CROSSROADS SYSTEMS INC S-1 Filing

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					                               As filed with the Securities and Exchange Commission on March 11, 2011
                                                                                                                         Registration No. 333-


                                                         UNITED STATES
                                             SECURITIES AND EXCHANGE COMMISSION
                                                      Washington, D.C. 20549




                                                            FORM S-1
                                                    REGISTRATION STATEMENT
                                                 UNDER THE SECURITIES ACT OF 1933




                                        CROSSROADS SYSTEMS, INC.
                                                    (Exact Name of Registrant as Specified in its Charter)


                   Delaware                                               3572                                        74-2846643
           (State or Other Jurisdiction of                     (Primary Standard Industrial                           (I.R.S. Employer
          Incorporation or Organization)                       Classification Code Number)                         Identification Number)

                                                        11000 North Mo-Pac Expressway
                                                              Austin, Texas 78759
                                                                (512) 349-0300
                                                    (Address, including zip code and telephone number,
                                               including area code, of registrant‘s principal executive offices)




                                                                Robert C. Sims
                                                     President and Chief Executive Officer
                                                       11000 North Mo-Pac Expressway
                                                             Austin, Texas 78759
                                                                (512) 349-0300
                                                 (Name, address, including zip code and telephone number,
                                                         including area code, of agent for service)




                                                                         Copy to:

                                                              Douglas M. Berman
                                                            Hunton & Williams LLP
                                                          1445 Ross Avenue, Suite 3700
                                                              Dallas, Texas 75202
                                                                (214) 979-3000




                                   From time to time after the effective date of this Registration Statement.
                                             (Approximate date of commencement of proposed sale to the public)
   If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415
under the Securities Act, as amended, check the following box. 
    If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the
following box and list the Securities Act registration statement number of earlier effective registration statement for the same
offering. 
     If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective registration statement for the same offering. 
     If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective registration statement for the same offering. 
   Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company. See the definitions of ―large accelerated filer,‖ ―accelerated filer,‖ ―non-accelerated filer,‖ or ―smaller
reporting company‖ in Rule 12b-2 of the Exchange Act.


     Large accelerated filer                                                             Accelerated filer 
     Non-accelerated filer (do not check if a smaller reporting company                  Smaller reporting company 
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                                                     CALCULATION OF REGISTRATION FEE



Title of Each Class of Securities to be Registered     Amount to be Registered (1)     Proposed           Proposed Maximum          Amount of
                                                                                       Maximum                 Aggregate         Registration Fee (2)
                                                                                     Offering Price         Offering Price (2)
                                                                                      per Share (2)
Warrants to purchase shares of Common                              4,296,875
  Stock, $0.001 par value
Common Stock, including attached                                  16,796,875         $    0.855       $          14,361,329      $        1,668
  preferred share purchase rights



(1) Total number of shares represents 12,500,000 shares of common stock, 4,296,875 warrants to purchase shares of common
    stock and 4,296,875 shares of common stock issuable upon exercise of the warrants to be offered by the selling security
    holders of the Registrant. In the event of a stock split, stock dividend or similar transaction involving the common stock of the
    Registrant, in order to prevent dilution, the number of shares registered shall be automatically increased to cover additional
    shares in accordance with Rule 416(a) under the Securities Act.
(2) Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(c) and (g) under the Securities
    Act based on the average of the high and low prices of the common stock on March 8, 2011, as reported on the Pink Sheets.
    Pursuant to Rule 457(g), no separate registration fee is payable with respect to the warrants being registered.




    The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its
effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until the Registration
Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
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 The information in this prospectus is not complete and may be changed. The selling security holders may not sell these securities
 until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to
 sell these securities and it is not soliciting offers to buy these securities in any state where the offer or sale is not permitted.

PROSPECTUS (Subject to Completion)
Issued March 11, 2011

                                       16,796,875 Shares of Common Stock
                                               4,296,875 Warrants

                                  CROSSROADS SYSTEMS, INC.


    We are registering 16,796,875 shares of our common stock, 4,296,875 warrants to purchase shares of our common stock and
4,296,875 shares of common stock issuable upon exercise of the warrants for sale by our security holders from time to time. The
selling security holders will receive all the proceeds from the sale of the offered securities. See ―Selling Security Holders‖ on page
69 of this prospectus.
    The selling security holders may dispose of their securities from time to time through one or more of the means described in the
section entitled ―Plan of Distribution‖ beginning on page 73 .
   Our common stock is quoted on the Pink Sheets under the symbol ―CRDS.‖ The last reported sale price of our common stock
on March 10, 2011 was $0.88 per share.
    Investing in our common stock involves a high degree of risk. See ―Risk Factors‖ beginning on page 6 of this prospectus.
   Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of
these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
                                         The date of this prospectus is     , 2011.
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                                                CROSSROADS SYSTEMS, INC.

                                                     TABLE OF CONTENTS


                                                                                                                    Page
        Prospectus Summary                                                                                              1
        Risk Factors                                                                                                    6
        Special Note Regarding Forward-Looking Statements                                                              24
        Use of Proceeds                                                                                                25
        Determination of Offering Price                                                                                25
        Dividend Policy                                                                                                25
        Price Range of Common Stock                                                                                    26
        Capitalization                                                                                                 27
        Management‘s Discussion and Analysis of Financial Condition and Results of Operations                          28
        Business                                                                                                       37
        Management                                                                                                     45
        Certain Relationships and Related Transactions                                                                 58
        Principal Stockholders                                                                                         59
        Description of Capital Stock                                                                                   61
        Shares Eligible for Future Sale                                                                                67
        Selling Security Holders                                                                                       69
        Plan of Distribution                                                                                           73
        Validity of Common Stock                                                                                       76
        Experts                                                                                                        76
        Where You Can Find More Information                                                                            76
        Index to Consolidated Financial Statements                                                                    F-1




    You should rely only on the information contained in this prospectus. We have not, and the selling security holders have not,
authorized anyone to provide you with different information. No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You must not rely on any unauthorized information or
representations. If anyone provides you with different information, you should not rely on it. We are not, and the selling security
holders are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should
assume that the information contained in this prospectus is accurate only as of the date on the front cover of this prospectus. Our
business, financial condition, results of operations and prospects may have changed since that date.

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                                                    PROSPECTUS SUMMARY
    This summary highlights information contained elsewhere in this prospectus. This summary does not contain all the
information you should consider before buying our common stock. You should read the following summary together with the more
detailed information appearing in this prospectus, including our consolidated financial statements and related notes, and our risk
factors beginning on page 6 , before deciding whether to purchase shares of our common stock. Unless the context otherwise
requires, we use the terms “Crossroads Systems,” the “company,” “we,” “us” and “our” in this prospectus to refer to Crossroads
Systems, Inc. and its subsidiaries on a consolidated basis.
Overview
    Crossroads Systems is a global provider of solutions to connect, protect and secure business-critical data for enterprise storage
and the cloud computing marketplace using our storage software solutions based on our patented core Routing Messaging Interface,
or RMI, technology. We offer innovative, cost-effective products and solutions that are built on superior quality, reliability and
performance that allow customers to protect and manage their corporate data assets. In fiscal 2012, we plan to introduce our
Crossroads NAT3, network attached tape for Tier 3 storage, which we believe will be the first fully portable, open-standard, data
storage archive.
    We believe that we are entering an exciting new chapter in Crossroads‘ history. Founded in 1996, we developed and introduced
a bridging technology, which enabled existing storage devices to connect to the then-new Fibre Channel Storage Area Network.
Our storage router products have been used by original equipment manufacturer, or OEM, customers such as Hewlett Packard
Company, EMC Corporation and Quantum Corporation and installed in more than 125,000 storage systems worldwide.
     Most technologies have limited life spans as systems transition to newer environments. In 2005, we undertook a strategic
initiative to develop a software solutions and services model focusing on emerging higher growth business opportunities for the
company. This transition of our research and development efforts have resulted in the creation of our currently shipping products:
Read Verify Appliance, or RVA, and SPHiNX. In addition, we generated over $50 million in revenue since 2005 from our
intellectual property licensing campaign.
    These past investments in R&D, along with a recent equity capital raise of $10 million, have enabled us to accelerate our
planned introduction of the NAT3 enterprise solution. Using the intellectual property and code from the bridges, SPHiNX and
RVA, we expect to target Tier 3 archive data, which we believe to be the fastest growing segment of the market.
Industry Background
    Information Technology, or IT, departments continue to experience pressure around cost effectively storing, accessing and
protecting rapidly increasing amounts of data. Even in the face of the recent economic downturn, companies still save data of all
types, structured and unstructured, for both near and long-term retention. This rapid data growth combined with demands for ready
access to data, expanding retention policies and laws regarding compliance and limited IT budget increases represent major
challenges for IT managers.
   Many companies experience rapid data growth year over year and have legal requirements or data retention policies that require
them to save data for lengthy periods, even indefinitely. This is one factor driving the need for long-term data retention solutions
and archive technologies. Additionally, many companies face regulatory requirements that mandate both long-term preservation of
and secure access to data. Even in industries without strong regulatory requirements, companies are recognizing the value of
securing access to their data as good business practice.
    This rapid growth is driven by long-term archive storage, or Tier 3 data. Private and governmental parties have growing
archives of business and operational data and also generate large amounts of data relating to governance, compliance and
e-discovery matters. Historically, tape-based products have been used for data archives due to their low cost, low power and
long-term reliability. However, demands on data storage and retrieval systems require archives to be more readily available, on-site
at a user‘s location or online. Disk or memory-based storage devices have traditionally been the only way to access online data.

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    There have been significant recent innovations in the operating and storage capabilities of tape-based systems that we believe
allow them to compete with disk or memory-based systems. An industry consortium has created Long Tape File System, or LTFS,
which enabled tape devices to write and read random files just like disk devices, increasing the flexibility of this proven storage
technology. In addition, consortium participants have also announced 35 and 50 terabyte per cartridge capabilities enabled in future
offerings. Both of these developments demonstrate significant investment in and marketability of tape-based storage capabilities.
We believe that we are a global leader and one of the few software vendors in the tape-based and storage industry, and are strongly
positioned to take advantage of recent advancements in tape-based storage with the NAT3 solution.
NAT3 Target Markets
   Many businesses have implemented or are looking to implement archive solutions within the next few years, recognizing the
benefit of online data access for their businesses. However, we believe that there are many market verticals where the value of
NAT3 can make an immediate and important impact, such as:
   •    The Cloud. The emergence of networked online storage, or the cloud, has added a new location for businesses to store
        their archive data along with the more traditional methods of utilizing corporate owned data centers. To date, cloud storage
        providers, or CSPs, have been able to offer only one tier of storage to the end-customer based on magnetic disk. Not only
        are the costs prohibitive for large data repositories, the power consumption and poor reliability of SATA disk create
        scalability issues in the current offerings. Additionally, there is no cost-effective method for a business to retrieve or move
        their data from a CSP back to their internal operations or to a different CSP. These issues along with security concerns
        have limited the enterprise adoption of cloud-based storage. We believe that NAT3 is well-positioned for the CSP market
        since it provides a low cost, additional tier that is highly reliable, uses very little power, scales seamlessly to
        multi-petabytes in size, and due to the non-proprietary file storage, allows the customer to retrieve their data from the CSP.
        We are actively pursuing business relationships with multiple CSPs and engaging in strategic discussions with global IT
        suppliers who are working to open their own cloud storage offerings based on NAT3 technology. We believe that once the
        NAT3 solution is rolled out into the cloud, many of the remaining CSPs will also need to move quickly to have similar
        offerings.
   •    Network Broadcasting. Network Broadcasting data, and the resulting IT system performance requirements, continue to
        expand. New 3D technology adds to the existing rollout of High Density video and the expanding cable networks to drive
        storage volume requirements exponentially for the foreseeable future. We believe that the NAT3 is ideal for this
        environment, where users require online access to archive footage but cannot afford the power, capital costs or the poor
        reliability of a full time disk archive. Additionally, the non-proprietary, portable nature of NAT3 will allow them to move
        large amounts of data via physical tapes to other studios or networks without the need for high cost, high bandwidth
        networks. We are pursuing multiple end users within the Network Broadcasting space as customer advisors and early
        adopters of NAT3 along with strategic initiatives with global IT providers to successfully engage within this market.
   •    Healthcare. HIPAA and other compliance mandates, as well as the digitization of healthcare facilities, have driven the
        need for long term, reliable and secure data archives within the healthcare industry. There are now regulations requiring
        patient data to be maintained and accessible for two years past the life of the patient. New imaging technologies and
        business tools will continue to drive the need for data storage and archive. Like other data archive markets, the challenge is
        developing a scalable, affordable solution for archiving massive volumes of data. The requirement to have the data online
        has been the limiting factor that we believe NAT3 effectively addresses. We are also pursuing leading healthcare
        organizations and hospitals for our early adopter program and engaging with global IT providers to affectively achieve the
        compliance requirements and data storage needs that we created NAT3 to address.

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    Other potential target markets, such as government, finance, logistics and retail, offer market expansion opportunities beyond
our initial target markets. However, based on technical positioning, IT spending, and overall sales cycle, we believe these
customers will not react as quickly to NAT3. We believe that that they represent additional high growth opportunities for sales and
partner development following our launch of NAT3 into our primary target markets.
Our Proprietary Technologies
    We have 75 granted U.S. patents and 31 U.S. patent applications pending. Within our company, our R&D staff holds
baccalaureate degrees in computer science and electrical engineering, many with advanced degrees in their respective fields. We
support an environment that fosters invention and rewards employees for their ideas. Our internal processes not only enable this
creativity, but we take the time during any project to work with the developers on documenting their concepts and ideas. Eight of
our 75 grants encompass the ‗972 patent family, which has generated over $50 million in revenue through one-time license fees or
a combination of back payment and ongoing royalty payments. Our portfolio encompasses inventions in storage networking,
storage virtualization, data management and monitoring, I/O optimization, and tape system controls. As we develop new products,
particularly with respect to the tape archive product platform, we will continue to take measures to protect our intellectual property
and continue to use our intellectual property assets to generate revenue.
Corporate Information
    We were incorporated in Delaware in September 1996. Our corporate headquarters is located at 11000 North Mo-Pac
Expressway, Austin, Texas 78759. Our telephone number is (512) 349-0300. Our website address is www.crossroads.com .
Information contained on our website is not incorporated by reference into this prospectus, and you should not consider information
contained on our website to be part of this prospectus or in deciding whether to purchase shares of our common stock.
    ―Crossroads,‖ ―Crossroads Systems,‖ ―FMA,‖ ―NearEdge,‖ ―ReadVerify,‖ ―RVA,‖ ―ShareLoader,‖ ―Strongbox,‖
―TapeSentry,‖ XpanDisk,‖ and ―XpanTape‖ and other trademarks of ours appearing in this prospectus are the property of
Crossroads Systems, Inc. This prospectus contains additional trade names and trademarks of ours and of other companies. We do
not intend our use or display of other companies‘ trade names or trademarks to imply a relationship with, or endorsement or
sponsorship of us by, these other companies.
Recent Developments
    On October 23, 2010, we closed our October 2010 private placement in which we sold 12,500,000 shares of our common stock
and issued warrants to purchase an additional 3,125,000 shares of common stock to a group of institutional investors and individual
accredited investors for gross proceeds to us of $10.0 million. The net proceeds of the offering, after deducting placement agent
fees and estimated financing expenses, were approximately $9.2 million. MDB Capital Group LLC acted as sole placement agent
for the private placement and received $750,000 and warrants to purchase 1,171,875 shares of our common stock as placement
agent fees.

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                                                      THE OFFERING
Securities offered by the selling security
  holders
                                                  16,796,875 shares of common stock

                                                  4,296,875 warrants to purchase common stock

                                                  4,296,875 shares of common stock issuable upon the exercise of warrants
Common stock outstanding as of March 4,
  2011
                                                  43,282,290 shares (1)
Use of proceeds
                                                  We will not receive any of the proceeds from the sale of the securities owned
                                                  by the selling security holders. We may receive proceeds in connection with
                                                  the exercise of the warrants, the underlying shares of which may in turn be
                                                  sold by the selling security holders under this prospectus. We intend to use any
                                                  proceeds from the exercise of warrants for working capital and other general
                                                  corporate purposes.
Risk Factors
                                                  Prior to making an investment decision, you should carefully consider all of
                                                  the information in this prospectus and, in particular, you should evaluate the
                                                  risk factors set forth under the caption ―Risk Factors‖ beginning on page 6 .
Pink Sheets Symbol
                                                  CRDS



(1) Excludes 11,980,338 shares of common stock issuable upon exercise of options and warrants outstanding as of March 4, 2011.

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                             SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
    The following tables summarize the consolidated financial data for our business for the periods presented. We derived the
following summary historical consolidated financial data for the two years ended October 31, 2010 from our audited consolidated
financial statements. You should read this data in conjunction with, and it is qualified by reference to, the sections entitled
―Management‘s Discussion and Analysis of Financial Condition and Results of Operations‖ and our consolidated financial
statements and the notes thereto, all included elsewhere in this prospectus.


