SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the
Registrant
x
Filed by a
Party other than the Registrant
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Check the
appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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x
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-11(c) or §240.14a-12
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OVERLAND STORAGE, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Payment of Filing Fee (Check the appropriate box):
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x
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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(2)
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Aggregate number of securities to which transaction applies:
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(3)
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4)
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Proposed maximum aggregate value of transaction:
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(5)
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify
the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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(3)
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Filing Party:
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Date Filed:
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OVERLAND STORAGE, INC.
9112 Spectrum Center Boulevard
San Diego, California 92123
May 17, 2013
Dear Shareholder:
You are cordially invited to attend the
annual meeting of shareholders of Overland Storage, Inc. to be held at 125 South Market Street, 2
nd
Floor, Suite 275, Room A, San Jose, CA 95113, on Tuesday, June 18, 2013 at 1:00 p.m. (Pacific Time).
The attached notice of annual meeting and proxy statement include the agenda for the annual meeting, explain the matters that we will discuss at the annual meeting and provide general information about
our company.
Your vote is very important. Whether or not you plan to attend the annual meeting, please complete, sign, date
and return the enclosed proxy card as soon as possible to ensure your representation at the annual meeting. We have provided a postage-paid envelope for your convenience. If you plan to attend the annual meeting and prefer to vote in person, you may
still do so even if you have already returned your proxy card.
If you are a shareholder of record (that is, if your stock is
registered with us in your own name), then you may vote by telephone or electronically via the Internet by following the instructions included in the proxy statement and with your proxy card. If your shares are registered in the name of a broker or
other nominee, your nominee may be participating in a program provided through Broadridge Financial Solutions, Inc. that allows you to vote by telephone or via the Internet. If so, the voting form that your nominee sends you will provide telephone
and Internet instructions.
We look forward to seeing you at the annual meeting.
Sincerely,
ERIC L. KELLY
President and Chief Executive Officer
OVERLAND STORAGE, INC.
9112 Spectrum Center Boulevard
San Diego, California 92123
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
June 18, 2013
The annual meeting of shareholders of Overland Storage, Inc. will be held at 125 South Market Street, 2
nd
Floor, Suite 275, Room A, San Jose, CA 95113, on Tuesday,
June 18, 2013 at 1:00 p.m. (Pacific Time) for the following purposes:
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to elect as directors the following nominees recommended by the Board of Directors: Robert A. Degan, Joseph A. De Perio, Eric L. Kelly, Vivekanand Mahadevan and Scott
McClendon;
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to ratify the appointment of Moss Adams LLP as our independent registered public accounting firm for the fiscal year ending June 30, 2013;
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to approve, on an advisory basis, the compensation of our named executive officers, referred to as “say-on-pay”;
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to approve, on an advisory basis, the preferred frequency of shareholder advisory votes on executive compensation, referred to as “say-on-frequency”; and
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to consider and vote upon such other business as may properly come before the annual meeting or any adjournment thereof.
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The foregoing items of business are more fully described in the proxy statement.
The Board of Directors has fixed the close of business on May 8, 2013 as the record date for the determination of shareholders
entitled to notice of and to vote at the annual meeting and at any adjournment or postponement thereof. A list of shareholders entitled to vote at the annual meeting will be available for inspection at our offices.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting
This proxy statement, along with our 2012 Annual Report on Form 10-K/A and proxy card is available on-line at
http://proxy.overlandstorage.com
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By order of the Board of Directors,
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KURT L. KALBFLEISCH
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Dated: May 17, 2013
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Secretary
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All shareholders are cordially invited to attend the annual meeting in person. Whether or not you
expect to attend the annual meeting, please complete, sign, date and return the enclosed proxy card as soon as possible to ensure your representation at the annual meeting. A postage-paid return envelope is enclosed for your convenience.
Shareholders with shares registered directly with our transfer agent, Wells Fargo Bank, N.A., may choose to vote those shares via the Internet at
http://www.eproxy.com/ovrl
, or telephonically, within the United States and Canada, by calling
1-800-560-1965. Shareholders holding shares with a broker, bank or other nominee may also be eligible to vote via the Internet or telephonically if their broker, bank or other nominee participates in the proxy voting program provided by Broadridge
Financial Solutions, Inc. (“Broadridge”). See “Voting Shares Registered in the Name of a Broker, Bank or Other Nominee” in the proxy statement for further details on the Broadridge program. Even if you have given your proxy, you
may still vote in person if you attend the annual meeting. Please note, however, that if a broker, bank or other nominee holds your shares of record and you wish to vote at the annual meeting, then you must obtain from the record holder a proxy
issued in your name.
OVERLAND STORAGE, INC.
9112 Spectrum Center Boulevard
San Diego, California 92123
2012 PROXY
STATEMENT
General Information
The Board of Directors of Overland Storage, Inc., a California corporation, is providing these proxy materials to you in connection with the solicitation of proxies for use at our 2012 annual meeting of
shareholders. The annual meeting will be held at 125 South Market Street, 2
nd
Floor, Suite 275, Room A, San Jose, CA 95113, on Tuesday, June 18, 2013 at 1:00 p.m. (Pacific Time) or at any adjournment or postponement thereof, for the purposes stated herein. This proxy
statement summarizes the information that you will need to know to vote in an informed manner.
Voting Rights and Outstanding Shares
We will begin mailing this proxy statement and the accompanying proxy card on or about May 17, 2013 to all
shareholders of record that are entitled to vote. Each share of our common stock that you own entitles you to one vote on all matters to be voted upon at the annual meeting. Only shareholders that owned our common stock at the close of business on
May 8, 2013, the record date, are entitled to vote at the annual meeting. On the record date, 29,933,544 shares of our common stock were outstanding.
The proxy card indicates the number of shares of our common stock that you own. We will have a quorum to conduct the business of the annual meeting if holders of a majority of the shares of our common
stock are present, in person or by proxy. Abstentions and broker non-votes (i.e., shares of common stock held by a broker, bank or other nominee that are represented at the annual meeting, but that the broker, bank or other nominee is not empowered
to vote on a particular proposal) will be counted in determining whether a quorum is present at the annual meeting. Brokers, banks and other nominees typically do not have discretionary authority to vote on non-routine matters. Under the rules of
the New York Stock Exchange (the “NYSE”), as amended (the “NYSE Rules”), which apply to all NYSE-licensed brokers, brokers have discretionary authority to vote on routine matters when they have not received timely voting
instructions from the beneficial owner.
The election of directors (“Proposal 1”) will be by a plurality of votes
cast by shares present or represented at the annual meeting. Abstentions and broker non-votes will have no impact on the election of directors under Proposal 1. Because the election of directors under Proposal 1 is considered to be a non-routine
matter under the NYSE Rules, if you do not instruct your broker, bank or other nominee on how to vote the shares in your account for Proposal 1, brokers will not be permitted to exercise their voting authority and uninstructed shares may constitute
broker non-votes.
Approval of the proposal to ratify the appointment of Moss Adams LLP as our independent registered public
accounting firm for the fiscal year ending June 30, 2013 (“Proposal 2”) requires (i) the affirmative vote of a majority of the shares entitled to vote that are present or represented by proxy at the annual meeting and (ii) a
majority of the shares required to constitute the quorum. Only “for” and “against” votes are counted for purposes of determining the votes received in connection with Proposal 2. Therefore, abstentions and broker non-votes have
no effect on determining whether the affirmative vote constitutes a majority of the shares present or represented by proxy and voting at the annual meeting. However, approval of Proposal 2 also requires the affirmative vote of a majority of shares
necessary to constitute the quorum, and therefore abstentions and broker non-votes could prevent the approval of Proposal 2 because they do not count as affirmative votes. Because the advisory vote under Proposal 2 is considered to be a non-routine
matter under the NYSE Rules, if you do not instruct your broker, bank or other nominee on how to vote the shares in your account for Proposal 2, brokers will not be permitted to exercise their voting authority and uninstructed shares may constitute
broker non-votes. In order to minimize the number of broker non-votes, we encourage you to provide voting instructions to the organization that holds your shares by carefully following the instructions provided in the Notice of Annual Meeting of
Shareholders.
-1-
Approval of the say-on-pay proposal (“Proposal 3”) requires the affirmative vote
of the holders of a majority of the shares present in person or represented by proxy and entitled to vote at the annual meeting. Because the vote on the compensation of our named executive officers is advisory, it will not be binding on us, our
Board of Directors or the Compensation Committee. Nevertheless, the views expressed by our shareholders, whether through this vote or otherwise, are important to us and, accordingly, our Board of Directors and the Compensation Committee may consider
the results of this vote in making determinations in the future regarding executive compensation arrangements. For purposes of this proposal, abstentions are treated as shares present and entitled to vote on the matter and, therefore, will have the
same effect as a vote “Against” the proposal. Broker non-votes are not considered entitled to vote on the matter and will have no effect on the outcome of the vote.
For purposes of the say-on-frequency proposal (“Proposal 4”), the option of three years, two years or one year that receives the highest number of votes cast by shareholders will be the
frequency for the advisory vote on executive compensation that has been selected by shareholders. As with your vote on Proposal 3 above, your vote on this Proposal 4 is advisory, and therefore not binding on us, the Compensation Committee, or our
Board of Directors, and our Board of Directors may decide that it is in the best interests of our shareholders and our company to hold an advisory vote on executive compensation more or less frequently than the option approved by our shareholders.
However, our Board of Directors and our Compensation Committee value the opinions of our shareholders and we will take our shareholders’ preferences into account in making determinations regarding the frequency of the say-on-pay advisory vote.
Abstentions and broker non-votes will have no effect on the outcome of the vote.
Voting Shares Registered in Your Name
If you are a shareholder of record, you may vote in one of four ways:
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attend the annual meeting and vote in person;
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complete, sign, date and return the enclosed proxy card;
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vote by telephone following the instructions included with your proxy card and outlined below; or
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vote via the Internet following the instructions included with your proxy card and outlined below.
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If you are a shareholder of record, then you may go to
http://www.eproxy.com/ovrl/
to vote your shares via the Internet. The votes
represented by this proxy will be generated on the computer screen and you will be prompted to submit or revise your vote as desired. If you are using a touch-tone telephone and are calling from the United States or Canada, then you may vote your
shares by calling 1-800-560-1965 and following the recorded instructions.
Votes submitted by telephone or via the Internet
must be received by 9:00 p.m. (Pacific Time) on Monday, June 17, 2013. Submitting your proxy by telephone or via the Internet will not affect your right to vote in person should you decide to attend the annual meeting.
Voting Shares Registered in the Name of a Broker, Bank or Other Nominee
Most beneficial owners whose stock is held in street name will receive instructions for voting their shares from their broker, bank or other nominee, rather than our proxy card.
A number of brokers and banks participate in a program provided through Broadridge that allows shareholders to grant their proxy to vote
shares by means of the telephone or via the Internet. If your shares are held in an account with a broker or bank participating in the Broadridge program, then you may vote your shares telephonically by calling the telephone number shown on the
instruction form received from your broker or bank, or via the Internet at Broadridge’s web site at
http://www.proxyvote.com
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If you wish to vote in person at the annual meeting, then you must obtain a legal proxy issued in your name from the broker, bank or other nominee that holds your shares of record.
-2-
Tabulation of Votes
A representative from our transfer agent, Wells Fargo Bank, N.A., will tabulate the votes. The shares of our common stock represented by proxy will be voted in accordance with the instructions given on
the proxy so long as the proxy is properly executed and received by us prior to the close of voting at the annual meeting or any adjournment or postponement of the annual meeting. If no instruction is given, then the proxy will be voted for the
nominees for director, for Proposal 2 and Proposal 3, and voted to hold a say-on-pay advisory vote every year for Proposal 4. In addition, the individuals that we have designated as proxies for the annual meeting will have discretionary authority to
vote for or against any other shareholder matter presented at the annual meeting.
