OVERLAND STORAGE, INC. NOTICE OF INDUCEMENT STOCK OPTION GRANT

Exhibit 10.49

OVERLAND STORAGE, INC.

NOTICE OF INDUCEMENT STOCK OPTION GRANT

As an inducement material to the hiring of the Optionee named below, Overland Storage, Inc., a California corporation (the “Company”), hereby grants to the Optionee a nonstatutory stock option to purchase up to the number of Common Shares of the Company’s Common Stock set forth below (the “Option”). This Option is subject to all of the terms and conditions set forth herein and in the Nonstatutory Stock Option Agreement (attached hereto) which is incorporated herein in its entirety. This Option is not issued pursuant to the Company’s 2003 Equity Incentive Plan or any other equity incentive plan of the Company.

The Optionee acknowledges receipt of, and represents that the Optionee has read, understands, accepts and agrees to the terms of this Notice of Nonstatutory Stock Option Grant (“Grant Notice”) and the Nonstatutory Stock Option Agreement. The Optionee hereby accepts the Option subject to all of its terms and conditions and further acknowledges that as of the Date of Grant, this Grant Notice

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and the Nonstatutory Stock Option Agreement set forth the entire understanding between the Optionee and the Company regarding the acquisition of stock in the Company and supersede all prior oral and written agreements pertaining to this particular Option. All capitalized terms used but not defined herein have the meaning ascribed in the Notice of Nonstatutory Stock Option Grant.

The Optionee further agrees that the Company may deliver by email all documents relating to this Option (including, without limitation, prospectuses required by the Securities and Exchange Commission) and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements). The Optionee also agrees that the Company may deliver these documents by posting them on a web site maintained by the Company or by a third party under contract with the Company. If the Company posts these documents on a web site, it will notify the Optionee by email.

NOTE: THE OPTIONEE IS SOLELY RESPONSIBLE FOR ANY ELECTION TO EXERCISE THE OPTION, AND THE COMPANY SHALL HAVE NO OBLIGATION WHATSOEVER TO PROVIDE NOTICE TO THE OPTIONEE OF ANY MATTER, INCLUDING, BUT NOT LIMITED TO, THE DATE THE OPTION TERMINATES.

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OVERLAND STORAGE, INC.

NONSTATUTORY STOCK OPTION AGREEMENT

Pursuant to the Grant Notice and this Nonstatutory Stock Option Agreement (the “ Agreement ”), Overland Storage, Inc., a California corporation (the “ Company ”) has granted to the Optionee named in the Grant Notice (“ you ” or the “ Optionee ”) an Option to purchase the number of Common Shares of the Company’s common stock (the “ Stock ”) indicated in the Grant Notice at the Exercise Price indicated in the Grant Notice.

The details of this Option are as follows:

1. Definitions And Construction .

1.1 Definitions . Whenever used herein, the following terms shall have their respective meanings set forth below:

(a) “ 2003 Plan ” means the Company’s 2003 Equity Incentive Plan, as amended and restated from time to time. This Option is not granted pursuant to the 2003 Plan.

(b) “ Affiliate ” means any entity other than a Subsidiary, if the Company and/or one or more Subsidiaries own not less than 50% of such entity.

(c) “ Applicable Law ” means any and all laws of whatever jurisdiction, within or without the United States, and the rules of any stock exchange or quotation system on which Common Shares are listed or quoted, applicable to the taking or refraining from taking of any action under the Agreement, including the administration of the Agreement and the issuance or transfer of the Agreement.

(d) “ Board ” means the Company’s Board of Directors, as constituted from time to time.

(e) “ Cause ” means (a) acts or omissions constituting gross negligence, recklessness or willful misconduct with respect to the Optionee’s obligations or otherwise relating to the business of the Company; (b) the Optionee’s material breach of a written agreement between the Optionee and the Company (or a Parent, Subsidiary or Affiliate); (c) conviction or entry of a plea of nolo contendere for fraud, misappropriation or embezzlement, or any felony or crime of moral turpitude; (d) dishonesty or involvement in any conduct that adversely affects the Company’s name or public image or is otherwise detrimental to the Company’s business interests; (e) willful neglect of duties; or (f) unauthorized use or disclosure of the confidential information or trade secrets of the Company, which use or disclosure causes material harm to the Company. The foregoing, however, shall not be deemed an exclusive list of all acts or omissions that the Company (or the Parent, Subsidiary or Affiliate employing the Optionee) may consider as grounds for the discharge of the Optionee without Cause. The Committee shall be entitled to determine “Cause” based on the Committee’s good faith belief.

(f) “ Change in Control ” means:

(1) The consummation of a merger or consolidation of the Company with or into another entity or any other corporate reorganization, if persons who were not shareholders of the Company immediately prior to such merger, consolidation or other reorganization own immediately after such merger, consolidation or other reorganization 50% or more of the voting power of the outstanding securities of each of (i) the continuing or surviving entity and (ii) any direct or indirect parent corporation of such continuing or surviving entity;

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(2) The sale, transfer or other disposition of all or substantially all of the Company’s assets;

(3) A change in the composition of the Board over a period of thirty-six (36) months or less such that a majority of the Board members (rounded up to the next whole number) ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who are Continuing Directors;

(4) Any transaction as a result of which the direct or indirect acquisition by any person or related group of persons (other than an acquisition from or by the Company or by a Company-sponsored employee benefit plan or by a person that directly or indirectly controls, is controlled by, or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities pursuant to a tender or exchange offer made directly to the Company’s shareholders which a majority of the Continuing Directors who are not affiliated with the offeror do not recommend such shareholders accept; or

(5) A Divestiture; provided that a Divestiture shall be a Change in Control only to the extent that the Board determines that such Divestiture constitutes a Change in Control, and then only for the Optionee if the Board has expressly resolved that such Divestiture constitutes a Change in Control for the Optionee or generally under the 2003 Plan. In making such determination, the Board need not adopt the same rules for each holder of a Company equity compensation award.

