Summary of OVERLAND STORAGE INC

Entry into a Material Definitive Agreement, Creation of a Direct Financial O

Item 1.01. Entry into a Material Definitive Agreement

On April 6, 2009, Overland Storage, Inc. (the "Company", "we", "our" and "us") entered into (i) a Secured Promissory Note (the "Note"), (ii) a Security Agreement (the "Security Agreement") and (iii) an Intellectual Property Security Agreement (the "IP Security Agreement") with Anacomp, Inc. ("Anacomp"). Anacomp provides repair and maintenance services for equipment we sell to our customers under an Authorized Service Provider Agreement (the "Service Agreement").

The Note represents a conversion of accounts payable owed by us to Anacomp which primarily had accumulated during the first calendar quarter of 2009 in which we were negotiating an extension and other terms under the Services Agreement. The principal amount of the Note is $2,386,000; however, we and Anacomp have agreed to adjust the principal amount of the Note if we both determine, within fifteen days after entering into the Note, that the amount owed by us to Anacomp is actually different than $2,386,000 (as provided for in the Security Agreement). The Note accrues simple interest at 12% per annum. The Note matures on July 9, 2010. We have agreed to pay Anacomp according to the following schedule:

               Payment Due                     Amount
               October 9, 2009   $ 477,200 plus all unpaid interest
               January 8, 2010   $ 596,500 plus all unpaid interest
               April 9, 2010     $ 596,500 plus all unpaid interest
               July 9, 2010      $ 715,800 plus all unpaid interest

The Note is secured by the Security Agreement and the IP Security Agreement described below. The Note may be prepaid at any time without penalty. Upon an event of default, Anacomp has the right to accelerate the Note. Events of default include, among other things, (i) failure by us to make any of the scheduled payments, (ii) uncured default by us of our obligations under the Note, the Security Agreement or the IP Security Agreement, (iii) failure by us to make payments in an amount that exceeds the most recent two months' worth of aggregate fees and payments under the Service Agreement, (iv) initiation of bankruptcy proceedings, and (v) Anacomp ceases to have a valid and perfected lien in all of the Collateral (as defined below) pursuant to the Security Agreement.

The Security Agreement provides Anacomp with a security interest against certain collateral belonging to the Company including all of our inventory, equipment, fixtures, Documents of Title, accounts, contract rights, general intangibles, Chattel Paper, Instruments, Commercial Tort Claims, and suretyships and guarantees (collectively, the "Collateral"). However, the Collateral excludes the intellectual property purchased from Adaptec, Inc. in June 2008 (the "Snap IP") and any accounts receivable transferred to Faunus Group International, Inc. or Marquette Business Credit, Inc. We agreed not to make any distributions or pay any dividends to our shareholders. The security interests created by the Security Agreement expire upon the occurrence of all three of the following conditions: (i) the Note is paid in full, (ii) we are current in our payments under the Service Agreement and (iii) we have provided financial statements indicating that as of the end of the preceding calendar quarter that we have an asset to debt ratio of 1.25-to-1 and a current asset to current liabilities ratio of 1.15-to-1.

The IP Security Agreement provides Anacomp security interest in our intellectual property (the "Intellectual Property") including the Company's copyrights, patents, patent applications, trademarks, know-how, trade secrets, and related goodwill. However, the Intellectual Property excludes the Snap IP.