SECURITY AGREEMENT

Exhibit 10.2

SECURITY AGREEMENT

THIS SECURITY AGREEMENT (“Agreement”) is made and entered into as of April 6, 2009, by and among Anacomp, Inc. (“Lender”) and Overland Storage, Inc., a California corporation (“Grantor”).

RECITALS

A. Grantor and Lender are parties to that certain Authorized Service Provider Agreement between Grantor and Lender dated as of July 1, 2001, as amended (the “Service Agreement”).

B. Grantor has issued to Lender a Promissory Note (with any amendments, the “Note”) in the principal amount of Two Million Three Hundred Eighty-Six Thousand Dollars ($2,386,000), subject to adjustment upon reconciliation of the parties as provided in Section 6.16 of this Agreement.

C. In connection with the Service Agreement, Lender provides services, either directly or indirectly, to Grantor’s customers and end-users pursuant to ongoing enrollments under the Service Agreement (the “Enrollments”). Pursuant to Amendment No. 15 to the Service Agreement, Grantor will be paying Lender in advance for a portion of the services to be provided pursuant to ongoing Enrollments (each an “Enrollment Payment” and collectively, the “Enrollment Payments”). All Enrollment Payments are secured by this Agreement.

D. Grantor is executing and delivering to Lender this Agreement to secure its obligations, responsibilities and covenants as set forth in the Note, any monetary obligation under the Service Agreement and this Agreement.

NOW, THEREFORE, in consideration of the foregoing Recitals, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Lender and Grantor hereby agree as follows:

1. Definitions . In addition to any terms defined elsewhere in this Agreement, the following terms have the following meanings ascribed to them for purposes of this Agreement:

1.1 “ Account ” means all “ accounts ” (as defined in the UCC) now owned or hereafter created or acquired by Grantor including, without limitation, all of the following now owned or hereafter created or acquired by Grantor: (a) accounts receivable, contract rights, book debts, notes, drafts, and other obligations or indebtedness owing to Grantor arising from the sale, lease, or exchange of goods or other property and/or the performance of services; (b) Grantor’s rights in, to and under all purchase orders for goods, services, or other property; (c) Grantor’s rights to any goods, services or other property represented by any of the foregoing (including returned or repossessed goods and unpaid sellers’ rights of rescission, replevin, reclamation, and rights to stoppage in transit); (d) moneys due to or to become due to Grantor under all contracts for the sale, lease, or exchange of goods or other property and/or the performance of Grantor); and (e) Proceeds of all of the foregoing, and all collateral security and guarantees of any kind given by any person with respect to any of the foregoing.

1

1.2 “ Affiliate ” means, with respect to any Person, any Person directly or indirectly controlling, controlled by or under common control with such Person.

1.3 “ Agreement ” means this Security Agreement, as amended from time to time.

1.4 “ Business ” means all business activities engaged in by Grantor.

1.5 “ Chattel Paper ” means any writing which evidences both a monetary obligation and a security interest in or a lease of specific goods.

1.6 “ Collateral ” means all of the following, whether now owned or hereafter existing, acquired or arising: (a) all of Grantor’s Inventory, Equipment and Fixtures; (b) all of Grantor’s Documents of Title; (c) all of Grantor’s Accounts, provided, however, that upon the sale of any Account to Faunus Group International, Inc. (“FGI”) pursuant to that certain Sale of Accounts and Security Agreement dated March 18, 2009 or to Marquette Commercial Finance, a division of Marquette Business Credit, Inc. (together, “Marquette”) pursuant to that certain Account Transfer and Purchase Agreement dated November 26, 2008 such Account shall be automatically released from the security interest provided in this Agreement; (d) all of Grantor’s Contract Rights; (e) all of Grantor’s General Intangibles, Chattel Paper, Instruments and Commercial Tort Claims; (f) all suretyships and guarantees of Grantor’s existing and future Accounts, Contract Rights, and General Intangibles, and all security for the payment or satisfaction of such suretyships and guarantees; (g) the goods or the services the sale or lease or performance of which gave rise to any Account, Contract Right or General Intangible of Grantor, including any returned goods; (h) any balance or share belonging to Grantor of any deposit account, agency, or other account with any bank and any other amounts which may be owing from time to time by any bank to Grantor; (i) all Investment Property; (j) all Letter of Credit Rights; and (k) all Products and Proceeds of all of the foregoing, including all Proceeds of other Proceeds; provided that “Collateral” shall not include property to the extent (i) such property is nonassignable by its terms without the consent of the licensor thereof or another party, or (ii) the granting of a security interest therein is contrary to applicable law, provided that upon the cessation of any such restriction or prohibition, such property shall automatically become part of the Collateral. Notwithstanding the foregoing, the Snap Intellectual Property is excluded from the Collateral.

