Document:

Exhibit 10.22

 

August 26,
2008

 

Robert
Farkaly

XXXXXXXXXXX

 Poway, 
CA  92064

 

Re:
Severance Agreement and General Release

 

Dear
Robert:

 

As
we discussed, your employment with Overland Storage, Inc. (the “Company”)
will terminate August 27, 2008 (“Separation Date”).  Although the
Company does not have a formal severance policy, this letter sets forth our
proposed agreement concerning your separation from the Company, benefits from
the Company and your release of the Company from any obligations or claims after
the Separation Date.

 

1.               You have held the position
of VP, Worldwide Sales.  As of the Separation Date, your responsibilities
as VP, Worldwide Sales will cease, and all payments and benefits from the
Company will cease, except as provided in this letter.

 

2.               On your Separation Date,
regardless of whether you sign this Agreement, the Company shall provide you
with a final paycheck for salary through August 27, 2008 less all
applicable federal, state and local income, social security and other payroll
taxes

 

3.               The Company will complete
the sales commissions true up calculation owed to you through your separation
date and will pay such commissions to you as soon as practicable.  We
expect to pay it within 10 calendar days from the date of this letter.

 

4.               You acknowledge that, other
than the sales commissions noted in 3 above, the Company has paid you all
salary and other compensation payments to which you are entitled in connection with
your service as an employee of the Company and that you are not entitled to any
additional compensation from the Company.

 

5.               Contingent upon (1) your
execution of this letter agreement and (2) this letter agreement becoming
effective and enforceable on the date immediately following the expiration of
the “Revocation Period” defined in paragraph 7 below (such date, the “Effective
Date”), the Company will pay you a sum equal to sixteen (16) weeks base salary
at your most recent rate of pay ($140,000.00 per annum) less all applicable
federal, state and local income tax, social security and other payroll taxes.

 

5.1                                 Included in
this communication are election forms for medical and dental insurance continuation
as provided by the Consolidated Omnibus Budget Reconciliation Act (COBRA). 
If you elect medical COBRA coverage after signing this Agreement, the Company
will pay for up to six (6) months of medical COBRA premiums. Nothing in this
Agreement may be construed as extending your COBRA period beyond the eighteen-month
period allowed under that law, nor is the Company assuming any responsibility
that you have for formally electing to continue coverage.

 

 

6.               You are required to
immediately return on the Separation Date all Company property that you have in
your possession, including all equipment and accessories, office equipment,
account lists, employee lists or client lists, credit cards, keys, and
documents, including copies of documents.

 

7.               In consideration for the
payments and other agreements set forth above, you release and forever
discharge the Company, its present and former agents, employees, officers,  directors, shareholders, principals,
predecessors, alter egos, partners, parents, subsidiaries, affiliate,
attorneys, insurers, successors and assigns, from any and all claims, demands,
grievances, causes of action or suit of any kind arising out of, or in any way
connected with, the dealings between the parties to date, including the
employment relationship and termination thereof.  YOU ALSO SPECIFICALLY
AGREE AND ACKNOWLEDGE YOU ARE WAIVING ANY RIGHT TO RECOVERY BASED ON STATE OR
FEDERAL AGE, SEX, PREGNANCY, RACE, COLOR, NATIONAL ORIGIN, MARITAL STATUS,
RELIGION, VETERAN STATUS, DISABILITY SEXUAL ORIENTATION, MEDICAL CONDITION, OR
OTHER ANTI-DISCRIMINATION LAWS, INCLUDING WITHOUT LIMITATION, TITLE VII OF THE
CIVIL RIGHTS ACT OF 1964, THE EQUAL PAY ACT, THE AMERICANS WITH DISABILITIES
ACT, THE CALIFORNIA LABOR CODE, THE CALIFORNIA FAIR EMPLOYMENT AND HOUSING ACT,
THE FAMILY AND MEDICAL LEAVE ACT, THE CALIFORNIA FAMILY RIGHTS ACT, THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT, THE WORKER ADJUSTMENT AND RETRAINING
ACT, AND THE FAIR LABOR STANDARDS ACT, ALL AS AMENDED, WHETHER SUCH CLAIM BE
BASED UPON AN ACTION FILED BY YOU OR BY A GOVERNMENTAL AGENCY.  YOU ALSO
RELEASE THE COMPANY FROM ANY CLAIM FOR ATTORNEYS’ FEES.

