Exhibit 10.30
EXECUTION VERSION
EMPLOYMENT
AGREEMENT
THIS EMPLOYMENT AGREEMENT (this
“ Agreement ”) is entered into between Overland
Storage, Inc., a California corporation (“ Employer
” or the “ Company ”) and Eric Kelly
(“ Executive ”) on June 24, 2009. This
Agreement is entered into in connection with the appointment of
Executive to the new position of Chief Executive Officer of the
Company on January 27, 2009 (the “ Effective Date
”), and shall be deemed effective as of such date.
The parties agree as
follows:
1. Positions And Duties .
Executive will be employed by the Company in the position of Chief
Executive Officer (“ CEO ”), reporting to the
Company’s Board of Directors (the “Board”), and
shall do and perform all services, acts or things necessary or
advisable to manage and conduct the business of the Company,
including but not limited to strategic planning, implementation of
business objectives and supervision of day-to-day business affairs
of the Company. Executive shall also perform such duties that are
normally associated with the position of CEO consistent with the
bylaws of the Company and as may be reasonably required by the
Board. In addition, the Board elected Executive as a member of the
Board at the January 27, 2009 Board meeting, and shall
nominate Executive for reelection by the Company’s
shareholders as a member of the Board at the 2009 Annual Meeting of
Shareholders of the Company (the “ 2009 Shareholders
Meeting ”) and thereafter as long as Executive is Chief
Executive Officer of the Company. Termination of Executive as Chief
Executive Officer of the Company, for any reason, shall constitute
the resignation by Executive, effective upon such termination, as a
director and officer of the Company and as a director and officer
of any affiliate of the Company. Upon request, Executive shall
provide the Company with additional written evidence of any such
resignation. The Company’s undertaking to elect Executive as
a member of the Board and to nominate Executive for reelection to
the Board by the Company’s shareholders at the 2009
Shareholders Meeting and thereafter is expressly conditioned on
this agreement by Executive regarding his resignation as a director
and officer of the Company and as a director and officer of any
affiliate of the Company in the event of his termination as Chief
Executive Officer of the Company.
1.1. Best Efforts/Full-Time .
During the Employment Term (as defined in Section 1.2 herein),
Executive will act in the best interests of Employer and devote his
full business time and best efforts to the performance of his
duties under this Agreement. Executive agrees to be available to
render such services at all reasonable times and places and in
accordance with Employer’s directives. Executive shall be
assigned to work in the Company’s corporate offices in San
Diego, California, but may be required to travel in connection with
his duties. Executive will abide by all policies, procedures, and
decisions made by Employer, as well as all federal, state and local
laws, regulations or ordinances applicable to his employment.
During his employment, Executive must not engage in any work, paid
or unpaid, that creates an actual or potential conflict of interest
with Employer’s business interests and if, in the opinion of
the Board, an actual or potential conflict exists, the Board may in
its sole discretion require Executive to choose either to
(i) discontinue the other work or (ii) resign from his
employment with Employer.
The foregoing restriction shall not
preclude Executive from engaging in civic, charitable or religious
activities, or from serving on boards of directors of companies or
organizations. so long such services do not pose a material
conflict or materially interfere with his responsibilities to
Employer. In addition, nothing herein shall limit Executive’s
ability to serve on the boards of directors of iGentx, and Silicon
Valley Management Partners. Executive shall also be entitled to
serve on the boards of directors of other companies so long as, in
each such instance, Executive obtains the prior written consent of
the Board (not to be unreasonably withheld). It is anticipated that
Executive shall generally devote no less than 40 hours per week to
his duties for Employer unless he is on vacation or a leave of
absence in accordance with the terms of this Agreement or the
Company’s policies as in effect from time to time.
1.2. Term Of Employment .
This Agreement shall commence on the Effective Date, and, unless
terminated by either party in accordance with Section 5
herein, shall continue until the third anniversary of the Effective
Date. Thereafter, unless terminated by either party in accordance
with Section 4, Executive’s employment shall
automatically renew for an additional one year term on such date
and on each anniversary thereof (the period of employment hereunder
shall be referred to herein as the “ Employment Term
”). Except as provided in Section 5, this Agreement
shall continue during the Employment Term to govern the terms and
conditions of Executive’s employment, unless modified by the
parties hereto in writing.
