Exhibit 10.1

SECURED PROMISSORY NOTE

 

$2,386,000

   San Diego, California

1. Fundamental Provisions. The following terms will be used as defined terms in
this Secured Promissory Note (“Note”):

 

Date of this Note:    April 6, 2009 Maker:    Overland Storage, Inc., a
California corporation Holder:    Anacomp, Inc., an Indiana corporation, or
assignee Principal Amount:    $2,386,000 United States Currency, subject to
reconciliation as provided in Section 6.16 of that certain Security Agreement
entered into as of April 6, 2009 between Maker and Holder (the “Security
Agreement”) Interest Rate:    12% per annum (simple interest) Default Interest
Rate:    14% per annum (simple interest) Maturity Date:    July 9, 2010
Security:    This Note is secured by the Security Agreement

2. Promise to Pay. For good and valuable consideration, Maker promises to pay to
Holder, or order, the principal amount of Two Million Three Hundred Eighty-Six
Thousand Dollars ($2,386,000) (“Principal Amount”), subject to reconciliation as
provided in Section 6.16 of the Security Agreement, with interest at the
Interest Rate (or the Default Interest Rate while an Event of Default exists).
On October 9, 2009, Maker shall pay to Holder the principal reduction payment of
$477,200 plus the then accrued and unpaid interest. On January 8, 2010, Maker
shall pay to Holder the principal reduction payment of $596,500 plus the then
accrued and unpaid interest. On April 9, 2010, Maker shall pay to Holder the
principal reduction payment of $596,500 plus the then accrued and unpaid
interest. On July 9, 2010, Maker shall pay to Holder the principal reduction
payment of $715,800 plus the then accrued and unpaid interest, in final payment
and satisfaction of the Note. The entire unpaid principal balance plus accrued
and unpaid interest, late charges and other fees and charges or expenses then
owing shall be due and payable on the Maturity Date. Payment shall be in lawful
money of the United States via wire transfer to Anacomp, Inc. pursuant to the
wire instructions attached hereto as Exhibit A, or such other method as Holder
may from time to time designate.

 

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3. Default Interest. If any scheduled payment of principal and interest due
under this Note is not received by Holder within five (5) calendar days after
the date such payment is due, the outstanding principal of the Note shall begin
accruing interest at the Default Interest Rate until the overdue payment has
been made. The five (5) calendar day period provided in the preceding sentence
is not a grace period or cure period and Holder shall be entitled to exercise
all of Holder’s rights and remedies upon the occurrence of an Event of Default.

4. Prepayments. This Note may be prepaid at any time in whole or in part before
due without prepayment penalty or premium. In the event that the full amount
owed by Maker under this Note is paid to Holder such that no indebtedness under
this Note remains unpaid, then the Holder shall return to Maker the original
Note marked “paid in full”.

5. Event of Default. At the option of Holder, it shall be an “Event of Default”
hereunder if:

(a) Maker fails to pay when due any payment of principal or any other sum
payable under the Note; provided that Holder provides Maker (with a copy to
Marquette Commercial Finance, a division of Marquette Business Credit, Inc.
(“Marquette”), Faunus Group International, Inc. (“FGI”) and Adaptec, Inc.
(“Adaptec”) as provided in Section 6.7 of the Security Agreement) five
(5) calendar days written notice of such failure and such failure is not cured
within such five (5) day period.

(b) Maker defaults in the performance of any of its obligations under any
provision of the Loan Documents (as defined in the Security Agreement); provided
that Holder provides Maker (with a copy to Marquette, FGI and Adaptec as
provided in Section 6.7 of the Security Agreement) thirty (30) calendar days
written notice of such default and such default is not cured within such thirty
(30) day period.

(c) Maker fails to pay any fees or payments under that certain Authorized
Service Provider Agreement dated July 1, 2001, including Amendments No. 1
through No. 15 (collectively referred to as the “Service Agreement”), in a total
amount that equals or exceeds the most recent two (2) months’ worth of aggregate
fees and payments under the Service Agreement; provided that failure to pay will
only be deemed to occur after the lapse of any grace period and cure period set
forth in the Service Agreement.