A transaction shall not constitute a Change in Control if its sole purpose is to change the state of the Company’s incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction. The Committee shall determine whether an event shall be treated as a Change in Control.

(g) “ Code ” means the Internal Revenue Code of 1986, as amended.

(h) “ Committee ” means a committee of the Board, as described in Section 2.

(i) “ Common Share ” means one share of the common stock of the Company.

(j) “ Company ” means Overland Storage, Inc., a California corporation.

(k) “ Consultant ” means a consultant or adviser who provides bona fide services to the Company, a Parent, a Subsidiary or an Affiliate as an independent contractor.

(l) “ Continuing Directors ” means members of the Board who either (i) have been Board members continuously for a period of at least thirty-six (36) months or (ii) have been Board members for less than thirty-six (36) months and were elected or nominated for election as Board members by at least a majority of the Board members described in clause (i) who were still in office at the time such election or nomination was approved by the Board.

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(m) “ Delay In Payments to Specified Employees ” means if the Optionee is a “specified employee” (as defined under Code Section 409A) on “separation from Service” (as defined under Code Section 409A), to the extent any Award or arrangement needs to comply with Code Section 409A, then certain payments may be delayed and not be paid during the first six months following the “separation from Service” but will instead be paid on the earlier of the first business day of the 7 ^th month following the “separation from Service,” or the Optionee’s death.

(n) “ Divestiture ” means a transaction or event where the Company or a Parent, Subsidiary or Affiliate sells or otherwise transfers its equity securities to a person or entity other than the Company or a Parent, Subsidiary or Affiliate, or leases, exchanges or transfers all or any portion of its assets to such a person or entity, where the Board specifies that such transaction or event constitutes a “Divestiture.”

(o) “ Domestic Relations Order ” means a “domestic relations order” as defined in, and otherwise meeting the requirements of, section 414(p) of the Code, except that reference to a “plan” in that definition shall be to the Agreement.

(p) “ Director ” means a member of the Board of Directors of the Company.

(q) “ Employee ” means a common law employee of the Company, a Parent, a Subsidiary or an Affiliate. Notwithstanding the foregoing, if you are classified by the Company or a Parent, Subsidiary or Affiliate as (i) leased from or otherwise employed by a third party, (ii) an independent contractor, or (iii) an intermittent or temporary worker, you shall not be deemed an Employee. The Company’s or a Parent’s, Subsidiary’s or Affiliate’s classification of you as an “Employee” (or as not an “Employee”) for purposes of this Agreement shall not be altered retroactively even if that classification is changed retroactively for another purpose as a result of an audit, litigation or otherwise. The Optionee shall not cease to be an Employee due to transfers between locations of the Company, or among the Company and a Parent, Subsidiary or Affiliate, or to any successor to the Company or a Parent, Subsidiary or Affiliate that assumes the Optionee’s Options under Section 11.3. Neither service as a Director nor receipt of a director’s fee shall be sufficient to make a Director an “Employee.”

(r) “ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

(s) “ Exercise Price ” means the amount for which one Common Share may be purchased upon exercise of the Option, as specified in this Agreement.

(t) “ Fair Market Value ” means the market price of Common Shares, determined by the Committee in good faith on such basis as it deems appropriate. Whenever possible, the determination of Fair Market Value by the Committee shall be based on the prices reported in The Wall Street Journal. Such determination shall be conclusive and binding on all persons.

(u) “ Involuntary Termination ” means the termination of the Optionee’s Service by reason of:

(1) The involuntary discharge of the Optionee by the Company (or the Parent, Subsidiary or Affiliate employing him or her) for reasons other than Cause; or

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(2) The voluntary resignation of the Optionee following (i) a material adverse change in his or her title, stature, authority or responsibilities with the Company (or the Parent, Subsidiary or Affiliate employing him or her), (ii) a material reduction in his or her base salary or (iii) receipt of notice that his or her principal workplace will be relocated by more than 90 miles.

(v) “ ISO ” means an incentive stock option described in section 422(b) of the Code.

(w) “ NSO ” means a stock option not described in sections 422 or 423 of the Code.

(x) “ Officer ” means an officer of the Company as defined in Rule 16a-1 adopted under the Exchange Act.

(y) “ Outside Director ” means a member of the Board who is not an Employee.

(z) “ Parent ” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, if each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Parent on a date after the Date of Grant indicated in the Grant Notice shall be considered a Parent commencing as of such date.

(aa) “ Securities Act ” means the Securities Act of 1933, as amended.

(bb) “ Service ” means your service as an Employee, Outside Director or Consultant. Unless otherwise determined by the Committee or otherwise provided in the Agreement, Service shall continue notwithstanding a change in status from an Employee, Consultant or Outside Director to another such status. An event that causes a Parent, Subsidiary or Affiliate to cease having status as a Parent, Subsidiary or Affiliate shall be deemed to discontinue your Service unless you retain the status of Employee, Outside Director or C