1.3. Termination . Executive
reaffirms that Executive’s employment relationship with the
Company is terminable at any time and for any reason by either the
Company or Executive, subject to the provisions hereof.
2. Compensation .
2.1. Base Salary . As
compensation for the proper and satisfactory performance of all
duties under this Agreement, Executive shall earn a gross annual
base salary of $400,000.00 ($16,666.67 gross per bi-weekly payroll
period), less applicable state and federal taxes and other
authorized payroll deductions, payable in accordance with
Employer’s normal payroll practices but in no event less
frequently than once per month (the “ Base Salary
”).
2.2. Bonus . Executive will
be eligible to receive potential quarterly or annual cash bonuses
solely as determined (if any) from time to time by the Board or
duly authorized committee thereof (and in each case in the sole
discretion of the Board or duly authorized committee thereof). Any
such bonuses will be based on the Company’s fiscal quarters
or fiscal year, and will be paid to Executive within 74 days
following the end of such fiscal quarter or year. If
Executive’s employment terminates before the end of a fiscal
quarter or year under Section 4.2, Section 4.3 or
Section 4.5, Executive shall be eligible to receive a prorated
amount of the Target Bonus (as defined below) for the fiscal
quarter or year in which Executive’s employment with the
Company terminates. If Executive’s employment terminates
before the end of a fiscal quarter or year under Section 4.4,
Executive shall be eligible to receive a prorated amount of bonus
actually earned in accordance with the terms and conditions
of
2
the Company’s bonus program
for the fiscal quarter or year in which Executive’s
employment with the Company terminates. If Executive’s
employment terminates before the end of a fiscal quarter or year
under Section 4.1, Executive shall not be eligible to receive
a bonus for that fiscal quarter or year. Executive acknowledges
that, as of the date of this Agreement, the Board has not
established any bonus target or program for Executive. For fiscal
years subsequent to fiscal year 2009, Executive shall be eligible
to receive an annual bonus calculated based upon financial and
management objectives reasonably established for Employer and
Executive by the Board or a duly authorized committee thereof that
will establish an annual bonus “target” of 100% of the
greater of $400,000 and Executive’s Base Salary as of the end
of the applicable fiscal quarter or year in which the bonus is
earned (the “ Target Bonus ”) and opportunities
for an annual bonus of up to 150% of the Target Bonus.
2.3. Equity Incentives .
Executive will be eligible to receive stock options or other equity
incentives as determined from time to time by the Board or duly
authorized committee thereof, and in each case in its sole
discretion and in accordance with terms and conditions determined
by the Board or duly authorized committee thereof. As of
January 27, 2009, Employer granted Executive an option to
purchase 900,000 shares of Employer’s common stock. The
vesting commencement date of the option was the Effective Date,
which option is evidenced by, and subject to the terms and
conditions of, the Stock Option Agreement dated as of the Effective
Date between Employer and Executive. Except as otherwise provided
herein, Executive’s option vests in thirty six consecutive
equal monthly installments for each completed month of continuous
service after the Effective Date. To the maximum extent permitted
within the $100,000 annual vesting limitation by Section 422
of the Code, this option shall be an incentive stock option within
the meaning of such section.
2.4. Unilateral Modification of
Compensation . Subject to Executive’s right to resign for
Good Reason under Section 4.3 of this Agreement, Employer
reserves the right to modify Executive’s cash compensation,
at any time, at its sole and absolute discretion.
3. Customary Fringe Benefits
. Executive shall be eligible for all customary and usual benefits
generally available to executive level employees of Employer,
subject to the terms and conditions set forth in the applicable
benefit plan or policy. Employer reserves the right to change or
eliminate any of the fringe benefits provided to executive level
employees on a prospective basis at any time, at Employer’s
sole and absolute discretion; provided, however, that Executive
may, in his discretion, retain his personal life, accident,
medical, dental, vision and/or other insurance plans and benefits,
the costs of which shall be reimbursed by the Company to Executive
(not to exceed the total cost of comparable benefits offered by the
Company to Executive and his dependents through the Company’s
plans). Executive understands that all benefits provided in this
section may be reduced by, or subject to, all applicable taxes.