(d) The Service Agreement is terminated on account of a breach of such agreement
by Maker.

(e) Any warranty or representation made by Maker in the Security Agreement, or
any of the Loan Documents, is untrue in any material respect, in any case on any
date as of which the facts set forth are stated or certified.

(f) Maker institutes a voluntary case seeking liquidation or reorganization
under Chapter 7 or Chapter 11 of the United States Bankruptcy Code, or consents
to the institution of an involuntary case thereunder against it; or Maker files
a petition initiating or otherwise institutes any similar proceeding under any
other applicable federal or state law, or consents thereto; or Maker applies
for, or by consent or by failure to object there is an appointment of or order
entered by a court of competent jurisdiction appointing a receiver, liquidator,
sequestrator, trustee or other officer with similar powers; or Maker makes an
assignment for the benefit of creditors; or Maker admits in writing its
inability to pay its debts generally as they become

 

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due; or, if an involuntary case is commenced seeking the liquidation or
reorganization of Maker under Chapter 7 or Chapter 11, respectively, of the
United States Bankruptcy Code, or any similar proceeding is commenced against
Maker under any other applicable federal or state law, and (1) the petition
commencing the involuntary case is not timely controverted within sixty
(60) calendar days; or (2) the petition commencing the involuntary case is not
stayed or dismissed within sixty (60) calendar days of its filing; or (3) a
trustee (interim or otherwise) is appointed to take possession of all or a
portion of the Maker’s assets, or to operate all or any part of the business of
Maker; or (4) an order for relief is issued or entered therein.

(g) Holder does not have or ceases to have a valid and perfected lien on and
security interest in all of the collateral as provided in the Security
Agreement, junior in priority only to the lien in favor or Marquette, the lien
in favor of FGI and the lien in favor of Adaptec, other than as a result of
action or inaction of Holder or Holder’s agent. Notwithstanding anything to the
contrary in this Agreement, Maker may not seek or obtain any Consent-Required
Indebtedness without the consent of Holder, which consent shall not be
unreasonably withheld. Maker shall promptly provide written notice to Holder of
its intent to seek or obtain Consent-Required Indebtedness, which reasonably
specifies the nature of such Consent-Required Indebtedness, and shall promptly
provide Holder with such financial or other information necessary or reasonably
requested by Holder so that Holder may assess Maker’s financial condition.
Holder shall use its best efforts to review such information and provide Maker
with its decision regarding its consent as soon as practicable after the receipt
of such information from Maker. For purposes of the foregoing, “Consent Required
Indebtedness” is new borrowing by Maker that is not included in any of the
following categories: (1) any unsecured indebtedness; (2) any secured
indebtedness where the corresponding lender agrees to subordinate its rights to
those of Holder under the Note or the Security Agreement; (3) any indebtedness
involving the acquisition of equipment or other assets where the vendor
maintains only a purchase money security interest in the equipment or assets
being purchased; (4) any indebtedness that is (x) incurred in the ordinary
course of Maker’s business and (y) not more than $100,000 at any one time; or
(5) any indebtedness sought or obtained when the purpose of such indebtedness is
to pay off Maker’s indebtedness to Marquette, FGI or Adaptec in order to obtain
more favorable financing terms; provided, however, that the total amount of new
facilities or loans do not exceed the total amount of the then-in-effect
facilities under the Marquette and FGI arrangements, or in the case of Adaptec,
the total amounts owed to Adaptec.

(h) The obligations and liabilities of Maker under any of its agreements with
Marquette, FGI or Adaptec is accelerated pursuant to the terms thereof.

6. Acceleration. Upon the occurrence of an Event of Default, at the option of
Holder and following written notice to each of Marquette, FGI and Adaptec as
provided in Section 6.7 of the Security Agreement, the entire sum of principal,
interest, and all other charges due under this Note, shall become immediately
due and payable without presentment, demand, protest or notice of dishonor, all
of which are hereby expressly waived by Maker; and Holder shall have all rights,
powers and remedies available under this Note, all of which rights, powers and
remedies may be exercised at any time by Holder and from time to time after the
occurrence of an Event of Default. All rights, powers and remedies of Holder in
connection with this Note are cumulative and not exclusive and shall be in
addition to any other rights, powers or remedies provided by law or equity.

