Document:

EXHIBIT 10.3

 

Confidential
portions of this document have been redacted and filed separately with the
Commission.

 

SECOND AMENDMENT TO

VR2 TECHNOLOGY LICENSE AGREEMENT

 

THIS SECOND AMENDMENT TO VR2 TECHNOLOGY
LICENSE  AGREEMENT
(this “Amendment”) is made and entered into as of this 7th
day of November, 2003 (the “Amendment Effective Date”), by and between
Overland Storage, Inc., a California corporation, having a place of business at
4820 Overland Avenue, San Diego, CA 
92123 (“Overland”), and Storage Technology Corp., a Delaware
corporation, having a place of business at One Storage Tek Drive, Louisville,
CO 80028  (“StorageTek”).

 

RECITALS

 

A.            Overland
and StorageTek are parties to that certain VR2  Technology
License Agreement, dated effective as of April 27, 2000 (the “Original
Agreement”) and whereby, Overland granted a license to StorageTek with
respect to the VR2 Intellectual Property, VR2 Intellectual
Property Derivatives and know-how of the VR2 Core (as each such
capitalized term is defined in the Original Agreement) to develop, make, use,
sell and offer for sale tape drive products incorporating application specific
integrated circuits embodying such VR2 Intellectual Property, VR2
Intellectual Property Derivatives and know-how of the VR2 Core all
as set forth in the Original Agreement. 
The Original Agreement was amended by mutual agreement of the parties by
that certain Amendment to VR2  Technology
License Agreement, as of June 18, 2002 (the “First Amendment”).

 

B.            StorageTek
and Overland have agreed to amend the Original Agreement in several respects
and under the terms and conditions herein and specifically relating to changes
in the royalty schedule to go into effect for VR2 Compliant Products
shipped on or after January 1, 2004.

 

NOW, THEREFORE, in consideration of the mutual
promises, covenants and other terms and conditions contained herein and for
other good and valuable consideration, the receipt of which is acknowledged by
both parties, the parties agree as follows:

 

1.             Definitions.           For purposes of this Amendment, any
capitalized terms used herein will have the meanings ascribed to such terms or,
if no meaning is ascribed herein, such capitalized terms will have the meanings
ascribed in the Original Agreement.

 

2.             Amendment
to Section 4.3.   Section
4.3 of the Original Agreement, as amended by the First Amendment, is hereby
deleted in its entirety and replaced with the following:

 

4.3          Royalty.  In consideration for the Core License, for
each VR2 Compliant Product sold by StorageTek as part of a tape
drive, StorageTek shall pay to Overland a royalty amount for each Channel
contained within such VR2 Compliant Product [***] in accordance with
the terms and conditions set forth in Exhibit B-1 [***].   StorageTek shall deliver such royalty
payments to Overland not later than [***] days after the end of each Quarter  during
the Term of this Agreement.

 

1

 

3.             No Other
Changes.  Except
as expressly provided in this Amendment, the Original Agreement remains un-amended
and unmodified and in full force and effect.

 

4.             General.
This Amendment contains the entire agreement between the parties with respect
to the subject matter hereof and supersedes any prior agreements, negotiations,
or representations between the parties with respect to the subject matter
hereof, whether written or oral.  This
Amendment may be modified only by a subsequent written agreement signed by the
parties.  If any provision of this
Amendment is held to be unenforceable, the remaining provisions will continue
unaffected.

 

5.             Governing
Law.   This Amendment will
be governed in all respects solely and exclusively by the laws of the State of
California, U.S.A. without regard to conflict of law principles.

 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized representatives as of the Amendment Effective
Date.

 

	
  Overland Storage, Inc.:

  	
  Storage Technology Corp.:

  
	
   

  	
   

  
	
  By:

  	
       /s/
  Vernon A. LoForti

  	
   

  	
  By:

  	
   /s/ Chris Durkeee

  
	
   

  	
       Vernon A. LoForti

  	
   Chris Durkeee

  
	
  Vice President and
  Chief Financial Officer

  	
  Contracts Administrator
  Sr. Consultant

  
					

 

2

 

EXHIBIT B-1

 

[***]

 

 

	
  [***]

  

 

(1) [***].

 

(2) [***].

 

3EXHIBIT
10.6

 

Overland
Storage, Inc.

