Document:

Exhibit 10.1

 

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).  Members of the Special
Committee on Shareholder Value will receive $500 for each committee meeting
attended (whether telephonically or in person) since formation of the
committee.  Such fee will not be paid for
committee meeting in joint session with the full board.

 

In addition to
the cash component of compensation, each non-employee director receives stock
options.  Under our 2003 Equity Incentive
Plan, which we refer to as the 2003 Incentive Plan, each non-employee director
receives a ten-year nonqualified stock option to purchase 18,000 shares on the
same date as the company’s annual meeting of shareholders.  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 15,
2005, the date of our last annual meeting of shareholders, Scott McClendon,
Robert Degan and Michael Norkus each received an option for 18,000 shares.  In connection with his election to the Board,
Mark Barrenechea received an option for 16,500 shares on December 21, 2005.

 

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 the our current executive officers as of the
date of this report on Form 10-Q:

 

	
  Christopher Calisi

  	
   

  	
  $

  	
  395,000

  	
  (1)

  
	
  W. Michael
  Gawerecki

  	
   

  	
  $

  	
  246,500

  	
   

  
	
  Christie
  Huff

  	
   

  	
  $

  	
  195,000

  	
   

  
	
  George
  Karabatsos

  	
   

  	
  $

  	
  350,000

  	
  (2)

  
	
  Michael S.
  Kerman

  	
   

  	
  $

  	
  225,000

  	
   

  
	
  Vernon A.
  LoForti

  	
   

  	
  $

  	
  297,750

  	
   

  
	
  Robert J.
  Scroop

  	
   

  	
  $

  	
  220,500

  	
   

  

 

(1)  Effective November 15, 2005, at the request
of Mr. Calisi, we reduced his annual salary from $500,000 to $395,000 as
described more fully under “Employment Arrangements with Current Executive
Officers” below.

 

(2) Of this amount, $175,000
is tied to performance as described more fully under “Employment Arrangements
with Current Executive Officers” below.

 

1

 

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:

 

Christopher
Calisi.  We entered into an employment agreement with
Mr. Calisi on March 12, 2001, pursuant to which Mr. Calisi is employed as our
President and Chief Executive Officer. The employment agreement has a one-year
term, automatically renews for successive one-year terms, and provides that our
Board may unilaterally modify Mr. Calisi’s compensation at any time.  If we terminate Mr. Calisi’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 November 22, 2005, we amended the
terms of Mr. Calisi’s employment agreement and retention agreement
pursuant to a voluntary offer made by Mr. Calisi at a meeting of our board of
directors on November 15, 2005.  Pursuant
to the amendments, Mr. Calisi’s gross annual base salary was reduced from
$500,000 to $395,000 effective as of November 15, 2005, except that solely
for purposes of calculating severance payments under the employment agreement
and retention agreement, Mr. Calisi’s salary will be deemed to be the
greater of $500,000 or his then current salary as of the date of termination or
a change of control, as applicable.  The reduction in salary will reduce
the annual bonus for which Mr. Calisi is eligible under the employment
agreement and the retention agreement, and will not constitute “good reason” to
terminate the employment agreement or retention agreement.  The board of
directors will have sole and absolute discretion to modify Mr. Calisi’s
compensation going forward, including any increase in compensation, subject to
the existing terms of the agreements.

 