                                                                                           As of                          As of
                                                                                        October 31,                    October 31,
                                                                                           2009                           2010
                                                                                                      (in thousands)
        Balance Sheet Data:
          Total current assets                                                    $           10,955               $        19,804
          Total assets                                                            $           13,842               $        21,178
          Total current liabilities                                               $            5,104               $         6,751
          Long-term liabilities                                                   $               59               $           103
          Stockholders‘ equity                                                    $            8,679               $        14,324
          Total liabilities and stockholders‘ equity                              $           13,842               $        21,178


                                                                                          Years Ended October 31,
                                                                                      2009                              2010
                                                                                      (in thousands, except per share data)
        Statement of Operations Data:
          Total revenue                                                   $            16,848              $             16,368
          Total cost of revenue                                           $             2,734              $              2,492
          Gross profit                                                    $            14,114              $             13,876
          Total operating expenses                                        $            18,607              $             18,048
          Losses from operations                                          $            (4,493 )            $             (4,172 )
          Interest expense                                                $              (113 )            $               (110 )
          Other income (expense)                                          $                12              $                 (4 )
          Net loss                                                        $            (4,594 )            $             (4,286 )
          Basic net loss per share (1)                                    $             (0.16 )            $              (0.14 )
          Fully diluted net loss per share (1)                            $             (0.16 )            $              (0.14 )


                                                                                             Years Ended October 31,
                                                                                         2009                            2010
                                                                                                   (in thousands)
        Statements of Cash Flows Data:
          Net cash used in operating activities                               $           (1,968 )             $            (179 )
          Net cash used in investing activities                               $             (216 )             $            (320 )
          Net cash (used in) provided by financing activities                 $              (50 )             $           9,178
          Net (decrease) increase in cash and cash equivalents                $           (1,789 )             $           8,514
          Cash and cash equivalents, end of period                            $            5,297               $          13,811



(1) Basic loss per share is computed by dividing net loss available to common stockholders by the weighted average number of
    common shares outstanding for the period. Diluted earnings per share is computed by giving effect to all dilutive potential
    common shares that were outstanding during the period. On October 23, 2010, eight days prior to the end of our fiscal year
    ended October 31, 2010, we closed our October 2010 private placement in which we sold 12,500,000 shares of our common
    stock and issued warrants to purchase an additional 4,296,875 shares of common stock to a group of institutional investors and
    the placement agent for the private placement.

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                                                           RISK FACTORS
    Investing in our common stock involves a high degree of risk. You should consider carefully the risks and uncertainties
described below, together with all of the other information in this prospectus, including our consolidated financial statements and
related notes, before deciding whether to purchase shares of our common stock. Any of these risks may have a material adverse
effect on our business, financial condition, results of operations and cash flows and our prospects could be harmed. In that event,
the price of our common stock could decline and you could lose part or all of your investment.

                                           Risks Related to Our Business and Industry
Recent turmoil in the financial markets and the global economic conditions have adversely affected and may continue to
adversely affect our industry, business and gross margins.
    The challenging economic conditions in the U.S. and world economic markets and the future economic environment may
continue to be significantly less favorable than that of recent years. Our business depends on the overall demand for information
technology, in particular for data storage and protection products for backup storage and network-based disaster recovery.
Information technology spending has historically declined with worsening general economic and market conditions, and we believe
the current economic conditions have already caused our customers to significantly reduce or delay their information technology
purchases and that these reductions and delays have negatively impacted demand for our products and services and our business. If
the U.S. and global economic conditions continue to worsen, and the U.S. and world economies do not improve for an extended
period of time, or if our customers believe such a downturn will continue for the foreseeable future or become more severe, then
our customers may continue to significantly reduce their information technology budgets and may decrease their demand for our
products and services.
    As a result of this economic slowdown and the continued tightening of credit markets, our customers may be delayed in
obtaining, or may not be able to obtain, necessary financing for their purchases of our products. A lack of liquidity in the capital
markets or the continued global economic conditions may cause our customers to delay or cancel their purchases, increase the time
they take to pay or default on their payment obligations. Currency fluctuations relating to the financial crisis could also negatively
affect our international customers‘ ability or desire to purchase our products. In addition, continued weakness in the economy could
cause some of our resellers and other customers to become illiquid, delay payments or adversely affect our collection on their
accounts, any of which would result in a higher level of bad debt expense.
   The global economic conditions may not only cause our customers to significantly reduce or delay their information technology
budgets, which would negatively impact demand for our products and services, but may also result in:
   •    increased price competition for our products, not only from our competitors, but also as a result of our customer‘s or
        potential customer‘s utilization of inventoried or underutilized products, which could put additional pressure on our near
        term gross profits;
   •    risk of excess or obsolete inventories;
   •    excess engineering capacity and higher associated overhead costs as a percentage of revenue; and
   •    more limited ability to accurately forecast our business and future financial performance.
    The lack of liquidity and economic slowdown may also adversely affect our suppliers, including those on whom we are
dependent and their liquidity, or the availability of, and terms and conditions on which we purchase their products and services.
Any of these events could limit our ability to obtain necessary products and services and could adversely impact our supply chain
or the delivery schedule to our customers. Any material change could require us to purchase more expensive components, or
re-design systems, or find new suppliers, any of which could increase the cost of our systems and support and delay the
manufacturing and delivery of our systems or negatively impact the performance or quality of our products and services. Such
events would likely negatively impact our business and gross margins and harm our reputation and our customer relationships.

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    As a result of the recent economic conditions, we may face new risks that we have not yet identified. In addition, a number of
the risks associated with our business, which are disclosed in these risk factors, may increase in likelihood, magnitude or duration.
We face significant competition and expect this competition to intensify, which could prevent us from increasing our revenue,
reduce our gross margins and result in the loss of market share.
    The market for our products is highly competitive and we expect competition to intensify in the future. Other companies have
introduced and may in the future introduce new products in the same markets we serve or intend to enter. New competitive
offerings have been recently announced or introduced in our marketplace by our competitors, and we anticipate additional offerings
by our competitors may be announced or introduced in 2011. Competition in the past has resulted in pricing pressure on our
products and services, and we anticipate that pricing pressure will increase in the future. Competition has in some instances resulted
in a negative impact on the length of our sales cycle, and we may experience longer sales cycles in future periods due to increased
competition. In particular, if a large number of orders, or a large dollar value order, is delayed or cancelled, our financial results
may be harmed. Competition may result in reduced gross margins for our products, increased sales and marketing expenses and a
failure to increase, or the loss of, market share.
    Competitive products may have better performance, lower prices and broader acceptance than our products. Many of our
current or potential competitors have longer operating histories, greater name recognition, larger customer bases and significantly
greater financial, technical, sales, marketing and other resources than we have. Potential customers may prefer to purchase from
their existing vendors rather than a new vendor regardless of product performance or features. In addition, our competitors may be
able to bundle products and services that we do not offer together with products that compete with ours at a combined price that is
more attractive than the price we charge for our products. Currently, we face competition from traditional providers of tape-based
storage systems as well as a number of established storage companies that offer a variety of different disk-based storage products.
Some of our competitors sell, or have announced plans to sell, data storage and protection products that compete directly with our
products, and additional competitors may introduce data storage and protection products in the future. We also compete with a
number of emerging hardware and software companies that may become more significant competitors in the future. In addition, at
the low-end of our product line, we may compete with other hardware or software providers that incorporate data storage and
protection capabilities in their products.
    We expect increased competition from other established and emerging companies if our market continues to develop and
expand. Some of our channel distributors currently market products and services that compete with our products. If these
distributors cease to distribute our products for competitive reasons, our sales may decrease or not grow as quickly. In addition,
some of our competitors have made acquisitions or entered into partnerships or other strategic relationships with one another to
offer a more comprehensive solution than they individually are able to offer. We believe additional consolidation or partnerships
are likely to occur in the future as companies attempt to strengthen or maintain their market positions in an evolving industry. The
companies resulting from these consolidations or partnerships could significantly change the competitive landscape and adversely
affect our ability to compete effectively. Some of our competitors have also entered into relationships with original equipment
manufacturers, or OEMs, that could provide those competitors with sales, marketing, distribution and other advantages.
We derive most of our product sales revenue from sales of virtual tape servers, and if demand for these systems does not
continue to grow, our business, results of operations and financial condition would be harmed.
    We derive most of our product sales revenue from sales of virtual tape servers and associated customer support and services. As
a result, we are vulnerable to fluctuations in demand for these systems, whether as a result of competing technologies and products,
the impact of the continuing weakening of U.S. and global economic conditions, decreases or delays in corporate spending for
information technologies, product obsolescence, lack of customer acceptance, technological change, customer budgetary
constraints or other factors. If demand for our systems does not continue to grow, our business, results of operations and financial
condition would be harmed.

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We experience quarterly fluctuations in our operating results due to a number of factors, which make our future results
difficult to predict and could cause our operating results to fall below expectations or our guidance.
    Our quarterly operating results may fluctuate due to a variety of factors, many of which are outside of our control. As a result,
comparing our operating results on a period-to-period basis may not be meaningful. You should not rely on our past results as an
indication of our future performance. If our revenue or operating results fall below the expectations of investors or securities
analysts, or below any guidance we may provide to the market, the price of our common stock could decline substantially.
    In addition to other risk factors listed in this ―Risk Factors‖ section, factors that may affect our quarterly operating results
include:
   •    fluctuations in demand for our products;
   •    fluctuations in sales cycles and prices for our products, particularly for large orders which tend to have a longer sales cycle;
   •    reductions in customers‘ budgets for information technology purchases and delays in their purchasing cycles;
   •    the timing of recognizing revenue in any given quarter as a result of revenue recognition rules;
   •    our ability to develop, introduce and ship in a timely manner new products and product enhancements that meet customer
        requirements;
   •    the timing of product releases or upgrades by us or by our competitors;
   •    our ability to hire additional sales personnel and the length of time required for any such additional personnel to generate
        significant revenue;
   •    seasonality in the sales of our products;
   •    any lack of availability of, delay in the availability of, or quality problems with, any components we acquire from
        third-party suppliers, particularly any components we acquire from a third-party that is our sole source of supply for the
        components;
   •    any significant changes in the competitive dynamics of our market, including new entrants or substantial discounting of
        products;
   •    our ability to control costs, including our operating expenses and the costs of the components we purchase;
   •    our experience with product reliability and associated warranty claims; and
   •    general economic conditions in our domestic and international markets.
Our international sales and operations subject us to additional risks that may harm our operating results.
   In the year ended October 31, 2010, we derived approximately 2.9% of our revenue from international customers. We expect to
continue to add personnel in additional countries. Our international operations subject us to a variety of risks, including:
   •    the difficulty of managing and staffing international offices and the increased travel, infrastructure and legal compliance
        costs associated with multiple international locations;
   •    our executive officers‘ lack of proximity to the international activities being managed and the inherent limitations of
        cross-border information flow;
   •    the management of our relationships with distributors outside the United States, whose sales and lead generation activities
        are very important to our international operations;
   •    difficulties in enforcing contracts and collecting accounts receivable, and longer payment cycles, especially in emerging
        markets;

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   •    tariffs and trade barriers and other regulatory limitations on our ability to sell our products in certain foreign markets;
   •    increased exposure to foreign currency exchange rate risk;
   •    potential exposure to adverse tax consequences;
   •    shortages in component parts and raw materials;
   •    import and export and trade regulation changes that could erode our profit margins or restrict our ability to transport our
        products;
   •    the burden and cost of complying with foreign and U.S. laws governing corporate conduct outside the U.S.;
   •    potential restrictions on the transfer of funds between countries;
   •    import and export duties and value-added taxes;
   •    natural disasters, including earthquakes, typhoons and tsunamis;
   •    increased exposure to possible violations of U.S. laws regulating the export of our products, and to other U.S. and foreign
        laws affecting the conduct of business globally such as product certification, environmental and waste management and
        data privacy laws;
   •    reduced protection for intellectual property rights in some countries; and
   •    political and economic instability.
    Sales to international customers may also result in greater shipping costs and additional expenses to conform our products to the
requirements of local laws or local product specifications. As we continue to expand our business internationally, our success will
depend, in large part, on our ability to anticipate and effectively manage these and other risks associated with our international
operations. Our failure to manage any of these risks successfully could harm our international operations, reduce or delay our
international sales, result in fines and penalties and reduce profitability on a dollar adjusted basis.
Our revenues depend in part on spending by corporate customers.
    The operating results of our business depend in part on the overall demand for data protection and network storage software.
Because the market for our software is primarily major corporate customers, any softness in demand for data protection or network
storage software may result in decreased revenues.
Changes in our provision for income taxes or adverse outcomes resulting from examinations of our income tax returns could
adversely affect our results.
    We are subject to income taxes in both the U.S. and the various foreign jurisdictions in which we operate. Judgment is required
in determining our provision for income taxes and there are many transactions and calculations where the tax determination may be
uncertain. Our future effective tax rates could be affected by changes in our:
   •    earnings or losses;
   •    changes in the valuation of our deferred tax assets;
   •    changes in tax laws; or
   •    other factors.
Our ability to correctly predict our future effective tax rates based upon these possible changes could significantly impact our
forecasted earnings.
    We have provided amounts and recorded liabilities for probable and estimable tax adjustments that may be proposed by various
taxing authorities in the U.S. and foreign jurisdictions. If events occur which indicate that payments of these amounts will be
greater than estimated, then tax charges and additional liabilities

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would be recorded. In particular, various foreign jurisdictions could challenge the characterization or transfer pricing of certain
intercompany transactions. In the event of an unfavorable outcome of such challenge, there exists the possibility of a material tax
charge and adverse impact on the results of operations in the period in which the matter is resolved or an unfavorable outcome
becomes probable and estimable.
    If our international revenues do not grow in absolute dollars and as a percentage of total revenues, then our effective tax rate
may not meet our planning objectives and our profitability may be negatively impacted. Our provision for income taxes is also
subject to volatility and could be adversely affected by changes in the valuation of our deferred tax assets and liabilities; by
expiration of or lapses in the research and development tax credit laws; by transfer pricing adjustments; by tax effects of
nondeductible compensation; or by changes in tax laws, regulations, accounting principles, including accounting for uncertain tax
positions or interpretations thereof. We account for uncertain tax positions in accordance with the authoritative guidance issued by
the Financial Accounting Standards Board, or FASB, on income taxes, which addresses the determination of whether tax benefits
claimed or expected to be claimed on a tax return should be recorded in the financial statements. Pursuant to the authoritative
guidance, we recognize the tax benefit from an uncertain tax position only if it meets the ―more likely than not‖ threshold that the
position will be sustained upon examination by the taxing authority, based on the technical merits of the position. The tax benefits
recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty
percent likelihood of being realized upon ultimate settlement. We include interest and penalties related to our uncertain tax
positions as part of income tax expense within our consolidated statement of operations. We anticipate future audits from various
tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the
adequacy of our provision for income taxes. There can be no assurance that the outcomes from these future potential audits may
result in an adverse effect on our operating results and financial condition.
   In addition, the recent turmoil in the financial markets, global economic slowdown, and change in U.S. federal administration
could result in changes to the U.S. tax code or changes in the tax law and regulations applicable to us in the various jurisdiction
around the world in which we operate with the effect of causing our effective tax rate to not meet our planning objectives and our
profitability to be negatively impacted.
We are exposed to fluctuations in currency exchange rates that could negatively impact our financial results and cash flows.
    Because a portion of our business is conducted outside the United States, we face exposure to adverse movements in foreign
currency exchange rates. These exposures may change over time as business practices evolve, and they could have a material
adverse impact on our financial results and cash flows. Fluctuations in currencies relative to currencies in which our earnings are
generated also make it more difficult to perform period-to-period comparisons of our reported results of operations. Historically,
our primary exposures have related to non dollar-denominated sales in Europe and Asia. We do not currently use derivative
financial instruments for foreign currency hedging or speculative purposes. Changes in economic or political conditions globally
and in any of the countries in which we operate could result in exchange rate movements, new currency or exchange controls or
other restrictions being imposed on our operations.
    Fluctuations in the value of the U.S. dollar may adversely affect our results of operations. Because our consolidated financial
results are reported in U.S. dollars, translation of sales or earnings generated in other currencies into U.S. dollars can result in a
significant increase or decrease in the reported amount of those sales or earnings. Significant changes in the value of these foreign
currencies relative to the U.S. dollar could have a material adverse effect on our financial condition or results of operations. Such
fluctuations in currency exchange rates could materially and adversely affect our business, financial condition and results of
operations.
    In addition to currency translation risks, we incur currency transaction risk whenever we enter into either a purchase or a sales
transaction using a currency other than the local currency of the transacting entity. Given the volatility of exchange rates, we cannot
be assured we will be able to effectively manage our currency transaction or translation risks. Volatility in currency exchange rates
may have a material effect on our financial condition or results of operations. We may experience at times an impact on earnings as
a result of foreign currency exchange rate fluctuations.