1.7 “ Contract Right ” means any right to payment under a contract (including but not limited to contracts for the sale or leasing of goods or for the rendering of services) not yet earned by performance and not evidenced by an Instrument or Chattel Paper.

1.8 “ Contingent Obligation ,” as applied to any Person, means any direct or indirect liability, contingent or otherwise, of that Person: (a) with respect to any indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto; (b) with respect to any letter of credit issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of any drawing thereunder; or (c) under any foreign exchange contract, currency swap agreement, interest rate swap or cap agreement or other similar agreement or arrangement

2

designed to protect that Person against fluctuations in currency values or interest rates. Contingent Obligations will include, without limitation, (1) the direct or indirect guaranty, endorsement (other than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such person of the obligation of another, (2) the obligation to make take-or-pay or similar payments if required regardless of nonperformance by any other party or parties to an agreement, and (3) any liability of such Person for the obligations of another through any agreement to purchase, repurchase or otherwise acquire such obligation, to provide funds for the payment or discharge of such obligation or to maintain the solvency, financial condition or any balance sheet item or level of income of another. The amount of any Contingent Obligation will be equal to the amount of the obligation so guaranteed or otherwise supported or, if a fixed and determined amount, the maximum amount so guaranteed.

1.9 “ Copyright License ” means any written agreement now or hereafter in existence granting to Grantor any right to use any Copyright.

1.10 “ Copyright ” means all of the following: (a) all copyrights, rights, and interests in copyrights, copyright registrations, and copyright applications now owned or hereafter created or acquired by Grantor; (b) all renewals of any of the foregoing; (c) all income, royalties, damages and payments now or hereafter due and/or payable under any of the foregoing, including, without limitation, damages or payments for past or future infringements of any of the foregoing; (d) the right to sue for past, present, and future infringements of any of the foregoing; and (e) all rights corresponding to any of the foregoing throughout the world.

1.11 “ Equipment ” means all “equipment” (as defined in the UCC) now owned or hereafter acquired by Grantor including, without limitation, all machinery, computers, computer equipment, motor vehicles, trucks, trailers, vessels, aircraft, and rolling stock, and all parts thereof and all additions and accessions thereto and replacements therefor.

1.12 “ Event of Default ” has the meaning set forth in paragraph 5 of this Agreement.

1.13 “ Financing Statement ” means the form of financing statement that will be necessary to perfect, upon filing, a security interest in the Collateral in each jurisdiction in which Grantor is registered or located or in which a filing is required under the UCC to perfect such security interest.

1.14 “ Fixtures ” means all of the following now owned or hereafter acquired by Grantor: plant fixtures; business fixtures; other fixtures and storage office facilities, wherever located; and all additions and accessions thereto and replacements therefor.

1.15 “ GAAP ” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession, which are applicable to the circumstances as of the date of determination.