The annual salary of Mr. Calisi had been
increased to $500,000 by the Compensation Committee on April 28, 2005 effective
immediately.  On that day, Mr. Calisi also received (1) a cash bonus of
$21,500 effective immediately, (2) a grant of 50,000 restricted shares of our
common stock pursuant to the 2003 Incentive Plan, which vest in installments of
16,667, 16,667 and 16,666 shares on January 1, 2006, January 1, 2007 and
January 1, 2008, respectively, (3) an option to purchase up to 100,000 shares
of our common stock at the purchase price of $11.00 per share pursuant to
the 2003 Incentive Plan, which option is immediately vested as to 11,200
shares, with the remainder vesting at a rate of 2,775 option shares on the last
day of the month commencing May 31, 2005 through December 31, 2007, and (4) a
grant of an additional 50,000 restricted shares of our common stock pursuant to
the 2003 Incentive Plan, which will vest as to 12,500, 12,500 and 25,000
shares, respectively, if the volume weighted daily average stock price for ten
consecutive trading days reaches $20, $25 and $30, respectively, on or before
January 1, 2008, provided that Mr. Calisi is employed by us as Chief Executive
Officer on such dates(s).  Mr. Calisi continues to be eligible to receive
a performance bonus equivalent to 75% of his base salary pursuant to our MBO
and Bonus Program.  The above referenced
stock option grant to Mr. Calisi accelerates upon a Change in Control as
defined in the 2003 Incentive Plan.  The vesting of shares underling the
stock option and restricted stock grants pursuant to the 2003 Incentive Plan
described above will cease upon termination of Service to Overland, as defined
in the 2003 Incentive Plan.

 

W. Michael Gawarecki.   On September 9, 2005, we
entered into an employment agreement with Mr. W. Michael Gawarecki, our Vice
President of Operations, which was effective as of May 16, 2005.  Under the agreement, Mr. Gawarecki is
entitled to a base salary of $246,500 per year and is eligible for
discretionary quarterly bonuses under our MBO and Bonus Plan, which bonuses may
not exceed 40% of Mr. Gawarecki’s quarterly base salary.  Mr. Gawarecki was also eligible to receive a
special bonus related to outsourcing of $100,000, but the conditions for
receiving that bonus were not satisfied. 
Mr. Gawarecki’s current base salary is $246,500.  The term of the agreement will continue until
June 30, 2006 and will not renew unless agreed by the parties in writing.  If Mr. Gawarecki is terminated without cause
or resigns with good reason, he will be entitled to receive 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 a lump-sum amount or in twelve
equal monthly installments

 

2

 

without interest, at the election of Mr.
Gawarecki.  Our obligation to pay
severance to Mr. Gawarecki under the agreement terminates upon the
occurrence of a change in control.

 

Christie Huff.  Ms.
Huff, our Vice President of Worldwide Marketing, is an at-will employee and may
be terminated by us for any reason, with or without notice.  Ms. Huff currently earns an annual salary of $195,000
per year.

 

George Karabatsos.  Mr.
Karabatsos, our Vice President of Worldwide Sales, is an at-will employee and
may be terminated by us 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 to performance.  When Mr.
Karabatsos joined Overland on August 8, 2005, he was granted an option to
purchase up to 100,000 shares of our common stock at the purchase price of
$7.84 per share pursuant to the 2003 Incentive Plan, which option will vest
over a three-year period with one-third vesting on August 8, 2006 and the
remaining two-thirds vesting monthly over the 24 months following that date in
equal installments. The option will accelerate upon a Change in Control as
defined in the 2003 Incentive Plan.  The
option has a ten-year life, subject to continuous service to us.  On his hire date, he was also awarded 15,000
restricted 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 continuing service to us.  In addition, we agreed to reimburse Mr.
Karabatsos for up to $20,000 of relocation expenses incurred by Mr. Karabatsos
in his move to San Diego County, and up to $4,000 per month, for up to three
months, for temporary housing.  If Mr.
Karabatsos is terminated for cause within the first twelve months of his
employment, he must repay the amount 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).

 

Michael S. Kerman.  Mr.
Kerman, our Vice President and General Manager of the Appliance Business Unit,
is an at-will employee and may be terminated by us for any reason, with or
without notice.  Mr. Kerman currently
earns an annual salary of $225,000 per year. 
In addition, we agreed to reimburse Mr. Kerman for up to $100,000 of
relocation expenses incurred by Mr. Kerman in the event that he is terminated
without cause on or before April 29, 2006 and he incurs such expenses related
to a relocation outside of San Diego within six months of his date of
termination.