 

You also specifically agree and acknowledge that (1) you are
knowingly and voluntarily waiving and releasing any rights you may have under
the Age Discrimination and Employment Act, as amended, and (2) that the
consideration given for this Agreement is in addition to anything of value to
which you are already entitled.  You are hereby advised that: (a) this
Agreement does not apply to any claims that may arise after the signing of this
Agreement; (b) you should consult with an attorney prior to executing this
release; (c) you have forty-five (45) days within which to consider this
release (although you may choose to voluntarily execute this release earlier);
and (d) as set forth in the following paragraph, you have seven (7) calendar
days following the execution of this release to revoke the Agreement.

 

Within three (3) calendar days of signing and dating this
Agreement, you agree to deliver the executed original of this Agreement to
me.  However, you understand that you may revoke this Agreement for up to
seven (7) calendar days following your execution of this Agreement (the “Revocation
Period”) and it shall not become effective or enforceable until such Revocation
Period has expired.  You and the Company
further acknowledge and agree that such revocation must be in writing addressed
to and received by me not later than midnight on the 7th day following your
execution of this Agreement.  Should you revoke this Agreement under this
paragraph, this Agreement shall not be effective or enforceable and you shall
no longer have the right to receive the benefits or payments described in this
Agreement (other than those set forth in numbered paragraph 2 herein).

 

8.               By executing this Agreement,
you acknowledge that you have read the document and have had the opportunity to
receive independent legal advice with respect to executing this Agreement and
that you expressly waive the rights and benefits you otherwise might have under
California Civil Code Section 1542, which provides:

 

A general release does not extend to claims which the employee does not
know or suspect to exist in his or her favor at the time of executing the
release, which if known 

 

 

by him or her must have materially affected his or her settlement with
the company.

 

9.               The Company expressly denies liability of
any kind to you and nothing contained in thisletter will be construed as an
admission of any liability.

 

10.         You acknowledge and agree that you have a
continuing obligation under the terms of the Confidentiality Agreement you
signed (copy attached) to keep confidential and not to disclose information
known or learned as a consequence of your employment with the Company,
including facts relating to the business operations, procedures, materials,
finances, customers, clients, suppliers, and marketing or sales strategies,
methods, and tactics which is not generally known in the industry.

 

11.         This Agreement has been executed and
delivered within the State of California and our respective rights and
obligations shall be construed and enforced in accordance with and governed by,
California law.

 

12.         You acknowledge that his Agreement is the
entire Agreement between the parties and supersedes all prior and
contemporaneous oral and written agreements and discussions.  This Agreement may be amended only by an
Agreement in writing.

 

13.         Any dispute or claim arising out of this
Agreement will be subject to final and binding arbitration.  The
arbitration will be conducted by one arbitrator who is a member of the American
Arbitration Association (AAA) and will be governed by the Model Employment
Arbitration rules of AAA.  The arbitration will be held in San Diego,
California and the arbitrator will apply California substantive law in all
respects.  The arbitrator shall have all authority to determine the
arbitrability of any claim and enter a final, binding judgment at the
conclusion of any proceeding.  Any final judgment only may be appealed on
the grounds of improper bias or improper conduct of the arbitrator.

 

We wish you the best in your future endeavours.

 

Sincerely yours,

 

OVERLAND STORAGE, INC.

 

	
  By:

  	
  /s/ V.A. LoForti

  	
   

  

 

Vern Loforti

President

 

* * * * * * * * * *

 

I understand, acknowledge
and agree to the terms and conditions, including the releases and waivers, set
forth in this letter.

 

	
       /s/
  Robert Farkaly

  	
   

  
	
  Robert Farkaly

  	
   

  
	
   

  	
   

  
	
  Dated:

  	
       4
  Sept 2008Exhibit 10.38

 

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:

 

	
  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 summarizes
the employment arrangements between us and our current executive officers as of
the date of this report on Form 10-K:

 

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
vested over one year in equal monthly installments and 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
assumed the permanent role of 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, April 2008 and July 2008.  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) 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 vested
over one year in equal monthly installments and 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. In August 2008, his role was
expanded to include Vice President of Worldwide Sales, replacing Robert Farkaly
who left the company in August 2008. 
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.  Pending relocation, the company will pay for
temporary housing, one round-trip flight per week to San Francisco, and the
services of a relocation advisor.  In
addition, if Mr. Pendekanti is terminated without cause within the first
12 months of employment, the company has agreed to provide severance in the
amount of six months base pay and 12 months medical COBRA coverage.  These severance benefits are not in addition
to the benefits provided under his Retention Agreement described below.  On April 28, 2008, he 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. 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.  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. Gawarecki,
Kalbfleisch, and Pendekanti each would be entitled to an amount equal to his
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.

 

 

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-00148-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00148-of-00352.parquet"}]]