Executive shall be entitled to paid annual flexible time off and
all paid Employer holidays, each in accordance with the
Employer’s standard policies as apply to other executive
employees of the Company. Executive will be reimbursed for all
reasonable, out-of-pocket business expenses incurred in the
performance of his duties on behalf of Employer subject to
Executive’s compliance
3
with the Company’s established expense
reimbursement policy. In addition, during the Employment Term,
Employer shall reimburse Executive for Executive’s reasonable
travel expenses from Executive’s principal residence in
Danville, California to San Diego, California, reasonable lodging
expenses in San Diego, California and a reasonable allowance for
the use of a car in San Diego, California. Reimbursement for air
travel shall be subject to the Employer’s generally
applicable travel expense reimbursement policies. To the extent any
travel, lodging or auto expense reimbursements are taxable to
Executive, Employer shall provide an additional gross-up payment to
reflect any federal, state or local income or employment taxes due
with respect to such reimbursements, such that Executive is put in
the same position as though such reimbursements had not been
subject to tax.
4. Termination .
4.1. Termination For Cause By
Employer . Employer may terminate Executive’s employment
under this Agreement immediately at any time for
“Cause,” which shall include, but is not limited to:
(a) acts or omissions constituting reckless or willful
misconduct on the part of Executive with respect to his obligations
or otherwise relating to the business of Employer that causes
material harm to the Company or its reputation;
(b) Executive’s material breach of this Agreement, which
breach Employee fails to cure within 30 days after receiving
written notice from the Board that specifies the specific conduct
giving rise to the alleged breach; (c) Executive’s
conviction or entry of a plea of nolo contendere for fraud, theft
or embezzlement, or any felony or crime of moral turpitude; or
(d) Executive’s willful neglect of duties as determined
in the sole and exclusive discretion of Employer, which Executive
fails to cure within 30 days after receiving written notice from
the Board that specifies the specific duties that Executive has
failed to perform.
4.1.1. Entitlements Upon
Termination For Cause. In the event that Executive’s
employment is terminated for Cause in accordance with
Section 4.1, Executive shall be entitled to receive:
(a) the Base Salary then in effect through the date of
termination; (b) the bonus to which Executive is then entitled
pursuant to Section 2.2, if any; and (c) any expense
reimbursements to which Executive is entitled by virtue of his
prior employment with Employer (collectively, (a), (b) and
(c) above are referred to herein as the “ Standard
Entitlements ”). The Standard Entitlements shall be paid
to such Executive within 30 days following termination or earlier
if required by law. In the event of such termination for Cause,
Executive shall not be entitled to receive (i) the Severance
Payment (as defined in Section 4.2 below) or any portion
thereof, or (ii) any further vesting of stock options, and all
other obligations of Employer to Executive pursuant to this
Agreement shall automatically terminate and be completely
extinguished.
4.2. Termination Without Cause By
Employer . Employer may terminate Executive’s employment,
without Cause, at any time. If Employer terminates
Executive’s employment without Cause, Executive shall be
entitled to receive the Standard Entitlements, which shall be paid
to Executive within 30 days following termination or earlier if
required by law. In addition to the above, so long as Executive
complies with all of the conditions in Section 4.2.1 below,
Executive will be entitled to an
4
aggregate severance payment equal to
the sum of (i) an amount equal to 150% of the greater of the
Executive’s then Base Salary or original Base Salary, plus
(ii) a portion of the Target Bonus prorated based on the
number of days Executive was employed during the period on which
the Target Bonus is based, plus (iii) an amount equal to the
premiums Employee would be required to pay to continue life,
accident, medical, dental and vision insurance coverage under the
Company’s insurance plans for Executive and his eligible
dependents pursuant to the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended (“ COBRA
”) for a period of eighteen (18) months following the
date of termination, plus (iv) the amount necessary for
Executive to continue life, accident, medical and dental insurance
benefits for Employee and his eligible dependents for insurance
coverage that he personally maintained in amounts substantially
similar to those which Employee was entitled to receive under
Section 3 of this Agreement immediately prior to the date of
termination for a period of 18 months following the date of
termination (which amount shall be reduced by the amount of any
reimbursements made by the Company to Employee pursuant to clause
(iii) above, if any) (collectively, the “ Severance
Payment ”). Subject to Section 10, the Severance
Payment shall be paid to Executive (less applicable state and
