Document:

EXHIBIT 10.4

 

ADDENDUM TO PRODUCT PURCHASE AGREEMENT

 

This THIRD ADDENDUM TO PRODUCT PURCHASE AGREEMENT (the “Addendum”)
supplements that certain Product Purchase Agreement No. 1585-042103 effective
as of July 31, 2003 by and between Hewlett-Packard Company (herein “HP”)
on the one hand and Overland Storage Inc. (herein “Supplier”) on the other
hand.  There are no third party
beneficiaries to this Addendum.

 

RECITALS

 

WHEREAS, HP and Supplier have previously entered into the aforesaid
Product Purchase Agreement (the “Agreement”);

 

WHEREAS, the purpose of this Addendum is to set forth commercial and
other terms and conditions for Product sold by Supplier and purchased by HP
pursuant to the Agreement; and

 

WHEREAS, HP and Supplier desire to supplement the Agreement as herein
provided.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, HP and Supplier hereby agree as
follows:

 

1.1                       The
effective date (“Effective Date”) of this Addendum is December 15, 2007.

 

1.2                       Capitalized
terms used herein, unless otherwise defined, will have the meanings given in
the Agreement.

 

1.3                       This
Addendum replaces section 4.2 Payment Terms in the Product Purchase Agreement

 

2.0       Payment Terms

 

4.2       Payment Terms. Payment
terms are [* * *]. No
invoice may be dated or submitted earlier than the date of Delivery. Any prompt
payment discount will be calculated from the same date. Payment will be in U.S.
currency unless otherwise stated. Payment terms are firm for the entire Term unless
changed by mutual written agreement of the parties.

 

3.0        Miscellaneous.

 

This Addendum is subject to the Agreement and
in the event of any conflict between a provision of the Agreement and a
provision of this Addendum, then the provision of the Agreement will
govern.  Termination or expiration of the
Agreement will ipso  facto terminate this Addendum.  This Addendum may be terminated as set forth in
Article 24 (Termination) of the Agreement. 
Termination or expiration of this Addendum will not terminate or otherwise
affect the Agreement which will continue unaffected and in full force and
effect according to the terms thereof. This Addendum can be executed in
original, faxed or emailed counterparts, and each counterpart will be
considered an original, but all of which together will constitute one and the
same instrument.  This Addendum will
inure to the benefit of each of the party’s permitted assigns or successors in
interest and will be effective as of the Effective Date. The Agreement
continues in full force and effect; and except as may be expressly set forth in
this Addendum, the Agreement is unchanged.

 

1

 

IN WITNESS WHEREOF, the parties, intending to be legally bound hereby,
have executed this Addendum as of the Effective Date.

 

	
  OVERLAND STORAGE INC.

  	
   

  	
  HEWLETT-PACKARD COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: 

  	
  /s/ Kurt L. Kalbfleisch

  	
   

  	
  By: 

  	
  /s/ Richard Gentilini

  
	
   

  	
   

  	
   

  
	
  Print Name: 

  	
  Kurt L. Kalbfleisch

  	
   

  	
  Print Name: 

  	
  Richard Gentilini

  
	
   

  	
   

  	
   

  
	
  Title: 

  	
  VP Finance and Interim CFO

  	
   

  	
  Title: 

  	
  Director, Global Procurement SWD

  
	
   

  	
   

  	
   

  
	
  Date: 

  	
  12/20/2007

  	
   

  	
  Date: 

  	
  1-4-2008

  
										

 

2Exhibit 10.5

 

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:

 

	
  Robert Farkaly

  	
   

  	
  $

  	
  280,000

  	
  *

  
	
  W. Michael Gawarecki

  	
   

  	
  $

  	
  270,000

  	
   

  
	
  Kurt L. Kalbfleisch

  	
   

  	
  $

  	
  225,000

  	
   

  
	
  Vernon A. LoForti

  	
   

  	
  $

  	
  400,000

  	
   

  
	
  Ravi Pendekanti

  	
   

  	
  $

  	
  250,000

  	
   

  

 

   *
$140,000 of this amount is tied to performance and is paid in the form of a
sales commission.

 

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:

 

Robert
Farkaly.  As our Vice President of Worldwide Sales, Mr. Farkaly
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 $280,000, with $140,000 of that amount guaranteed as
base salary and $140,000 tied to performance. 
On August 13, 2007, he received an option to purchase up to 125,000
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 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.

 

 

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 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.

 

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
was appointed as our 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 and
April 2008 and will earn an additional cash bonus of $10,000 in July 2008,
subject to his continued employment at our company.  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) will 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 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.

 

Ravi
Pendekanti.  Mr. Pendekanti
joined our company on April 21, 2008 as our Vice President of Worldwide
Marketing. 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.  In connection with the relocation, we will
pay for temporary housing, one round-trip flight per week from San Diego to San
Francisco, and the services of a relocation advisor.  If Mr. Pendekanti is terminated without
cause within the first 12 months of employment, we have agreed to provide
severance in the amount of six months base pay and 12 months medical COBRA
coverage in exchange for a general release of claims against our company.  These severance benefits will not apply if Mr. Pendekanti
is terminated within two years following the consummation of a change of
control, in which case he would receive the severance set forth in the
retention agreement we signed with Mr. Pendekanti as described below.  On April 28, 2008, Mr. Pendekanti  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. Farkaly, 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,
or in the case of Mr. Farkaly, the target sales commission he is eligible
to receive, prior to a change of control, in the event targeted revenue is
achieved for the year. 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. Farkaly, Gawarecki, Kalbfleisch, and Pendekanti
each would be entitled to an amount equal to his respective base salary plus
target bonus (or in the case of Mr. Farkaly, target sales commission). 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

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00141-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00141-of-00352.parquet"}]]