2003 Equity
Incentive Plan

 

Notice of
Stock Option Grant

(Senior
Officer, Limited Transferability)

 

You have been granted the
following option to purchase shares of the Common Stock of Overland Storage,
Inc. (the “Company”):

 

	
  Name of Optionee:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Total Number of Shares:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Type of Option:

  	
   

  	
  Incentive Stock Option

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Nonstatutory Stock
  Option

  
	
   

  	
   

  	
   

  
	
  Exercise Price Per
  Share:

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Date of Grant:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Vesting Commencement
  Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Vesting Schedule:

  	
   

  	
  This option becomes
  exercisable with respect to the first
  [           ]% of the
  Shares subject to this option when you complete
  [           ] months of
  continuous “Service” (as defined in the Plan) from the Vesting Commencement
  Date.  Thereafter, this option becomes
  exercisable with respect to an additional
  [           ]% of the
  Shares subject to this option when you complete each month of Service.

  
	
   

  	
   

  	
   

  
	
  Expiration Date:

  	
   

  	
  [                         ][        ],
  20[    ], or if such date falls on a day when Company headquarters
  are not open for business, at the close of business at Company headquarters
  on the last business day before such date. 
  This option expires earlier if your Service terminates earlier, as
  described in the Stock Option Agreement.

  

 

You and the Company agree
that this option is granted under and governed by the terms and conditions of
the 2003 Equity Incentive Plan (the “Plan”) and the Stock Option Agreement,
both of which are attached to and made a part of this document.

 

You further agree that the
Company may deliver by email all documents relating to the Plan or this option
(including, without limitation, prospectuses required by the Securities and
Exchange Commission) and all other documents that the Company is required to
deliver to its security holders (including, without limitation, annual reports
and proxy statements).  You also agree
that

 

 

the Company may deliver
these documents by posting them on a web site maintained by the Company or by a
third party under contract with the Company.  If the Company posts these documents on a web site, it will notify
you by email.

 

	
  Optionee:

  	
  Overland Storage, Inc.

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						

 

2

 

Overland
Storage, Inc.

2003 Equity
Incentive Plan

 

Stock Option
Agreement

 

	
  Tax Treatment

  	
   

  	
  This option is intended
  to be an incentive stock option under section 422 of the Internal Revenue
  Code or a nonstatutory stock option, as provided in the Notice of Stock
  Option Grant.

  
	
   

  	
   

  	
   

  
	
  Vesting

  	
   

  	
  This option becomes exercisable
  in installments, as shown in the Notice of Stock Option Grant.  In addition, this option becomes
  exercisable in full if either of the following events occurs:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  •                                          Your
  Service terminates because of total and permanent disability, or death, or

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  •                                          The
  Company is subject to a “Change in Control” (as defined in the Plan) before
  your Service terminates.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  This option will in no
  event become exercisable for additional shares after your Service has
  terminated for any reason.

  
	
   

  	
   

  	
   

  
	
  Term

  	
   

  	
  This option expires in
  any event at the close of business at Company headquarters on the 10th
  anniversary of the Date of Grant, as shown in the Notice of Stock Option
  Grant, or if such anniversary date would fall on a day when Company
  headquarters are not open for business, at the close of business at Company
  headquarters on the last business day before such anniversary date.  (It will expire earlier if your Service
  terminates, as described below.)

  
	
   

  	
   

  	
   

  
	
  Regular Termination

  	
   

  	
  If your Service
  terminates for any reason except death or total and permanent disability,
  then this option will expire at the close of business at Company headquarters
  on the date three months after your termination date, or if such expiration
  date would fall on a day when Company headquarters are not open for business,
  at the close of business at Company headquarters on the last business day
  before such expiration date.  The
  Company determines when your Service terminates for this purpose.

  

 

3

 

	
  Death

  	
   

  	
  If you die before your
  Service terminates, then this option will expire at the close of business at
  Company headquarters on the date 12 months after the date of death, or if
  such expiration date would fall on a day when Company headquarters are not
  open for business, at the close of business at Company headquarters on the
  last business day before such expiration date.

  
	
   

  	
   

  	
   

  
	
  Disability

  	
   

  	
  If your Service
  terminates because of your total and permanent disability, then this option
  will expire at the close of business at Company headquarters on the date 12
  months after your termination date, or if such expiration date would fall on
  a day when Company headquarters are not open for business, at the close of
  business at Company headquarters on the last business day before such
  expiration date.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  For all purposes under
  this Agreement, “total and permanent disability” means that you are unable to
  engage in any substantial gainful activity by reason of any medically
  determinable physical or mental impairment which can be expected to result in
  death or which has lasted, or can be expected to last, for a continuous
  period of not less than one year.

