to Mr. Gawarecki under the agreement terminates upon theoccurrence of a change in control.  On November 15,2004, Mr. Gawarecki was granted a stock option to purchase up to 31,400shares of our common stock at the purchase price of $14.29 per share pursuantto the 2003 Incentive Plan, which option became fully vested under the StockOption Acceleration Program described below, subject to sale restrictionsdescribed below.

 

**Ms. Christie Huff.** Ms. Huff, our VicePresident of Worldwide Marketing, is an at-will employee and may be terminatedby us for any reason, with or without notice. Ms. Huff currently earns an annual salary of $195,000 peryear.  On July 4, 2004, Ms. Huffwas granted a stock option to purchase up to 10,000 shares of our common stockat the purchase price of $13.24 per share pursuant to the 2003 Incentive Plan, whichoption became  fully vested pursuant tothe Stock Option Acceleration Program described below.

 

**Mr. George Karabatsos.** Mr. Karabatsos, our VicePresident of Worldwide Sales, is an at-will employee and may be terminated byus for any reason, with or without notice. Ms. Karabatsos currently earns an annual salary of $350,000, with$175,000 of that amount guaranteed as base salary and $175,000 tied toperformance.    When Mr. Karabatsos joined Overland on August 8,2005, he was granted an option to purchase up to 100,000 shares of the our  common stock at the purchase price of $7.84per share pursuant to the 2003 Incentive Plan, which option will vest over athree-year period with one-third vesting on August 8, 2006 and theremaining two-thirds vesting monthly over the 24 months following that date inequal installments. The option will accelerate upon a Change in Control asdefined in the 2003 Incentive Plan.  Theoption has a ten-year life, subject to continuous service to us.  On his hire date, he was also awarded 15,000restricted shares of our common stock pursuant to the 2003 Incentive Plan,which shares will vest in annual installments of 5,000 shares on each of August 8,2006, August 8, 2007 and August 8, 2008, subject to continuingservice to us.  In addition, we agreed toreimburse Mr. Karabatsos for up to $20,000 of relocation expenses incurredby Mr. Karabatsos in his move to San Diego County, and up to $4,000 permonth, for up to three months, for temporary housing.  If Mr. Karabatsos is terminated forcause within the first twelve months of his employment, he must repay theamount of his moving and relocation costs and the amount of his signing bonus(pro-rated on a monthly basis from the first date of his employment).

 

**Mr. Michael S. Kerman.**  Mr. Kerman, our VicePresident and General Manager of the Appliance Business Unit, is an at-willemployee and may be terminated by us for any reason, with or withoutnotice.  Mr. Kerman currently earnsan annual salary of $225,000 per year. On August 30, 2004,  Mr. Kermanwas granted a new-hire option to purchase up to 75,000 shares of our commonstock at the purchase price of $13.18 pursuant to the 2003 Incentive Plan, whichoption became fully vested under the Stock Option Acceleration Programdescribed below, subject to sale restrictions described below.  On April 28, 2005, Mr. Kerman wasgranted an option to purchase up to 25,000 shares of our common stock at thepurchase price of $10.86 per share pursuant to the 2003 Incentive Plan, whichoption will vest monthly in arrears from the date of grant in 36 equalinstallments.   The above referencedstock option grants to Mr. Kerman will accelerate upon a Change in Controlas defined in the 2003 Incentive Plan.  The vesting of shares underlingthe stock option grant pursuant to the 2003 Incentive Plan described above willcease upon termination of  Service to us, as defined in the 2003 IncentivePlan. In addition, we agreed to reimburse Mr. Kerman for up to $100,000 ofrelocation expenses incurred by Mr. Kerman  in the event that he isterminated

 

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withoutcause on or before April 29, 2006 and he incurs such expenses related to arelocation outside of San Diego within six months of his date of termination.