3

1.16 “ General Intangibles ” means all “general intangibles” (as defined in the UCC) now owned or hereafter acquired by Grantor including, without limitation, all right, title, and interest of Grantor in and to: (a) all agreements, leases, licenses, and contracts to which Grantor is or may become a party; (b) all obligations, indebtedness, causes of action or choses in action, owing to Grantor (other than accounts) from whatever source arising; (c) all tax refunds; (d) all Intellectual Property; and (e) all trade secrets, know how and common law intellectual property rights including, without limitation, rights in computer software developed by or for Grantor and other confidential information relating to the business of the Grantor, including by way of illustration and not limitation: the names and addresses of, and credit and other business information concerning, Grantor’s past, present, or future customers; the prices that Grantor obtains for its services or at which it sells merchandise; estimating and costs procedures; profit margins; policies and procedures pertaining to the sale and design of equipment, components, devices, and services furnished by Grantor; information concerning suppliers of Grantor and information concerning the manner of operation, business plans, pledges, projections, and all other information of any kind or character, whether or not reduced to writing, with respect to the conduct by Grantor of its business not generally known by the public.

1.17 “ Governmental Approvals ” means any consent, right, exemption, concession, permit, license, authorization, certificate, order, franchise, determination, or approval of any federal, state, provincial, municipal, or governmental department, commission, board, bureau, agency, or instrumentality required for the ownership of properties by or activities of Grantor.

1.18 “ Governmental Authority ” means any nation or government, any state, province or other political subdivision thereof, or any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

1.19 “ Governmental Requirements ” means all legal requirements in effect from time to time including all laws, statutes, codes, acts, ordinances, orders, judgments, decrees, injunctions, rules, regulations, permits, licenses, authorizations, certificates, orders, franchises, determinations, approvals, consents, notices, demand letters, directions, and requirements of all governments, departments, commissions, boards, courts, authorities, agencies, officials, and officers, foreseen or unforeseen, ordinary or extraordinary, including but not limited to any change in any law or regulation, or the interpretation thereof, by any foreign or domestic governmental or other authority (whether or not having the force of law), relating now or at any time heretofore or hereafter to the business or operations of Grantor or to any of the property owned, leased, or used by Grantor, including, without limitation, the development, design, construction, acquisition, start-up, ownership, and operation and maintenance of property.

1.20 “ Incipient Default ” means an event, which, upon the lapse of time or the giving of notice, or both, would constitute an Event of Default.

1.21 “ Indebtedness ” of any Person means all liabilities, obligations and reserves, contingent or otherwise, of such Person.

1.22 “ Instrument ” means a negotiable instrument or a security or any other writing which evidences a right to the payment of money and is not itself a security agreement or lease, and is of a type which is in the ordinary course of business transferred by delivery with any necessary endorsement or assignment.

4

1.23 “ Intellectual Property ” means all of the following: Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks, and Trademark Licenses.

1.24 “ Inventory ” means all “goods” (as defined in the UCC) now owned or hereafter acquired and held by Grantor for sale or lease or to be furnished under contracts of service, tangible personal property which Grantor has so leased or furnished including, without limitation, tangible personal property, raw materials, work in process, and materials used, produced or consumed in Grantor’s business, and will include tangible personal property held by others for sale on consignment from Grantor, tangible personal property sold by Grantor on a sale or return basis, tangible personal property returned to Grantor by the purchaser following a sale thereof by Grantor, and tangible personal property represented by Documents of Title. All equipment, accessories, and parts at any time attached or added to items of Inventory or used in connection therewith will be deemed to be part of the Inventory.

1.25 “ Lien ” means any lien, mortgage, pledge, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest).

1.26 “ Loan Documents ” means the Note, this Agreement and the Intellectual Property Security Agreement.

1.27 “ Material Adverse Effect ” means a material adverse effect on (a) the business, assets, operations or financial condition of Grantor, (b) the ability of Grantor to pay the Obligations when due, in accordance with their terms, or (c) the perfection or priority of Lender’s lien on and security interest in the Collateral (as defined in this Agreement) or the value of such Collateral.