Revocability of Proxies
As a shareholder of record, once you have submitted your proxy by mail, telephone or via the Internet, you may revoke it at any time
before it is voted at the annual meeting. You may revoke your proxy in any one of three ways:
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you may grant another proxy marked with a later date (which automatically revokes the earlier proxy) using any of the methods described above (and
until the applicable deadline for each method);
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you may notify our Secretary in writing that you wish to revoke your proxy before it is voted at the annual meeting; or
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you may vote in person at the annual meeting.
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Solicitation
This solicitation is made by our Board of Directors and we
will bear the entire cost of soliciting proxies, including the preparation, assembly, printing and mailing of this proxy statement, the proxy card and any additional information furnished to shareholders. We will provide copies of solicitation
materials to banks, brokerage houses, fiduciaries and custodians holding in their names shares of our common stock that are beneficially owned by others for forwarding to the beneficial owners. We may reimburse persons representing beneficial owners
of common stock for their costs of forwarding solicitation materials to the beneficial owners. Solicitations will be made primarily through the mail, but may be supplemented by telephone, telegram, facsimile, Internet or personal solicitation by our
directors, executive officers, employees or other agents. No additional compensation will be paid to these individuals for these services.
Shareholder Proposals for 2013
Requirements for Shareholder Proposals to be Considered for Inclusion in Overland’s Proxy Materials.
Shareholder proposals submitted pursuant to Rule 14a-8 under the Securities Exchange Act of
1934, as amended (the “Exchange Act”), and intended to be presented at our 2013 annual meeting of shareholders must be received by us not later than January 17, 2014 in order to be considered for inclusion in our proxy materials for
that meeting.
Requirements for Shareholder Proposals to be Brought Before an Annual Meeting.
Our amended and restated
bylaws (our “Bylaws”) provide that, for shareholder nominations to our Board of Directors or other proposals to be considered at an annual meeting of shareholders, the shareholder must have given timely notice of the proposal or nomination
in writing to our Secretary. To be timely for the 2013 annual meeting of shareholders, a shareholder’s notice must be delivered to, or mailed and received by, our Secretary at our principal executive offices between February 16, 2014 and
March 18, 2014. Pursuant to our Bylaws, however, any shareholder proposal or nomination for director must meet the deadline pursuant to Rule 14a-8, as described above, to be included in our proxy materials. A shareholder’s notice to the
Secretary must set forth, as to each matter the shareholder proposes to bring before the annual meeting, the information required by our Bylaws.
Separate Copy of Annual Report or Proxy Materials
If you share an address
with another shareholder, each shareholder may not receive a separate copy of our annual report and proxy materials. Shareholders who do not receive a separate copy of our annual report and proxy materials and who want to receive a separate copy may
request to receive a separate copy of our annual report and proxy materials by writing to Investor Relations at Overland Storage, Inc., 9112 Spectrum Center Boulevard, San Diego, California 92123, or by calling 1-800-729-8725. We undertake to
deliver promptly a copy of the annual
-3-
report or proxy materials, as applicable, upon the receipt of such request. Shareholders who share an address and receive multiple copies of our annual report and proxy materials may also request
to receive a single copy by following the instructions above.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth certain information regarding the beneficial ownership of our common stock as of May 8, 2013 (except
as otherwise indicated) by each person who is known by us to own, or we have reason to believe owns, more than 5% of our shares of our common stock, each of our named executive officers, each of our directors and all of our directors and executive
officers as a group.
Unless otherwise indicated in the footnotes to this table and subject to community property laws where
applicable, we believe that each of the shareholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned.
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Beneficial Ownership
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Beneficial Owner
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Shares of
common stock
currently owned
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Shares acquirable
within 60 days (1)
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Total shares of
common stock
owned
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Percent of
class
(2)
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5% Shareholders
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Special Situations Fund
527 Madison Avenue, Suite 600
New York, NY 10022
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3,143,459
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(3)
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6,658,150
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(3)
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9,801,609
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(3)
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26.8
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%
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The Cyrus Group
399 Park Avenue, 39
th
Floor
New York, NY 10022
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9,230,767
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(11)
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9,230,767
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(11)
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19.99
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%(11)
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Marathon Capital Management, LLC
4 North Park Drive, Suite 106
Hunt Valley, MD 21030
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5,102,916
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(5)
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5,102,916
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(5)
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17.0
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%
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Clinton Group, Inc.
601 Lexington Avenue, 51st Floor, New
York, NY 10022
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2,897,218
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(4)
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2,015,688
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(4)
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4,912,906
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(4)
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15.4
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%
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Pinnacle Family Office Investments, L.P.
4965 Preston Park Blvd., Suite 240
Plano, TX 75093
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2,227,680
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347,600
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2,575,280
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8.5
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%
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Southwell Partners, L.P.
1901 North Akard, 2
nd
Floor
Dallas, TX 75201
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1,219,094
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(12)
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347,600
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(12)
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1,566,694
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(12)
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5.2
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%
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Executive Officers and Directors+
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Eric Kelly
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540,935
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(7)
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1,651,829
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(13)
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2,192,764
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6.9
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Jillian Mansolf
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213,395
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(8)
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265,354
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(14)
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478,749
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1.6
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%
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Kurt L. Kalbfleisch
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179,647
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177,333
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356,980
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1.2
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%
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Scott McClendon
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520,485
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(9)
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132,312
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(15)
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652,797
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2.2
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%
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Robert A. Degan
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6,666
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(6)
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102,483
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109,149
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*
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Joseph A. De Perio (10)
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16,000
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56,061
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72,061
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*
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Vivekanand Mahadevan
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—
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23,333
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23,333
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*
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Current directors and executive officers as a group (7 persons)
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1,477,128
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2,408,705
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3,885,833
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12.0
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%
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+
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Except as otherwise indicated, the address for each beneficial owner is 9112 Spectrum Center Boulevard, San Diego, CA, 92123.
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(1)
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With respect to holders of 5% or more of our shares of common stock, this amount includes shares of our common stock, which could be acquired upon exercise of
outstanding warrants and convertible debt. With respect to our executive officers and directors, this amount includes shares of our common stock, which could be acquired upon exercise of stock options which are either currently vested and
exercisable or will vest and become exercisable within 60 days of May 8, 2013 and with respect to Ms. Mansolf and Messrs. Kelly and McClendon, shares of our common stock, which could be acquired upon exercise of outstanding warrants.
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(2)
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Based on 29,933,544 shares of our common stock outstanding on May 8, 2013 and calculated in accordance with Rule 13d-3 promulgated under the Exchange Act.
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(3)
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According to a Form 4 filed with the Securities and Exchange Commission (the “SEC”) on March 14, 2012 and our records, the number of shares of our common
stock currently owned (“Shares”) and the number of shares of our common stock acquirable within 60 days pursuant to warrants (“Warrant Shares”) includes 1,311,720 Shares and 2,741,592 Warrant Shares held directly by Special
Situations Fund III Q.P., L.P., 893,661 Shares and 1,958,279 Warrant Shares held directly by Special Situations Private Equity Fund, L.P., 131,329 Shares and 274,158 Warrant Shares held directly by Special Situations Technology Fund, L.P. and
806,749 Shares and 1,684,121 Warrant Shares held directly by Special Situations Technology Fund II, L.P. MGP Advisors Limited (“MGP”) is the general partner of the Special Situations Fund III, QP, L.P. AWM Investment Company, Inc.
(“AWM”) is the general partner of MGP and the investment adviser to the Special Situations Fund III, QP, L.P., the Special Situations Technology Fund, L.P., the Special Situations Technology Fund II, L.P. and the Special Situations Private
Equity Fund, L.P. Austin W. Marxe and David M. Greenhouse are the principal owners of MGP and AWM. Through their control of MGP and AWM, Messrs. Marxe and Greenhouse share voting and investment control over the portfolio securities of each of the
funds listed above.
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(4)
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The number of shares include 2,897,218 Shares and 1,246,458 Warrant Shares held directly by Clinton Magnolia Master Fund, Ltd. (“CMAG”). On February 13,
2013, we issued convertible promissory notes (the “Notes”) to certain investors, including CMAG, pursuant to a note purchase agreement. The number of shares reported above also includes 769,230 shares of our common stock issuable upon
conversion of the Note held by CMAG. Additional shares of our common stock may be issued to CMAG as payment of interest on the Note pursuant to the terms of the note purchase agreement. Clinton Group, Inc. (“CGI”) is the investment manager
of CMAG and consequently has voting control and investment discretion over securities held by CMAG. CGI and George Hall, as chief investment officer and president of CGI, may be deemed to beneficially own any securities owned by CGI and CMAG. Each
of CGI and Mr. Hall disclaim beneficial ownership of these securities.
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(5)
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According to a Schedule 13G/A filed on February 19, 2013 and effective as of February 15, 2013, Marathon Capital Management, LLC has sole disposition
authority with respect to these shares and sole voting power with respect to 430,000 of these shares.
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(6)
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Includes 3,333 shares of our common stock held by Mr. Degan’s wife.
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(7)
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Includes 49,309 shares of our common stock owned by Mr. Kelly through his family trust.
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(8)
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Includes 22,760 shares of our common stock owned by Ms. Mansolf through her family trust.
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(9)
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Represents 486,819 shares of our common stock owned by Mr. McClendon through his family trust, 33,333 shares of our common stock through his self-directed IRA and
333 shares of our common stock held by his wife.
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(10)
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Mr. De Perio was elected to our Board of Directors pursuant to the terms of that certain purchase agreement, by and among us and certain
investors, including CGI and CMAG, dated March 16, 2011 (the “Purchase Agreement”). CMAG is the nominee of, and is employed by, CGI and CGI is the investment manager of
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CMAG. Pursuant to the Purchase Agreement, CMAG acquired 2,832,861 Shares and 1,246,458 Warrant Shares for total consideration of $5.0 million.
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The number of shares includes 9,230,767 shares of common stock issuable to the Cyrus Group upon conversion of the Notes held by the Cyrus Group; however, the terms of
the note purchase agreement provide that the number of shares of our common stock issuable upon conversion of the Notes will be limited to the extent necessary to ensure that, following such conversion, the total number of shares of our common stock
beneficially owned by the Cyrus Group will not exceed 19.99% of the total number of the then-issued and outstanding shares of our common stock (including for such purposes the shares of our common stock issuable upon conversion of the Notes).
Additional shares of our common stock may be issued to the Cyrus Group as payment of interest on the Notes pursuant to the terms of the note purchase agreement. The Cyrus Group is comprised of Cyrus Capital Partners, L.P. (“Cyrus”),
Crescent 1, L.P. (“Crescent”), CRS Master Fund, L.P.(“CRS”), Cyrus Opportunities Master Fund II, Ltd. (“Cyrus Opportunities”), Cyrus Select Opportunities Master Fund, Ltd. (“Cyrus Select”), Cyrus Capital
Partners GP, L.L.C. (“Cyrus GP”), Cyrus Capital Advisors, L.L.C. (“Cyrus Advisors”), and Mr. Stephen C. Freidheim. Each of Crescent, CRS, Cyrus Opportunities and Cyrus Select, or collectively the Cyrus Funds, are
private investment funds engaged in the business of acquiring, holding and disposing of investments in various companies. Cyrus is the investment manager of each of the Cyrus Funds. Cyrus GP is the general partner of Cyrus. Cyrus Advisors is the
general partner of Crescent and CRS. Mr. Freidheim is the managing member of Cyrus GP and Cyrus Advisors and is the Chief Investment Officer of Cyrus. Except for Mr. Freidheim, each member of the Cyrus Group disclaims beneficial ownership
these shares of common stock, other than those reported herein as being owned by such member of the Cyrus Group. Mr. Freidheim disclaims beneficial ownership of these shares of common stock held by the Cyrus Group, except to the extent of his
pecuniary interest in members of the Cyrus Group, if any. Crescent 1, L.P., CRS Master Fund, L.P., Cyrus Opportunities Master Fund II, Ltd., Cyrus Select Opportunities Master Fund, Ltd. and Mr. Freidheim have entered into an investment
management agreement with Cyrus giving Cyrus full voting and dispositive power over the shares of common stock held by the Cyrus Group.