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We have a history of losses and we may not be able to sustain profitability in the future.
    For the years ended October 31, 2009 and 2010, we recorded net losses of approximately $4.6 million and $4.3 million,
respectively. We may incur additional losses in future periods. We expect to make significant expenditures related to the
development of our business, including expenditures to hire additional personnel relating to sales and marketing and product
development. In addition, we will continue to incur significant legal, accounting and other expenses that we did not incur as a
private company. We may incur significant losses in the future for a number of reasons, including those discussed in other risk
factors and factors that we cannot foresee.
A large percentage of our sales come from a few customers, some of which are also competitors, and these customers generally
have no minimum or long-term purchase commitments. The loss of, or a significant reduction in demand from, one or more key
customers could materially and adversely affect our business, financial condition and operating results.
    Our sales have been and continue to be concentrated among a few customers. Sales to our top three customers in fiscal 2010
represented 75.0% of total revenue, and HP represented 49.1% of our total revenue. This sales concentration does not include
revenues from sales of licenses sold to these customers, for which we earn licensing and royalty revenue. Furthermore, customers
are not obligated to purchase any minimum product volume and our relationships with our customers are terminable at will. If we
experience declines in revenue from any of our large customers, we could be materially and adversely affected. In addition, certain
of our large customers are also our competitors, and such customers could decide to reduce or terminate their purchases of our
products for competitive reasons. Merger and acquisition activity, such as the purchase of Data Domain by EMC, could increase
the risk that large customers reduce or terminate their purchases of our products.
    Many of our tape and disk products are primarily incorporated into larger storage systems or solutions that are marketed and
sold to end users by our large original equipment manufacturer, or OEM, customers as well as our value added resellers, or VARs,
system integrators, or SIs, and other distributors. Because of this, we have limited market access to these end users, limiting our
ability to reach and influence their purchasing decisions. These market conditions further our reliance on these OEM and other
large customers. Thus if they were to significantly reduce, cancel or delay their orders with us, our results of operations could be
materially and adversely affected.
A large percentage of our revenue comes from our licensing program. The loss of, or a significant reduction in, licensing
revenue could materially and adversely affect our business, financial condition and operating results.
    Our IP licensing revenue for the year ended October 31, 2010 was $6.5 million, or approximately 39.7% of revenues. If we
experience declines in revenue from our licensees, as a result of economic conditions, customers‘ business performance or
otherwise, we could be materially and adversely affected.
Our sales are difficult to predict, even in the near term, and a substantial portion of our quarterly sales typically occurs during
the last several weeks of the quarter.
     A substantial portion of our quarterly sales typically occurs during the last several weeks of the quarter, which we believe
largely reflects customer buying patterns of products similar to ours and other products in the technology industry generally. In
addition, a significant portion of our sales in any quarter is not forecast at the start of the quarter and is generated by sales activity
initiated within the quarter. Similarly, we have little visibility at the start of any quarter as to which existing customers, if any, will
make additional purchases and when any additional purchases may occur, if at all. As a result, our quarterly operating results are
difficult to predict even in the near-term.
    The market we serve is emerging and the purchase of our products and services by new customers may involve material
changes to established purchasing patterns and policies. Our sales efforts involve educating potential customers about the uses and
benefits of our products, including their technical capabilities and potential cost savings. Potential customers may undertake a
significant evaluation process that has in the past resulted in a longer sales cycle. In addition, our sales cycle may be extended if
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re-evaluate other aspects of their backup storage infrastructure at the same time they are considering a purchase of our products.
We spend substantial time, money and other resources in our sales process without any assurance that our efforts will produce any
sales. In addition, customer purchases are frequently subject to budget constraints, which could be negatively impacted by
deteriorating global economic conditions, multiple approvals and unplanned administrative, processing and other delays. If sales
expected from a specific customer for a particular quarter are not realized in that quarter, or at all, our business may suffer.
If we lose key personnel or are unable to attract and retain qualified personnel on a cost-effective basis, our business would be
harmed.
    Our success is substantially dependent upon the performance of our senior management and key technical and sales personnel.
We are particularly dependent on the continued service of Robert C. Sims, our President and Chief Executive Officer. Our
management and employees can terminate their employment at any time, and the loss of the services of one or more of our
executive officers or other key employees could harm our business. Our success also is substantially dependent upon our ability to
attract additional personnel for all areas of our organization, particularly in our sales and research and development departments.
Our dependence on attracting and retaining qualified personnel is particularly significant as we attempt to grow our organization.
Competition for qualified personnel in our industry is intense, and we may not be successful in attracting and retaining such
personnel on a timely basis, on competitive terms, or at all. If we are unable to attract and retain the necessary technical, sales and
other personnel on a cost-effective basis, our business would be harmed.
If we fail to manage growth effectively, our business would be harmed.
    We have expanded our operations significantly since inception and anticipate that further expansion of our operations and
headcount will be required. Our growth has placed, and any future growth will place, significant demands on our management,
infrastructure and other resources. To manage any future growth, we will need to hire, train, integrate and retain a large number of
highly skilled and motivated employees. We will also need to continue to improve our financial and management controls and
reporting systems and procedures. We could encounter delays or difficulties in implementing any of these systems. If we do not
effectively hire, train, integrate and retain sufficient highly qualified personnel to support any future growth, and if we do not
effectively manage the associated increases in expenses, our business, results of operations and financial condition would be
harmed.
Because we may order components from suppliers in advance of receipt of customer orders for our products which include
these components, we could face a material inventory risk, which could have a material and adverse effect on our results of
operations and cash flows.
    We manufacture products in-house. Managing our in-house manufacturing capabilities presents a number of risks that could
materially and adversely affect our financial condition. For instance, as part of our component planning, we place orders with or
pay certain suppliers for components in advance of receipt of customer orders. We occasionally enter into negotiated orders with
vendors early in the manufacturing process of our storage products to ensure that we have sufficient components for our new
products to meet anticipated customer demand. Because the design and manufacturing process for these components is
complicated, it is possible that we could experience a design or manufacturing flaw that could delay or even prevent the production
of the components for which we previously committed to pay. We also face the risk of ordering too many components, or
conversely, not enough components, since supply orders are generally based on forecasts of customer orders rather than actual
customer orders. In addition, in some cases, we make non-cancelable order commitments to our suppliers for work-in-progress,
supplier‘s finished goods, custom sub-assemblies, discontinued (end-of-life) components and unique raw materials that are
necessary to meet our lead times for finished goods. If we cannot change or be released from supply orders, we could incur costs
from the purchase of unusable components, either due to a delay in the production of the components or other supplies or as a result
of inaccurately predicting supply orders in advance of customer orders. Our business and operating results could be materially and
adversely affected as a result of these increased costs.

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Any shortages in components used in our products could delay shipment of our products or increase our product costs, which
could harm our business.
     Significant time and effort would be required to locate new vendors for the components we use in our products, if available at
all, to qualify replacement components or to develop our products using alternative suppliers. The unavailability of any necessary
components could delay or prevent us from shipping our products. Component suppliers may be vulnerable to pressure from large
purchasers of their products, who may be competitors of ours, to allocate available component supplies to them. The global
economic conditions may also adversely affect our suppliers and their liquidity, and the availability of, or terms and conditions on
which we purchase, their products and services. In addition, increased demand generally by third parties for the components we use
in our products may lead to decreased availability and higher prices for those components.
   If we experience shortages in components that we use in our products, or do not accurately predict the availability of and
demand for such components, or if new product introductions by our suppliers do not meet our expectations for timing, availability,
functionality, performance, quality or price, then our business and gross margins could be negatively impacted, and our reputation
and customer relationships could be harmed.
If we are unable to develop and manufacture new products that achieve acceptance in the data protection and the network
storage software markets, our operating results may suffer.
    The data protection and the network storage software markets continue to evolve and as a result there is continuing demand for
new products. Accordingly, we may need to develop and manufacture new products that address additional data protection or
network storage software market segments and emerging technologies to remain competitive in the data storage software industry.
We are uncertain whether we will successfully qualify new data protection or network storage software products with our
customers by meeting customer performance and quality specifications. Any failure to address additional market segments could
harm our business, financial condition and operating results.
If we fail to offer high quality customer support and services, our business would suffer.
     Once our products are deployed within our customers‘ networks, our customers depend on our support organization to resolve
any issues relating to our products. A high level of customer support and services is important for the successful marketing and sale
of our products. If we or our distributors do not help our customers quickly resolve post-deployment issues and provide effective
ongoing support, our ability to sell our products to existing customers would suffer and our reputation with potential customers
would be harmed. Some of our international distributors offer primary support for the products they sell to customers, and we rely
on third parties to provide onsite hardware repair and replacement services for most of our customers. If the third parties fail to
provide timely and effective services, our business could be harmed. As we expand our sales, we will be required to hire and train
additional support personnel. In addition, as we expand our operations internationally, our support organization will face additional
challenges including those associated with delivering support, training and documentation in languages other than English. If we
fail to maintain high quality customer support or to grow our support organization to match any future sales growth, our business
will suffer.
If we elect to discount our support and services pricing to attract or retain customers, we may be required to defer a portion of
our revenue to future periods.
    If we elect to discount our support and services pricing or otherwise introduce significant variability in our support and services
arrangements, this variability may require us to defer the recognition of revenue from sales of our products. We recognize revenue
for our products using the residual method as allowed by the American Institute of Certified Public Accountants, or AICPA,
Statement of Position No. 98-9, Modification of SOP No. 97-2, Software Revenue Recognition, with Respect to Certain
Transactions , or SOP 98-9. Under this method, in order to recognize product revenue upon shipment, we must establish sufficient
evidence, which is referred to as vendor specific objective evidence, or VSOE, of fair value of our undelivered support and
services. We have established VSOE of fair value of our support and services based on the price charged when support and services
are sold separately. If we are required to change the pricing of support and services

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through discounting, or otherwise introduce variability in the pricing of support and services on certain transactions to attract or
retain customers, we may be unable to maintain VSOE of the fair value of support and services for similar types of transactions. As
a result, we could be required to defer all revenue for these transactions and recognize revenue ratably over the term of the related
support and services contracts, which is typically one to three years. If this were to occur, our revenue would decline and our
operating results would be negatively impacted.
Our products handle mission-critical data for our customers and are highly technical in nature. If customer data is lost or
corrupted, or our products contain software errors or hardware defects, we could have product liability exposure and our
reputation and business could be harmed.
    Our products are involved in storing and replicating mission-critical data for our customers. The process of storing, protecting
and replicating that data is highly technical and complex. If any data is lost or corrupted in connection with the use of our products,
our reputation could be seriously harmed and market acceptance of our products could suffer. In addition, our products have
contained and may in the future contain software errors, hardware defects or security vulnerabilities. We rely on our suppliers to
deliver high quality components for use in our products and we have limited or no control over our suppliers‘ product development
and production processes. Some software errors or defects in the hardware components of our products may only be discovered
after a product has been installed and used by customers. In addition, we could face claims for product liability, tort or breach of
warranty. Defending a lawsuit, regardless of its merit, is costly and may divert management‘s attention and adversely affect the
market‘s perception of us and our products.
    We face potential liability for performance problems of our products because our end users employ our storage technologies for
the storage and backup of important data and to satisfy regulatory requirements. Although we maintain technology errors and
omissions insurance, our insurance may not cover potential claims of this type or may not be adequate to indemnify us for all
liability that may be imposed. Any imposition of liability or accrual of litigation costs that is not covered by insurance or is in
excess of our insurance coverage could harm our business.
    In addition, we could potentially face claims for product liability from our customers if our products cause property damage or
bodily injury. Although we maintain general liability insurance, our insurance may not cover potential claims of this type or may
not be adequate to indemnify us for all liability that may be imposed. Any imposition of liability or accrual of litigation costs that is
not covered by insurance or is in excess of our insurance coverage could harm our business.
Changes in existing technologies or the emergence of new products or technologies could reduce demand for our products and
significantly harm our business.
    Changes in existing technologies could cause demand for our products to decline. For example, if changes in technology result
in a significant reduction in the price for hard disk drives, enterprises may not need to utilize information security, data protection,
information assurance, business information assurance, business continuity, disaster recovery, data privacy, risk management, fraud
prevention, corporate governance and regulatory compliance products or services. One or more new technologies also could be
introduced that compete favorably with our products or that cause our products to no longer be of significant benefit to our
customers. In addition, because our products work with enterprise backup software applications to transfer and store data in the
protection storage environment, we are dependent on enterprises‘ use of these applications for data protection and disaster recovery
purposes. If enterprises adopt products or technologies that enable them to protect and recover their data, demand for our products
and services would be reduced significantly.

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Our operating results depend on new product introductions, which may not be successful, in which case our business, financial
condition and operating results may be materially and adversely affected.
   To compete effectively, we must continually improve existing products and introduce new ones. We have devoted and expect to
continue to devote considerable management and financial resources to these efforts. We cannot provide assurance that:
   •    we will introduce new products in the timeframe we forecast;
   •    we will not experience technical, quality, performance-related or other difficulties that could prevent or delay the
        introduction and market acceptance of new products;
   •    our new products will achieve market acceptance and significant market share, or that the markets for these products will
        continue or grow as we have anticipated;
   •    our new products will be successfully or timely qualified with our customers by meeting customer performance and quality
        specifications which must occur before customers will place large product orders; or
   •    we will achieve high volume production of these new products in a timely manner, if at all.
    If we are not successful in timely completion of our new product qualifications and then ramping sales to our key customers,
our revenue and results of operations could be adversely impacted. In addition, if the quality of our products is not acceptable to our
customers, this could result in customer dissatisfaction, lost revenue and increased warranty and repair costs.
The inability of our products to interoperate with backup software applications would cause our business to suffer.
    We have designed our products to interoperate with the leading enterprise backup software applications available in the market.
If our products are not compatible with the leading backup software applications, demand for our products will decline. Some
backup software providers currently offer products that compete with ours and other providers may do so in the future. Backup
software providers may in the future make changes that would diminish the ability of our products to interoperate with their
applications. If this were to occur, we may need to spend significant time and effort to ensure the continued compatibility of our
products, which may not be possible at all. Any of these developments could significantly harm our business.
Our products must conform to industry standards and integrate smoothly with user systems in order to be accepted by customers
in our markets.
    We offer our software on a stand-alone basis and as part of a product in which we install our software onto third party
hardware. Our current products are only one part of a storage system. All components of these systems must comply with the same
industry standards in order to operate together efficiently. We depend on companies that provide other components of these
systems to conform to industry standards. Some industry standards may not be widely adopted or implemented uniformly, and
competing standards may emerge that may be preferred by OEM customers or end users. If other providers of components do not
support the same industry standards as we do, if competing standards emerge or if our products are not easy to deploy or do not
integrate smoothly with end user systems, our products may not achieve market acceptance, which would adversely affect our
business.
Issues with the hardware on which our software products are installed could increase our support costs and result in lower sales
of our products.
    We deliver some of our products, both through our resellers and directly to end-users, installed on third party hardware. If the
hardware does not function properly, our support costs will go up. We will have to arrange or pay for the repair or replacement of
the broken hardware and we may have to increase the size of our support operations. Hardware reliability issues could also cause
resellers and end-users to refuse to make purchases from us, even if our software products function properly.

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If we are unable to protect our intellectual property rights, our competitive position could be harmed, and we could be required
to incur significant expenses to enforce our rights.
    We depend on our ability to protect our proprietary technology. We also maintain an active licensing program related to our
patent portfolio pursuing upfront nonrefundable licensing fees and recurring licensing fees. We rely on trade secret, patent,
copyright and trademark laws and confidentiality agreements with employees and third parties, all of which offer only limited
protection. Despite our efforts, the steps we have taken to protect our proprietary rights may not be adequate to preclude
misappropriation of our proprietary information or infringement of our intellectual property rights, and our ability to police such
misappropriation or infringement is uncertain, particularly in countries outside of the United States. Further, we do not know
whether any of our pending patent applications will result in the issuance of patents or whether the examination process will require
us to narrow our claims. Even issued patents may be contested, circumvented or invalidated. Moreover, the rights granted under
any issued patents may not provide us with proprietary protection or competitive advantages, and, as with any technology,
competitors may be able to develop similar or superior technologies to our own now or in the future. It is also possible that we may
find it necessary or advantageous to enter into similar cross licenses in the future with other actual or potential competitors.
    Protecting against the unauthorized use of our patents, trademarks and other proprietary rights is expensive, difficult and, in
some cases, impossible. Litigation may be necessary in the future to enforce or defend our intellectual property rights, to protect
our trade secrets or to determine the validity and scope of the proprietary rights of others. Such litigation could be costly and divert
management resources, either of which could harm our business. Furthermore, many of our current and potential competitors have
the ability to dedicate substantially greater resources to enforce their intellectual property rights than we do. Accordingly, despite
our efforts, we may not be able to prevent third parties from infringing upon or misappropriating our intellectual property.
We may not prevail in our litigation proceedings, which could cause us to incur significant legal expenditures without any
related earnings.
    We currently and in the past have initiated litigation for the infringement of certain of our patents. As with any litigation, the
outcome is uncertain, and although we intend to vigorously pursue our claims, there are no guarantees that we can protect our
intellectual property rights in our current litigation or prevent the unauthorized use of our technology in the future. The litigation
will be lengthy and costly. Additionally, unintended consequences of our litigation may adversely affect our business, including,
without limitation, that we may have to devote significant time and financial resources to pursuing the litigation, that we may
become subject to counterclaims or lawsuits and that the expenses of pursuing the litigation could increase based upon new
developments. In addition, if we do not prevail in our patent litigation, the consequences could involve the circumvention or
invalidation of our patents, which could have a material adverse effect on our ongoing licensing program and our ability to enforce
our existing licenses. These, and other factors not currently known to or deemed material by management, could have a material
and adverse impact on the Company‘s business, prospects, liquidity and results of operations.
Claims by others that we infringe their proprietary technology could harm our business.
    Third parties could claim that our products or technology infringe their proprietary rights. We expect that infringement claims
may increase as the number of products and competitors in our market increases and overlaps occur. In addition, to the extent that
we gain greater visibility and market exposure as a public company, we face a higher risk of being the subject of intellectual
property infringement claims. Any claims of infringement by a third party, even those without merit, could cause us to incur
substantial costs defending against the claim, and could distract our management from our business. Furthermore, a party making
such a claim, if successful, could secure a judgment that requires us to pay substantial damages. A judgment could also include an
injunction or other court order that could prevent us from offering our products. In addition, we might be required to seek a license
for the use of such intellectual property, which may not be available on commercially reasonable terms or at all. Alternatively, we
may be required to develop non-infringing technology, which could require significant effort and expense and may ultimately not
be successful. Any of these events could seriously harm our business.