1.28 “ Obligations ” means all (a) debts, liabilities, obligations, covenants, and duties owing to Lender by Grantor under the Loan Documents and (b) monetary obligations under the Service Agreement, including without limitation any and all Enrollment Payments now or hereafter in existence, all as may be amended, supplemented, modified, renewed or extended from time to time.

1.29 “ Patent License ” means any written agreement now or hereafter in existence granting to Grantor any right to use any invention on which a subsisting Patent exists.

1.30 “ Patents ” means all of the following: (a) all patents and patent applications now owned or hereafter created or acquired by Grantor and the inventions and improvements described and claimed therein, and all patentable inventions; (b) the reissues, divisions, continuations, renewals, extensions, and continuations-in-part of any of the foregoing; (c) all income, royalties, damages, or payments now and hereafter due and/or payable under any of the foregoing or with respect to any of the foregoing including, without limitation, damages or payments for past or future infringements of any of the foregoing; (d) the right to sue for past, present, and future infringements of any of the foregoing; and (e) all rights corresponding to any of the foregoing throughout the world.

5

1.31 “ Person ” means any individual, corporation, partnership, trust, association or other entity or organization, including any government, political subdivision, agency or instrumentality thereof.

1.32 “ Proceeds ” means all proceeds of, and all other profits, rentals, or receipts, in whatever form, arising from the collection, sale, lease, exchange, assignment, licensing, or other disposition of, or realization upon, any Collateral including, without limitation, all claims of Grantor against third parties for loss of, damage to, or destruction of, or for proceeds payable for loss of, damage to, or destruction of, or for proceeds payable under, or unearned premiums with respect to, policies of insurance with respect to any Collateral, and any condemnation or requisition payments with respect to any Collateral, in each case whether now existing or hereafter arising.

1.33 “ Snap Intellectual Property ” means all of the Intellectual Property and General Intangibles purchased by Grantor from Adaptec, Inc. (“Adaptec”) pursuant to that certain Asset Purchase Agreement dated as of June 27, 2008, as amended.

1.34 “ Trademark ” means all of the following now owned or hereafter created or acquired by Grantor: (a) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, logos, other business identifiers, prints and labels on which any of the foregoing have appeared or appear, all registrations and recordings thereof, and all applications in connection therewith, including registrations, recordings, and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof, and in any other country or any political subdivision thereof; (b) all reissues, extensions, or renewals thereof; (c) all income, payable under any of the foregoing or with respect to any of the foregoing, including damages or payments for past or future infringements of any of the foregoing; (d) the right to sue for past, present, and future infringements of any of the foregoing; (e) all rights corresponding to any of the foregoing throughout the world; and (f) all goodwill associated with or symbolized by any of the foregoing.

1.35 “ Trademark License ” means any written agreement now or hereafter in existence granting to Grantor any right to use any Trademark.

1.36 “ UCC ” means the California Uniform Commercial Code, as amended from time to time, and any successor statute; provided, however, that if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection of the security interest in any Collateral is governed by the Uniform Commercial Code, or other applicable statute, law, or provision relating to the perfection or the effect of perfection or non-perfection of any such security interest, as in effect on or after the date hereof in any other jurisdiction, then “UCC” will mean the Uniform Commercial Code or such other statute, law, or provision as in effect in such other jurisdiction for purposes of the provision hereof relating to such perfection or the effect of perfection or non-perfection.

Any capitalized term not defined in this Agreement will have the meaning given to it under the UCC. Any accounting term not defined in this Agreement will have the meaning given to it under GAAP.

6

2. Security Interest .

2.1 Grant of Security Interest . Grantor hereby grants to Lender a continuing security interest in and to all right, title, and interest of Grantor in the Collateral, whether now owned or existing or hereafter acquired or arising, regardless of where located, to secure payment and performance of the Obligations and all renewals, extensions, restructurings, and refinancings of the same. Notwithstanding any other provision of this Agreement: (a) Grantor will remain liable under the contracts and agreements included in the Collateral to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed; and (b) Lender will not have any obligation or liability under the contracts and agreements included in the Collateral by reason of this Agreement, nor will Lender be obligated to perform any of the obligations or duties of Grantor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder.