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(12)
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According to a Schedule 13G/A filed on February 11, 2013 and effective as of December 31, 2012, Southwell Partners, L.P. has shared voting and dispositive
power with respect to these shares.
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(13)
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Includes 101,830 shares of common stock which could be acquired upon exercise of outstanding warrants owned by Mr. Kelly through his family trust.
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(14)
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Includes 46,998 shares of common stock which could be acquired upon exercise of outstanding warrants owned by Ms. Mansolf through her family trust.
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(15)
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Includes 39,163 shares of common stock which could be acquired upon exercise of outstanding warrants owned by Mr. McClendon through his family trust.
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We are aware of no arrangements, including any pledge by any person of shares of our common stock, the
operation of which may at a subsequent date result in a change of control of our company.
-6-
PROPOSAL NO. 1
TO ELECT AS DIRECTORS THE NOMINEES
RECOMMENDED BY THE BOARD OF DIRECTORS
Our Board of Directors, acting
pursuant to our Bylaws, has determined that the number of directors constituting the full Board of Directors shall be seven at the present time. Our Board of Directors currently has five members and there are two vacancies. Our Bylaws provide that,
for shareholder nominations to our Board of Directors to be considered at an annual meeting, the shareholder must have given timely notice of the nomination in writing to our Secretary. Any vacancies on our Board of Directors may be filled in
accordance with applicable law and our Bylaws.
Our Board of Directors has, upon recommendation of the Nominating and
Governance Committee, nominated Robert A. Degan, Joseph A. De Perio, Eric L. Kelly, Vivekanand Mahadevan and Scott McClendon for reelection as members of our Board of Directors. Each of the nominees is currently a director of our company. Each
newly-elected director will serve a one-year term until the next annual meeting of shareholders or until such director’s successor is qualified and elected. During the course of a term, our Board of Directors may appoint a new director to fill
any vacant seat, including a vacancy caused by an increase in the size of our Board of Directors. The new director will complete the term of the director he or she replaced. Each person nominated for election has agreed to serve if elected and we
have no reason to believe that any nominee will be unable to serve. However, if any nominee cannot serve, then your proxy will be voted for another nominee proposed by our Board of Directors, or if no nominee is proposed by our Board of Directors,
an additional vacancy will occur.
We, as a matter of policy, encourage our directors to attend meetings of our shareholders.
The following directors proposed for election at the annual meeting attended our 2011 annual meeting of shareholders: Eric L. Kelly and Scott McClendon.
There are no family relationships between any nominees or executive officers of our company, and, except as described below, there are no arrangements or understandings between any nominee and any other
person pursuant to which such nominee was or is selected as a director or nominee.
Pursuant to the terms of that certain
purchase agreement, dated as of March 16, 2011, by and among us, Clinton Group, Inc. (“CGI”) and other investors party thereto (the “Purchase Agreement”), we agreed to nominate Mr. De Perio, as representative of CGI, to
our Board of Directors. Mr. De Perio was elected to our Board of Directors on April 6, 2011.
Nominees for Director
You are being asked to vote on the five director nominees listed below. Unless otherwise instructed, the proxy holders
will vote the proxies received by them for these six nominees. The names of the director nominees, their ages as of May 17, 2013 and other information about them are shown below.
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Name of Director Nominee
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Age
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Director
Since
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Position
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Robert A. Degan
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74
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2000
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Independent Director
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Joseph A. De Perio
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34
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2011
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Independent Director
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Eric L. Kelly
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54
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2007
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President and Chief Executive Officer
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Vivekanand Mahadevan
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59
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2012
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Independent Director
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Scott McClendon
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74
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1991
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Chairman of our Board of Directors (Independent Director)
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Robert A. Degan
has been a private investor since January 2000. From November 1998 to
December 1999, Mr. Degan served as General Manager of the Enhanced Services & Migration Business Unit (formerly, Summa Four, Inc.) of Cisco Systems, Inc., an Internet networking company. From July 1998 to November 1998, Mr. Degan
was Chairperson, President and Chief Executive Officer of Summa Four, Inc., and from January 1997 to July 1998, he served as its President and Chief Executive Officer and as a director. Mr. Degan retired from the board of directors of
CaminoSoft Corp. in December 2007, FlexiInternational Software, Inc. in July 2006 and Gensym
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Corporation in May 2005. Mr. Degan was formerly on the research staff at Massachusetts Institute of Technology. Mr. Degan’s significant prior experience as a director and Chief
Executive Officer of Summa Four, along with his experience from his career in related industries and as a board member of other public technology companies, provides our Board of Directors with financial and operational expertise and analytical
skills relevant to the storage industry.
Joseph A. De Perio
has been a senior member of the portfolio
management team of Clinton Group, Inc. (“CGI”) from June 2006 to December 2007, serving as Vice President, Activist Investments and Long/Short Equity and Private Equity, and from October 2010 to the present, serving as Senior Portfolio
Manager, Activist Investments and Private Equity. As a senior portfolio manager at CGI, Mr. De Perio is involved in all aspects of portfolio management for the public equity and private equity strategies at CGI, including origination,
trading, structuring and research. From December 2007 to September 2010, he was a Vice President at Millennium Management, L.L.C., a global investment management firm, executing a public equity strategy. Prior to his work in hedge funds,
Mr. De Perio was an associate at Trimaran Capital Partners, a middle-market private equity investment fund, where he originated, executed and monitored leveraged buyout and growth equity investments in the healthcare, technology and consumer
industries. Mr. De Perio was also an associate and an analyst in the Mergers and Acquisitions department of CIBC Oppenheimer. Mr. De Perio has served as the Vice Chairman and President of ROI Acquisition Corporation, a company formed
for the purpose of acquiring one or more businesses or assets, since its inception in September 2011. Mr. De Perio previously served on the board of directors of Viking Systems, Inc., a developer, manufacturer and marketer of visualization
solutions for complex, minimally invasive surgery, from June 2011 until its sale to Conmed Corporation in October 2012. Mr. De Perio’s experience in corporate finance, including as an investment analyst and portfolio manager in private
equity and public equity, his strong understanding of corporate finance and strategic business planning activities, and his significant experience advising and investing in public companies enables him to provide our Board of Directors with insights
as to the perspectives of our institutional shareholder base.
Eric L. Kelly
has served as our Chief Executive
Officer since January 2009, our President since January 2010 and a member of our Board of Directors since November 2007. From April 2007 to January 2009, Mr. Kelly served as President of Silicon Valley Management Partners Inc., a management
consulting and M&A advisory firm, which he co-founded in April 2007. From July 2004 to August 2006, Mr. Kelly was Vice President and General Manager of storage systems solutions at Adaptec, Inc. (“Adaptec”). From August 2002 to
July 2004, he served as President and Chief Executive Officer of Snap Appliance, Inc., which was acquired by Adaptec in July 2004. The Snap division of Adaptec was acquired by us in June 2008. From March 2000 to June 2002, Mr. Kelly served as
President, Network Systems Division of Maxtor Corporation. From 1980 to 1998, he served in executive or managerial roles with Netpower Incorporated, Diamond Multimedia Systems Incorporated, Conner Peripherals Incorporated, Marq Technologies
Incorporated and IBM. Mr. Kelly’s position as our President and Chief Executive Officer provides our Board of Directors with unique insight and direct access to strategic and operational information about us. His significant experience in
the storage industry, including his involvement in Snap Appliance, allows him to draw on experiences and knowledge from across the storage industry and enables him to identify best practices and strategic initiatives for us.
Vivekanand Mahadevan
has been a business consultant since March 2012. Mr. Mahadevan was the Chief Strategy Officer for
NetApp, Inc., a supplier of enterprise storage and data management software and hardware products and services, from November 2010 until February 2012 and prior to that time served as Vice President of Marketing for LSI Corporation, an electronics
company that designs semiconductors and software that accelerate storage and networking, from January 2009 to September 2010. Prior to LSI Corporation, he was Chief Executive Officer for Deeya Energy, Inc., a company that develops and
manufactures stationary electrical energy storage solutions, from December 2007 to July 2008. Mr. Mahadevan has also held senior management positions with leading storage and systems management companies including BMC Software,
Compaq, Ivita, and Maxxan Systems. Mr. Mahadevan’s significant experience at NetApp and other technology companies provides our Board of Directors with valuable insight directly related to technology developments in the storage
industry. His engineering background and storage experience makes him particularly well suited to understanding our technology and allows him to provide valuable perspective to our Board of Directors on new product initiatives.
Scott McClendon
has served as the Executive Chairperson of our Board of Directors since May 2011 and, from March 2001 to
May 2011, served as Chairperson of our Board of Directors. From November 2006 to August 2007, Mr. McClendon served as our interim President and Chief Executive Officer and as our President and Chief Executive Officer from October 1991 to March
2001, when he was named Chairperson of our Board of Directors, and continued as an executive officer and employee until June 2001. Mr. McClendon has been a business consultant
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since June 2001. Mr. McClendon was employed by HP for over 32 years in various positions in engineering, manufacturing, sales and marketing. He last served as the general manager of the San
Diego Technical Graphics Division and site manager of HP in San Diego, California. Mr. McClendon is Chairperson and a director of Procera Networks, Inc., a network equipment company. Mr. McClendon’s significant experience with HP, his
prior tenure as our President and Chief Executive Office and his current experience as the Executive Chairperson of our Board of Directors and director of Procera provide him with a unique set of managerial, operational and strategic skills, which
provides our Board of Directors insights into our challenges, opportunities and operations.
Cumulative Voting Rights
Our Bylaws provide that you can cumulate your votes in the election of directors if, before the vote begins, the candidate or candidates
have been nominated and any of our shareholders notifies us of such shareholder’s intent to cumulate such shareholder’s votes. Under cumulative voting, you may cast a number of votes equal to the product of the number of your shares times
the number of directors to be elected at the annual meeting. If you notify us that you intend to cumulate your votes at any time before the election of directors begins, then you may vote all of your votes for one candidate or you may distribute
your votes among as many candidates as you desire. The candidates receiving the highest numbers of affirmative votes of the shares entitled to vote in the election of directors will be elected to positions on our Board of Directors up for election.
If voting for directors is conducted by cumulative voting, then the person named on the proxy will have discretionary authority to cumulate votes among the candidates.
Vote Required
The nominees who receive the highest number of votes
represented by shares of common stock present or represented by proxy and entitled to vote at the annual meeting will be elected.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION
TO
THE BOARD OF DIRECTORS OF EACH OF THESE NOMINEES
-9-
PROPOSAL NO. 2
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We are asking you to ratify the appointment of Moss Adams LLP (“Moss Adams”) as our independent registered public accounting
firm for the fiscal year ending June 30, 2013. Moss Adams was engaged to serve as our independent registered public accounting firm on October 16, 2009. The engagement of Moss Adams was approved by our Audit Committee. Representatives of
Moss Adams are expected to be at the annual meeting to answer any questions and make a statement should they choose to do so.