federal taxes or other payroll deductions) in monthly installments
in accordance with Employer’s regular payroll practices for
the 18 months following the date of termination, provided that such
payments shall not commence before: (i) Employer receives an
executed copy of the Release (defined in Section 4.2.1) from
Executive; and (ii) Executive’s right to revoke the
Release has lapsed under applicable law and the terms of the
Release, and provided, further, that such payments shall commence
in the month following the month in which Executive’s
Separation from Service occurs. As used herein, a “
Separation from Service ” occurs when Executive dies,
retires, or otherwise has a termination of employment with the
Company that constitutes a “separation from service”
within the meaning of Treasury Regulation
Section 1.409A-1(h)(1), without regard to the optional
alternative definitions available thereunder. Upon
Executive’s termination without Cause, subject to the
conditions specified above, any unvested portion of
Executive’s then outstanding stock options and other
equity-based awards granted by the Company that would otherwise
vest during the twelve (12) months following the date of such
termination shall vest in full as of the date of such termination,
and, in the case of such vested stock options (including those
stock options whose vesting was accelerated pursuant to the
preceding clause), may be exercised in whole or in part at any time
within one (1) year of the date of such termination without
Cause, subject to earlier termination upon the expiration of the
maximum term of the applicable options or in connection with a
corporate transaction involving the Company to the extent provided
in the Plan and/or the award agreements that evidence such options
(collectively, the “ Accelerated Vesting and Extended
Exercise Period Severance Benefit ”). In the event of
such termination without Cause, all of Employer’s other
obligations pursuant to this Agreement except as provided in this
Section 4.2 shall terminate automatically and extinguish
completely following the date of such termination without
Cause.
4.2.1. Conditions to Receive
Severance Payment . The Severance Payment will be paid provided
that the following conditions are met: (i) Executive complies
with all surviving provisions of this Agreement as specified in
Section 10.8 below; and (ii) Executive executes (and does
not revoke) a full general release in the form attached hereto as
Exhibit A , releasing all claims, known or unknown, that
Executive may have against Employer arising out of or in any way
related to Executive’s employment or termination of
employment with Employer (the “ Release
”).
5
4.3. Voluntary Resignation by
Executive for Good Reason . If Executive notifies Employer in
writing within 60 days following the initial existence of one of
the circumstances constituting “Good Reason” (see
Section 4.3.1), Employer will be given 30 days from the
receipt of such notice in which Employer may remedy or cure such
condition. For purposes of the foregoing, if Executive does not
timely provide notice to Employer, then Executive is deemed to have
waived this right. If Employer fails to remedy or cure the
condition set forth in Executive’s notice within 30 days from
the receipt of such notice, Executive may resign for Good Reason,
and shall be entitled to receive the Standard Entitlements, which
shall be paid to Executive within 30 days following termination or
earlier if required by law. In addition, so long as Executive
complies with all of the conditions set forth in Section 4.2.1
above, Executive will be entitled to receive the Severance Payment
and the Accelerated Vesting and Extended Exercise Period Severance
Benefit. Subject to Section 10, the Severance Payment shall be
paid to Executive (less applicable state and federal taxes or other
payroll deductions) in monthly installments in accordance with
Employer’s regular payroll practices for the 18 months
immediately following the date of termination, provided that such
payments shall not commence before: (i) Employer receives an
executed copy of the Release from Executive; and
(ii) Executive’s right to revoke the Release has lapsed
under applicable law and the terms of the Release, and provided,
further, that such payments shall commence in the month following
the month in which Executive’s Separation from Service
occurs.. In the event of such resignation for Good Reason, all of
Employer’s other obligations pursuant to this Agreement
except as provided in this Section 4.3 shall terminate
automatically and extinguish completely following the date of such
resignation for Good Reason.
4.3.1. Executive will be deemed to
have resigned for “ Good Reason ” if Executive
voluntarily terminates employment with the Company within one year
after the occurrence of one or more of the following:
(a) Employer reduces Executive’s Base Salary by more
than ten percent (10%), unless the reduction is made as part of,
and is generally consistent with, a general reduction of other
senior executive salaries; (b) Executive’s authority,
responsibilities and/or duties are materially reduced so that his
duties are no longer consistent with the position of President or
Chief Executive Officer; (c) a material breach of