  
	
   

  	
   

  	
   

  
	
  Leaves of Absence and Part-Time Work

  	
   

  	
  For purposes of this
  option, your Service does not terminate when you go on a military leave, a
  sick leave or another bona fide leave of absence, if the leave was approved
  by the Company in writing and if continued crediting of Service is required
  by the terms of the leave or by applicable law. But your Service terminates
  when the approved leave ends, unless you immediately return to active work.
  If this option is designated as an Incentive Stock Option, and if such leave
  exceeds ninety (90) days, and reemployment upon expiration of such leave is
  not guaranteed by statute or contract, then this option shall be treated as a
  Non-Qualified Stock Option on the day three (3) months and one (1) day
  following the expiration of such ninety (90) day period.

  

 

4

 

	
   

  	
   

  	
  If you go on a leave of
  absence, then the vesting schedule specified in the Notice of Stock Option
  Grant may be adjusted in accordance with the Company’s leave of absence
  policy or the terms of your leave.  If
  you commence working on a part-time basis, then the vesting schedule
  specified in the Notice of Stock Option Grant may be adjusted in accordance
  with the Company’s part-time work policy or the terms of an agreement between
  you and the Company pertaining to your part-time schedule.

  
	
   

  	
   

  	
   

  
	
  Restrictions on Exercise

  	
   

  	
  The Company will not
  permit anyone to exercise this option if the issuance of shares at that time
  would violate any “Applicable Law” (as defined in the Plan).

  
	
   

  	
   

  	
   

  
	
  Notice of Exercise

  	
   

  	
  When you wish to
  exercise this option, you may select one of the following:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  •                                          If
  you have established an account with E*Trade OptionsLink
  (www.optionslink.com, (800) 838-0908), or such other or substitute employee
  stock option plan administrative service as the Company may elect to engage
  (such stock option administrative service being the “Plan Agency”), you may
  elect to exercise this option by utilizing the procedures established by the
  Plan Agency for exercise of this option. Such procedures may include
  provisions for execution of an electronic or a written notice stating the number
  of shares to be purchased pursuant to this option and accompanied by delivery
  of an executed exercise agreement as implemented by the Plan Agency, and
  payment made in accordance with this Agreement and the Plan for the full
  purchase price of the shares to be purchased.  The “Committee” (as defined in the Plan) may from time to time
  establish further limitations and rules or procedures for exercise through
  the Plan Agency.  The Company may also
  discontinue use of the Plan Agency at any time, in which case you will be
  required to use the exercise procedure described below.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  •                                          Notify
  the Company by filing the proper “Exercise Notice” form at the address given
  on the form.  Your notice must specify
  how many shares you wish to purchase. 
  Your notice must also specify how your shares should be registered.

  

 

5

 

	
   

  	
   

  	
  Exercise through the
  Plan Agency will be effective in accordance with the policies and procedures
  of the Plan Agency.  An “Exercise
  Notice” filed with the Company will be effective when the Company receives it
  together with payment made in accordance with this Agreement and the Plan for
  the full purchase price of the shares to be purchased.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  If another person wants
  to exercise this option after it has been transferred to him or her (a
  “Transferee”), that person must prove to the Company’s satisfaction that he
  or she is entitled to exercise this option, and must then select one of the
  exercise alternatives specified above; provided that exercise by a Transferee
  may not be available through the Plan Agency, and if it is available, such
  exercise may require additional procedures or documentation established by
  the Company or the Plan Agency.

  
	
   

  	
   

  	
   

  
	
  Form of Payment

  	
   

  	
  When you exercise your
  option, you must pay the option exercise price for the shares that you are
  purchasing.  Payment may be made in
  one or a combination of the following forms:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  •                                          Your
  personal check, a cashier’s check or a money order.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  •                                          Irrevocable
  directions to a securities broker (such as the Plan Agency) approved by the
  Company to sell all or part of your option shares and to deliver to the
  Company from the sale proceeds an amount sufficient to pay the option
  exercise price and any withholding taxes. 
  (The balance of the sale proceeds, if any, will be delivered to you.)
  This procedure will be permitted only if you utilize the services of the Plan
  Agency, or another securities broker pre-approved by the Company in its sole
  discretion.  You will not be permitted
  to use this procedure if you are an “Officer” or “Director” (each as defined
  in the Plan) and this procedure would be deemed an extension of credit or the
  arranging of an extension of credit in the form of a personal loan by the
  Company.