 

Vernon A. LoForti.  We
entered into an employment agreement with Mr. LoForti on December 4, 2000,
pursuant to which Mr. LoForti is employed as our Vice President and Chief
Financial Officer. The 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.  Mr. LoForti currently earns a
salary of $297,750 per year.

 

Robert J. Scroop.  Mr. Scroop, our Vice President Engineering, 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.

 

Stock Option Acceleration Program

 

In July 2005, our Board of Directors approved the accelerated vesting
of all unvested stock options, held by the company’s officers and employees,
with an exercise price at or above $12.00 per share, effective July 3, 2005.
The stock option acceleration program does not apply to stock options held by our
non-employee directors. The accelerated options were issued under the 2000
Stock Option Plan, the 2001 Supplemental Stock Option Plan and the 2003
Incentive Plan.  In connection with the
acceleration of vesting of options held by our executive officers, each
executive officer agreed not to sell or transfer any shares subject to
accelerated vesting until the original vesting date would have occurred based
on the original vesting schedule (without giving effect to any future

 

3

 

termination of service). The primary purpose of the accelerated vesting
was to eliminate future stock-based employee compensation expense.

 

Retention Agreements

 

We entered into retention agreements with
Messrs. LoForti, Scroop and Gawarecki effective January 27, 2000,
with Mr. Calisi effective March 12, 2001, with Mr. Kerman effective
August 30, 2004, with Mr. Karabatsos effective August 8, 2005 and with Ms. Huff
effective September 14, 2005.   These agreements provide that the officer will
receive a severance payment if, within two years of the consummation of a
change in control of Overland, he or she 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. Calisi would be entitled to receive an
amount equal to 2.5 times his base salary plus target bonus, and
Mr. LoForti would be entitled to receive an amount equal to 2.0 times his
base salary plus target bonus. Ms. Huff, and Messrs. Gawarecki, Karabatsos,
Kerman, and Scroop each would be entitled to an amount equal to their
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.

 

MBO and Bonus Plan

 

Our Chief Executive Officer
and other executive officers, except Mr. Karabatsos, participate in our
executive bonus plan which is designed as a performance-based component of
their compensation package. The Compensation Committee tailors the plan for
each executive to be unique to his or her area of responsibility. For fiscal
year 2006, the plan established by the Compensation Committee has been and will
be evaluated and paid on a quarterly basis, and include two performance
measurement points for each executive officer:

 

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

 

• achievement of individual job performance
goals and objectives.

 

No bonuses were paid under the plan for the first, second or third fiscal
quarters of 2006, as the EPS targets were not achieved.

 

Discretionary Bonus

 

On January 24, 2006, the Compensation
Committee of our board of directors approved a $10,000 discretionary bonus
payable immediately to certain of our executive officers in recognition of certain
OEM business awarded to Overland.  The
$10,000 discretionary bonus was paid in February 2006 to each of the following
current executive officers as of the date of this report on Form 10-Q:

 

	
  W. Michael Gawarecki

  	
   

  	
  Vice President, Operations

  
	
  Christie Huff

  	
   

  	
  Vice President, Worldwide
  Marketing

  
	
  Michael Kerman

  	
   

  	
  Vice President and General
  Manager, Appliance Business Unit

  
	
  Vernon A. LoForti

  	
   

  	
  Vice President, Chief
  Financial Officer and Secretary

  
	
  Robert J. Scroop

  	
   

  	
  Vice President,
  Engineering

  

 

4EXHIBIT 4.6
 

AMENDMENT NO. 4
TO CREDIT AGREEMENT

 