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    Third parties may also assert infringement claims relating to our products against our customers and distributors. Any of these
claims may require us to initiate or defend potentially protracted and costly litigation on their behalf, regardless of the merits of
these claims, because we generally are obligated to indemnify our distributors and our customers, from claims of infringement of
proprietary rights of third parties. If any of these claims succeed, we may be forced to pay damages to, or on behalf of, our
customers or distributors, which could seriously harm our business.
Our use of open source software could impose limitations on our ability to commercialize our products.
    We incorporate open source software into our products. Open source software is typically licensed for use at no initial charge.
Certain open source software licenses, however, require users of the open source software to license to others any software that is
based on, incorporates or interacts with, the open source software under the terms of the open source license. Although we
endeavor to comply fully with such requirements, third parties could claim that we are required to license larger portions of our
software than we believe we are required to license under open source software licenses. If such claims were successful, they could
adversely impact our competitive position and financial results by providing our competitors with access to sensitive information
that may help them develop competitive products. In addition, our use of open source software may harm our business and subject
us to intellectual property claims, litigation or proceedings in the future because:
   •    open source license terms may be ambiguous and may subject us to unanticipated obligations regarding our products,
        technologies and intellectual property;
   •    open source software generally cannot be protected under trade secret law; and
   •    it may be difficult for us to accurately determine the origin of the open source code and whether the open source software
        infringes, misappropriates or violates third party intellectual property or other rights.
    The terms of many open source licenses have not been interpreted by United States courts, and there is a risk that such licenses
could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to commercialize our
products. In that event, we could be required to seek licenses from third parties in order to continue offering our products, to
re-engineer our products, to discontinue the sale of our products in the event re-engineering cannot be accomplished on a timely
basis or to litigate any disputes relating to our use of open source software, any of which could harm our business.
U.S. Government export restrictions could impede our ability to sell our software to certain end users.
    Certain of our products include the ability for the end user to encrypt data. The U.S. government places restrictions on the
export of certain encryption technology. These restrictions may include the requirement to have a license to export the technology,
the requirement to have software licenses approved before export is allowed and outright bans on the licensing of certain
encryption technology to particular end users or to all end users in a particular country. Certain of our products are subject to
various levels of export restrictions. These export restrictions could negatively impact our business.
Our business is subject to increasingly complex environmental legislation that has increased both our costs and the risk of
noncompliance and may continue to do so in the future.
    We are subject to a variety of laws and regulations relating to, among other things, the use, storage, discharge and disposal of
materials and substances used in our facilities and manufacturing processes as well as the safety of our employees and the public.
Directives first introduced in the European Union impose a ―take back‖ obligation on manufacturers for the financing of the
collection, recovery and disposal of electrical and electronic equipment and restrict the use of certain potentially hazardous
materials, including lead and some flame retardants, in electronic products and components. Other jurisdictions in the U.S. and
internationally have since introduced similar requirements, and we anticipate that future regulations might further restrict allowable
materials in our products, require the establishment of additional recycling or take back programs or mandate the measurement and
reduction of carbon emissions into the environment. We have implemented procedures and will likely continue to introduce new
processes to comply with current and future

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safety and environmental legislation. However, measures taken now or in the future to comply with such legislation may adversely
affect our manufacturing or personnel costs or product sales by requiring us to acquire costly equipment or materials, redesign
production processes or to incur other significant expenses in adapting our manufacturing programs or waste disposal and emission
management processes. Furthermore, safety or environmental claims or our failure to comply with present or future regulations
could result in the assessment of damages or imposition of fines against us, or the suspension of affected operations, which could
have an adverse effect on our business, financial condition and results of operations.
    We have incurred costs to comply with these regulations in the past and could incur additional costs in the future. In addition,
compliance with these regulations could disrupt our operations and logistics. We will need to ensure that we can design and
manufacture compliant products and that we can be assured a supply of compliant components from suppliers. Similar laws and
regulations have been proposed or may be enacted in other regions in which we operate. These and other environmental regulations
may require us to reengineer our products to utilize new components that are compatible with these regulations, which may result
in additional costs to us.
We may not generate positive returns on our research and development investments.
    Developing our products is expensive, and our investment in product development may involve a long investment return cycle.
For the year ended October 31, 2010, our research and development expenses were approximately $8.9 million, or approximately
54.4% of revenue. Our future plans include significant investments in research and development and related product opportunities.
We believe that we must continue to dedicate a significant amount of resources to our research and development efforts to maintain
our competitive position. These investments may not generate positive returns in the near term, or at all.
If we need additional capital in the future, it may not be available to us on favorable terms, or at all.
     We have historically relied on outside financing and cash flows from operations to fund our operations, capital expenditures
and expansion. We may require additional capital from equity or debt financings in the future to fund our operations or respond to
competitive pressures or strategic opportunities. We may not be able to secure timely additional financing on favorable terms, or at
all. The terms of any additional financing may limit our financial and operating flexibility. If we raise additional funds through
further issuances of equity, convertible debt securities or other securities convertible into equity, our existing stockholders could
suffer significant dilution in their percentage ownership of our company, and any new securities we issue could have rights,
preferences and privileges senior to those of holders of our common stock. If we are unable to obtain adequate financing or
financing on terms satisfactory to us if and when we require it, our ability to grow or support our business and to respond to
business challenges could be significantly limited.
From time to time we may make acquisitions. The failure to successfully integrate future acquisitions could harm our business,
financial condition and operating results.
    As a part of our business strategy, we have in the past and may make acquisitions in the future. We may also make significant
investments in complementary companies, products or technologies. If we fail to successfully integrate such acquisitions or
significant investments, it could harm our business, financial condition and operating results. Risks that we may face in our efforts
to integrate any recent or future acquisitions include, among others:
   •    failure to realize anticipated savings and benefits from the acquisition;
   •    difficulties in assimilating and retaining employees;
   •    potential incompatibility of business cultures;
   •    coordinating geographically separate organizations;
   •    diversion of management‘s attention from ongoing business concerns;
   •    coordinating infrastructure operations in a rapid and efficient manner;
   •    the potential inability to maximize our financial and strategic position through the successful incorporation of acquired
        technology and rights into our products and services;

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   •    failure of acquired technology or products to provide anticipated revenue or margin contribution;
   •    insufficient revenues to offset increased expenses associated with the acquisition;
   •    costs and delays in implementing or integrating common systems and procedures;
   •    reduction or loss of customer orders due to the potential for market confusion, hesitation and delay;
   •    impairment of existing customer, supplier and strategic relationships of either company;
   •    insufficient cash flows from operations to fund the working capital and investment requirements;
   •    difficulties in entering markets in which we have no or limited direct prior experience and where competitors in such
        markets have stronger market positions;
   •    the possibility that we may not receive a favorable return on our investment, the original investment may become impaired
        or we may incur losses from these investments;
   •    dissatisfaction or performance problems with the acquired company;
   •    the assumption of risks of the acquired company that are difficult to quantify, such as litigation;
   •    the cost associated with the acquisition; and
   •    assumption of unknown liabilities or other unanticipated adverse events or circumstances.
    Acquisitions present many risks, and we may not realize the financial and strategic goals that were contemplated at the time of
any transaction. We cannot provide assurance that we will be able to successfully integrate any business, products, technologies or
personnel that we may acquire in the future, and our failure to do so could harm our business, financial condition and operating
results.
Because we are a relatively small company, the requirements of being a public company, including compliance with the
reporting requirements of the Exchange Act of 1934, as amended, and the requirements of the Sarbanes-Oxley Act, may strain
our resources, increase our costs and distract management; and we may be unable to comply with these requirements in a
timely or cost-effective manner.
    As a public company, we will need to comply with new laws, regulations and requirements, certain corporate governance
provisions of the Sarbanes-Oxley Act of 2002, related regulations of the Securities and Exchange Commission, or the SEC, and the
requirements of any exchange on which our securities may be traded, with which we are not required to comply as a private
company. In addition, we agreed with the purchasers in our October 2010 private placement, among other things, that we would list
our common stock and warrants on either the OTC Bulletin Board or NASDAQ exchange. If we list our securities on an exchange,
the exchange will impose additional requirements on listed companies, including enhanced corporate governance practices. For
example, the NASDAQ listing requirements require that listed companies satisfy certain corporate governance requirements
relating to independent directors, audit committees, distribution of annual and interim reports, stockholder meetings, stockholder
approvals, solicitation of proxies, conflicts of interest, stockholder voting rights and codes of business conduct.
    Complying with the SEC statutes, regulations and requirements will occupy a significant amount of time of our board of
directors and management and will significantly increase our costs and expenses, which we cannot estimate accurately at this time.
These rules and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of
directors and board committees or as executive officers. We will need to:
   •    institute a more comprehensive compliance function;
   •    maintain a system of internal controls over financial reporting in compliance with certain of the requirements of Section
        404 of the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the SEC and the Public Company
        Accounting Oversight Board;
   •    prepare and distribute periodic public reports in compliance with our obligations under the federal securities laws;

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   •    establish new internal policies, such as those relating to disclosure controls and procedures and insider trading;
   •    involve and retain to a greater degree outside counsel and accountants in the above activities;
   •    institute a more comprehensive internal audit function; and
   •    institute a more comprehensive investor relations function.
Our business is subject to the risks of earthquakes, fire, floods and other natural catastrophic events, and to interruption by
man-made problems such as computer viruses or terrorism.
    While our headquarters facilities contain redundant power supplies and generators, our domestic and foreign operations, and the
operation of our strategic allies, VARs, SIs and others, remain susceptible to fire, floods, tornadoes, power loss, power shortages,
telecommunications failures, break-ins and similar events. In addition, our servers are vulnerable to computer viruses, break-ins and
similar disruptions from unauthorized tampering with our computer systems. In addition, acts of terrorism or war could cause
disruptions in our or our customers‘ business or the economy as a whole. To the extent that such disruptions result in delays or
cancellations of customer orders, or delay the manufacture and shipment of our products, our business would be harmed.
We are dependent on a variety of IT and telecommunications systems, and any failure of these systems could adversely impact
our business and operating results.
    We depend on IT and telecommunications systems for our operations. These systems support a variety of functions including
data storage and retrieval, order processing, shipping, shipment tracking, billing, support center and internal information exchange.
    Failures or significant downtime of our IT or telecommunications systems could prevent us from taking customer orders,
shipping products, billing customers, handling support calls, or communication among our offices. The Internet and individual
websites have experienced a number of disruptions and slowdowns, some of which were caused by organized attacks. In addition,
some websites have experienced security breakdowns. If we were to experience a security breakdown, disruption or breach that
compromised sensitive information, it could harm our relationship with our customers. Our support centers are dependent upon
telephone and data services provided by third party telecommunications service vendors and our IT and telecommunications
system. Any significant increase in our IT and telecommunications costs or temporary or permanent loss of our IT or
telecommunications systems could harm our relationships with our customers. The occurrence of any of these events could have an
adverse effect on our operations and financial results.

                                       Risks Related to Ownership of Our Common Stock
We may experience volatility in our stock price, which could negatively affect your investment, and you may not be able to resell
your shares at or above the offering price.
    There is no established public trading market for our common stock. Currently, our common stock is quoted on the Pink Sheets.
There can be no assurance that our common stock will be admitted to trade on any established trading market or exchange.
Additionally, if our common stock is admitted for listing or trading, there can be no assurance that it will maintain the requirements
for continued listing or trading on an established trading market or exchange.
    Our common stock may not be traded actively. An illiquid market for shares of our common stock may result in lower trading
prices and increased volatility, which could negatively affect the value of your investment or your ability to sell your shares. If an
active trading market does develop, it may not last and the trading price of the shares may fluctuate widely as a result of a number
of factors, many of which are outside our control. The market price of our common stock may fluctuate significantly in response to
a number of factors, some of which are beyond our control, including:
   •    quarterly variations in operating results;
   •    changes in financial estimates by us or securities analysts who may cover our stock or by our failure to meet the estimates
        made by securities analysts;

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   •    changes in market valuations of other similar companies;
   •    announcements by us or our competitors of new products or of significant technical innovations, contracts, acquisitions,
        divestitures, strategic relationships or joint ventures;
   •    additions or departures of key personnel;
   •    any deviations in net sales or in losses from levels expected by securities analysts;
   •    the realization of any of the risk factors presented in this prospectus; and
   •    future sales of common stock.
    In addition, the stock market has recently experienced extreme volatility that has often been unrelated to the performance of
particular companies. These market fluctuations may cause our stock price to fall regardless of our performance.
If securities or industry analysts do not publish research or reports about our business, our stock price and trading volume
could decline.
    The trading market for our common stock may depend on the research and reports that industry or securities analysts publish
about us or our business. We do not have any control over research and reports these analysts publish or whether they will be
published at all. If one or more of the analysts who decides to cover us downgrade our stock, our stock price would likely decline.
If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in
the financial markets, which in turn could cause our stock price or trading volume to decline.
Because our shares are deemed “penny stock,” you may have difficulty selling them in the secondary trading market.
    The SEC has adopted regulations which generally define a ―penny stock‖ to be any equity security that has a market price of
less than $5.00 per share or with an exercise price of less than $5.00 per share. Additionally, if the equity security is not registered
or authorized on a national securities exchange, the equity security also would constitute a ―penny stock.‖ As our common stock
falls within the definition of penny stock, these regulations require the delivery, prior to any transaction involving our common
stock, of a risk disclosure schedule explaining the penny stock market and the risks associated with it. Disclosure is also required to
be made regarding compensation payable to both the broker-dealer and the registered representative and current quotations for the
securities. In addition, monthly statements are required to be sent disclosing recent price information for the penny stocks. The
ability of broker-dealers to sell our common stock and the ability of shareholders to sell our common stock in the secondary market
would be limited. As a result, the market liquidity for our common stock would be severely and adversely affected. We can provide
no assurance that trading in our common stock will not be subject to these or other regulations in the future, which would
negatively affect the market for our common stock.
As a result of becoming a public company, we will be obligated to develop and maintain proper and effective internal control
over financial reporting. We may not complete our analysis of our internal control over financial reporting in a timely manner,
or these internal controls may not be determined to be effective, which may adversely affect investor confidence in our company
and, as a result, the value of our common stock.
    We will be required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other
things, the effectiveness of our internal control over financial reporting for the first fiscal year beginning after the effective date of
this offering. This assessment will need to include disclosure of any material weaknesses identified by our management in our
internal control over financial reporting, as well as a statement that our auditors have issued an attestation report on effectiveness of
our internal controls. We may not be able to remediate future material weaknesses, or to complete our evaluation, testing and any
required remediation in a timely fashion. During the evaluation and testing process, if we identify one or more material weaknesses
in our internal control over financial reporting, we will be unable to assert that our internal controls are effective. If we are unable
to assert that our internal control over financial

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reporting is effective, or if our auditors are unable to express an opinion on the effectiveness of our internal controls, we could lose
investor confidence in the accuracy and completeness of our financial reports, which would have a material adverse effect on the
price of our common stock.
We do not presently intend to pay any cash dividends on or repurchase any shares of our common stock.
    We do not presently intend to pay any cash dividends on our common stock. Any payment of future dividends will be at the
discretion of the board of directors and will depend on, among other things, our earnings, financial condition, capital requirements,
level of indebtedness, statutory and contractual restrictions applying to the payment of dividends, and other considerations that our
board of directors deems relevant. Cash dividend payments in the future may only be made out of legally available funds and, if we
experience substantial losses, such funds may not be available. In addition, our credit facility prohibits us from paying dividends,
making distributions or payments or redeeming, retiring or purchasing any of our capital stock. Accordingly, you may have to sell
some or all of your common stock in order to generate cash flow from your investment.
A large number of shares will be eligible for future sale and may depress our stock price.
    Our shares that are eligible for future sale may have an adverse effect on the price of our stock. As of March 4, 2011, there were
43,282,290 shares of our common stock outstanding. In addition to the shares covered by this prospectus, approximately
29,400,824 of these shares are or will become freely tradeable without substantial restriction or the requirement of future
registration under the Securities Act of 1933. The remainder of our outstanding shares are held by our officers, directors and greater
than 5% shareholders and may be sold without registration under the exemption from registration provided by Rule 144 under the
Securities Act of 1933. In addition, as of March 4, 2011, an additional 11,980,338 shares were subject to outstanding options and
warrants.
   Sales of substantial amounts of common stock, or a perception that such sales could occur, and the existence of options or
warrants to purchase shares of common stock at prices that may be below the then current market price of the common stock, could
adversely affect the market price of our common stock and could impair our ability to raise capital through the sale of our equity
securities.
We may conduct further offerings in the future in which case your shareholdings will be diluted.
    Our board of directors has the authority to issue up to 75,000,000 authorized shares of our common stock or stock options to
acquire such common stock; or up to 25,000,000 shares of preferred stock with rights, privileges and preferences designated by the
board of directors. The future issuance of common stock or preferred stock may result in dilution in the percentage of our common
stock held by our existing stockholders. Also, any stock we sell in the future may be valued on an arbitrary basis by us and the
issuance of shares of common stock or preferred stock for future services, acquisitions or other corporate actions may have the
effect of diluting the value of the shares held by our existing stockholders.
    In October 2010, we completed a private placement of 12,500,000 shares of our common stock at a price of $0.80 per share and
issued warrants to purchase an additional 4,296,875 shares of common stock, including warrants issued as part of the fees paid to
the placement agent, with an exercise price of $0.80 per share. We may conduct further equity offerings in the future. If common
stock is issued in return for additional funds, property or services, the price per share could be lower than that paid by our current
stockholders.
We do not have cumulative voting and a small number of existing shareholders control our company, which could limit your
ability to influence the outcome of shareholder votes.
    Our shareholders do not have the right to cumulative votes in the election of our directors. Cumulative voting, in some cases,
could allow a minority group to elect at least one director to our board. Because there is no provision for cumulative voting, a
minority group will not be able to elect any directors. Accordingly, the holders of a majority of the shares of common stock, present
in person or by proxy, will be able to elect all of the members of our board of directors.

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    Our executive officers and directors, together with our largest shareholders, beneficially own approximately 20.4% of our
common stock as of March 4, 2011. As a result, these persons may be able to exercise significant influence over the outcome of
shareholder votes, including votes concerning the election of directors, the adoption or amendment of provisions in our charter or
bylaws and the approval of mergers and other significant corporate transactions.
Certain provisions in our charter documents, our shareholder rights plan and Delaware law could discourage takeover attempts
and lead to management entrenchment.
   Our certificate of incorporation and bylaws contain provisions that could have the effect of delaying or preventing changes in
control or changes in our management without the consent of our board of directors. These provisions include:
   •    no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director
        candidates;
   •    the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of
        directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies
        on our board of directors;
   •    the ability of our board of directors to determine to issue shares of preferred stock and to determine the price and other
        terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to
        significantly dilute the ownership of a hostile acquirer;
   •    a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special
        meeting of our stockholders;
   •    the requirement that a special meeting of stockholders may be called only by the board of directors, which may delay the
        ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; and
   •    advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or
        to propose matters to be acted upon at a stockholders‘ meeting, which may discourage or deter a potential acquiror from
        conducting a solicitation of proxies to elect the acquiror‘s own slate of directors or otherwise attempting to obtain control
        of us.
    In addition, pursuant to our stockholder rights plan, each share of our common stock has an associated preferred share purchase
right. The rights will not trade separately from the common stock until, and are exercisable only upon, the acquisition or the
potential acquisition through tender offer by a person or group of 15% or more of our outstanding common stock.
    We are also subject to certain anti-takeover provisions under Delaware law. Under Delaware law, a corporation may not, in
general, engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock
for three years or, among other things, the board of directors has approved the transaction.