Although our Bylaws do not require that our shareholders approve the appointment of our independent registered public accounting firm,
our Board of Directors is submitting the selection of Moss Adams to our shareholders for ratification as a matter of good corporate governance. If our shareholders vote against the ratification of Moss Adams, our Board of Directors will reconsider
whether or not to retain the firm. Even if our shareholders ratify the appointment of Moss Adams, our Board of Directors may choose to appoint a different independent registered public accounting firm at any time during the year if our Board of
Directors determines that such a change would be in the best interests of our company and our shareholders.
Vote Required
Ratification of Moss Adams as our independent registered public accounting firm requires the affirmative vote of the holders of a majority
of the shares casting votes in person or by proxy on this Proposal 2 at the annual meeting. The number of such affirmative votes must also be at least a majority of the required quorum.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” RATIFICATION
OF MOSS ADAMS LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
-10-
PROPOSAL 3
APPROVE, ON AN ADVISORY BASIS, THE COMPENSATION OF THE
COMPANY’S
NAMED EXECUTIVE OFFICERS, REFERRED TO AS “SAY-ON-PAY”
Section 14A of the Exchange Act requires that we provide
our shareholders with the opportunity to vote to approve, on a nonbinding, advisory basis, the compensation of our named executive officers as disclosed in this proxy statement.
We are asking our shareholders to indicate their support for our named executive officer compensation as described in this proxy
statement. This proposal, commonly known as a “say-on-pay” proposal, gives our shareholders the opportunity to express their views on the compensation of our named executive officers. This vote is not intended to address any specific item
of compensation, but rather the overall compensation of our named executive officers.
Our executive compensation program is
designed to attract, motivate and retain our executive officers, who are critical to our success. Our named executive officers are rewarded for the achievement of our financial and strategic goals and for driving corporate financial performance
through the award of base salaries, the opportunity to earn annual cash bonuses and the award of stock options or restricted stock units, as deemed appropriate by our Compensation Committee. Executives’ bonuses under our annual incentive plan
are determined using multiple performance criteria, and each executive’s bonus is capped at a maximum amount. Viewed from a multi-year perspective, the majority of our executives’ compensation is in the form of long-term equity awards
which further align their interests with those of our shareholders and provide an additional retention incentive. We also do not provide tax gross-up payments to our executives.
Accordingly, the following resolution is submitted for shareholder vote at the annual meeting:
“RESOLVED, that the shareholders of Overland Storage, Inc. hereby APPROVE, on a nonbinding advisory basis, the compensation paid to
its named executives officers, as disclosed in the proxy statement for the 2012 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission.”
Because this say-on-pay vote is advisory, it will not be binding on us, our Board of Directors or the Compensation Committee.
Nevertheless, the views expressed by our shareholders, whether through this vote or otherwise, are important to us and, accordingly, our Board of Directors and the Compensation Committee may consider the results of this vote in making determinations
in the future regarding executive compensation arrangements.
Vote Required
Approval of the say-on-pay proposal requires the affirmative vote of the holders of a majority of the shares casting votes in person or by
proxy on this Proposal 3 at the annual meeting.
OUR BOARD OF DIRECTORS RECOMMENDS
A VOTE “FOR” THE APPROVAL OF THE COMPENSATION OF OUR
NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT
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PROPOSAL 4
APPROVE, ON AN ADVISORY BASIS, THE PREFERRED
FREQUENCY OF SHAREHOLDER
ADVISORY VOTES ON EXECUTIVE
COMPENSATION, REFERRED TO AS “SAY-ON-FREQUENCY”
Section 14A of the Securities Exchange Act also provides that shareholders must be given the opportunity to vote, on a non-binding,
advisory basis, for their preference as to how frequently we should hold future advisory votes on the compensation of our named executive officers, which we refer to as say-on-frequency. By voting with respect to this Proposal 4, shareholders may
indicate whether they would prefer that we conduct future say-on-pay votes once every year, every two years or every three years. Shareholders, if they wish, also may abstain from casting a vote on this proposal.
After careful consideration, our Board of Directors has determined that a say-on-pay vote on executive compensation every year is the
best approach for our company, and therefore our Board recommends that you vote for a one-year interval between the say-on-pay votes.
Our Board of Directors recognizes the importance of shareholder input on executive compensation and has determined that advisory votes on executive compensation should be conducted every year so that
shareholders may annually express their views on our executive compensation program. Our Board of Directors believes that the Compensation Committee, which administers our executive compensation program, values the opinions expressed by shareholders
in these advisory votes on executive compensation and will consider the outcome of these votes in making its decisions on executive compensation.
As with your vote on Proposal 3 above, your vote on this Proposal 4 is advisory, and therefore not binding on us, our Board of Directors or the Compensation Committee, and our Board of Directors may
decide that it is in the best interests of our shareholders and our company to hold an advisory vote on executive compensation more or less frequently than the option approved by our shareholders. However, our Board of Directors and our Compensation
Committee value the opinions of our shareholders and we will take our shareholders’ preferences into account in making determinations regarding the frequency of the say-on-pay vote.
Vote Required
For this proposal, the option of three years, two years or
one year that receives the highest number of votes cast by shareholders will be the frequency for the advisory vote on executive compensation that has been selected by shareholders.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR”
THE OPTION OF EVERY ONE YEAR AS THE PREFERRED
FREQUENCY WITH WHICH
SHAREHOLDERS ARE PROVIDED
AN ADVISORY VOTE ON EXECUTIVE COMPENSATION
-12-
INFORMATION ABOUT OUR BOARD OF DIRECTORS
Director Independence
Our Board of Directors, upon the recommendation of the Nominating and Governance Committee, has affirmatively determined that Messrs.
Degan, De Perio, Mahadevan and McClendon are independent directors within the meaning of NASDAQ Marketplace Rule 5605(a)(2). Mr. Kelly does not meet the independence requirements under NASDAQ Marketplace Rule 5605(a)(2) because he is our
President and Chief Executive Officer. In the course of determining whether Messrs. Degan, De Perio, Mahadevan and McClendon were independent under NASDAQ Marketplace Rule 5605(a)(2), our Board of Directors considered the following transactions,
relationships and arrangements not required to be disclosed in “Certain Relationships and Related Party Transactions”:
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Although Mr. McClendon served as our Interim President and Chief Executive Officer from November 2006 through August 2007, he is not automatically
disqualified from being an independent director under NASDAQ Marketplace Rule 5605(a)(2) because he served in these interim positions more than three years prior to our Board of Director’s determination of his independence and for less than one
year.
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Although Mr. De Perio was elected to our Board of Directors pursuant to the terms of the Purchase Agreement and is the nominee of, and is employed
by, one of our shareholders, he is not automatically disqualified from being an independent director under NASDAQ Marketplace Rule 5605(a)(2). In April 2011, our Board of Directors, upon the recommendation of the Nominating and Governance Committee,
found that Mr. De Perio had no relationship with us which, in the opinion of our Board of Directors, would interfere with his exercise of independent judgment in carrying out the responsibilities of a director. In making this determination, our
Board of Directors found that ownership of our securities by Mr. De Perio’s employer does not preclude a finding of independence.
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Meetings of our Board of Directors and Committees
Board of
Directors.
Our Board of Directors currently has five directors. During fiscal year 2012, our Board of Directors held five meetings and each director attended at least 75% of all meetings of our Board of Directors and applicable committees during
the periods that he or she served.
Committees.
We have a standing Audit Committee as defined in
Section 3(a)(58)(A) of the Exchange Act. During fiscal year 2012, our Board of Directors also had the following additional committees: a Compensation Committee and a Nominating and Governance Committee.
The charters of the Audit Committee, the Compensation Committee and the Nominating and Governance Committee, which have been adopted by
our Board of Directors, are publicly available on our website at www.overlandstorage.com. The Audit Committee, the Compensation Committee and the Nominating and Governance Committee are comprised entirely of independent directors as defined in
NASDAQ Marketplace Rule 5605(a)(2). Current membership of the Audit Committee, the Compensation Committee and the Nominating and Governance Committee is as follows:
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Audit Committee
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Compensation Committee
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Nominating and
Governance Committee
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Robert A. Degan (Chairman)
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Scott McClendon (Chairman)
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Scott McClendon (Chairman)
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Joseph A. De Perio
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Robert A. Degan
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Robert A. Degan
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Vivekanand Mahadevan
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Joseph A. De Perio
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Each of the above-listed committee members served in such capacity for all of fiscal year 2012 except:
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Mr. De Perio who was appointed to the Audit Committee in August 2012. He was also appointed to the Nominating and Governance Committee in November
2012 when Shmuel Shottan resigned from our Board of Directors and this committee;
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Mr. McClendon who was appointed to the Compensation Committee in August 2012 and appointed Chairman of the Compensation Committee in February 2013
when Ms. Denzel resigned from our Board of Directors and the Compensation Committee; and
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Mr. Mahadevan who was appointed to the Audit Committee in November 2012 replacing Ms. Denzel on the Audit Committee.
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Audit Committee.
The Audit Committee held four meetings during fiscal year 2012. The Audit Committee
acts pursuant to the Audit Committee Charter and currently performs the following functions, among others:
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reviews our annual and quarterly financial statements and oversees the annual and quarterly financial reporting processes;
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reviews and approves related party transactions;
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selects our independent registered public accounting firm, pre-approves all audit and non-audit services by them, oversees and approves their
compensation, confirms their independence and reviews the scope of their activities;
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receives and considers our independent registered public accounting firm’s comments as to the adequacy and effectiveness of our accounting and
financial controls;
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retains independent counsel, accountants, or others at our expense to advise the committee or assist in the conduct of an investigation;
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reviews our effectiveness and system for monitoring compliance with laws and regulations and the results of management’s investigation and
follow-up including disciplinary action) of any instances of noncompliance;
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reviews the process for communicating our Code of Business Conduct and Ethics to company personnel and monitors compliance with such code of ethics;
and
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considers the effectiveness of our internal control over the financial reporting process, including information technology security and control.
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In addition to being independent under NASDAQ Marketplace Rule 5605(a)(2), all members of the Audit
Committee must meet the additional independence standards for audit committee members set forth in Rule 10A-3(b)(1) of the Exchange Act and NASDAQ Marketplace Rule 5605(c)(2)(A). Our Board of Directors has determined that Mr. Degan qualifies as
an “audit committee financial expert” as defined in Item 407(d)(5) of Regulation S-K under the Exchange Act.
Compensation Committee.
The Compensation Committee held three meetings during fiscal year 2012. The Compensation Committee acts
pursuant to the Compensation Committee Charter and currently performs the following functions, among others:
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reviews and approves compensation for our executive officers, including our Chief Executive Officer;
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reviews and approves performance goals for our Chief Executive Officer;
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reviews and approves grants of equity-based and other incentive awards and administers our various equity and other incentive compensation plans; and
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annually reviews director compensation and makes related recommendations to our Board of Directors.
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The Compensation Committee Charter requires that each member of the Compensation Committee must satisfy certain standards of independence
as defined under applicable regulations. Accordingly, each member of the Compensation Committee must be:
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an “independent director” as defined under NASDAQ Marketplace Rule 5605(a)(2);
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a “Non-Employee Director” as defined under Rule 16b-3 of the Exchange Act; and
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an “outside director” as defined under Treasury Regulations section 1.162-27(e)(3) of Section 162(m) of the Internal Revenue Code of
1986, as amended.