THIS AMENDMENT NO. 4 TO CREDIT
AGREEMENT, is entered
into as of May 11, 2006 (the “Amendment”), by and among P&F INDUSTRIES, INC., a Delaware
corporation (“P&F”), FLORIDA PNEUMATIC MANUFACTURING CORPORATION,
a Florida corporation (“Florida Pneumatic”), EMBASSY
INDUSTRIES, INC., a New York corporation (“Embassy”), GREEN MANUFACTURING, INC., a Delaware
corporation (“Green”), COUNTRYWIDE HARDWARE, INC.,
a Delaware corporation (“Countrywide”), NATIONWIDE INDUSTRIES, INC., a Florida corporation (“Nationwide”),
WOODMARK INTERNATIONAL, L.P., a
Delaware limited partnership (“Woodmark”), PACIFIC STAIR PRODUCTS, INC.,
a Delaware corporation (“Pacific”) and WILP HOLDINGS, INC.,
a Delaware corporation (“WILP”; and collectively with P&F, Florida
Pneumatic, Embassy, Green, Countrywide, Nationwide, Woodmark and Pacific, the “Co-Borrowers”),
CITIBANK, N.A. and HSBC BANK
USA, NATIONAL ASSOCIATION (formerly known as HSBC Bank USA)
(collectively, the “Lenders”) and CITIBANK, N.A.,
as Administrative Agent for the Lenders.

 

BACKGROUND

 

The Co-Borrower, the Lenders and the Administrative
Agent are parties to a Credit Agreement, dated as of June 30, 2004 (as
same has been and may be further amended, restated, supplemented or
modified, the “Credit Agreement”), pursuant to which the Lenders provide the
Co-Borrowers with certain financial accommodations.

 

The Co-Borrowers have requested, and the
Administrative Agent and the Lenders have agreed, subject to the terms and
conditions of this Amendment, to amend and waive certain provisions of the
Credit Agreement and the other Loan Documents, as herein set forth. Capitalized
terms used herein and not defined herein shall have the meanings given to them
in the Credit Agreement.

 

Accordingly, in consideration of the premises and of
the mutual covenants and agreements hereinafter set forth, the parties hereto
agree as follows:

 

ARTICLE I

 

Amendment to Credit
Agreement.

 

Section 1.1.                                   The table in Section 7.13(b) of the
Credit Agreement is hereby amended and restated in its entirety to provide as
follows:

 

	
  Period

  	
   

  	
  Amount

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  January 1, 2006 through March 31,
  2006

  	
   

  	
  $

  	
  15,000,000

  	
   

  
	
  April 1, 2006 through June 30,
  2006

  	
   

  	
  $

  	
  15,500,000

  	
   

  
	
  July 1, 2006 through December 30,
  2006

  	
   

  	
  $

  	
  16,500,000

  	
   

  
	
  December 31, 2006 through December 30,
  2007

  	
   

  	
  $

  	
  22,000,000

  	
   

  
	
  December 31, 2007 and thereafter

  	
   

  	
  $

  	
  25,000,000

  	
   

  
						

 

ARTICLE II.

 

Conditions of Effectiveness;
Further Conditions.

 

1

 

Section 2.1.                                   This Amendment shall become effective as of
the date hereof, upon receipt by the Administrative Agent of this Amendment,
duly executed by each Co-Borrower.

 

ARTICLE III.

 

Representations and
Warranties; Effect on Credit Agreement.

 

Section 3.1. Each Co-Borrower hereby represents
and warrants as follows:

 

a.                                       This Amendment and the Credit Agreement, as
amended hereby, constitute legal, valid and binding obligations of the
Co-Borrowers and are enforceable against the Co-Borrowers in accordance with
their respective terms.

 

b.                                      Upon the effectiveness of this Amendment, the
Co-Borrowers hereby reaffirm all covenants, representations and warranties made
in the Credit Agreement to the extent that the same are not amended hereby and
each Co-Borrower agrees that all such covenants, representations and warranties
shall be deemed to have been remade as of the date hereof.