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                             SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
    This prospectus includes forward-looking statements that relate to future events or our future financial performance and involve
known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or
achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by
these forward-looking statements. Words such as, but not limited to, ―believe,‖ ―expect,‖ ―anticipate,‖ ―estimate,‖ ―intend,‖ ―plan,‖
―targets,‖ ―likely,‖ ―will,‖ ―would,‖ ―could,‖ and similar expressions or phrases identify forward-looking statements.
Forward-looking statements include, but are not limited to, statements about:
   •    our ability to implement our business strategy, including the transition from a hardware storage company to a software
        solutions and services provider;
   •    anticipated trends and challenges in our business and the markets in which we operate;
   •    our expected future financial performance;
   •    our expectations regarding our operating expenses;
   •    our ability to anticipate market needs or develop new or enhanced products to meet those needs;
   •    our ability to expand into other sectors of the storage market, beyond protection storage;
   •    our expectations regarding market acceptance of our products;
   •    our ability to compete in our industry and innovation by our competitors;
   •    our ability to protect our confidential information and intellectual property rights;
   •    our ability to successfully identify and manage any potential acquisitions;
   •    our ability to manage expansion into international markets;
   •    our ability to remediate the material weakness in our internal controls identified by our independent registered public
        accounting firm;
   •    our ability to maintain or broaden our business relationships and develop new relationships with strategic alliances,
        suppliers, customers, distributors or otherwise;
   •    our ability to recruit and retain qualified sales, technical and other key personnel;
   •    our ability to obtain additional financing; and
   •    our ability to manage growth.
    All forward-looking statements involve risks, assumptions and uncertainties. The occurrence of the events described, and the
achievement of the expected results, depend on many events, some or all of which are not predictable or within our control. Actual
results may differ materially from expected results. See the section titled ―Risk Factors‖ and elsewhere in this prospectus for a more
complete discussion of these risks, assumptions and uncertainties and for other risks and uncertainties. These risks, assumptions
and uncertainties are not necessarily all of the important factors that could cause actual results to differ materially from those
expressed in any of our forward-looking statements. Other unknown or unpredictable factors also could harm our results. In light of
these risks, uncertainties and assumptions, the forward-looking events discussed in this prospectus might not occur.
    Readers are cautioned not to place undue reliance on forward-looking statements, as there can be no assurance that the plans,
intentions or expectations upon which they are based will occur. By their nature, forward-looking statements involve numerous
assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the
predictions, forecasts, projections and other things contemplated by the forward-looking statements will not occur.
Forward-looking statements in this prospectus are based on management‘s beliefs and opinions at the time the statements are made.
The forward-looking statements contained in this prospectus are expressly qualified in their entirety by this cautionary statement.
The forward-looking statements included in this prospectus are made as of the date of this prospectus and we undertake no
obligation to publicly update or revise any forward-looking statements to reflect new information, future events or otherwise,
except as required by applicable securities laws.

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                                                        USE OF PROCEEDS
    We will not receive any proceeds from the sale of the common stock by the selling security holders pursuant to this prospectus.
We may receive proceeds from the issuance of shares of our common stock upon the exercise of the warrants. Warrants we issued
in our October 2010 private placement to purchase 4,296,875 shares of our common stock with an exercise price of $0.80, subject
to anti-dilution adjustments. The warrants also contain a ―cashless exercise‖ provision, by which a warrant holder may elect to
exercise the warrants without paying cash. Pursuant to that provision, a warrant holder may exercise a warrant to receive a number
of shares of our common stock equal in market value to the difference between the average of the five day closing bid price for the
shares issuable upon exercise and the total cash exercise price of the part of the warrant being exercised. We intend to use any
proceeds from the exercise of warrants for working capital and other general corporate purposes.
   There is no assurance that any of the warrants will ever be exercised for cash, if at all. If all of the outstanding warrants are
exercised for cash, we would receive aggregate gross proceeds of approximately $3.4 million. See ―Description of Capital
Stock — Warrants.‖

                                             DETERMINATION OF OFFERING PRICE
    The selling security holders will sell their shares of our common stock at a price of $0.80 per share until a public market
develops for our shares or the shares of our common stock are quoted on the OTC Bulletin Board, or listed for trading or quoted on
any other public market, and thereafter at prevailing market prices or privately negotiated prices. The offering price has been
determined arbitrarily and does not have any relationship to any established criteria of value, such as book value or earning per
share. Additionally, because there is no established trading market for our common stock, the price of the common stock is not
based on past earnings, nor is the price of the common stock indicative of the current market value of the assets owned by us. In
connection with our October 2010 private placement, we agreed with the purchasers, among other things, that we would list our
common stock and warrants on either the OTC Bulletin Board or NASDAQ exchange. There can be no assurance that our common
stock or warrants will be accepted for listing on NASDAQ or that we will be able to find market makers willing to quote our shares
on the OTC Bulletin Board or NASDAQ.
    The exercise price of the warrants being registered was determined in negotiations with investors in our October 2010 private
placement.

                                                         DIVIDEND POLICY
    We have never declared or paid cash dividends on our common stock. We currently intend to retain all available funds and any
future earnings for use in the operation of our business and do not anticipate paying any cash dividends in the foreseeable future. In
addition, our credit facility prohibits us from paying dividends, making distributions or payments or redeeming, retiring or
purchasing any of our capital stock. Any future determination to declare cash dividends will be made at the discretion of our board
of directors and will depend on our financial condition, results of operations, capital requirements, general business conditions and
other factors that our board of directors may deem relevant.

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                                              PRICE RANGE OF COMMON STOCK
    There is no established public trading market for our common stock. Our common stock is quoted under the symbol ―CRDS‖
on the Pink Sheets. The following table sets forth the high and low bid information for our common stock for the periods indicated,
which reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions:


                                                                                        High              Low
             Fiscal Year Ended October 31, 2011
               First Quarter                                                      $       1.39       $       0.82
               Second Quarter (through March 8, 2011)                             $       1.03       $       0.80
             Fiscal Year Ended October 31, 2010
               First Quarter                                                      $       0.43       $       0.18
               Second Quarter                                                     $       0.53       $       0.32
               Third Quarter                                                      $       0.77       $       0.37
               Fourth Quarter                                                     $       1.24       $       0.31
             Fiscal Year Ended October 31, 2009
               First Quarter                                                      $       0.50       $       0.16
               Second Quarter                                                     $       0.48       $       0.16
               Third Quarter                                                      $       0.32       $       0.16
               Fourth Quarter                                                     $       0.35       $       0.18
   On March 8, 2011, the last reported sale price of our common stock on the Pink Sheets was $0.88 per share. As of March 4,
2011, there were 43,282,290 shares of our common stock outstanding held by 234 holders of record.

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                                                         CAPITALIZATION
    The following table sets forth our capitalization as of October 31, 2010. You should read this table in conjunction with the
sections of this prospectus entitled ―Selected Consolidated Financial Data‖ and ―Management‘s Discussion and Analysis of
Financial Condition and Results of Operations‖ and with our consolidated financial statements and related notes.


                                                                                                                As of
                                                                                                            October 31,
                                                                                                                2010
                                                                                                           (in thousands)
        Cash and cash equivalents                                                                    $            13,811

        Total current liabilities                                                                                  6,751
        Long-term liabilities                                                                                        103
        Stockholders‘ equity:
          Common stock, $.001 par value, 75,000,000 shares authorized, 42,945,102 shares                               43
             issued and outstanding
          Additional paid-in capital                                                                            198,697
          Accumulated other comprehensive loss                                                                      (49 )
          Accumulated deficit                                                                                  (184,367 )
             Total stockholders‘ equity                                                                          14,324
             Total liabilities and stockholders‘ equity                                              $           21,178


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                                      MANAGEMENT’S DISCUSSION AND ANALYSIS OF
                                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    The following discussion and analysis of the financial condition and results of our operations should be read in conjunction
with the consolidated financial statements and related notes included elsewhere in this prospectus. This discussion contains
forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed
below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those
discussed in the section titled “Risk Factors” included elsewhere in this prospectus.
Overview
    Crossroads Systems is a global provider of solutions to connect, protect and secure business-critical data for enterprise storage
and the cloud computing marketplace using our storage software solutions based on our patented core Routing Messaging Interface,
or RMI, technology. We offer innovative, cost-effective products and solutions that are built on superior quality, reliability and
performance that allow customers to protect and manage their corporate data assets. In fiscal 2012, we plan to introduce our
Crossroads NAT3, network attached tape for Tier 3 storage, which we believe will be the first fully portable, open-standard, data
storage archive.
    We believe that we are entering an exciting new chapter in Crossroads‘ history. Founded in 1996, we developed and introduced
a bridging technology, which enabled existing storage devices to connect to the then-new Fibre Channel Storage Area Network.
Our storage router products have been used by original equipment manufacturer, or OEM, customers such as Hewlett Packard
Company, EMC Corporation and Quantum Corporation and installed in more than 125,000 storage systems worldwide.
     Most technologies have limited life spans as systems transition to newer environments. In 2005, we undertook a strategic
initiative to develop a software solutions and services model focusing on emerging higher growth business opportunities for the
company. This transition of our research and development efforts have resulted in the creation of our currently shipping products:
Read Verify Appliance, or RVA, and SPHiNX. In addition, we generated over $50 million in revenue since 2005 from our
intellectual property licensing campaign.
   We deliver our current offerings to the market through hardware appliances. This strategy allows us to use off-the-shelf
hardware platforms, which can easily be customized to support specific OEM or SI specifications. We believe this strategy
provides us with low-cost, high performance options that can be quickly deployed with minimal disruption to customers all the
while minimizing inventory and associated excess and obsolete costs.
    Substantially all of our current products have been sold in combination with support and services contracts. Our support and
services contracts are typically offered for periods of one to three years. We sell these products through a network of OEMs and
VARs. As of October 31, 2010, we had over 50 VARs, and additionally, we expect to continue selling the SPHiNX product
through our OEM channel.
    Although the environment for IT spending, including storage, improved during fiscal 2010, there is still an atmosphere of
caution. For example, we believe that storage projects continue to be highly scrutinized within companies and there were
difficulties with deals progressing through customers‘ approval processes resulting in reduced and delayed sales this fiscal year.
However, there was improvement in the storage purchasing environment during the second half of fiscal 2010. IT budgets were
more available, channel inventories began to replenish and, as a result, the industry had modest growth.
   We expect growth in international markets for both the RVA and SPHiNX to be a significant factor contributing to our revenue
growth in future periods. International revenue accounted for approximately 3.0% and 2.9% of our total revenue in the years ended
October 31, 2009 and 2010, respectively. As we expand internationally, we may incur additional costs to conform our products to
comply with local laws or local product specifications and to ship our products to our international customers.
    We continue to realize revenue from existing intellectual property licensees with go-forward royalties derived from the ‗972
patent family, which accounts for 8 of our exiting 75 granted patent and 31 pending patents. We maintain an active licensing
program related to the ‗972 family, which has been licensed to over

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40 of the leading storage industry providers. We pursue upfront nonrefundable licensing fees and recurring licensing fees. In some
cases we are required to litigate where we believe other companies are infringing our claims. Generally, these cases are settled
quickly as we engage in business discussions with the opposing parties; however, one or more of the litigants may pursue their
defense to greater lengths, which would require higher expenses to continue the lawsuit.
     These past investments in R&D, along with a recent equity capital raise of $10 million, have enabled us to accelerate our
planned introduction of the NAT3 enterprise solution. Using the intellectual property and code from the bridges, SPHiNX and
RVA, we expect to target Tier 3 archive data, which we believe to be the fastest growing segment of the market. The NAT3 also
utilizes the new Long Tape File System, or LTFS, technology developed by the LTO consortium with IBM, HP and Quantum as
primary members. We believe that LTFS is a disruptive technology to the current mechanisms used by IT staffs for their long-term
data repositories, which are either costly, for both capital and power consumption, disk based or proprietary tape based solutions.
We believe that the Crossroads NAT3 will be the first open-standard, fully portable long-term data storage solution that
―plug-n-plays‖ within the existing CIFS/NFS network attached storage infrastructure, requiring no modifications or changes to
their existing applications.
    Our target market strategy for the tape archive is multi-pronged, utilizing our VAR channel, SIs and new OEM relationships.
We are initially focusing on the Cloud Storage, Network Broadcasting, and Healthcare verticals but will expand into the financial,
government, retail, and logistics markets as we gain traction in the marketplace. We will deploy with two different sales models, a
traditional sell through with ongoing maintenance model and a model where the customer pays an ongoing monthly charge for the
amount of storage they are utilizing.
   Critical milestones for this solution are:
   •    Round Trip . Data is sent from an application to the solution all the way to the LTFS tape and read back to the application.
        This milestone was completed successfully on schedule in February 2011.
   •    Customer Advisory Board . We form a Customer Advisory Board and engage in discussions with customer advisors who
        provide valuable feedback to the overall architecture and design of the solution. This milestone is in progress as of the date
        of this prospectus, and we expect to complete this milestone in March 2011.
   •    Full Performance Testing . The system is put through three critical performance tests: (1) maximum file ingest to
        measure against market requirements, (2) maximum simultaneous reads to determine the flexibility and responsiveness in a
        Tier 3 storage environment, and (3) real world simulation providing a mixture of large & small files ingestion and read
        operations intermixed to measure expected use case responses and performance. We currently plan to complete this
        milestone by our second fiscal quarter of 2011.
   •    Early Adopter Program . We currently plan for the early adopter customers to receive initial systems for their internal
        labs in the third fiscal quarter of 2011. These will be fully functional and tested systems, but may not have the breadth of
        features that the general availability systems will. We intend for the early adopters to provide feedback on multiple facets
        of the product and provide us customer testimonials for press and industry analyst briefings. We believe that the early
        adopter customers will serve as a valuable base across the different market verticals by which we can tune and enhance the
        solution going forward.
   •    General Availability . We expect to launch the solution via press announcements and advertisements, using our early
        adopter customer feedback and testimonials in the fourth fiscal quarter of 2011. We plan to have trained our VAR channel
        and sales force to engage the market via specific verticals we have determined provide the most likely short term sales
        opportunities.
The engineering development, marketing and sales expenses associated with this solution are planned to be $3.5 million for 2011
and over $4.0 million in 2012. We expect these expenses to be offset by the existing business to some degree. We conducted our
October 2010 private placement to raise funds to complete and begin marketing this program. We expect to begin receiving initial
revenue from the program during fiscal

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2012, which should offset a portion of the expenses. However, shifts in market need or particular customer requirements, changes
in the economy and delays with our strategic alliances could adversely affect the revenue growth and timing of this program.
    Revenue. Revenue consists of sales of hardware, software and services, as well as royalties we earn for the license of certain
intellectual property. Our product revenue is composed of sales of our hardware products and software products sold to distributors,
value added resellers, original equipment manufacturers and end users. Our IP license, royalty and other revenue is derived from
the licensing of intellectual property, royalty payments, and sales of service contracts.
    Cost of Revenue. Cost of revenue is composed of cost of product revenue and IP license, royalty and other revenue. Cost of
product revenue consists primarily of the cost charged by our previous contract manufacturer to manufacture our products, shipping
charges and warranty obligations. Cost of IP license, royalty and other revenue consists of professional fees and services, overhead
allocations, and provisions for excess and obsolete inventory.
   Gross Profit. Our gross profit has been and will continue to be affected by a variety of factors, including our product
configuration mix, software having a higher gross margin, and our hardware products and IP licenses, which tend to have a lower
gross margin. Our support and service revenue also tends to have lower gross margins.
    Operating Expenses. Operating expenses consist of sales and marketing, research and development, general and
administrative expenses and amortization of intangible assets. Personnel-related costs, which include stock-based compensation
expense, are the most significant component of each of these expense categories. We had 87 employees as of October 31, 2009 and
86 employees as of October 31, 2010. We expect to continue to hire significant numbers of new employees in order to support our
growth. In any particular period, the timing of additional hires could materially affect our operating expenses, both in absolute
dollars and as a percentage of revenue. We anticipate that our operating expenses will significantly increase in absolute dollar
amounts.
    Sales and Marketing. Sales and marketing expenses include personnel costs, employee sales commissions and marketing
programs. We intend to continue to invest heavily in sales and marketing by increasing the number of sales and channel support
personnel worldwide. We expect future sales and marketing costs to continue to increase. Hiring additional sales personnel reduces
operating margins until the new sales personnel generate meaningful revenue.
    Research and Development. Research and development expenses primarily include personnel costs, depreciation on lab
equipment, costs of prototype equipment, other related costs of quality assurance and overhead allocations. We expense research
and development costs as incurred. Though we incur software development costs, the costs of software development that we incur
after a product has reached marketability are considered immaterial, and to date, we have not capitalized any such costs. We expect
that research and development costs will increase in absolute dollar amounts.
    General and Administrative. General and administrative expenses consist primarily of compensation and related costs for
personnel and facilities related to our executive, finance, human resource, information technology and legal organizations, and fees
for professional services. Professional services consist, excluding those for IP, of outside legal, tax and audit costs. We expect to
continue to incur significant additional expenses as a result of operating as a public company and as we hire additional personnel
and incur costs for implementation of business strategy.
   Amortization of Intangibles. Amortization of intangibles consists of the amortization of purchased technology.
Critical Accounting Policies and Estimates
    Our discussion and analysis of the financial condition and results of operations is based on the accompanying consolidated
financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The
preparation of these statements requires us to make significant estimates and judgments about future uncertainties that affect
reported assets, liabilities, revenues and expenses