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The Compensation Committee may delegate to a subcommittee of two or more directors the
authority to make grants under our equity-based incentive plans to employees and consultants who are not executive officers or directors of our company. The Compensation Committee has no current intention to delegate any of its authority to any
other committee or subcommittee.
The Compensation Committee reviews the compensation arrangements of the executive officers
at least once annually, generally at the time of our annual meeting of shareholders. In determining the appropriate
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compensation levels for our Chief Executive Officer, the Compensation Committee meets outside the presence of our executive officers and other employees. With respect to our other executive
officers, our Chief Executive Officer reviews the performance of each executive officer with the Compensation Committee and makes related recommendations to the Compensation Committee.
The Compensation Committee evaluates executive officer performance with the goal of setting compensation levels competitive with
companies in the computer peripherals industry of similar revenue, with adjustments for individual experience levels and performance. To help fulfill its responsibilities, the Compensation Committee periodically engages external executive
compensation consultants to obtain market data and to conduct reviews of our executive compensation program. The compensation consultants that have been retained by the Compensation Committee act as independent advisors to the Compensation
Committee. For fiscal year 2012, the Compensation Committee did not seek the assistance of compensation consultants.
With
respect to determining compensation for new hires, the Compensation Committee takes into account a number of factors, including past compensation history, any compensation forfeited by the new hire due to leaving the prior job, or any uniquely
valuable skills the new hire might bring to enhance shareholder value. With respect to internal promotions to executive officer positions, the Compensation Committee considers factors such as past compensation history, the new levels of
responsibility of the executive officer, and the importance of maintaining the continued employment of individuals with an established record of contributing to shareholder value.
In addition, the Compensation Committee is responsible for overseeing the assessment and management of risks related to our compensation
plans, policies and overall philosophy. The Compensation Committee has reviewed our compensation programs, and our executive compensation programs in particular, and has determined based on its review that our compensation programs do not encourage
unnecessary or excessive risk taking that would be reasonably likely to have a material adverse effect on us. Viewed over a multi-year period, the majority of compensation provided to our executive officers is in the form of equity awards that
further align executives’ interests with those of our shareholders. The Compensation Committee believes that these awards do not encourage unnecessary or excessive risk taking because the ultimate value of the awards is tied to our stock price,
and because grants are subject to long-term vesting schedules to help ensure that executives always have significant value tied to long-term stock price performance. In addition, executives’ bonuses under our annual incentive plan are
determined using multiple performance criteria, which mitigates risk associated with emphasizing a single performance goal, and each executive’s bonus is capped at a maximum amount.
Nominating and Governance Committee.
The Nominating and Governance Committee held four meetings during fiscal year 2012. The
Nominating and Governance Committee acts pursuant to the Nominating and Governance Committee Charter and currently performs the following functions, among others:
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•
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identifies individuals qualified to become members of our Board of Directors;
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•
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recommends the persons to be nominated for election as directors at the annual meeting of shareholders;
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•
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regularly reviews and advises our Board of Directors with respect to corporate governance principles and policies applicable to us; and
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•
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oversees the annual evaluation of the director effectiveness.
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The Nominating and Governance Committee is responsible for reviewing with our Board of Directors, on an annual basis, the appropriate
skills and characteristics required of directors in the context of the current make-up of our Board of Directors and to set those forth in writing. This assessment includes issues of diversity, experience, judgment, ability and willingness to devote
the necessary time, and familiarity with domestic and/or international markets, all in the context of an assessment of our perceived needs. The Nominating and Governance Committee does not assign specific weights to particular criteria and no
particular criterion is necessarily applicable to all prospective nominees. We believe that the backgrounds and qualifications of the directors, considered as a group, should provide a significant composite mix of experience, knowledge and abilities
that will allow our Board of Directors to fulfill its responsibilities. The Nominating and Governance Committee has not established any specific minimum criteria or qualifications that a nominee must possess. Each of the nominees for election as a
director at the annual meeting and each of our current directors holds or has held senior executive positions in, and/or has experience serving on the boards of directors and board committees of, large, complex organizations and has operating
experience that meets the foregoing objectives. In these positions, they have also gained experience in core management skills, such as strategic and financial planning, public company financial reporting, corporate governance, risk management and
leadership development.
-15-
The Nominating and Governance Committee also believes that each of the nominees and current
directors has other key attributes that are important to an effective board of directors: integrity and demonstrated high ethical standards; sound judgment; analytical skills; the ability to engage management and each other in a constructive and
collaborative fashion; diversity of origin, background, experience and thought; and the commitment to devote significant time and energy to service on our Board of Directors and its committees.
The Nominating and Governance Committee will consider nominees recommended by our shareholders if the nominee recommendations are
submitted in writing and sent to our Secretary by mail to our offices at 9112 Spectrum Center Boulevard, San Diego, California 92123
The Nominating and Governance Committee will evaluate nominees recommended by our shareholders under the same criteria as other nominees.
Leadership Structure
Our Board of Directors does not have a formal policy
regarding the separation of the roles of Chief Executive Officer and Chairman of our Board of Directors since our Board of Directors believes it is in our best interest to make that determination from time-to-time based on our position and direction
and the membership of our Board of Directors. Pursuant to our Bylaws, our Board of Directors in its discretion may elect a Chairman from among its members. Our Board of Directors has determined that having an independent director serve as Chairman
of our Board of Directors is in our best interest at this time. Mr. McClendon has served as Chairman of our Board of Directors since March 2001 and as Executive Chairman of our Board of Directors since May 2011. Because our Board of Directors
has determined that Mr. McClendon meets the independence standards of the NASDAQ Marketplace Rules, he also presides over separate meetings of the independent directors. Our Board of Directors regularly observes such independent directors
separate meeting time. This structure ensures a greater role for the independent directors in our oversight and active participation of the independent directors in setting agendas and establishing Board of Director priorities and procedures.
Further, this structure permits the Chief Executive Officer to focus on the management of our day-to-day operations, while the Executive Chairman of our Board of Directors presides at all meetings of our Board of Directors at which he is present;
assists in establishing the agenda for each Board of Directors meeting; assists in setting a schedule of an annual agenda, to the extent foreseeable; calls and prepares the agenda for and presides over separate sessions of the independent directors;
acts as a liaison between the independent directors and our management and performs such other powers and duties as may from time to time be assigned to him by our Board of Directors or as may be prescribed by our Bylaws. Our Board of Directors will
review from time to time the appropriateness of its leadership structure and implement any changes as it may deem necessary.
Risk
Oversight
Companies face a variety of risks, including credit risk, liquidity risk and operational risk. Our Board of
Directors believes that an effective risk management system will (i) timely identify the material risks that we face, (ii) communicate necessary information with respect to material risks to senior executives and, as appropriate, to our
Board of Directors or relevant committees, (iii) implement appropriate and responsive risk management strategies consistent with our risk profile and (iv) integrate risk management into our decision-making.
Our Board of Directors takes the lead in overseeing risk management and the Audit Committee makes periodic reports to our Board of
Directors regarding briefings provided by management and advisors, as well as the Audit Committee’s own analysis and conclusions regarding the adequacy of our risk management processes. Material risks are identified and prioritized by
management, and each prioritized risk is referred to the relevant committee or the full Board of Directors for oversight. For example, management refers strategic risks to the full Board of Directors while financial risks are referred to the Audit
Committee. Our Board of Directors regularly reviews information regarding our credit, liquidity and operations, as well as the risks associated with each, and annually reviews our risk management program as a whole. Also, the Compensation Committee
periodically reviews the most important risks to us to ensure that compensation programs do not encourage excessive risk-taking.
In addition to the formal compliance program, our Board of Directors encourages management to promote a corporate culture that incorporates risk management into our corporate strategy and day-to-day
business operations. Our Board of Directors also continually works, with the input of our executive officers, to assess and analyze the most likely areas of future risk.
-16-
Director Compensation Table for Fiscal Year 2012
The following table provides compensation information for fiscal year 2012 for each non-employee member of our Board of Directors, except
for Vivekanand Mahadevan who was not a member of our Board of Directors during fiscal year 2012. See “Executive Compensation – Summary Compensation Table for Fiscal Year 2012” for information related to the compensation of
Mr. Kelly who was a director in fiscal year 2012 and who also served as an executive officer during the fiscal year.
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Name
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Fees earned or
paid in cash
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Stock awards (1)(2)(3)
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Total
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Robert A. Degan
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$
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40,000
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$
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31,946
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|
$
|
71,946
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Joseph De Perio
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|
$
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40,000
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|
$
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31,946
|
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|
$
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71,946
|
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Nora M. Denzel (4)
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$
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40,000
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$
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31,946
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|
$
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71,946
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Scott McClendon
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$
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50,000
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$
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31,946
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$
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81,946
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Shmuel Shottan (5)
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$
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40,000
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$
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31,946
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$
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71,946
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(1)
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The amounts shown in this column do not reflect compensation actually received by the non-employee director. These amounts represent the fair value on the grant date of
the awards granted to the directors during fiscal year 2012. These values have been determined under the principles used to calculate the grant date fair value of equity awards for purposes of our financial statements. For a more detailed discussion
on the valuation model and assumptions used to calculate the fair value of these awards, see Note 7 to the consolidated financial statements, included in our annual report on Form 10-K/A for the fiscal year ended July 1, 2012.
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(2)
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The amounts in this column represent the fair value on the grant date of stock option awards granted on June 4, 2012 to each non-employee director, in exchange for
the cancellation of the unvested restricted stock awards granted to the director on May 10, 2011. Each of the canceled restricted stock awards had a fair value on the May 2011 grant date of $50,000. There were no stock awards granted in fiscal
2012.
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(3)
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At fiscal year 2012 end, the number of shares subject to outstanding option awards for each director were as follows: Mr. Degan—85,816; Mr. De
Perio—22,728; Ms. Denzel—57,150; Mr. McClendon—93,149; and Mr. Shottan—22,728. The number of shares subject to outstanding stock awards were as follows: Mr. Degan—0; Mr. De Perio—0;
Ms. Denzel—0; Mr. McClendon—565,869; and Mr. Shottan—0.
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(4)
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Ms. Denzel resigned from our Board of Directors in February 2013.
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(5)
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Mr. Shottan resigned from our Board of Directors in November 2012.
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Overview of Non-Employee Director Compensation and Procedures
We
compensate non-employee directors through cash and equity-based compensation. Each non-employee director receives an annual retainer of $40,000 payable quarterly. The Executive Chairperson of our Board of Directors receives an additional $10,000
retainer annually. No additional fees are paid for attendance at meetings of our Board of Directors or committees. We also reimburse expenses incurred by non-employee directors to attend meetings.
In addition to the above fees, each non-employee director receives an annual equity award with a grant date fair value of $50,000 (based
on the assumptions used to value equity awards for purposes of our financial reporting). These equity awards generally vest one year from the grant date and, in the case of options and similar awards, have a per share exercise price equal to the
fair market value of our common stock on the grant date, and a maximum exercise term of six years. In August 2012, each non-employee director, except for the Executive Chairperson, received an annual equity award in the form of an option to purchase
40,000 shares of our common stock.
-17-
In May 2011, Ms. Denzel and Messrs. Degan, De Perio, McClendon, and Shottan each
received a restricted stock award for 22,728 shares which were scheduled to vest in full on June 14, 2012. On June 4, 2012, the restricted stock awards granted in May 2011 were canceled, and Ms. Denzel and Messrs. Degan, De Perio,
McClendon, and Shottan each received a nonqualified stock option award for 22,728 shares with a per share exercise price of $2.16. These nonqualified stock option awards vested in full on June 14, 2012, and have a six year term.