2.2 Affirmative Covenants of Grantor . Grantor will: (a) do all acts that may be necessary to maintain, preserve, and protect the Collateral; (b) pay promptly when due all taxes, assessments, charges, encumbrances, and liens now or hereafter imposed upon or affecting the Collateral, except to the extent the same are being contested in good faith and Grantor maintains sufficient reserves therefor; (c) procure, execute, and deliver from time to time any endorsements, assignments, financing statements, and other writings reasonably necessary or appropriate to perfect, maintain, and protect Lender’s security interest hereunder and the priority thereof, and to deliver promptly to Lender all records of (1) Collateral or (2) insurance proceeds; (d) appear in and defend any action or proceeding which may affect its title to or Lender’s interest in the Collateral, except to the extent the failure to do so could not reasonably be expected to have a Material Adverse Effect; (e) keep accurate and complete records of the Collateral and provide Lender with such books, records, and such other reports and information relating to the Collateral as Lender may reasonably request from time to time upon prior written notice and during normal business hours; (f) when an Event of Default under this Agreement has occurred and is continuing, and after demand, account fully for and immediately deliver to Lender in the form received, all Collateral and all proceeds, endorsed to Lender as appropriate, and unless so delivered all Collateral and all such proceeds will be held by Grantor in trust for Lender, separate from all other property of Grantor and identified as the property of Lender; (g) keep the Collateral in good condition and repair, reasonable wear and tear excepted; (h) at any reasonable time, upon prior written notice and during normal business hours, exhibit to and allow inspection by Lender (or persons designated by Lender) of all Collateral not embodying Intellectual Property; (i) give thirty (30) calendar days’ prior written notice of any change in Grantor’s chief place of business or trade name(s) or style(s) set forth therein; (1) comply with all laws, regulations, and ordinances relating to the possession, operation, maintenance, and control of the Collateral; (j) execute and file such financing or continuation, statements, or amendments thereto, and such other instruments or notices as may be reasonably necessary in order to perfect and preserve the security interest granted or intended to be granted hereby under the laws of any applicable jurisdiction; and (k) upon Lender’s request, appear in and defend any action or proceeding that may affect Grantor’s title to or Lender’s security interest in the Collateral, except to the extent the failure to do so could not reasonably be expected to have a Material Adverse Effect.

7

2.3 Negative Covenants of Grantor . Grantor will not, without the prior written consent of Lender: (a) use or permit the Collateral to be used unlawfully or in violation of any provision of this Agreement, or any applicable statute, regulation, or ordinance or any policy of insurance covering the Collateral; (b) cause any waste or unusual or unreasonable depreciation of the Collateral; or (c) after default under this Agreement and upon demand, modify, waive or release any provisions of any Account, Contract Right, item of Chattel Paper, Instrument or other right to the payment of money constituting Collateral.

2.4 Insurance . Upon execution of this Agreement, Grantor will insure the Collateral, with Lender named as a loss payee, in reasonable form and amounts, with companies reasonably acceptable to Lender, and against normal risks and liabilities. Grantor will deliver copies of such policies to Lender at Lender’s request. In the event of loss of insured Collateral, Lender may make any claim thereunder, and until the Collateral is promptly replaced by Grantor from the segregated proceeds of the insurance, Lender may collect and receive payment of and endorse any instrument in payment of loss, and apply such amounts received, at Lender’s election, to replacement of Collateral or to the Obligations. Lender will not by the fact of approving, disapproving, accepting, preventing, obtaining or failing to obtain any insurance, incur any liability for or with respect to the amount of insurance carried, the form or legal sufficiency of insurance contracts, solvency of insurance companies, or payment or defense of lawsuits. Grantor he