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and related disclosures. We base our estimates on historical experience and on various other assumptions believed to be reasonable
under the circumstances. Our critical accounting estimates require the most difficult, subjective or complex judgments and are
described below. An accounting estimate is considered critical if it requires estimates about the effect of matters that are inherently
uncertain when the estimate is made, if different estimates reasonably could have been used or if changes in the estimate that are
reasonably possible could materially impact the financial statements. We have discussed the development, selection and disclosure
of our critical accounting policies with the Audit Committee of our board of directors. We believe the assumptions and estimates
used and the resulting balances are reasonable; however, actual results may differ from these estimates under different assumptions
or conditions.
    Revenue Recognition
    Application of the various accounting principles related to measurement and recognition of revenue requires us to make
judgments and estimates in the following related areas: determining fair value in arrangements with multiple deliverables, the
amount of revenue allocated to undelivered elements in software arrangements using vendor-specific objective evidence (―VSOE‖),
the interpretation of non-standard terms and conditions in sales agreements, assessments of future price adjustments, such as
rebates, price protection and future product returns and estimates for contractual licensee fees.
    When we enter into sales arrangements with customers that contain multiple deliverables such as hardware, software and
services, these arrangements require us to determine fair value of the undelivered elements. Additionally, we sometimes use
judgment in determining whether any undelivered elements are essential to the functionality of the delivered elements in order to
determine the appropriate timing of revenue recognition. If fair value does not exist for undelivered elements, then revenue for the
entire arrangement is deferred until all elements have been delivered.
   For any undelivered elements in multiple element software arrangements we determine fair value based on VSOE, which
consists of the prices charged when these services are sold separately or, for new software products, the price established by
management. If VSOE does not exist for undelivered elements, then revenue for the entire arrangement is deferred until all
elements have been delivered.
    While the majority of our sales arrangements contain standard terms and conditions, we sometimes apply judgment when
interpreting complex arrangements with non-standard terms and conditions to determine the appropriate accounting. An example of
such a judgment is deferring revenue related to significant post-delivery obligations and customer acceptance criteria until such
obligations are fulfilled.
    We record reductions to revenue for estimated future price adjustments such as future product returns. These allowances are
based on programs in existence at the time revenue is recognized, plans regarding future price adjustments, the customers‘ master
agreements and historical product return rates. We have historically been able to reliably estimate the amount of allowances
required and recognize revenue, net of these projected allowances, upon shipment to our customers. If allowances cannot be
reliably estimated in any specific reporting period, revenue would be deferred until the rights have lapsed and we are no longer
under obligation to reduce the price or accept the return of the product.
    We license certain software to customers under licensing agreements that allow those customers to embed the software into
specific products they offer. As consideration, licensees pay us a fee based on the amount of sales of their products that incorporate
our software. On a periodic and timely basis, the licensees provide us with reports listing their sales to end users for which they
owe us license fees. Similarly, royalty revenue is estimated from licensee reports of units sold to end users subject to royalties
under master contracts. In both cases, these reports are used to substantiate delivery and we recognize revenue based on the
information in these reports.
    Inventory Allowances
    Our manufacturing and service parts inventories are stated at the lower of cost or market, with cost computed using standard
costs, which approximates the first-in, first-out (―FIFO‖) basis. Adjustments to reduce the carrying value of both manufacturing and
service parts inventories to their net realizable value are made for estimated excess, obsolete or impaired balances. Factors
influencing these adjustments include significant estimates and judgments about the future of product life cycles, product demand,
rapid

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technological changes, development plans, product pricing, physical deterioration, quality issues, end of service life plans and
volume of enhanced or extended warranty service contracts.
    Impairment of Long-lived Assets
    We apply judgment when reviewing amortizable intangible and other long-lived assets (―long-lived assets‖) for impairment.
We apply judgment when evaluating potential impairment indicators. Indicators we consider include adverse changes in the
business climate that could affect the value of our long-lived assets, changed long-term economic outlook including downward
revisions in our revenue projections, negative current events, decreases or slower than expected growth in sales of products and
relative weakness in customer channels.
    When an impairment indicator exists, we then evaluate long-lived assets for impairment as appropriate. Because we operate as a
single reporting unit, we consider the company as a whole when evaluating our long-lived assets for impairment. If our business
operations were to change and revenue streams related to long-lived assets were to become identifiable at a lower level, we would
apply significant judgment to determine the appropriate grouping of these assets for impairment testing.
    We use an undiscounted cash flow approach to evaluate our long-lived assets for recoverability when there are impairment
indicators. Estimates of future cash flows require significant judgments about the future and include company forecasts and our
expectations of future use of our long-lived assets, both of which may be impacted by market conditions. Other critical estimates
include determining the asset group or groups within our long-lived assets, the primary asset of an asset group and the primary
asset‘s useful life.
    Inherent in our development of cash flow projections for the income approach used in an impairment test are assumptions and
estimates derived from a review of our operating results, approved business plans, expected growth, cost of capital and income tax
rates. We also make certain assumptions about future economic conditions, applicable interest rates and other market data. Many of
the factors used in assessing fair value are outside of our control. Future period results could differ from these estimates and
assumptions, which could materially affect the determination of fair value of the company and future amounts of potential
impairment.
    Accrued Warranty
    We estimate future product failure rates based upon historical product failure trends as well as anticipated future failure rates if
believed to be significantly different from historical trends. Similarly, we estimate future costs of repair based upon historical
trends and anticipated future costs if they are expected to significantly differ, for example due to negotiated agreements with third
parties. We use a consistent model and exercise considerable judgment in determining the underlying estimates. Our model requires
an element of subjectivity for all of our products. For example, historical return rates are not completely indicative of future return
rates and we must therefore exercise judgment with respect to future deviations from our historical return rates. When actual failure
rates differ significantly from our estimates, we record the impact of these unforeseen costs or cost reductions in subsequent periods
and update our assumptions and forecasting models accordingly. As our newer products mature, we are able to improve our
estimates with respect to these products.
   Income Taxes
   Deferred tax assets and liabilities are recognized for the effect of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for income tax purposes. In addition, deferred tax assets are
reduced by a valuation allowance if it is more likely than not that some or all of the deferred tax asset will not be realized. A
number of estimates and judgments are necessary to determine deferred tax assets, deferred tax liabilities and valuation allowances.
    We recognize the benefit from a tax position only if it is more-likely-than-not that the position would be sustained upon audit
based solely on the technical merits of the tax position. The calculation of our tax liabilities requires judgment related to
uncertainties in the application of complex tax regulations. We recognize liabilities for uncertain tax positions based on a two-step
process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates
that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation

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processes, if any. The second step requires us to estimate and measure the tax benefit as the largest amount that is more than 50%
likely to be realized upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as we have to
determine the probability of various possible outcomes. We reevaluate these uncertain tax positions on a quarterly basis. This
evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled
issues under audit and new audit activity.
     We have provided a full valuation allowance against our U.S. net deferred tax assets due to our history of net losses, difficulty
in predicting future results and our conclusion that we cannot rely on projections of future taxable income to realize the deferred tax
assets. In addition, we have provided a full valuation allowance against certain of our international net deferred tax assets. Due to
reorganizations in these jurisdictions, it is unclear whether we will be able to realize a benefit from these deferred tax assets. Also,
certain changes in stock ownership could result in a limitation on the amount of net operating loss and tax credit carryovers that can
be utilized each year. Should we undergo such a change in stock ownership, it would severely limit the usage of these carryover tax
attributes against future income, resulting in additional tax charges.
    Significant management judgment is required in determining our deferred tax assets and liabilities and valuation allowances for
purposes of assessing our ability to realize any future benefit from our net deferred tax assets. We intend to maintain this valuation
allowance until sufficient positive evidence exists to support the reversal of the valuation allowance. Future income tax expense
will be reduced to the extent that we have sufficient positive evidence to support a reversal or decrease in this allowance. We also
have deferred tax assets and liabilities due to prior business acquisitions with corresponding valuation allowances after assessing
our ability to realize any future benefit from these acquired net deferred tax assets.
Results of Operations
    Year Ended October 31, 2010 Compared to Year Ended October 31, 2009
    Revenue. Revenues decreased $0.4 million, or 2.8%, to $16.4 million for the year ended October 31, 2010 from $16.8 million
for the year ended October 31, 2009. Product revenues for the year ended October 31, 2010 decreased $1.7 million, or 27.9%, to
$4.2 million compared with $5.9 million for the year ended October 31, 2009 due to the expected reduction in shipments of our
legacy products due to our transition from hardware commodity storage to software-based storage solutions and services. This
reduction was partially offset by increase in RVA product sales. IP license, royalty and other revenues for the year ended October
31, 2010 increased $1.1 million, or 10.5%, to $12.1 million compared with $11.0 million for the year ended October 31, 2009 due
to the increased IP settlements and patent royalty income received during the fiscal year 2010.
    Cost of Revenue. Cost of revenue decreased $0.2 million, or 8.8%, to $2.5 million for the year ended October 31, 2010 from
$2.7 million for the year ended October 31, 2009. Product costs for the year ended October 31, 2010 decreased $231,000, or 35.3%,
to $422,000 compared with $653,000 for the year ended October 31, 2009 due to reduced shipments of legacy product with higher
material costs. IP license, royalty and other costs for the year ended October 31, 2010 decreased $11,000, or 0.5% to $2.07 million
compared with $2.08 million for the year ended October 31, 2009 due to reduction of costs and personnel related to our Operations
department offset by an increase in professional fees in relation to our IP licensing activities.
    Sales and Marketing. Sales and marketing expenses decreased $0.2 million, or 4.1%, to $5.3 million for the year ended
October 31, 2010 from $5.5 million for the year ended October 31, 2009. This decrease was due to a decrease in evaluation unit
costs, and the decrease in headcount. We anticipate that sales and marketing expenses will increase in absolute dollars, as we intend
to market our new tape archive products.
    Research and Development. Research and development expenses decreased $0.8 million, or 8.5%, to $8.9 million for the year
ended October 31, 2010 from $9.7 million for the year ended October 31, 2009. This decrease was due to reduced payroll related
expenses and contract labor, as well as a reduction in depreciation related to research and development. We anticipate that research
and development expenses will increase in absolute dollars as we intend to expand our engineering department in connection with
the development of anticipated new products. We anticipate that research and development expenses as a percentage of our total

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revenue will increase for fiscal year 2011 as we continue to invest in research, new product development and enhancements to our
existing products.
    General and Administrative. General and administrative expenses increased $0.5 million, or 24.0%, to $2.6 million for the
year ended October 31, 2010 from $2.1 million for the year ended October 31, 2009. An increase in legal fees accounted for $0.3
million of the increase, and an increase in stock-based compensation accounted for $0.2 million of the increase. The increase in
legal fees was due to an arbitration settlement in 2009 which reimbursed a portion of legal fees expended during the process, as
well as an increase in patent filing activity during 2010. The increase in stock-based compensation was due to an increase in the
value of options granted having a higher valuation, due to the rise in our stock value underlying those options. We expect the
absolute amount of general and administrative expenses to increase in the future as we expand our finance function to manage our
growth and as we incur additional costs associated with being a public company.
Liquidity and Capital Resources
    Cash Flows
    Our principal liquidity requirements are to meet our lease obligations and our working capital and capital expenditure needs.
Subject to our operating performance, which, if significantly adversely affected, would adversely affect the availability of funds,
we expect to finance our operations through cash provided by operations and existing borrowings available under our credit
facility. We cannot be sure, however, that this will be the case, and we may seek additional financing in the future. The following
table summarizes our primary sources and uses of cash in the periods presented:


                                                                                            Years Ended
                                                                                 October 31,               October 31,
                                                                                    2009                      2010
                                                                                            (in thousands)
             Net cash used in operating activities                           $       (1,968 )        $          (179 )
             Net cash used in investing activities                                     (216 )                   (320 )
             Net cash (used in) provided by financing activities                        (50 )                  9,178
             Net (decrease) increase in cash and cash equivalents                    (1,789 )                  8,514
             Cash and cash equivalents, end of period                                 5,297                   13,811
    Our cash flows from operating activities will continue to be affected principally by the extent to which we spend on increasing
personnel, primarily in sales and marketing and research and development, in order to grow our business. The timing of hiring sales
personnel in particular affects cash flows as there is a lag between the hiring of sales personnel and the generation of revenue and
cash flows from such recently hired sales personnel. Our primary uses of cash from operating activities are for personnel-related
expenditures, rent payments and inventory purchases to support our revenue growth and research and development costs.
    Net cash used in operating activities decreased from approximately $2.0 million in the year ended October 31, 2009 to
approximately $0.2 million in the year ended October 31, 2010 due to decreased losses for the year, primarily from the reduction in
expenses, adjusted for the impact of non-cash charges, particularly relating to depreciation and stock-based compensation, and net
changes in operating assets and liabilities, primarily changes in our deferred revenue, accounts payable, and accounts receivable.
We may not be able to generate positive cash flows from operating activities in the near term as we continue to add personnel,
increase inventory purchases and invest in functions associated with being a public company.
    Cash flows from investing activities primarily relate to capital expenditures to support our employees, and our capital needs in
our research and development efforts. Net cash used in investing activities was approximately $0.3 million in the year ended
October 31, 2010 compared to $0.2 million in the year ended October 31, 2009. Included in the year ended October 31, 2009 and
2010 are capital expenditures for research and development equipment.

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    Cash flows provided by financing activities in the year ended October 31, 2010 of approximately $9.2 million resulted from the
net proceeds from our October 2010 private placement. Cash used from financing activities in the year ended October 31, 2009 was
approximately $50,000 from the paydown of our line of credit.
    We believe that our existing cash balances will be sufficient to fund our projected operating requirements for at least 12
months. However, we may need to raise additional capital or incur indebtedness to continue to fund our operations in the future or
to respond to competitive pressures or strategic opportunities. Our future capital requirements will depend on many factors,
including our rate of revenue growth, the expansion of our sales and marketing activities, the timing and extent of expansion into
new territories, the timing of new product introductions and enhancements to existing products, and the continuing market
acceptance of our products. Although we currently are not a party to any agreement or letter of intent with respect to potential
investments in, or acquisitions of, complementary businesses, services or technologies, we may enter into these types of
arrangements in the future, which could also require us to seek additional equity or debt financing. Additional funds may not be
available on terms favorable to us, or at all.
    Credit Facility
    We have a revolving line of credit with a banking institution. The committed revolving line of credit provides for an advance of
up to $4.0 million with a borrowing base of the sum of $2 million if we maintain at least $4 million in unrestricted cash with or
through the bank, plus 80% of eligible accounts receivable. The bank may decrease the percentage of the eligible accounts
receivable in its good faith business judgment based on events, conditions, contingencies or risks which it determines may
adversely affect its collateral under the line of credit. The line of credit is secured by substantially all of our assets other than
intellectual property rights; however, we have agreed with the bank not to encumber those intellectual property rights. The principal
amount outstanding accrues interest at a floating per annum rate equal to 0.25% above the Prime Rate, defined in the line of credit.
We are required to satisfy certain financial and reporting covenants in conjunction with the line of credit. Financial covenants under
the credit facility include:
   •    maintaining a ratio of unrestricted cash and investment with the bank plus accounts divided by current liabilities of at least
        1.25 to 1.00;
   •    maintaining a minimum tangible net worth of at least $7.5 million plus 50% of new equity and subordinated debt and 50%
        of net income, and this covenant is tested if we maintain less than $10 million in unrestricted with the bank; and
   •    maintaining unrestricted cash and cash equivalents on deposit with the bank in an aggregate amount of not less than $2
        million.
    The line of credit will mature on December 28, 2011. We are in compliance with all the related financial covenants and
restrictions included in the agreement.
Off-Balance Sheet Arrangements
   At October 31, 2009 and 2010, we did not have any off-balance sheet arrangements.
Recent Accounting Pronouncements
    In October 2009, the FASB issued Accounting Standards Update (―ASU‖) 2009-13, Revenue Recognition (Topic 605):
Multiple-Deliverable Revenue Arrangements — a consensus of the FASB Emerging Issues Task Force (―ASU 2009-13‖). ASU
2009-13 changes accounting for certain multiple deliverable arrangements. ASU 2009-13 addresses the separation of deliverables
and how to measure and allocate the arrangement consideration to one or more units of accounting in multiple deliverable
arrangements. Currently, under the residual method of allocation, we use objective and reliable evidence of the fair value of the
undelivered elements to separate deliverables in multiple deliverable arrangements. ASU 2009-13 eliminates the residual method
and requires that consideration from the arrangement be allocated to all deliverables using the relative selling price method. ASU
2009-13 requires additional disclosures related to multiple deliverable revenue arrangements upon adoption and is effective for
fiscal years beginning after June 15, 2010, or the beginning of our fiscal 2012. In addition, ASU 2009-13 may be early adopted. It
may be implemented with either

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prospective or retrospective application; however, if early adoption is chosen, the entity must either adopt at the beginning of its
fiscal year, or adopt using retrospective application. We are still evaluating the impact of adoption; however, based on a
preliminary assessment, we do not expect the adoption of this guidance to have a material impact on our consolidated financial
statements.
     In October 2009, the FASB issued ASU 2009-14, Software (Topic 985): Certain Revenue Arrangements That Include Software
Elements — a consensus of the FASB Emerging Issues Task Force (―ASU 2009-14‖). ASU 2009-14 changes the accounting for
revenue arrangements that include both tangible products and software elements. Tangible products containing software
components and non-software components that function together to deliver the tangible product‘s essential functionality are no
longer within the scope of the software revenue guidance. Under prior guidance, such arrangements were accounted for as software
if the software was determined to be more than incidental. ASU 2009-14 requires that any hardware components of such
arrangements be excluded from software revenue guidance and that any essential software that is sold with or embedded within the
product also be excluded from software revenue guidance. This ASU is effective for fiscal years beginning after June 15, 2010, or
the beginning of our fiscal 2012. In addition, ASU 2009-14 may be early adopted. ASU 2009-14 may be implemented with either
prospective or retrospective application; however, if early adoption is chosen, the entity must either adopt at the beginning of its
fiscal year, or adopt using retrospective application. Further, ASU 2009-14 must be adopted in the same period and with the same
implementation method as ASU 2009-13. We are still evaluating the impact of adoption; however, based on a preliminary
assessment, we do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.
    In August 2009, the FASB issued ASU 2009-05, Fair Value Measurements and Disclosures (Topic 820) — Measuring
Liabilities at Fair Value (―ASU 2009-05‖). ASU 2009-05 clarifies that in circumstances in which a quoted price in an active market
for the identical liability is not available, an entity must measure fair value using either the quoted price of the identical liability
when traded as an asset, quoted prices for similar liabilities or similar liabilities when traded as assets or another valuation
technique consistent with fair value measurements such as an income approach or a market approach. ASU 2009-05 clarifies that
no separate input, or adjustment to other inputs, must be made for the existence of a restriction that prevents the transfer of a
liability when measuring fair value of a liability. We adopted ASU 2009-05 on November 1, 2009 and it did not have an impact on
our consolidated financial statements.
    In January 2010, the FASB issued ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820) — Improving
Disclosures about Fair Value Measurements (―ASU 2010-06‖). ASU 2010-06 increases disclosures to include transfers in and out
of Levels 1 and 2 and clarified inputs, valuation techniques and the level of disaggregation to be disclosed. This ASU is effective
for fiscal years beginning after December 15, 2010. In addition, ASU 2010-06 may be early adopted. We are still evaluating the
impact of adoption; however, based on a preliminary assessment, we do not expect the adoption of this guidance to have an impact
on our consolidated financial statements.