Equity Ownership by our Board of Directors
Pursuant to stock ownership guidelines recommended by our Nominating and Governance Committee and approved by our Board of Directors, each director is expected to own at least 1,000 shares of our common
stock during their term of service as a director, with new directors expected to acquire at least that number of shares in the open market within 90 days of their commencement of service as a director, subject to applicable laws.
Shareholder Communications with our Board of Directors
We have adopted a formal process by which shareholders may communicate with our Board of Directors. Communications to our Board of Directors must either be in writing and sent care of the Secretary by
mail to our offices at 9112 Spectrum Center Boulevard, San Diego, California 92123, or delivered via e-mail to
secretary@overlandstorage.com
. This centralized process will assist our Board of Directors in reviewing and responding to
shareholder communications in an appropriate manner. The name of any specific intended recipient should be noted in the communication. All communications must (i) be accompanied by a statement of the type and amount of the securities of our
company that the person holds, (ii) identify any special interest, meaning an interest not in the capacity of a shareholder of our company, of the person submitting the communication, and (iii) include the address, telephone number and
e-mail address, if any, of the person submitting the communication. Our Board of Directors has instructed the Secretary to forward to it such correspondence; however, before forwarding any correspondence, our Board of Directors has also instructed
the Secretary to review such correspondence and, in the Secretary’s discretion, not to forward certain items if they are deemed of a personal, illegal, commercial, offensive or frivolous nature or otherwise inappropriate for director
consideration.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors, executive officers and beneficial owners of more than 10% of our common
stock to file reports of ownership and changes in ownership with the SEC. Based solely on copies of these reports provided to us and written representations that no other reports were required, we believe that these persons met all of the applicable
Section 16(a) filing requirements during fiscal year 2012.
Code of Business Conduct and Ethics
We have adopted the Overland Storage, Inc. Code of Business Conduct and Ethics, which applies to our directors, executive officers and
employees. A copy of the Code of Business Conduct and Ethics is publicly available on our website at
www.overlandstorage.com
. If we make any substantive amendments to the Code of Business Conduct and Ethics or grant any waiver from a
provision of the code applying to our principal executive officer or our principal financial or accounting officer, we will disclose the nature of such amendment or waiver on our website or in a current report on Form 8-K.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
The names of our current executive officers, their ages as of May 17, 2013, and their positions are shown below. Biographical summaries of each of our executive officers who are not also members of
our Board of Directors are included below.
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Name
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Age
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Position Held
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Eric L. Kelly
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54
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President and Chief Executive Officer
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Kurt L. Kalbfleisch
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|
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47
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Senior Vice President of Finance, Chief Financial Officer and Secretary
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Jillian Mansolf
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46
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|
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Vice President of Worldwide Sales and Marketing
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Eric L. Kelly
is our President and Chief Executive Officer and a director. See the
description of his business experience under “Nominees for Director” on page 8 of this proxy statement.
-18-
Kurt L. Kalbfleisch
has 18 years of service with Overland Storage and has
served as our Senior Vice President since June 2012, Chief Financial Officer since February 2008, and Secretary since October 2009. He served as our Vice President of Finance from July 2007 to June 2012. He served as our Interim Chief Financial
Officer from August 2007 to February 2008.
Jillian Mansolf
has served as our Senior Vice President of Global
Sales and Marketing since June 2012, and prior to that as our Vice President of Worldwide Sales and Marketing since joining us in July 2009. From August 2007 to June 2009, Ms. Mansolf served as Senior Vice President of Worldwide Sales and
Marketing for Data Robotics-The Makers of Drobo. From May 2006 to July 2007, she was Vice President of Worldwide Marketing & Product Management for Motion Computing, Inc., a creator of tablet personal computers.
Executive officers serve at the pleasure of our Board of Directors. There are no arrangements or understandings between any officer and
any other person pursuant to which such executive officer was or is to be selected as an executive officer. There are no family relationships between any executive officer, director or person nominated by us to become a director or executive
officer.
EXECUTIVE COMPENSATION
Summary Compensation Table for Fiscal Year 2012
The following table
summarizes the total compensation paid to or earned by our principal executive officer and our two other most highly compensated executive officers (referred to as our “named executive officers”) for the Company’s 2012 and 2011 fiscal
years.
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Name and
Principal Position
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Fiscal
Year
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Salary
($)
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|
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Bonus
($)(1)
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Stock
Awards
($)(2)
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Non-Equity
Incentive Plan
Compensation
($)(3)
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All Other
Compensation
($)(4)
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Total
($)
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Eric L. Kelly
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2012
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|
|
|
400,000
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|
|
|
—
|
|
|
|
—
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|
|
|
180,000
|
|
|
|
16,260
|
|
|
|
596,260
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|
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President and Chief Executive Officer
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|
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2011
|
|
|
|
400,000
|
|
|
|
—
|
|
|
|
4,419,519
|
|
|
|
350,000
|
|
|
|
22,929
|
|
|
|
5,192,448
|
|
|
Kurt L. Kalbfleisch
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|
|
2012
|
|
|
|
266,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
73,250
|
|
|
|
25,306
|
|
|
|
364,556
|
|
|
Senior Vice President, Chief Financial Officer and Secretary
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|
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2011
|
|
|
|
243,500
|
|
|
|
10,000
|
|
|
|
1,767,859
|
|
|
|
109,875
|
|
|
|
25,096
|
|
|
|
2,156,330
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Jillian Mansolf
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|
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2012
|
|
|
|
326,500
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(5)
|
|
|
—
|
|
|
|
—
|
|
|
|
9,688
|
|
|
|
29,617
|
|
|
|
365,805
|
|
|
Senior Vice President of Global Sales and Marketing
|
|
|
2011
|
|
|
|
334,095
|
(5)
|
|
|
—
|
|
|
|
1,537,980
|
|
|
|
21,275
|
|
|
|
28,214
|
|
|
|
1,921,564
|
|
|
(1)
|
The amount shown in the “Bonus” column represents a discretionary bonus awarded by the Compensation Committee for the fiscal year.
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(2)
|
The amounts shown in the “Stock Awards” column do not reflect compensation actually received by the named executive officer. These amounts represent the fair
value on the grant date of the awards granted to these officers during the applicable fiscal year. These values have been determined under the principles used to calculate the grant date fair value of equity awards for purposes of our consolidated
financial statements. For a more detailed discussion on the valuation model and assumptions used to calculate the fair value of these awards, see Note 7 to the consolidated financial statements, included in our annual report on Form 10-K/A for the
fiscal year ended July 1, 2012. There were no option awards granted in fiscal 2012 and 2011.
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(3)
|
The amounts shown in the “Non-Equity Incentive Plan” column represent bonuses awarded for fiscal 2012 and 2011 pursuant to the terms of our Executive Bonus
Plan and as established by the Compensation Committee for the fiscal year.
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-19-
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(4)
|
The amounts shown in the “All Other Compensation” column reflect premiums we paid on the officer’s behalf for health insurance, term life insurance and
certain out-of-pocket medical and wellness expenses we paid on the officer’s behalf.
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(5)
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This amount includes sales commissions of $76,500 and $94,490 earned in fiscal 2012 and 2011, respectively.
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Outstanding Equity Awards At Fiscal Year-End for Fiscal Year 2012
The following table provides information about the holdings of stock and option awards by our named executive officers outstanding at the end of fiscal year 2012.
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Option Awards
|
|
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Stock Awards
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|
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Name
|
|
Grant Date (7)
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|
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Number of
securities
underlying
unexercised
options
(#)
exercisable
|
|
|
Number of
securities
underlying
unexercised
options
(#)
unexercisable
|
|
|
Option
exercise
price
($)
|
|
|
Option
expiration
date
|
|
|
Number of
units of
stock that
have not
vested
(#)
|
|
|
Market value
of units of
stock that
have not
vested
($)(4)
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|
|
Eric L. Kelly
|
|
|
11/13/2007
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|
|
|
6,000
|
|
|
|
—
|
|
|
|
5.31
|
|
|
|
11/13/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/9/2008
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|
|
|
6,000
|
|
|
|
—
|
|
|
|
0.75
|
|
|
|
12/9/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/27/2009
|
|
|
|
299,999
|
|
|
|
—
|
|
|
|
0.78
|
|
|
|
1/27/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/18/2010
|
|
|
|
962,889
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(1)
|
|
|
275,111
|
(2)
|
|
|
2.49
|
|
|
|
4/23/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/29/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,311,154
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(3)
|
|
|
2,464,970
|
|
|
Kurt L. Kalbfleisch
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|
|
8/8/2002
|
|
|
|
833
|
|
|
|
—
|
|
|
|
29.16
|
|
|
|
8/8/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5/22/2006
|
|
|
|
333
|
|
|
|
—
|
|
|
|
24.09
|
|
|
|
5/22/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/18/2010
|
|
|
|
177,000
|
(1)
|
|
|
—
|
|
|
|
2.49
|
|
|
|
4/23/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/29/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
522,633
|
(3)
|
|
|
982,550
|
|
|
Jillian Mansolf
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|
|
7/16/2009
|
|
|
|
40,000
|
|
|
|
—
|
|
|
|
1.65
|
|
|
|
7/16/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/18/2010
|
|
|
|
178,356
|
(1)
|
|
|
—
|
|
|
|
2.49
|
|
|
|
4/23/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/29/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
449,516
|
(3)
|
|
|
845,090
|
|
|
(1)
|
This award was originally granted as a stock option award and was amended and reissued on June 29, 2011 as a stock appreciation rights (“SAR”) award. The
purpose of the amendment and reissuance is to provide that, upon exercise, the SAR award will be settled in cash or stock, at our discretion. No other terms of the award changed.
|
|
(2)
|
This SAR award vests in equal monthly installments over a thirty-six month period following the grant date.
|
|
(3)
|
This stock award vests in six equal installments, with the first installment vesting six months after July 15, 2011 and an additional installment vesting at the
end of each six-month period thereafter.
|
|
(4)
|
Amounts listed represent the aggregate market value of the unvested restricted stock awards held by the named executive officers based on the closing price of a share
of our common stock of $1.88 on the last trading day of fiscal 2012.
|
Employment, Severance and Change in Control Agreements
Employment Agreements
.
The following describes the employment arrangements we
have with our named executive officers.
Eric L. Kelly
. We entered into an employment agreement with
Mr. Kelly, our President and Chief Executive Officer, on June 24, 2009, which was amended and restated on June 29, 2011 (the “Kelly Agreement”). The Kelly Agreement provides for Mr. Kelly to earn a base salary of
$400,000, which has been his base salary since his appointment as Chief Executive Officer on January 27, 2009. Mr. Kelly is eligible to receive an annual bonus based upon the achievement of financial and management objectives reasonably
established by our Board of Directors or an authorized committee of our Board of Directors. His annual bonus target is 100% of the greater of $400,000 or his base salary as of the end of the applicable fiscal quarter or year in which the bonus is
earned, and he has the opportunity to earn an annual bonus of up to 150% of the target bonus. If we terminate Mr. Kelly’s employment
-20-
without cause or he resigns for good reason, or if he dies or becomes disabled, before the end of a fiscal quarter or year, he will be eligible to receive a prorated amount of the target bonus
for the fiscal quarter or year in which his employment terminates. For purposes of the Kelly Agreement, the terms “cause” and “good reason” are defined in the agreement, and a termination of employment by us without cause
includes a termination by us at the end of the term then in effect. To the extent that any travel, lodging or auto expense reimbursements are taxable to Mr. Kelly, we will provide him with a tax restoration payment so that he will be put in the
same after-tax position as if such reimbursements had not been subject to tax. The Kelly Agreement has a three-year term and automatically renews for additional one-year terms. We may unilaterally modify Mr. Kelly’s cash compensation at
any time, subject to Mr. Kelly’s right to terminate his employment for good reason.
