Exhibit 10.5
AMENDED AND RESTATED RETENTION
AGREEMENT
This Amended and
Restated Retention Agreement (this “ Agreement
”) is entered into on September 27, 2007 between Overland
Storage Inc., a California corporation having its principal offices
at 4820 Overland Avenue, San Diego, California 92123 (the “
Company ”), and Robert Farkaly (“
Employee ”). This Agreement amends, restates and
supersedes in its entirety that certain Retention Agreement
effective July 10, 2007 between the Company and
Employee.
AGREEMENT
WHEREAS, Employee
is a key employee of the Company;
WHEREAS, the
Company considers that providing Employee with certain employment
termination benefits will operate as an incentive for Employee to
remain employed by the Company in the event of a Change of
Control;
WHEREAS, the
parties agreed it is advisable and in the best interests of the
parties to amend and restate this Agreement to make certain changes
related to recent legal developments, most particularly related to
California arbitration procedures and Internal Revenue Code
Section 409A, and also to make certain other changes as
reflected herein; and
NOW THEREFORE, for
the consideration stated above, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the Company and Employee agree as follows:
1.
Definitions
.
1.1
“ Base Salary
” shall mean the Employee’s gross annual salary at the
time of a Change of Control or the Termination Date, whichever is
higher.
1.2
“ Change of
Control ” is defined to have occurred if, and only if,
during Employee’s employment:
(a)
any individual,
partnership, firm, corporation, association, trust, unincorporated
organization or other entity or person, or any syndicate or group
deemed to be a person under Section 14(d)(2) of the Exchange Act is
or becomes the “Beneficial Owner” (as defined in Rule
13d-3 of the General Rules and Regulations under the Exchange Act),
directly or indirectly, of securities of the Company representing
50% or more of the combined voting power of the Company’s
then outstanding securities entitled to vote in the election of
directors of the Company;
(b)
there occurs a
reorganization, merger, consolidation or other corporate
transaction involving the Company (“ Transaction
”), in each case, with respect to which the stockholders of
the Company immediately prior to such Transaction do not,
immediately after the Transaction, own more than fifty (50) percent
of the combined voting power of the Company or other corporation
resulting from such Transaction; or
(c)
all or substantially all
of the assets of the Company are sold, liquidated or
distributed.
1.3
“ Cause
” shall mean
(a)
Employee’s gross
neglect of his duties to the Company, where Employee has been given
a reasonable opportunity to cure his gross neglect (which
reasonable opportunity must be granted during the thirty-day period
preceding termination);
(b)
any violation by Employee
of Employee’s obligations under this Agreement or any
employment agreement which Employee may have with the
Company;
(c)
Employee taking any role
in any buy-out of the Company without the approval of the
Company’s majority shareholder; or
(d)
Employee’s
commission of any act of fraud, theft or embezzlement against the
Company.
1.4
“
Compensation ” shall mean Base Salary plus Target
Commission.
1.5
“ Resignation For
Good Reason ” shall mean the voluntary resignation by
Employee of his employment with the Company within two years
following a Change of Control and within three (3) months of the
following Good Reasons:
(a)
any reduction in
Employee’s Base Salary or Target Commission; or
(b)
any reduction in
Employee’s title; or
(c)
any significant reduction
in Employee’s responsibilities and authority;
(d)
any failure by the Company
to pay Employee’s Base Salary; or
(e)
a relocation by the
Company of Employee’s place of Employment outside a fifty
(50) mile radius of Employee’s current place of
employment.
An event described
in Section 1.5(a) through (e) will not constitute Good Reason
unless Employee provides written notice to the Company of his
intention to resign for Good Reason and unless the Company does not
cure or remedy the alleged Good Reason condition within thirty (30)
days of the Company’s receipt of the written
notice.
1.6
“ Severance
Period ” shall begin on the Termination Date and extend
for twelve months following the Termination Date.
1.7
“ Target
Commission ” shall mean the variable annual compensation
represented by the Sales Commission Employee is eligible to
receive, prior to a Change of Control, in the event targeted
revenue is achieved for the year.
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1.8
“ Termination
Date ” shall mean the date of termination of
Employee’s employment relationship with the
Company.
1.9
“ Termination
Payments ” shall mean any payment or distribution of
Compensation or benefits made pursuant to Section 4.1(a)-(c) of
this Agreement.
2.
Title and
Duties .
Employee will hold the position of Vice President of Worldwide
Sales. Employee’s primary duties will include such duties as
are assigned or delegated to Employee by the Board of Directors of
the Company (the “ Board ”). Employee will: (i)
devote his entire business time, attention, skill, and energy
exclusively to the business of the Company; (ii) use his best
efforts to promote the success of the Company’s business; and
(iii) cooperate fully with the Board in the advancement of the best
interests of the Company.