 

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7. Costs of Collection. Maker agrees to pay all costs of collection when
incurred, including reasonable attorneys’ fees, expenses and any other costs
attributable to collection, whether or not suit is filed, and all costs incurred
in realizing upon any collateral securing this Note. No extension of the time
for the payment of this Note or any installment hereof made by agreement with
any person now or hereafter liable for the payment of this Note shall operate to
release, discharge, modify, change or affect the original liability under this
Note of any of the undersigned not a party to such agreement.

8. No Waiver. No delay or omission of Holder in exercising any right or power
arising in connection with any Event of Default shall be construed as a waiver
or as an acquiescence therein, nor shall any single or partial exercise thereof
preclude any further exercise thereof. Holder may, as its option, in writing,
waive any of the conditions herein and no such waiver shall be deemed to be a
waiver of Holder’s rights hereunder, but rather shall be deemed to have been
made in pursuance of this Note and not in modification thereof. No waiver of any
Event of Default shall be construed to be a waiver of or acquiescence in or
consent to any preceding or subsequent Event of Default.

9. Waivers. Maker waives presentment, protest, demand, notice of protest,
dishonor or non-payment of this Note, and any and all other notices or matters
of a like nature, waive all applicable exemption rights, whether under any state
constitution, homestead laws or otherwise, consent to any and all renewals and
extensions of the time of payment hereto, and agree further that any time and
from time to time without notice, the terms of payment hereof may be modified,
without in any way affecting the liability of any party to this Note, any
endorser, or any person liable or to become liable with respect to any
indebtedness evidenced hereby. No single or partial exercise of, or forbearance
from exercising, any power hereunder or under any security agreement or other
agreement or instrument securing this Note shall preclude other or further
exercises thereof or the exercise of any other power. Neither the granting of
any extension of time, nor the acceptance or release of any security for this
Note, nor the cancellation, modification or invalidity of any document
evidencing or securing this Note, nor any delay or omission on the part of
Holder hereof in exercising any right hereunder, shall operate as a waiver of
such right or of any other right under this Note to release Maker or any
endorser of this Note or general partner of any of the foregoing. The release of
any party liable on this Note shall not operate to release any other party
liable hereon. The acceptance by Holder hereof of any payment which is less than
the payment in full of all amounts due and payable at the time of such payment
shall not constitute a waiver of any default which may then exist or the right
to accelerate at that time or any subsequent time or nullify any prior
acceleration without the express prior written consent of Holder hereof. The
right to plead any and all statutes of limitations as a defense to any demand on
this Note, or any agreement to the same, or any instrument securing this Note,
or any and all obligations or liabilities arising out of or in connection with
this Note, is expressly waived by Maker and each and every endorser or
guarantor, if any, to the fullest extent permitted by law.

 

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10. Permissible Interest. In no contingency or event whatsoever, by acceleration
or otherwise, shall the amount of interest paid or agreed to be paid to Holder,
its successors or assigns, for the loan, use, forbearance or detention of money
exceed the maximum, if any, permissible under applicable law. If, from any
circumstances, Holder, or its successors or assigns, should ever receive as
interest an amount that would exceed the highest lawful rate, such amount as
would be excessive interest shall be applied to the reduction of the unpaid
principal balance of this Note and not the payment of interest. This provision
shall control every other provision of this Note and all agreements between
Maker and Holder, and its successors and assigns.

11. Representations. Maker represents and warrants that (a) Maker is duly
incorporated and validly existing in its place of operation, with authority to
execute this Note, (b) Maker has total assets of at least $2,000,000 according
to its most recent financial statements, which are of a date not more than 90
calendar days prior to the date of this Note and were prepared in accordance
with generally accepted accounting principles, (c) Maker has a preexisting
personal or business relationship with Holder and/or Maker, by reason of its own
business and financial experience or that of its professional advisors, has the
capacity to protect its own interests in connection with this Note and the
Security Agreement, and (d) the proceeds of this Note were not used for
household use.