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                                                            BUSINESS
Overview
    Crossroads Systems is a global provider of solutions to connect, protect and secure business-critical data for enterprise storage
and the cloud computing marketplace using our storage software solutions based on our patented core Routing Messaging Interface,
or RMI, technology. We offer innovative, cost-effective products and solutions that are built on superior quality, reliability and
performance that allow customers to protect and manage their corporate data assets. In fiscal 2012, we plan to introduce our
Crossroads NAT3, network attached tape for Tier 3 storage, which we believe will be the first fully portable, open-standard, data
storage archive.
    We believe that we are entering an exciting new chapter in Crossroads‘ history. Founded in 1996, we developed and introduced
a bridging technology, which enabled existing storage devices to connect to the then-new Fibre Channel Storage Area Network.
Our storage router products have been used by original equipment manufacturer, or OEM, customers such as Hewlett Packard
Company, EMC Corporation and Quantum Corporation and installed in more than 125,000 storage systems worldwide.
     Most technologies have limited life spans as systems transition to newer environments. In 2005, we undertook a strategic
initiative to develop a software solutions and services model focusing on emerging higher growth business opportunities for the
company. This transition of our research and development efforts have resulted in the creation of our currently shipping products:
Read Verify Appliance, or RVA, and SPHiNX. In addition, we generated over $50 million in revenue since 2005 from our
intellectual property licensing campaign.
    These past investments in R&D, along with a recent equity capital raise of $10 million, have enabled us to accelerate our
planned introduction of the NAT3 enterprise solution. Using the intellectual property and code from the bridges, RVA and
SPHiNX, we expect to target Tier 3 archive data, which we believe to be the fastest growing segment of the market.
    Our target markets for NAT3 initially focus on the Cloud, Network Broadcasting and Healthcare as these verticals are ideally
suited for quick adoption of our solution. We are pursuing strategic relationships with potential OEMs and SIs, which will enable
us to reach the global market, as well as a branded VAR channel for our US and European operations. We intend to expand into
other vertical markets such as finance, government, retail, and logistics as the NAT3 gains industry adoption and the required
features and functions for those environments are developed.
Industry Background
    Information Technology, or IT, departments continue to experience pressure around cost effectively storing, accessing and
protecting rapidly increasing amounts of data. Even in the face of the recent economic downturn, companies still save data of all
types, structured and unstructured, for both near and long-term retention. This rapid data growth combined with demands for ready
access to data, expanding retention policies and laws regarding compliance and limited IT budget increases represent major
challenges for IT managers.
   Many companies experience rapid data growth year over year and have legal requirements or data retention policies that require
them to save data for lengthy periods, even indefinitely. This is one factor driving the need for long-term data retention solutions
and archive technologies. Additionally, many companies face regulatory requirements that mandate both long-term preservation of
and secure access to data. Even in industries without strong regulatory requirements, companies are recognizing the value of
securing access to their data as good business practice.
    This rapid growth is driven by long-term archive storage, or Tier 3 data. Private and governmental parties have growing
archives of business and operational data and also generate large amounts of data relating to governance, compliance and
e-discovery matters. Historically, tape-based products have been used for data archives due to their low cost, low power and
long-term reliability. However, demands on data storage and retrieval systems require archives to be more readily available, on-site
at a user‘s location or online. Disk or memory-based storage devices have traditionally been the only way to access online data.

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    There have been significant recent innovations in the operating and storage capabilities of tape-based systems that we believe
allow them to compete with disk or memory-based systems. An industry consortium has created Long Tape File System, or LTFS,
which enabled tape devices to write and read random files just like disk devices, increasing the flexibility of this proven storage
technology. In addition, consortium participants have also announced 35 and 50 terabyte per cartridge capabilities enabled in future
offerings. Both of these developments demonstrate significant investment in and marketability of tape-based storage capabilities.
We believe that we are a global leader and one of the few software vendors in the tape-based and storage industry, and are strongly
positioned to take advantage of recent advancements in tape-based storage with the NAT3 solution.
Business Strategy
    Our strategy is to provide solutions for the archive data storage space and provide solutions to change the way businesses
approach their long-term data repository requirements. Since 2005, we have evolved from a hardware commodity storage company
to a software solutions and services provider. The investment in R&D and the strategy to create tape monitoring and virtualization
solutions enabled us to bring new products to market while developing the Crossroads NAT3.
     Backup, recovery and archive continues to be a major focus for customers who face a number of challenges in managing and
protecting their data which continues to grow significantly year after year. Customers are demanding higher optimization and
utilization of their current assets in order to minimize their capital expenditures in this current economy. Additionally, as their Tier
3 storage needs continue to grow, they require solutions that reliably increase capacity and provide their long-term data needs at a
lower cost and using significantly lower power.
    Our strategy consists of tactical business operation objectives along with the primary focus of being the first to market with the
open-standard, low-cost, highly reliable and portable tape based archive. We believe that our current RVA and SPHiNX solutions
along with the VAR and other distribution channels can be used for the introduction of the Crossroads NAT3 solution. We have
already engaged many of the existing RVA customers as early adopters due to their use of the RVA within their environments. Key
elements of our strategy for 2011 include:
   •    achieving development milestones for the NAT3 program;
   •    building a market and vertical diverse customer advisory board for the NAT3 solution;
   •    launching the NAT3 solution early adopter program in the third fiscal quarter of 2011;
   •    pursuing relationships with cloud storage providers to implement the NAT3 solution;
   •    pursue strategic OEMs and SIs and other distribution relationships to brand, resell or utilize the NAT3 solution for their
        business objectives;
   •    launching the NAT3 for general availability in the fourth fiscal quarter of 2011;
   •    pursuing OEM and strategic relationships for our RVA solution;
   •    continuing to build our Crossroads branded sales channel in the US and European territories;
   •    continuing our IP licensing strategy; and
   •    managing our legacy bridging and routing business.
Our Current Products
   Based on our patented RMI technology and track record of more than 125,000 successful installations, our products assist
companies with information security, data protection, information assurance, business continuity, and disaster recovery. Our
products include:
   •    Fibre Channel (FC) Storage Bridges and Storage Routers offer connectivity and protocol conversion from the FC Storage
        Area Network (SAN) to SCSI tape and disk storage device interfaces;
   •    ReadVerify® Appliance (RVA®) proactively monitors tape media and the overall health of drives and tape environment
        services for customer‘s storage system analysis; and

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   •    SPHiNX provides data protection from the desktop to the data center, functioning as a network attached storage device or
        virtual tape library to ensure holistic data protection.
   Fibre Channel (FC) Storage Bridges and Storage Routers
    Our Fibre Channel Storage Bridges and Routers provide connectivity and protocol conversion from the Fibre Channel (FC)
Storage Area Network (SAN) to tape and disk storage device interfaces. We believe that our proven technology brings the best-of
class data accessibility, device management, system performance and security functionality required by today‘s enterprise SANs.
Our bridges and routers are an integral component of our solutions that protect critical enterprise information by delivering
accessible, resilient and secure business information on an anytime, anywhere basis.
    Our bridges provide value by extending the useful life of SCSI storage resources, and aggregating device ports to save on
switch port expenses. They are simple to deploy (via either rack or desktop), manage (using CLI or Ethernet interface options) and
support (with field updateable firmware). Our bridges are designed to add reliability to SANs by detecting and tracking path
readiness and network event errors and reporting configuration issues and conflicts.
    Our storage routers expand bridge functionality, offering complete network-ready services that enhance security, management
and system performance for storage devices. With our patented access controls, storage resources are securely allocated and shared.
Users can configure, secure and manage up to eight custom device maps while dynamic mapping allows immediate changes
without router reboot. Crossroads Visual Manager, or CVM, provides a powerful web-based tool used to configure, control and
manage all elements of the storage routers. An intuitive graphical representation of the router allows point-and-click access for
status information and management settings. CVM manages individual storage devices as an integrated system rather than a
collection of stand-alone devices while supporting troubleshooting utilities such as traces and event logging.
    We believe that our routers include industry-leading functionality to enhance the management, performance and security of
enterprise SANs. Our CVM provides ―point and click‖ access to status information and management settings and adds a
comprehensive suite of troubleshooting utilities, traces and event logs. SAN performance is enhanced using configurable buffered
tape writes and inquiry caching. With our patented RMI technology, storage resources are securely allocated and up to eight custom
device maps are supported. Dynamic mapping allows device maps to be updated without rebooting the router.
   ReadVerify Appliance (RVA)
    Our ReadVerify Appliance, or RVA, proactively validates the integrity of tape backup systems and provides a simple, real-time
way to monitor, track and report on the performance, utilization and health of tape devices and tape media. Providing visibility into
the causes of incomplete or failed backups, RVA helps customers address media and hardware issues before a catastrophic failure
threatens their data and business.
    RVA proactively monitors tape backups and reports cartridge and drive statistics collected during backup operations. Automatic
alerting and reporting provides critical information on impending media or drive failures, overall utilization and performance of
tape media and drives. RVA uses built-in reporting for load balancing and to proactively address media and hardware failure.
    ArchiveVerify, or AV, an optional feature for RVA, reduces the risk of losing data stored on tape and lowers backup and
archive costs. With AV verification procedures are automatically initiated, and analysis conducted on the entire written length of
tape media to ensure that what‘s been written to tape can be read back. Reporting capabilities help fulfill requirements for service
level agreements and regulatory compliance audits.
     Tape is a high-capacity, low-cost solution for securing large amounts of backup and archive data, while providing the lowest
cost, most portable and environmentally friendly solution. Use of tape continues to increase sharply as the amount of electronic
information grows and enterprises face increasing legal and regulatory pressure to store electronic information. As the number of
tape media required to support these processes increases, managing life cycle phases of tape media, from acquisition through useful
life and ultimate disposal, has become a significant task and presents a challenge not fully addressed by most IT administrators.

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     Tape resource management has also recently become a focus of corporate ―green‖ initiatives and an important part of a
comprehensive examination of backup operations with the intent to control costs and reduce companies‘ carbon footprint. Green
initiatives encourage reuse of tape media at end-of-life through reselling or recycling, but used tape often contains sensitive or
confidential company information that could potentially fall into the wrong hands. To avoid potential exposure, data eradication is
recommended before reusing tape media because simple erasure does not guarantee data has been completely and permanently
removed. Eradication involves applying a high-intensity magnetic field using professional-grade degaussing equipment, which is a
labor and resource intensive process. A simpler, though less green alternative is to simply destroy tapes by incinerating or cutting
and pulverizing them before discarding. Whatever method is chosen, dispensation of tape media in an environmentally-responsible
manner is not a trivial task.
    Many IT administrators have expanded their approach to backup systems going green beyond managing end-of-life of used
tape, to include the concept of ―resource stewardship,‖ a holistic approach to environmental protection. Resource stewardship calls
for reducing the environmental impact of all life cycle phases of systems, not just the consumable E-waste at end-of-life. For tape
backup systems, an important aspect of resource stewardship is better backup system design that improves operational efficiency
and minimizes tapes in use at a given time. Resource stewardship uses hardware resources and consumables efficiently and
continues through responsible tape disposal. Reselling or recycling used media plays an important role, but reducing tape
requirements up front becomes key to helping proactively reduce tapes being managed and ultimately requiring disposal.
    Data compression and de-duplication reduce space requirements for storing backup and archive data, significantly reducing
tapes required for data protection operations. However, to comprehensively control and minimize tapes in use at a given time,
system reliability issues attributed to failure of tape media, tape drives or interaction of the two must also be addressed. IT
administrators commonly mitigate risk of these causes of failed backups by making copies of the same backup, prematurely cycling
tape media or destroying potentially good tape media after a failure, all activities that increase the number of tapes managed,
creating unnecessary waste. Typical tape management techniques are low-tech approaches that ensure tape vendor‘s directions for
handling and storage are followed, tapes are replaced tapes regularly and tape drives are cleaned according to manufacturer‘s
recommended schedules. These practices are prone to arbitrary decision making about tape viability and do not assure successful
backups, ability to quickly find and replace failed tape(s) or avoid disposing of tapes prior to true end-of-life. All these
circumstances contribute to increased requirements for tape that translate into end-of-life management issues.
     To improve reliability of data protection operations and manage tape resources in an environmentally friendly way, a
comprehensive tool to statistically measure and analyze backup system and media performance is needed. Our RVA is a tape
backup system monitoring appliance that installs and configures easily and immediately begins reporting on the health of the
backup infrastructure, including individual tape media. Too often, when a backup application reports media errors, the assumption
is the media is bad and the tape is discarded. However, tape drives are often the root cause of errors, and a misdiagnosis can lead to
throwing away good media leading to additional costs. RVA provides a method to diagnose a degrading backup environment and
correctly identify root cause. Using RVA, tapes will not be disposed of until they truly reach end-of-life.
    RVA further contributes to resource stewardship by improving backup system efficiency and reliability. Measuring utilization
of each unique drive makes analysis data and reporting available on drives that are over- and under-utilized, providing a method to
tune the system. Users are alerted to potential system imbalances, system configuration issues or problems with individual drives or
media. Proper configuration of data management applications and system infrastructure improves performance and reliability and
optimizes use of storage devices and tape media. Increased system reliability contributes to resource stewardship goals, validates
efficient system designs and translates into real savings by eliminating duplicate backups and optimizing use of tape resources.
RVA can help defer tape purchases, reduce recycling obligations, control disposal costs and contribute to corporate green initiatives
by minimizing tapes required to support data protection operations.

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    Given the complexity of environmentally-friendly tape disposal, IT administrators should focus on effective resource
stewardship in all phases and aspects of their backup systems to help mitigate tape end-of-life issues. Our RVA helps achieve
resource stewardship objectives by improving backup and archival systems performance and reliability, contributing to efficient use
of backup resources, using tape until true end of-life is reached and reducing the number of tapes required to support operations.
We believe these benefits will conserve resources, reduce toxins entering the waste stream and mitigating recycling activities.
Results can be significant contributions to efficient resource usage and waste prevention that moves IT processes toward corporate
green goals and initiatives.
   SPHiNX
    SPHiNX provides complete disaster recovery capabilities for mid-range server, open systems and the desktop host environment
and is designed to scale easily to grow with a customer‘s business. As a primary repository for data center backups, SPHiNX can
be used as secondary tiered storage for replicated data to meet disaster recovery requirements. As a disk-based data protection
solution, SPHiNX maximizes reliability and improves backup and restore success rates by eliminating associated drive or media
errors. SPHiNX offers flexible functionality either as a network attached storage, or NAS, device or virtual tape library, or VTL,
for rapid, reliable data recovery with reduced data loss and minimal downtime. SPHiNX is delivered via a dedicated appliance with
hot swappable drives and redundant power supplies ensures high system availability.
   Backups can be streamlined for improved performance, and restores are exponentially faster than using traditional tape drives.
Multiple host systems can be secured and connected to SPHiNX as a shared resource for several systems or partitions with multiple
backup streams supported from any single system. With immediate access to stored data, SPHiNX drastically reduces recovery
time to meet increasing stringent recovery time objective and recovery point objective requirements. A customer can reduce capital
expenditures and operational expenses by consolidating the number of tape devices and media that must be maintained.
    We have been successfully integrating with other leading technologies for more than 15 years. For example, SPHiNX can
emulate standard tape drive and library formats to ensure compatibility with existing backup applications to leverage the assets a
customer may already have. SPHiNX can integrate with most leading backup applications with no disruption to current backup
policies and processes.
   IP Licensing Campaign
    We have focused on developing a strong intellectual property portfolio and licensing campaign. Licensing fees and royalties
have been an ongoing component of revenue. We maintain an active licensing program related to the ‘972 family, which has been
licensed to over 40 of the leading storage industry providers. We pursue upfront nonrefundable licensing fees and recurring
licensing fees. We believe that we may be able to use the other components of our intellectual property portfolio to generate
revenues through multiple avenues as well.
Principal Markets and Distribution Channels and Marketing
    We employ a multi-channel distribution strategy, selling products and services to end users through OEM and channel partners
along with our direct sales force. Our channel partners include VARs, SIs and distributors. We have over 50 channel partners that
help market and sell our appliances, typically with the assistance of our direct sales force. Our direct sales force is responsible for
managing and overseeing indirect sales within our geographic territories, including North America, Europe and Asia. This joint
sales approach combines the benefit of our having relationships with substantially all of our customer accounts with the reach and
relationships of our channel partners, especially internationally. We intend to expand these channel partner relationships in the
future to further extend our distribution coverage.
   We focus our marketing efforts on communicating product advantages, generating qualified leads for our direct sales force and
channel partners and increasing brand awareness. We rely on a variety of marketing efforts, including tradeshows, advertising,
public relations, industry research and our website. In addition, we work closely with a number of technology partners, including
some of the leading suppliers of storage infrastructure products, on co-marketing and lead-generation activities in an effort to
broaden our marketing reach.