  

 

6

 

	
  Withholding Taxes and Stock Withholding

  	
   

  	
  You will not be allowed
  to exercise this option unless you make arrangements acceptable to the
  Company to pay any withholding taxes that may be due as a result of the
  option exercise.  With the Company’s
  consent, these arrangements may include withholding shares of Company stock
  that otherwise would be issued to you when you exercise this option.  The value of these shares, determined as
  of the effective date of the option exercise, will be applied to the
  withholding taxes.

  
	
   

  	
   

  	
   

  
	
  Restrictions on Resale

  	
   

  	
  You agree not to sell
  any option shares at a time when Applicable Law, Company policies or an
  agreement between the Company and its underwriters prohibit a sale.  This restriction will apply as long as
  your Service continues and for such period of time after the termination of
  your Service as the Company may specify.

  
	
   

  	
   

  	
   

  
	
  Transfer of Option

  	
   

  	
  In general, only you
  may exercise this option prior to your death.  You may not transfer or assign this option,  unless one of the provisions below
  applies. For instance, you may not sell this option or use it as security for
  a loan.  If you attempt to do any of
  these things, this option will immediately become invalid.  You may, however, dispose of this option
  in your will or in a beneficiary designation.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  If this option is
  designated as a nonstatutory stock option in the Notice of Stock Option
  Grant, then the Committee may, in its sole discretion, allow you to transfer
  this option as a gift to one or more family members.  For purposes of this Agreement, “family
  member” means a child, stepchild, grandchild, parent, stepparent,
  grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law,
  father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law
  (including adoptive relationships), any individual sharing your household
  (other than a tenant or employee), a trust in which one or more of these
  individuals have more than 50% of the beneficial interest, a foundation in
  which you or one or more of these persons control the management of assets,
  and any entity in which you or one or more of these persons own more than 50%
  of the voting interest.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  If this option is
  designated as an incentive stock option, the Committee may, in its sole
  discretion, allow you to transfer this option to a trust, where under Section
  671 of the Code and other Applicable Law you are considered the sole
  beneficial owner of this option while it is held in trust.

  

 

7

 

	
   

  	
   

  	
  Regardless of any
  marital property settlement agreement, the Company is not obligated to honor
  a notice of exercise from your former spouse, nor is the Company obligated to
  recognize your former spouse’s interest in your option in any other way,
  except pursuant to a Domestic Relations Order.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The Committee will
  allow you to transfer this option only if both you and the transferee(s)
  execute the forms prescribed by the Committee, which include the consent of
  the transferee(s) to be bound by this Agreement.

  
	
   

  	
   

  	
   

  
	
  Retention Rights

  	
   

  	
  Your option or this
  Agreement does not give you the right to be retained by the Company or a
  subsidiary of the Company in any capacity. 
  The Company and its subsidiaries reserve the right to terminate your
  Service at any time, with or without cause.

  
	
   

  	
   

  	
   

  
	
  Shareholder Rights

  	
   

  	
  You (or your estate,
  heirs or transferee) have no rights as a shareholder of the Company until you
  (or your estate, heirs or transferee) have exercised this option by giving
  the required notice to the Company and paying the exercise price.  No adjustments are made for dividends or
  other rights if the applicable record date occurs before this option is
  exercised, except as described in the Plan.

  
	
   

  	
   

  	
   

  
	
  Adjustments

  	
   

  	
  In the event of a stock
  split, a stock dividend or a similar change in Company stock, the number of
  shares covered by this option and the exercise price per share may be
  adjusted pursuant to the Plan.

  
	
   

  	
   

  	
   

  
	
  Governing Law

  	
   

  	
  This Agreement will be
  interpreted and enforced under the laws of the State of California (without
  regard to its choice-of-law provisions).

  
	
   

  	
   

  	
   

  
	
  The Plan and Other Agreements

  	
   

  	
  The text of the Plan is
  incorporated in this Agreement by reference.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  This Agreement and the
  Plan constitute the entire understanding between you and the Company
  regarding this option.  Any prior
  agreements, commitments or negotiations concerning this option are
  superseded.  This Agreement may be
  amended only by another written agreement between the parties.

  

 

By signing your Notice of Stock
Option Grant form which precedes this Agreement, you agree to all of the terms
and conditions described above and in the Plan.

 

8

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