12. Benefit of Notice; Assignment. The provisions of this Note shall bind Maker,
its successors, devisees and assigns for the benefit of Holder or its
successors, devisees and assignees. This Note may be assigned in whole or in
part by Holder subject to any terms and conditions of the Security Agreement,
but not Maker.

13. TOTAL AMOUNTS OWED. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THE LOAN
DOCUMENTS, THE SERVICE AGREEMENT OR ANY OTHER AGREEMENT, THE PARTIES AGREE AND
ACKNOWLEDGE THAT THE PRINCIPAL AMOUNT (AS DEFINED IN THE NOTE AND SUBJECT TO
AMENDMENT UPON RECONCILIATION OF THE PRINCIPAL AMOUNT AS SET FORTH IN SECTION
6.16 OF THE SECURITY AGREEMENT) OF THE NOTE IS THE TOTAL AMOUNT OWED BY MAKER TO
HOLDER UNDER ANY AGREEMENT, INCLUDING, BUT NOT LIMITED TO, THE LOAN DOCUMENTS,
THE SERVICE AGREEMENT AND ANY OTHER AGREEMENT, AS OF MARCH 31, 2009. HOLDER
ACCEPTS THE NOTE, SUBJECT TO AMENDMENT OF THE PRINCIPAL AMOUNT UPON
RECONCILIATION AS PROVIDED IN SECTION 6.16 OF THE SECURITY AGREEMENT, AS PAYMENT
IN FULL FOR ALL AMOUNTS OWED BY MAKER TO HOLDER AS OF MARCH 31, 2009.

14. Choice of Law and Venue. This Note shall be governed by, and construed in
accordance with, the internal laws of the State of California, without regard to
principles of conflicts of law. Maker and Holder each hereby submit to the
exclusive jurisdiction of the state and Federal courts located in the County of
San Diego, State of California. MAKER AND HOLDER EACH HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS NOTE OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN,
INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND
AGREES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO
ENTER INTO THIS NOTE.

 

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15. Severable Provisions. The provisions of this Note are intended by Maker to
be severable and divisible and the invalidity or unenforceability of a provision
or term herein shall not invalidate or render unenforceable the remainder of
this Note or any part hereof.

16. Time is of the Essence. Maker agrees that time is strictly of the essence
for every provision hereof.

17. Notice. Unless otherwise provided in this Note, all notices or demands by
any party relating to this Note or any other agreement entered into in
connection herewith shall be in writing and shall be personally delivered or
sent by certified mail, postage prepaid, return receipt requested, or by prepaid
facsimile to Maker or to Holder, as the case may be, at its addresses set forth
below:

 

If to Maker:   

Overland Storage, Inc.

Attn: Kurt L. Kalbfleisch, Chief Financial Officer

4820 Overland Avenue

San Diego, California 92123

Fax No.: (858) 495-4267

If to Holder:   

Anacomp, Inc.

Attn: Paul J. Najar, Executive Vice President, General Counsel and Secretary

15378 Avenue of Science

San Diego, CA 92128

Fax No.: (858) 716-3771

The parties hereto may change the address at which they are to receive notices
hereunder, by notice in writing in the foregoing manner given to the other.

 

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18. Amendments in Writing, Integration. This Note may not be amended, except in
a writing executed by the parties; provided, however upon the reconciliation of
the amounts due to Holder as of March 31, 2009 under the Service Agreement as
provided in Section 6.16 of the Security Agreement, Maker shall immediately
amend this Note to provide the reconciled amount as the principal amount under
this Note and shall immediately provide Holder with an originally executed
amendment to this Note. All prior agreements, understandings, representations,
warranties, and negotiations between the parties hereto with respect to the
subject matter of this Note, if any, are merged into this Note.

IN WITNESS WHEREOF, Maker has executed this Note as of the Date of this Note.

 

MAKER: Overland Storage, Inc. By:   /s/ Vernon A. LoForti   Vernon A. LoForti  
President

 

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EXHIBIT A

WIRE INSTRUCTIONS

Union Bank of California

Monterey Park, CA

Bank Routing # 122000496

ANACOMP, INC.

Account# 4040128749