 

c.                                       No Default or Event of Default has occurred
and is continuing or would exist after giving effect to this Amendment.

 

d.                                      No Co-Borrower has any defense, counterclaim
or offset with respect to the Credit Agreement.

 

e.                                       All corporate and limited partnership action
of each Co-Borrower appropriate and necessary, including, if necessary,
resolutions of the Board of Directors of each of P&F, Florida Pneumatic,
Embassy, Green, Countrywide, Nationwide, Pacific and WILP and resolutions of
the general partner of Woodmark, to authorize the execution, delivery and
performance of this Amendment, has been taken.

 

Section 3.2.                                   Effect on Credit Agreement and Loan Documents.

 

a.                                       Upon the effectiveness of this Amendment,
each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof”,
“herein” or words of like import shall mean and be a reference to the Credit
Agreement as amended hereby.

 

b.                                      Except as specifically amended herein, the
Credit Agreement, and all other documents, instruments and agreements executed
and/or delivered in connection therewith, shall remain in full force and
effect, and are hereby ratified and confirmed.

 

c.                                       Except as expressly provided  herein, the execution, delivery and
effectiveness of this Amendment shall not operate as a waiver of any right,
power or remedy of the Administrative Agent or the Lenders, nor constitute a
waiver of any provision of the Credit Agreement, or any other documents, instruments
or agreements executed and/or delivered under or in connection therewith.

 

d.                                      The other Loan Documents and all agreements,
instruments and documents executed and delivered in connection with the Credit
Agreement and any other Loan Documents shall each be deemed to be amended and
supplemented hereby to the extent necessary, if any, to give effect to the
provisions of this Amendment.

 

2

 

ARTICLE IV.

 

Miscellaneous.

 

Section 4.1.                                   This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.

 

Section 4.2.                                   Section headings in this Amendment are
included herein for convenience of reference only and shall not constitute a part of
this Amendment for any other purpose.

 

Section 4.3.                                   This Amendment may be executed in one or
more counterparts, each of which shall constitute an original, and all of
which, taken together, shall be deemed to constitute one and the same
agreement.

 

[next
page is signature page]

 

3

 

IN WITNESS WHEREOF, the Co-Borrowers, the Lenders and the
Administrative Agent have caused this Amendment to be duly executed by their
duly authorized officers as of the day and year first above written.

 

	
   

  	
  P&F INDUSTRIES, INC.

  
	
   

  	
  FLORIDA PNEUMATIC MANUFACTURING

  
	
   

  	
    CORPORATION

  
	
   

  	
  EMBASSY INDUSTRIES, INC.

  
	
   

  	
  GREEN MANUFACTURING, INC.

  
	
   

  	
  COUNTRYWIDE HARDWARE, INC.

  
	
   

  	
  NATIONWIDE INDUSTRIES, INC.

  
	
   

  	
  WOODMARK INTERNATIONAL, L.P.

  
	
   

  	
  By:

  	
  Countrywide Hardware, Inc., its General
  Partner

  
	
   

  	
  PACIFIC STAIR PRODUCTS, INC.

  
	
   

  	
  WILP HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Joseph A. Molino, Jr.

  	
   

  
	
   

  	
   

  	
  Joseph A. Molino, Jr., the President of Green Manufacturing, Inc.
  and the Vice President of each of the other corporations named above

  
	
   

  	
   

  
	
   

  	
  CITIBANK, N.A., as a Lender and as

  
	
   

  	
  Administrative Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Stephen Kelly

  	
   

  
	
   

  	
  Name: Stephen Kelly

  
	
   

  	
  Title:     Vice President

  
	
   

  	
   

  
	
   

  	
  HSBC BANK USA, NATIONAL

  
	
   

  	
  ASSOCIATION, as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Raymond Fincken

  	
   

  
	
   

  	
  Name:

  	
  Raymond Fincken

  
	
   

  	
  Title:

  	
  Vice President

  
						

 

4

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