The Kelly Agreement also
provides that if we terminate Mr. Kelly’s employment without cause or if Mr. Kelly resigns from employment for good reason, then we will be obligated to pay him an aggregate severance payment equal to the sum of (i) 150% of the
greater of his base salary then in effect or his original base salary, (ii) a portion of his target bonus prorated based on the number of days he was employed during the period on which the target bonus is based, (iii) an amount equal to
the premiums he would be required to pay to continue health insurance coverage under our insurance plans for himself and his eligible dependents under COBRA for 18 months following the date of his termination, and (iv) an amount necessary for
him to continue life, accident, medical and dental insurance benefits for himself and his eligible dependents in amounts substantially similar to those which he received immediately prior to the date of his termination for a period of 18 months
following his termination (reduced by the amount of any reimbursement for COBRA premiums as described in clause (iii) above). The severance payment will be made in equal monthly installments over 18 months in accordance with our regular payroll
practices. In addition, Mr. Kelly will be entitled to accelerated vesting for any unvested portion of his then outstanding stock options and any other equity-based awards that would otherwise have vested during the 12-month period following his
termination. In the case of vested stock options, he will be permitted to exercise such options in whole or in part at any time within one year of the date of his termination, subject to earlier termination upon the expiration of the maximum term of
the applicable options under the applicable plan or upon a change in control. The severance benefits described above are contingent upon Mr. Kelly providing us with a general release of all claims.
Kurt L. Kalbfleisch
.
We entered into an employment and severance agreement with Mr. Kalbfleisch, our Senior
Vice President of Finance, Chief Financial Officer and Corporate Secretary on September 29, 2009, which was amended and restated on June 29, 2011 (the “Kalbfleisch Agreement”). The Kalbfleisch Agreement provides for
Mr. Kalbfleisch to earn a base salary of $266,000 which was effective in May 2011. Prior to that time Mr. Kalbfleisch earned a base salary of $240,000. Mr. Kalbfleisch is eligible to receive an annual bonus based upon the achievement
of financial and management objectives reasonably established by our Board of Directors or an authorized committee of our Board of Directors. If we terminate Mr. Kalbfleisch’s employment without cause or he resigns his employment for good
reason before the end of a fiscal quarter or year, he will be eligible to receive a prorated amount of the target bonus for the fiscal quarter or year in which his employment terminates. For purposes of the Kalbfleisch Agreement, the terms
“cause” and “good reason” are defined in the agreement, and a termination of employment by us without cause includes a termination by us at the end of the term then in effect. The Kalbfleisch Agreement has a three-year term and
automatically renews for additional one-year terms. We may unilaterally modify Mr. Kalbfleisch’s cash compensation at any time, subject to Mr. Kalbfleisch’s right to terminate his employment for good reason.
The Kalbfleisch Agreement provides that if we terminate Mr. Kalbfleisch’s employment without cause or if Mr. Kalbfleisch
resigns from employment for good reason, we will be obligated to pay him an aggregate severance payment equal to the sum of (i) the greater of his annual base salary then in effect or his original base salary of $266,000, (ii) a portion of
any target bonus prorated based on the number of days he was employed during the period on which the target bonus is based, (iii) an amount equal to the premiums he would be required to pay to continue health insurance coverage under our
insurance plans for himself and his eligible dependents under COBRA for 12 months following the date of his termination, and (iv) an amount necessary for him to continue life, accident, medical and dental insurance benefits for himself and his
eligible dependents in amounts substantially similar to those which he received immediately prior to the date of his termination for a period of 12 months following his termination (reduced by the amount of any reimbursement for COBRA premiums as
described in clause (iii) above). The severance payment will be made in equal monthly installments over the 12 months following termination of employment. In addition, Mr. Kalbfleisch will be entitled to accelerated vesting for any
unvested portion of his then outstanding stock options and any other equity-based awards that would otherwise have vested during the 12-month period following his termination. In the case of vested stock options, he will be permitted to exercise
such options in whole or in part at any time within one year of the date of his termination, subject to earlier termination upon the expiration of the maximum term of the applicable options under the applicable plan or upon a change in control. If
-21-
such a termination of employment occurs within two years following a change in control of our company, then the severance benefits will generally be the same as described above except that the
cash severance will paid in a single lump sum on the sixtieth day after termination of employment and Mr. Kalbfleisch will be entitled to accelerated vesting for any unvested portion of his then outstanding stock options and any other
equity-based awards. If any payment under the Kalbfleisch Agreement 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 if such reduction would result in a greater benefit for Mr. Kalbfleisch on an after-tax basis. The severance benefits described
above are contingent upon Mr. Kalbfleisch providing us with a general release of all claims.
Jillian
Mansolf
. As our Senior Vice President of Global Sales and Marketing, Ms. Mansolf is an at-will employee and her employment may be terminated by us for any reason, with or without notice. Prior to May 2011, Ms. Mansolf earned an
annual salary of $238,000, was eligible for quarterly commission earnings of up to $25,500 for a total compensation package equal up to $340,000 annually. Ms. Mansolf currently earns an annual salary of $250,000 and is eligible for quarterly
commission earnings of $25,500, for a total annual compensation package of up to $352,000. Ms. Mansolf is also eligible to receive an annual bonus based upon the achievement of financial and management objectives reasonably established by our
Board of Directors or an authorized committee of our Board of Directors. Ms. Mansolf’s offer letter provides that if her employment is terminated by us without cause she is eligible to receive severance benefits consisting of six months of
base salary plus earned commissions and twelve months of continued health benefits coverage.
Retention
Agreements
.
The following describes the severance arrangements we have with our named executive officers in the case of a change of control. For these purposes, the terms “cause,” “good reason,”
and “change in control” are defined in each executive’s retention agreement.
Eric L. Kelly
. On
June 24, 2009, we entered into a retention agreement with Mr. Kelly, which provides that he will receive a lump sum severance payment if, within 60 days before or two years following a change of control of our company, his employment is
terminated by us without cause or he resigns for good reason. The severance payment will equal 150% of the sum of Mr. Kelly’s base salary at the time of the consummation of the change of control or termination date or $400,000, whichever
is higher, plus any annual target bonus. The retention agreement provides that (i) if Mr. Kelly elects to continue insurance coverage as provided by COBRA, we will reimburse him for an amount equal to the premiums he would be required to
pay to continue health insurance coverage under our insurance plans for himself and his eligible dependents under COBRA for 18 months following the date of his termination, and (ii) we will reimburse him for an amount necessary for him to
continue life, accident, medical and dental insurance benefits for himself and his eligible dependents in amounts substantially similar to those which he received immediately prior to the date of his termination for a period of 18 months following
his termination (reduced by the amount of any reimbursements for COBRA premiums as described in clause (i) above). We are required to reimburse Mr. Kelly for the estimated costs of these benefits in one lump sum payment on his termination
date. In addition, Mr. Kelly will be entitled to accelerated vesting for any unvested portion of his then outstanding stock options and any other equity-based awards. In the case of vested stock options, he will be permitted to exercise such
options in whole or in part at any time within one year of the date of his termination, subject to earlier termination upon the expiration of the maximum term of the applicable options under the applicable plan or upon a change of control. If any
portion of any payment under the retention agreement 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 if such reduction would result in a greater benefit for Mr. Kelly on an after-tax basis. The consideration payable to Mr. Kelly under
the retention agreement is contingent upon him providing us a general release of claims.
Jillian Mansolf
. We entered
into a retention agreement with Ms. Mansolf effective July 13, 2009. This agreement generally provides that Ms. Mansolf will receive a lump sum severance payment if, within two years of the consummation of a change of control of our
company, her employment is terminated without cause or she resigns with good reason. These severance payments are based on Ms. Mansolf’s base salary and target commission at the time of the consummation of the change of control or the
termination date, whichever is higher, plus her target bonus for the year before the consummation of the change of control. The agreement provides that, upon a qualifying termination in connection with a change of control, Ms. Mansolf is
entitled to receive an amount equal to her annual base salary, target commissions plus target bonus. If any portion of any payment under the retention agreement 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
-22-
triggering the tax imposed by Section 4999 of the Internal Revenue Code. The agreement also provides that if Ms. Mansolf elects to continue health insurance coverage as provided by
COBRA, we would reimburse her for the amount of the premiums incurred by her for 12 months following the termination date. The consideration payable to Ms. Mansolf under the retention agreement is contingent upon her providing us a general
release of claims.
Equity Awards Granted in Fiscal 2012
There were no equity awards granted to our named executive officers during fiscal 2012.
Executive Bonus Plan
In
September 2010, the Compensation Committee approved an Executive Bonus Plan (“Bonus Plan”), which provides bonus opportunities for selected employees of the Company, including each of our executive officers. Each participant in the Bonus
Plan is assigned a target bonus percentage that is expressed as a percentage of the participant’s base salary for the applicable bonus period (“Bonus Period”). Bonuses are payable based upon our attainment of one or more performance
goal(s) for revenue, gross profit, operating income, operating expenses and/or earnings per share as approved by the Compensation Committee for the applicable Bonus Period. The Compensation Committee may establish minimum, target and/or maximum
performance goals for one or more of these performance metrics. The Compensation Committee establishes target bonus amounts for each Bonus Period and also establishes the percentage of the total bonus that will be determined based on our performance
and the percentage of the total bonus that will be determined based on individual performance and, as applicable, the performance goals that will be used to determine a participant’s individual performance for the Bonus Period. The Bonus Plan
is effective for each fiscal year unless and until otherwise determined by the Compensation Committee.
For fiscal 2012, the
Compensation Committee established performance goals for our revenue growth and gross operating expenses. The named executive officers’ target bonuses for fiscal 2012 (expressed as a percentage of the executive’s annual base salary) were
as follows: Mr. Kelly-100%; Mr. Kalbfleisch-50%; and Ms. Mansolf-10%. (Ms. Mansolf’s participation in the Bonus Plan is in addition to her opportunity to be awarded sales commissions under her employment agreement as described
above.) The bonuses awarded to each named executive officer under the Bonus Plan for fiscal 2012 are reported in the Non-Equity Incentive Plan Compensation column of the “Summary Compensation Table for Fiscal 2012” above.
401(k) Plan
In February
1994, we adopted our On-Track 401(k) Savings Plan that covers all of our eligible employees who are at least 21 years old. Our 401(k) plan is intended to qualify under Section 401 of the Internal Revenue Code so that employee contributions and
income earned on such contributions are not taxable to employees until withdrawn. Employees may elect to defer up to 60% of their eligible compensation (not to exceed the statutorily prescribed annual limit) in the form of elective deferral
contributions to our 401(k) plan. However, our named executive officers qualify as highly compensated employees and may only elect to defer up to 8.5% of their eligible compensation (not to exceed the statutorily prescribed annual limit) in the form
of elective deferral contributions to our 401(k) plan. Our 401(k) plan also has a catch up contribution feature for employees aged 50 or older (including those who qualify as highly compensated employees) who can defer amounts over the statutory
limit that applies to all other employees. In October 2008, we suspended the matching by us of contributions made by participants under our 401(k) plan.
-23-
Equity Compensation Plan Information
The following table provides information about our equity compensation plans as of the last day of fiscal 2012.