3.
At-Will
Employment .
Employee reaffirms that Employee’s employment relationship
with the Company is at-will, terminable at any time and for any
reason by either the Company or Employee. While certain paragraphs
of this Agreement describe events that could occur at a particular
time in the future, nothing in this Agreement may be construed as a
guarantee of employment of any length.
4.
Termination
Payments .
4.1
If, within two (2) years
immediately following a Change of Control, Employee’s
employment terminates as the result of (i) termination by the
Company of Employee’s employment for a reason other than
Cause; or (ii) Employee’s Resignation for Good
Reason:
(a)
Employee will receive a
pro-rata share of Base Salary and accrued but unused vacation
through the Termination Date, less applicable state and federal
taxes or other payroll deductions;
(b)
Subject to Section 9,
Employee will be eligible for Severance under this Agreement in a
lump-sum amount equal to Base Salary plus Target Commission, less
applicable state and federal taxes or other payroll deductions;
and
(c)
Subject to Section 9, if
Employee elects to continue insurance coverage as afforded to
Employee according to the Consolidated Omnibus Budget
Reconciliation Act of 1985 (“ COBRA ”), Company
will reimburse Employee the amount of the premiums incurred by
Employee during the Severance Period. Nothing in this Agreement
will extend Employee’s COBRA period beyond the period allowed
under COBRA, nor is Company assuming any responsibility which
Employee has for formally electing to continue coverage.
With the exception of
COBRA reimbursements, all payments made pursuant to this Section
4.1 will be made within 60 days following the termination of the
employment of Employee, subject to Section 9.
4.2
The payments set forth in
Section 4.1(b) and (c) above are in exchange for, and contingent
upon Employee’s execution and non-revocation of a release of
all claims as of the Termination Date, in substantially the form
attached to this Agreement as Exhibit A .
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4.3
If Employee’s
employment terminates for any reason after the two year period
immediately following a Change of Control or terminates during that
two year period for any reason other than (i) termination by the
Company of Employee’s employment for a reason other than
Cause; or (ii) Employee’s Resignation for Good Reason, the
Company will pay Employee a pro-rata share of Base Salary and
accrued but unused vacation through the Termination Date, less
applicable state and federal taxes or other payroll
deductions.
5.
Retirement and
Profit-Sharing Plans . Notwithstanding anything in this Agreement to
the contrary, Employee’s rights in any retirement, pension or
profit-sharing plans offered by the Company shall be governed by
the rules of such plans as well as by applicable law; provided,
however, that on the Termination Date, Employee shall become fully
vested in all pension and 401(k) account balances.
6.
Tax
Consequences .
The Company makes no representations regarding the tax consequence
of any provision of this Agreement. Employee is advised to consult
with his own tax advisor with respect to the tax treatment of any
payment contained in this Agreement.
7.
Tax
Adjustment .
Notwithstanding the foregoing or any other provision of this
Agreement to the contrary, if tax counsel selected by the Company
and acceptable to Employee determines that any portion of any
payment under this Agreement would constitute an “excess
parachute payment” within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the “ Code
”), the payments to be made to Employee under this Agreement
shall be reduced (but not below zero) such that the value of the
aggregate payments that Employee is entitled to receive under this
Agreement and any other agreement or plan or program of the Company
shall be one dollar ($1) less than the maximum amount of payments
which Employee may receive without becoming subject to the tax
imposed by Section 4999 of the Code.
8.
Agreement to
Arbitrate .
Employee and Company agree to arbitrate any claim or dispute
(“ Dispute ”) arising out of or in any way
related to this Agreement, the employment relationship between
Company and Employee or the termination of Employee’s
employment, except as provided in paragraph 8.1 below, to the
fullest extent permitted by law. Except as provided above, this
method of resolving Disputes shall be the sole and exclusive remedy
of the parties. Accordingly, the parties understand that, except as
provided herein, they are giving up their rights to have their
disputes decided in a court of law and, if applicable, by a jury,
and instead agree that their disputes shall be decided by an
arbitrator.
8.1
Scope
of the Agreement . A Dispute shall include all disputes or
claims between Employee and Company arising out of, concerning or
relating to Employee’s employment by Company, including,
without limitation: claims for breach of contract, tort,
discrimination, harassment, wrongful termination, demotion,
discipline, failure to accommodate, compensation or benefits
claims, constitutional claims and claims for violation of any
local, state or federal law, or common law, to the fullest extent
permitted by law. A Dispute shall not include any dispute or claim,
whether brought by either Employee or Company, for:
(a) workers’ compen
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