Exhibit 10.24

EXECUTION VERSION

RETENTION AGREEMENT

This Retention Agreement (this “ Agreement ”) is entered into on June 24, 2009 between Overland Storage Inc., a California corporation having its principal offices at 4820 Overland Avenue, San Diego, California 92123 (the “ Company ”), and Eric Kelly (“ Employee ”).

AGREEMENT

WHEREAS, Employee is a key employee of the Company;

WHEREAS, the Company considers that providing Employee with certain employment termination benefits will operate as an incentive for Employee to remain employed by the Company in the event of a Change of Control;

WHEREAS, in conjunction with the execution of this Agreement, the parties are also entering into an Employment Agreement on the date hereof (the “ Employment Agreement ”).

NOW THEREFORE, for the consideration stated above, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and Employee agree as follows:

1. Definitions .

1.1. “ Base Salary ” shall mean the Employee’s gross annual salary at the time of a Change of Control or the Termination Date, whichever is higher.

1.2. “ Change of Control ” is defined to have occurred if, and only if, during Employee’s employment:

(a) any individual, partnership, firm, corporation, association, trust, unincorporated organization or other entity or person, or any syndicate or group deemed to be a person under Section 14(d)(2) of the Exchange Act is or becomes the “Beneficial Owner” (as defined in Rule 13d-3 of the General Rules and Regulations under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company’s then outstanding securities entitled to vote in the election of directors of the Company;

(b) there occurs a reorganization, merger, consolidation or other corporate transaction involving the Company (“ Transaction ”), in each case, with respect to which the stockholders of the Company immediately prior to such Transaction do not, immediately after the Transaction, own more than fifty (50) percent of the combined voting power of the Company or other corporation resulting from such Transaction; or

(c) all or substantially all of the assets of the Company are sold, liquidated or distributed.

1.3. “ Cause ” shall mean

(a) Employee’s gross neglect of his duties to the Company, where Employee has been given a reasonable opportunity of not less than 30 days to cure his gross neglect after receiving written notice from the Company’s Board of Directors (the “ Board ”) (which reasonable opportunity must be granted during the thirty-day period preceding termination);

(b) any material breach by Employee of Employee’s obligations under this Agreement or any employment agreement which Employee may have with the Company ,which Employee fails to cure within 30 days after receiving written notice from the Board; or

(c) Employee’s commission of any act of fraud, theft or embezzlement against the Company.

1.4. “ Compensation ” shall mean Base Salary plus Target Bonus.

1.5. “ Resignation For Good Reason ” shall mean the voluntary resignation by Employee of his employment with the Company within sixty (60) days before or two years following a Change of Control and within six (6) months of the occurrence of any of the following Good Reasons:

(a) any reduction in Employee’s Base Salary or Target Bonus by more than ten percent (10%); or

(b) any material reduction in Employee’s duties, responsibilities and authority;

(c) a relocation by the Company of Employee’s place of Employment outside a fifty (50) mile radius of Employee’s current place of employment; provided, however, that “Good Reason” shall not include relocation of Executive’s principal place of work to Employer’s Milpitas, California location or to a location within thirty (30) miles of Executive’s Danville, California residence; or

(d) a material breach of this Agreement or the Employment Agreement by the Company.

An event described in Section 1.5(a) through (f) will not constitute Good Reason unless Employee provides written notice to the Company within 60 days of the Good Reason event of his intention to resign for Good Reason and unless the Company does not cure or remedy the alleged Good Reason condition within thirty (30) days of the Company’s receipt of the written notice.

1.6. “ Severance Period ” shall begin on the Termination Date and extend for eighteen (18) months following the Termination Date.

1.7. “ Target Bonus ” shall mean the variable annual compensation represented by the percentage of Base Salary Employee is eligible to receive, if any, prior to a Change of Control, in the event targeted goals are achieved for the year. Employee acknowledges that there is no Target Bonus established for Employee at the date of this Agreement, but that he is eligible for a Target Bonus for Fiscal 2010 and thereafter in accordance with the terms and conditions of the Employment Agreement.

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1.8. “ Termination Date ” shall mean the date of termination of Employee’s employment relationship with the Company.

1.9. “ Termination Payments ” shall mean any payment or distribution of Compensation or benefits made pursuant to Section 4.1(a)-(c) of this Agreement.

2. Title and Duties . Employee will hold the position of Chief Executive Officer in accordance with the terms and conditions of the Employment Agreement.

3. At-Will Employment . Employee reaffirms that Employee’s employment relationship with the Company is at-will, terminable at any time and for any reason by either the Company or Employee, subject to the terms of the Employment Agreement. While certain paragraphs of this Agreement describe events that could occur at a particular time in the future, nothing in this Agreement may be construed as a guarantee of employment of any length.

4. Termination Payments .

4.1. If, within sixty (60) days before or within two (2) years immediately following a Change of Control, Employee’s employment terminates as the result of (i) termination by the Company of Employee’s employment for a reason other than Cause; or (ii) Employee’s Resignation for Good Reason:

(a) Employee will receive the Standard Entitlements (as defined in the Employment Agreement);

(b) Subject to Section 9, Employee will be eligible for Severance under this Agreement in a lump-sum amount equal to 150% of the sum of Base Salary plus Target Bonus, less applicable state and federal taxes or other payroll deductions, such amount to be paid (subject to Section 9) in the month following the month in which Employee’s Separation from Service (as defined below) occurs; and

(c) Subject to Section 9, (i) if Employee elects to continue insurance coverage as afforded to Employee according to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“ COBRA ”), Company will reimburse Employee the amount of the premiums incurred by Employee during the Severance Period, and (ii) the Company will reimburse Employee for the costs to continue life, accident, medical and dental insurance benefits for Employee and his eligible dependents during the Severance Period in amounts substantially similar to those which Employee was entitled to receive under the Employment Agreement immediately prior to the Termination Date (which amount shall be reduced by the amount of any reimbursements made by the Company to Employee pursuant to clause (c)(i) above), the estimated costs of which shall be paid to Executive in one lump sum payment on the Termination Date (and any actual costs in excess of such estimate shall be paid to Executive no later than ten (10) days following his submission of written evidence of the amount of such excess). Nothing in this Agreement will extend Employee’s COBRA period beyond the period allowed under COBRA, nor is Company assuming any responsibility which Employee has for formally electing to continue coverage; and

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(d) Any portion of Employee’s then outstanding stock options and other equity-based awards granted by the Company that are not vested shall immediately vest and, in the case of stock options and similar awards, may be exercised in whole or in part within one year of the date of Employee’s termination of employment, subject to earlier termination upon the expiration of the maximum term of the applicable options or in connection with a corporate transaction involving the Company to the extent provided in the Plan and/or the award agreements that evidence such options.

As used herein, a “ Separation from Service ” occurs when Executive dies, retires, or otherwise has a termination of employment with the Company that constitutes a “separation from service” within the meaning of Treasury Regulation Section 1.409A-1(h)(1), without regard to the optional alternative definitions available thereunder.

4.2. The payments set forth in Section 4.1(b) and (c) above are in exchange for, and contingent upon Employee’s execution and non-revocation of a release of all claims as of the Termination Date, in substantially the form attached to this Agreement as Exhibit A .

4.3. If Employee’s employment terminates for any reason after the two year period immediately following a Change of Control or terminates during that two year period for any reason other than