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Plan Category
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(a)
Number of common shares
to be issued upon exercise
of
outstanding
options and rights
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(b)
Weighted-average
exercise
price of
outstanding
options and rights (3)
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(c)
Number of common shares
remaining available
for
future issuance under equity
compensation plans
(excluding shares reflected
in column (a))
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Equity compensation plans approved by our shareholders (1)
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5,427,435
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$
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2.86
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2,614,129
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Equity compensation plans not approved by our shareholders (2)
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283,356
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$
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1.69
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—
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Total
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5,710,791
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$
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2.66
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2,614,129
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(1)
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Of the aggregate number of shares that remained available for future issuance reported in column (c), 1,939,742 were available under the 2009 Plan and 674,387 were
available under the 2006 Employee Stock Purchase Plan. The 2009 Plan permits the granting of the following types of incentive awards: stock options, stock appreciation rights, restricted shares, and stock units. Subject to any accelerated
vesting that may apply in the circumstances, the unvested portion of a named executive officer’s outstanding awards will immediately terminate upon a termination of the named executive officer’s employment.
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(2)
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These figures represent options to purchase shares of our common stock granted to certain employees (including Ms. Mansolf) as an inducement to their commencing
employment with us (the “Inducement Options”). The Inducement Options were not granted under a plan and are administered by the Compensation Committee. The Inducement Options are generally subject to the same terms as options granted under
the 2009 Plan. The Inducement Options have a six-year term and are subject to earlier termination in the case of termination of the optionee’s employment or a change in control of us. These options generally may not be transferred by the
optionee.
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(3)
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The weighted-average exercise prices do not reflect shares subject to outstanding awards of restricted stock units.
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-24-
REPORT OF THE AUDIT COMMITTEE OF
THE BOARD OF DIRECTORS
The purpose of the Audit Committee is to assist our Board of Directors in its general oversight of our financial reporting, internal control and audit functions. Management is responsible for the
preparation, presentation and integrity of our financial statements, accounting and financial reporting principles, internal controls and procedures designed to assure compliance with accounting standards, applicable laws and regulations. The
independent registered public accounting firm selected and appointed by the Audit Committee is responsible for performing an independent audit of, and expressing an opinion on our consolidated financial statements.
The Audit Committee is comprised solely of independent directors as defined in the listing standards of the NASDAQ Marketplace Rules. The
Audit Committee members are not professional accountants or auditors and their functions are not intended to duplicate or to certify the activities of management and the independent audit. The Audit Committee serves in a board-level oversight role
where it provides advice, counsel and direction to management and the independent registered public accounting firm on the basis of the information it receives, discussions with the auditors and the experience of the Audit Committee’s members
in business, financial and accounting matters. At each meeting, the Audit Committee meets in executive session with the independent registered public accounting firm without management present and in separate individual sessions with our chief
financial officer, our controller and other finance personnel. All services provided by the independent registered public accounting firm are pre-approved by the Audit Committee, and the Audit Committee reviews and approves the overall scope and
plans for the annual audit.
Our management represented to the Audit Committee that our consolidated financial statements for
fiscal year 2012 were prepared in accordance with generally accepted accounting principles applied on a consistent basis. The Audit Committee reviewed and discussed the consolidated financial statements with management and our independent registered
public accounting firm, including a discussion of the quality, not just the acceptability, of our accounting principles, the reasonableness of significant estimates and judgments, and the clarity of disclosure in our consolidated financial
statements. The Audit Committee discussed with our independent registered public accounting firm other matters as are required to be discussed under the standards of the Public Company Accounting Oversight Board (United States), including the
matters required by AU Section 380, Communication with Audit Committees. In addition, the Audit Committee has discussed with our independent registered public accounting firm such firm’s independence from management and our company and has
received from the independent registered public accounting firm the written disclosures and the letter regarding its independence as required by Rule 3526 of the Public Company Accounting Oversight Board, Communication with Audit Committee
Concerning Independence. Based on the foregoing reviews and discussion, the Audit Committee recommended to our Board of Directors, and our Board of Directors approved, that the audited financial statements be included in our annual report on Form
10-K for the fiscal year ended July 1, 2012, which was amended by our annual report on Form 10-K/A on February 13, 2013.
The Audit Committee has selected Moss Adams as our independent registered public accounting firm for the fiscal year ending June 30, 2013. We expect that a representative of Moss Adams will attend
the annual meeting, and the representative will have an opportunity to make a statement if the representative so desires. The representative will also be available to respond to appropriate questions from shareholders.
THE AUDIT COMMITTEE:
Robert A. Degan, Chairman
Joseph A. De Perio
Vivekanand Mahadevan
-25-
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES AND SERVICES
Independent Registered Public Accountants Fees
The following table summarizes the aggregate fees billed to us by our independent registered public accounting firm, Moss Adams (in thousands):
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Fiscal Year
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2012
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2011
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Audit fees(1)
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$
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347
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$
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405
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Audit-related fees(2)
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20
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92
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Tax fees(3)
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—
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—
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All other fees(4)
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—
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—
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Total
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$
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367
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$
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497
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(1)
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Audit fees consist of fees billed for professional services rendered in connection with the audit of our consolidated annual financial statements and review of the
interim consolidated financial statements included in quarterly reports, which were provided by Moss Adams in connection with statutory and regulatory filings or engagements.
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(2)
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Audit-related fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our consolidated
financial statements and are not reported under audit fees.
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(3)
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Tax fees consist of fees billed for professional services rendered for tax compliance, tax advice and tax planning (domestic and international). These services include
assistance regarding federal, state and international tax compliance, acquisitions and international tax planning. There were no such services rendered to us by Moss Adams during fiscal years 2011 or 2012.
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(4)
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All other fees consist of fees for products and services other than the services reported above. There were no such services rendered to us by Moss Adams during fiscal
years 2011 or 2012.
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Pre-Approval Policies and Procedures
As a matter of policy, all audit and non-audit services provided by our independent registered public accounting firm are approved in
advance by the Audit Committee, which considers whether the provision of non-audit services is compatible with maintaining such firm’s independence. All services provided by Moss Adams during fiscal years 2011 and 2012 were pre-approved by the
Audit Committee. The Audit Committee has considered the role of Moss Adams in providing services to us for fiscal years 2011 and 2012 and has concluded that such services are compatible with their independence as our auditors.
-26-
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Mr. De Perio was elected to our Board of Directors pursuant to the terms of the Purchase Agreement and is the nominee of, and is
employed by, CGI. CGI is the investment manager of CMAG. Pursuant to the Purchase Agreement, CMAG acquired 2,832,861 shares of common stock and warrants exercisable to purchase 1,246,458 shares of common stock for total consideration of $5.0
million.
Indemnification of Our Executive Officers and Directors
Our executive officers and directors are entitled to be indemnified under our amended and restated articles of incorporation, as amended,
and our Bylaws to the fullest extent permitted under California law. We have also entered into indemnification agreements with each of our executive officers and directors.
OTHER MATTERS
We know of no other matters to be submitted at the annual
meeting. If any other matters are properly brought before the annual meeting, it is the intention of the persons named in the enclosed proxy card to vote the shares that they represent in accordance with their judgment.
For further information about Overland Storage, Inc., please refer to our annual report on Form 10-K/A for the fiscal year ended
July 1, 2012, which was filed with the SEC on February 13, 2013 and accompanies this proxy statement. Our annual report on Form 10-K/A is publicly available on our website at
www.overlandstorage.com
. You may also obtain a copy by
sending a written request to Investor Relations, Overland Storage, Inc., 9112 Spectrum Center Boulevard, San Diego, California 92123.
By order of the Board of Directors,
KURT L. KALBFLEISCH
Secretary
-27-
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Shareowner Services
P.O.
Box 64945
St. Paul, MN 55164-0945
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Address Change? Mark box,
sign, and indicate changes below:
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THE DIRECTORS RECOMMEND A VOTE
“FOR” ALL NOMINEES FOR
DIRECTOR LISTED IN PROPOSAL 1, A VOTE “FOR” PROPOSALS 2 AND
3,
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AND A VOTE FOR EVERY ONE YEAR FOR PROPOSAL 4
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1.
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ELECT FIVE DIRECTORS:
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01 Robert A. Degan
02 Joseph A. De Perio
03 Eric L. Kelly
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04 Vivekanand Mahadevan
05 Scott McClendon
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¨
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Vote FOR all nominees
(except
as marked)
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¨
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Vote WITHHELD
from all
nominees
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(Instruction: To withhold authority to vote for any individual nominee, write that nominee’s name in the space provided at right.)
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2.
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RATIFY THE APPOINTMENT OF MOSS ADAMS LLP
AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING JUNE 30, 2013:
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¨
For
¨
Against
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Abstain
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3.
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APPROVE, ON AN ADVISORY BASIS, THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS, REFERRED TO AS “SAY-ON-PAY.”
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¨
For
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Against
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Abstain
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4.
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APPROVE, ON AN ADVISORY BASIS, THE PREFERRED FREQUENCY OF SHAREHOLDER ADVISORY VOTES ON EXECUTIVE COMPENSATION, REFERRED TO AS
“SAY-ON-FREQUENCY.”
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¨
1 Year
¨
2 Years
¨
3
Years
¨
Abstain
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UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED “FOR” ALL NOMINEES FOR DIRECTOR LISTED IN
PROPOSAL 1, “FOR” PROPOSALS 2 AND 3, EVERY ONE YEAR FOR PROPOSAL 4 AND IN THE DISCRETION OF THE APPOINTED PROXIES UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE
VOTED IN ACCORDANCE THEREWITH.
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Date:
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Signature(s) in Box
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Please sign exactly as your name(s) appears on Proxy. If held in joint tenancy, all persons
should sign. Trustees, administrators, etc., should include title and authority. Corporations should provide full name of corporation and title of authorized officer signing the proxy.
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OVERLAND STORAGE, INC.
ANNUAL MEETING OF SHAREHOLDERS
Tuesday, June 18, 2013
1:00 p.m.
125 South Market Street
2nd Floor, Suite 275, Room A
San Jose, CA 95113
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2012 Annual Meeting Proxy
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THIS PROXY IS
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
I appoint Eric L. Kelly and Kurt L. Kalbfleisch, or either of them, with power of
substitution to each, to vote all shares of common stock which I have power to vote at the annual meeting of shareholders of Overland Storage, Inc. to be held on Tuesday, June 18, 2013 at 1:00 p.m., or at any adjournment or postponement
thereof, in accordance with the instructions on the reverse side of this card and with the same effect as though I were present in person and voting such shares. My appointed proxies are authorized in their discretion to vote upon such other
business as may properly come before the annual meeting.
There are three ways to vote your Proxy.
Your telephone or Internet vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed and returned this proxy
card.
VOTE BY PHONE – TOLL FREE – 1-800-560-1965 – QUICK***EASY***IMMEDIATE
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Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a week until 9:00 p.m., Pacific Time, on June 17, 2013.
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Please have your proxy card and the last four digits of your Social Security Number or Tax Payer Identification Number available. Follow the simple
instructions the voice provides you.
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VOTE VIA INTERNET – http://www.eproxy.com/ovrl/ –
QUICK***EASY***IMMEDIATE
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Use the Internet to vote your proxy 24 hours a day, 7 days a week until 9:00 p.m., Pacific Time, June 17, 2013.
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Please have your proxy card and the last four digits of your Social Security Number or Tax Payer Identification Number available. Follow the simple
instructions to obtain your records and create an electronic ballot.
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VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Overland Storage, Inc., c/o Wells Fargo
Shareowner Services, P.O. Box 64873, St. Paul, MN 55164-0873.
If you vote by phone or Internet, please do not mail your
proxy card.
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