 

**Mr. Vernon A. LoForti.**  We entered into an employmentagreement with Mr. LoForti on December 2, 2000, pursuant to which Mr. LoFortiis employed as our Vice President and Chief Financial Officer. The employmentagreement has a one-year term, automatically renews for successive one-yearterms, and provides that our Board may unilaterally modify Mr. LoForti’scompensation at any time.  If weterminate Mr. LoForti’s employment without cause, then we are obligated topay him a severance payment equal to his base salary, payable on a pro-ratedbasis according to our normal payroll cycle for the 12 months followinghis termination. In addition, he is entitled to receive accelerated vesting forany stock options that would otherwise have vested during the 12-month periodfollowing his termination. He is also entitled to receive the cash severancepayment if he resigns for good reason because of any of the following events: (i) reductionin compensation of more than 10%; (ii) change in position or duties sothat his duties are no longer consistent with his previous position; or (iii) changein principal place of work to more than 50 miles from our current facilitywithout his approval.  Mr. LoForticurrently earns a salary of $297,750 per year. On November 15, 2004, Mr. LoFortiwas granted a stock option to purchase up to 29,700 shares of our common stockat the purchase price of $14.29 per share pursuant to the 2003 Incentive Plan, whichoption became fully vested under the Stock Option Acceleration Programdescribed below, subject to sale restrictions described below.

 

**Mr. Robert J. Scroop. **Mr. Scroop, our Vice PresidentEngineering, is an at-will employee and may be terminated by us for any reason,with or without notice.  Mr. Scroopcurrently earns an annual salary of $220,500 per year. On November 15,2004, Mr. Scroop was granted a stock option to purchase up to 29,700shares of our common stock at the purchase price of $14.29 per share pursuantto the 2003 Incentive Plan, which option became fully vested under the StockOption Acceleration Program described below, subject to sale restrictionsdescribed below.

 

**StockOption Acceleration Program**

 

In July 2005, our Boardof Directors approved the accelerated vesting of all unvested stock options,held by the company’s officers and employees, with an exercise price at orabove $12.00 per share, effective July 3, 2005. The stock optionacceleration program does not apply to stock options held by our non-employeedirectors. The accelerated options were issued under the 2000 Stock OptionPlan, the 2001 Supplemental Stock Option Plan and the 2003 Incentive Plan.  In connection with the acceleration ofvesting of options held by our executive officers, each executive officer agreednot to sell or transfer any shares subject to accelerated vesting until theoriginal vesting date would have occurred based on the original vesting schedule (withoutgiving effect to any future termination of service). The primary purpose of theaccelerated vesting was to eliminate future stock-based employee compensationexpense.

 

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**Retention Agreements**

 

Weentered into retention agreements with Messrs. LoForti, Scroop andGawarecki effective January 27, 2000, with Mr. Calisi effective March 12,2001, with Ms. Gallo effective August 30, 2002, with Mr. Kermaneffective August 30, 2004, with Mr. Karabatsos effective  August 8, 2005 and with Ms. Huffeffective September 14, 2005.   These agreements provide that the officer willreceive a severance payment if, within two years of the consummation of achange in control of Overland, he or she is terminated without cause or resignswith good reason. These severance payments are based on the officer’s basesalary at the time of the consummation of the change in control or thetermination date, whichever is higher, plus his or her target bonus for theyear prior to the consummation of the change in control. The agreements providethat, upon a change in control, Mr. Calisi would be entitled to receive anamount equal to 2.5 times his base salary plus target bonus, and Mr. LoFortiwould be entitled to receive an amount equal to 2.0 times his base salary plustarget bonus. Ms. Gallo, Ms. Huff, and Messrs. Gawarecki, Karabatsos,Kerman, and Scroop each would be entitled to an amount equal to theirrespective 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.

 

**MBO and Bonus Plan**

 

Our Chief Executive Officer and other executiveofficers, except Mr. Karabatsos, participate in our executive bonus planwhich is designed as a performance-based component of their compensationpackage. The Compensation Committee tailors the bonus plan for each executiveto be unique to his area of responsibility. For fiscal year 2005, the planestablished by the Compensation Committee has been and will be evaluated andpaid on a quarterly basis, and included two performance measurement points foreach executive officer:

 

•our actual earnings per share (EPS) in comparison to the target approved by theCompensation Committee; and

•achievement of individual job performance goals and objectives.

 

At the end of the firstquarter of fiscal year 2005, EPS targets and performance measurement points foreach executive officer were met and in October 2004, we paid the followingbonuses to our executive officers:  Mr. Calisi,$119,575; Ms. Gallo, $30,702; Mr. Gawarecki, $32,001; Ms. Huff, $12,529,Mr. Kerman, $12,366; Mr. LoForti, $40,397;  and Mr. Scroop, $33,268.  No bonuses were paid for the second, third orfourth fiscal quarters of 2005, as the EPS targets were not achieved.

 

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