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Customers
    Customers for our products and services include a variety of other distributors, resellers and OEMs to reach end user customers
from small businesses to government agencies and large, multinational corporations. Our sales are concentrated with several key
customers because under our business model, as is typical for our industry, we sell to OEMs, distributors, SIs and VARs to reach
end user customers. Sales to our top three customers represented 75.0% of revenue in fiscal 2010 and 54.2% of revenue in fiscal
2009. Sales to HP comprised 49.1% of revenue in fiscal 2010 compared to 54.2% of revenue in fiscal 2009.
Global Maintenance and Warranty
    Our global services strategy is an integral component of our total customer solution. Service is typically a significant purchase
factor for customers considering data management and storage solutions, and our ability to provide comprehensive service and
support can present us with a noteworthy competitive advantage. In addition, we believe that our ability to retain long-term
customer relationships and secure repeat business is frequently tied directly to our service capabilities and performance. Our
warranty period is typically one year from the date of shipment to the customer for hardware and 90 days for software.
    We offer tiered customer support programs through the sale of support and services contracts. Customers that purchase a
support and services contract are granted rights to accelerated shipment of replacement parts or onsite hardware repair and support,
and software updates and maintenance releases that become available during the support period. Our support and services contracts
are typically offered for periods of one to three years. We offer product support to all of our customers, including those customers
who purchase our appliances through our channel partners.
    North American customers are supported out of our headquarters in Austin, Texas. European customers are supported by a
third-party vendor located in Europe in addition to our headquarters.
Research and Development
    Continued investment in research and development is critical to our business. We have assembled a team of skilled engineers
with extensive experience in the fields of computing, storage, network system design, internet routing protocols and embedded
software. These individuals have extensive prior experience with many leading digital storage and computer data networking
companies. We have invested significant time and financial resources in the development of our storage management solutions for
enterprise storage and cloud computing data providers. Research and development costs were approximately $9.7 million and $8.9
million for fiscal 2009 and 2010, respectively. Our research and development activities take place at our corporate headquarters in
Austin, Texas. We intend to dedicate significant research and development resources to continue to improve the performance and
features of our storage and protection solutions and to expand our product offerings to address other segments of the enterprise
storage market.
Intellectual Property
    Our future success as a company will depend in part upon our ability to protect our core technology and intellectual property.
To accomplish this, we rely on a combination of intellectual property rights, including patents, trade secrets, copyrights and
trademarks, as well as customary contractual protections. Our registered trademarks in the United States are ―Crossroads,‖
―Crossroads Systems,‖ ―FMA,‖ ―NearEdge,‖ ―ReadVerify,‖ ―RVA,‖ ―ShareLoader,‖ ―Strongbox,‖ ―TapeSentry,‖ XpanDisk,‖ and
―XpanTape.‖
    We develop and protect our technology and know-how, principally in the field of data storage. As of October 31, 2010, we held
75 U.S. patents and have 31 pending U.S. patent applications. We also hold a number of foreign patents and patent applications for
certain of our products and technologies.
    It is unknown if any of the pending patent applications will issue as patents. The patent applications may be opposed, contested,
circumvented, designed around by a third party, or found to be invalid or unenforceable.
   Although we believe that our patents and applications have significant value, rapidly changing storage industry technology
means that our future success will also depend heavily on the technical competence and creative skills of our employees.

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    United States patent filings are intended to provide the holder with a right to exclude others from making, using, selling or
importing in the United States the inventions covered by the claims of granted patents. We do not know whether any of our pending
patent applications will result in the issuance of patents or whether the examination process will require us to narrow our claims.
Our issued United States patents, and any future patents that may be issued, may be contested, circumvented or invalidated, and we
may not be able to prevent third parties from infringing these patents
   In addition to the foregoing protections, we generally control access to and use of our proprietary software and other
confidential information through the use of internal and external controls, including contractual protections with employees,
contractors, customers and partners, and our software is protected by United States and international copyright laws.
    Although we rely on patent, copyright, trade secret, trademark and other intellectual property laws to protect our technology, we
also believe that factors such as the technological and creative skills of our personnel, new product developments, frequent product
enhancements and reliable product support and services are essential to establishing and maintaining a technology leadership
position. We cannot be sure that others will not develop technologies that are similar or superior to our technology.
    Protecting against the unauthorized use of our patents, trademarks and other proprietary rights is expensive, difficult and, in
some cases, impossible. Litigation has been necessary in the past, and may be necessary in the future, to enforce or defend our
intellectual property rights, to protect our trade secrets or to determine the validity and scope of the proprietary rights of others.
Such litigation could be costly and divert management resources, either of which could harm our business. Furthermore, many of
our current and potential competitors have the ability to dedicate substantially greater resources to enforce their intellectual
property rights than we do. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon or
misappropriating our intellectual property.
Competition
    The market for our products is highly competitive and is driven by rapidly changing technology. In addition to competing with
traditional providers of tape-based storage systems, such as Oracle, IBM, HP and Quantum Corporation, we compete with other
established storage companies such as EMC Corporation, Hitachi Data Systems Corporation, and NetApp, Inc. that offer a variety
of different data protection products. Some of our competitors sell, or have announced plans to sell, products and services to
connect, protect and secure business-critical data that compete directly with our offerings. We also compete with a number of
emerging hardware and software companies such as TSI and Falconstor Software, Inc. that may become more significant
competitors in the future.
    In general, while these companies have product offerings that have similarities to our solutions, we believe our go-to-market
approach either positions us outside of their target markets, such as with the SPHiNX solution, or positions us in a niche market
where other players have not chosen to offer competing solutions, such as RVA. We plan to target the highly competitive archive
data market with the NAT3 solution, but we believe the NAT3 solution provides superior function and value compared to the
solutions offered by potential competitors and addresses key customer issues that other companies‘ offerings do not address. We
believe the principal factors on which our products compete are as follows:
   •    innovative features and functionality;
   •    integrated monitoring and virtualization technology;
   •    product features and enhancements, including ease of implementation and use, performance, scalability, reliability,
        replication and multi-protocol support;
   •    high performance, low latency storage routing;
   •    product pricing and total cost of ownership;
   •    product interoperability with customer networks and backup software;
   •    industry credibility and emerging market presence; and
   •    customer support and services.

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    We continue to pursue strategic and OEM relationships for our products and services, which, along with our growing branded
VAR channel, we expect to expand the breadth and reach of our solutions worldwide. As one of the few storage software
companies with our deep tape based knowledge, we offer solutions that can augment the offerings of larger suppliers without
competing directly with their products to meet particular customer needs that we believe other companies‘ offerings do address.
However, Many of our current and potential competitors have longer operating histories, greater name recognition, larger customer
bases and significantly greater financial, technical, sales and marketing and other resources than we have. Our competitors may
offer to sell their products and services at more attractive prices than we offer, and potential customers may prefer to purchase from
their existing vendors rather than a new vendor regardless of product performance or features. Some of our competitors have also
entered into relationships with original equipment manufacturers, or OEMs, that could provide those competitors with sales,
marketing, distribution and other advantages.
Employees
    As of October 31, 2010, we had 86 employees in offices around the world, of which 76 were in the United States. Of the total
employees, 22 were engaged in sales and marketing, 50 in research and development and 11 in general and administration, support
and services and operations. None of our employees are represented by a labor union, and we consider current employee relations
to be good.
Legal Proceedings
    On September 1, 2011, we filed a lawsuit against 3Par, Inc., American Megatrends, Inc., Rorke Data, Inc., D-Link Systems,
Inc., Chelsio Communications, Inc., DataCore Software Corporation, and IStor Networks, Inc. in a lawsuit styled Crossroads
Systems, Inc. v. 3Par, Inc. et al, Civil Action No. 1:10-CV-652-SS (W.D. Tex — Austin Division) alleging infringement by each of
the defendants of one or both of U.S. Patent Nos. 6,425,035 and 7,051,147. The defendants have been granted extensions of time to
answer the complaint. The lawsuit has not yet entered into the discovery phase.
    In addition to the 3 Par, Inc. et al, lawsuit above, from time to time, we may become involved in legal proceedings arising in the
ordinary course of our business. We are not presently involved in any legal proceeding in which the outcome, if determined
adversely to us, would be expected to have a material adverse effect on our business, operating results or financial condition.
Environmental Compliance
    Our business involves purchasing finished goods as components from different vendors and then assembling and configuring of
these components into finished products at our facilities. Accordingly, we are not involved in the actual manufacturing of
components, which can often involve significant environmental regulations with respect to the materials used, as well as work place
safety requirements. Our operations and properties, however, do remain subject in particular to domestic and foreign laws and
regulations governing the storage, disposal and recycling of computer products. For example, our products are subject to the
European Union‘s Directive 2002/96/EC Waste Electrical and Electronic Equipment and Directive 2002/95/EC on Restriction on
the Certain Hazardous Substances in Electrical and Electronic Equipment. To date, we have not been the subject of any material
investigation or enforcement action by either U.S. or foreign environmental regulatory authorities. Further, because we do not
engage in primary manufacturing processes like those performed by our suppliers who are industrial manufacturers, we believe that
costs related to our compliance with environmental laws should not materially adversely affect us.
Properties
    We lease approximately 37,800 square feet of office space in Austin, Texas, which serves as our principal executive offices,
laboratory, data center and administrative space. The original lease was effective October 31, 2005, and the term of the lease
expires in February 2015. Under the term of the lease, we pay rent of approximately $364,000 per year.
   We also lease a 3,415 square foot sales office in Schwabisch Gmund, Germany. The lease is a month-to-month term, and we
pay approximately $53,000 per year.

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                                                          MANAGEMENT
Executive Officers and Directors
   The following table sets forth certain information regarding our executive officers and directors as of the date of this
prospectus.


        Name                               Age                                      Position
        Robert C. Sims                      43     President, Chief Executive Officer and Member of the Board of
                                                   Directors
        Brian Bianchi                       44     Chief Operating Officer
        David Cerf                          45     Executive Vice President of Business and Corporate Development
        Jennifer Ray Crane                  39     Chief Financial Officer
        Bernd R. Krieger                    57     General Manager, Europe
        Don Pearce                          67     Director, Chairman of the Board of Directors
        Elliott Brackett                    46     Director
        Joseph J. Hartnett                  55     Director
        Alan B. Howe                        50     Director
        Steven Ledger                       51     Director
    Robert C. Sims has served as our President and Chief Executive Officer since October 2003 and as a member of our Board of
Directors since November 2003. From May 2002 to September 2003, Mr. Sims served as our Chief Operating Officer. From April
2001 to May 2002, Mr. Sims served as our Vice President of Engineering and Operations. From July 2000 to April 2001, Mr. Sims
served as our Vice President of Operations and Corporate Quality. From March 1999 to July 2000, Mr. Sims served as our Director
of Operations. Prior to joining us, from January 1998 to March 1999, Mr. Sims managed the advanced manufacturing and product
test organizations at Kentek Corp. From 1990 to 1998, Mr. Sims served in various capacities at Exabyte, including manager of the
manufacturing engineering and quality organizations for the high-end tape drive division. Mr. Sims received a B.S.E.E. from
Colorado State University.
    Brian Bianchi has served as our Chief Operating Officer since January 2008. Mr. Bianchi served as our Vice President,
Engineering Development from November 2004 to January 2008. From May 2002 to October 2004, Mr. Bianchi served as our
Director of Development and Product Test. From April 1998 until April 2002, Mr. Bianchi served in various engineering capacities
at Crossroads. Prior to joining us, from May 1996 to March 1998, Mr. Bianchi served as Technical Program Manager for Hewlett
Packard. From June 1988 to April 1996, Mr. Bianchi served in various capacities at Convex Computer Corporation, including
Networking & I/O Software Manager. Mr. Bianchi received a Bachelor of Arts in Computer Science from the University of Texas,
Austin.
    David Cerf has served as our Executive Vice President of Business and Corporate Development since April 2005. Prior to
joining us in 2005, Mr. Cerf served as Vice President of Sales and Business Development at NexQL, a provider of advanced
database acceleration technologies since 2002. Prior to NexQL, Mr. Cerf co-founded 360World, a national provider of
video/imaging solutions. In 1988, as the Founder and Managing Director of the Dallas Business Incubator, Mr. Cerf was
responsible for the development and funding of more than 50 new high-growth startup companies.
    Jennifer Ray Crane has served as our Chief Financial Officer since November 2008. Ms. Crane joined Crossroads in 2003 as
Financial Controller and currently leads the company‘s financial and legal teams. Prior to joining us, Ms. Crane held senior
positions at Deloitte & Touche LLP and PriceWaterhouse Coopers LLP. Jennifer is an active member of the Financial Executive
Institute (FEI) association as well as the American Institute of Certified Public Accountants (AICPA) and holds a Bachelor of
Business Administration from the University of Texas at Austin.
    Bernd R. Krieger has served as our General Manager, Europe since November 2008. With more than 30 years of experience in
the data storage and backup industry, Mr. Krieger joined Crossroads in 2007 as the Head of European Sales. Previously, Bernd held
general manager and CEO positions at several IT companies, with experience in sales and multi-country operations. Prior to joining
Crossroads and after 2005, Mr. Krieger served as General Manager, Sales and Marketing at Data Global GmbH. Mr. Krieger also
previously served as

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CEO of Entire Software AG, and Director of International Sales at Grau (ADIC). Mr. Krieger brings strong relationships with
established partners and resellers throughout the IT industry, as well as Global 1000 companies.
    Don Pearce joined our board of directors in May 2009 and has served as Chairman of the Board since May 2010. Mr. Pearce
served as Vice President for the Texas division of Alliance Technology Group from April 2009 to January 2011. Mr. Pearce served
as a Regional Sales Manager for Sun Microsystems from October 2005 until June 2008. Mr. Pearce founded and has been the
owner of Pearce Advisory Services since June 2008. Beginning his career in systems and sales at IBM, Mr. Pearce was employed
for more than 20 years at Amdahl Corp until January 2001. Mr. Pearce then held sales executive positions at Tarantella, StorageTek
and Sun Microsystems. Mr. Pearce has served as a member of the Advisory Board for the Computer Science Engineering
Department at Southern Methodist University since April 2002. Mr. Pearce holds a B.S. in mathematics from Southern Methodist
University and an M.S. in mathematics from Louisiana State University, where he also taught Mathematics for two years. We
believe Mr. Pearce‘s qualifications to serve on our board of directors include his extensive experience and a global network of
industry contacts from his career focused on sales. We believe that Mr. Pearce is a recognized leader in business management with
a significant track record of delivering revenue generating strategies within the high-tech sector.
   Elliott Brackett has served as a director since September 2008. In 1988, Mr. Brackett purchased Lifetime Automotive Products
from bankruptcy. Mr. Brackett has been Vice President of Exceptional Products, Inc., a direct response television marketing
company, for over five years. Mr. Brackett is a co-founder of Encrypto Inc., is a key founder of NexQL, and currently serves as a
consultant for SCA Promotions and Davis Technologies International. Mr. Brackett holds a BBA from Southern Methodist
University. We believe Mr. Brackett‘s qualifications to serve on our board of directors include more than 20 years of experience in
new product funding, marketing, acquisitions and turnarounds.
     Joseph J. Hartnett was appointed to our board of directors on March 1, 2011. Mr. Hartnett served as President and Chief
Executive Officer of Ingenient Technologies, Inc., an embedded multimedia IP licensing and software services company with
world headquarters in Rolling Meadows, Illinois, from April 2008 through November 2010. He joined Ingenient as Chief
Operating Officer in September 2007. Mr. Hartnett left Ingenient following the sale of the company and completion of post-sale
activities. From May 2001 through October 2006, Mr. Hartnett served as President and Chief Executive Officer of U.S. Robotics
Corporation, a global Internet communications product company headquartered in Schaumburg, Illinois. He joined U.S. Robotics
as its Chief Financial Officer in June 2000. Prior to that, Mr. Hartnett was a partner with Grant Thornton LLP where he served for
over 20 years in various leadership positions at the regional, national and international level. Mr. Hartnett is a CPA and holds a
bachelor‘s degree in Accounting from the University of Illinois at Chicago. Mr. Hartnett currently serves as a director of Sparton
Corporation, a NYSE-listed company, Chairman of the Audit Committee, member of the Compensation Committee and past
member of the Nominating and Corporate Governance Committee. He is a former director of both U.S. Robotics Corporation and
Ingenient Technologies, Inc. Mr. Hartnett brings significant industry experience in the areas of international business, operations
management, executive leadership, strategic planning and finance as well as extensive corporate governance, executive
compensation and financial experience from his work on current and past boards of directors.
    Alan B. Howe has served as a director since August of 2005. He has served as co-founder and managing partner of Broadband
Initiatives, LLC, a boutique corporate advisory and consulting firm, since 2003. He also has served as a Managing Director with B
Riley & Co. LLC in their corporate advisor group under a consulting agreement, since December 2009. He served as vice president
of strategic and wireless business development for Covad Communications, Inc., a national broadband telecommunications
company from May 2005 to October 2008. Prior to that, Mr. Howe was chief financial officer and vice president of corporate
development of Teletrac, Inc., and director of corporate development for Sprint PCS. Mr. Howe is currently a member of the public
Boards of Directors and Chairman of both Ditech Networks, Inc. and Selectica, Inc. He previously served on the boards of Altigen,
Inc., Proxim, Inc., Alliance Semiconductor Inc., LCC International, Inc., Kitty Hawk, Inc., and Dyntek, Inc. which are no longer
reporting companies. Mr. Howe holds a B.A. in business administration from the University of Illinois and an M.B.A. from the
Indiana University Kelley Graduate School of Business. We believe that Mr. Howe's prior positions and current

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advisory roles provide the Board with leadership experience and operational knowhow. In addition his outside board experience
helps the Board in its compliance and governance discussions and strategies.
    Steven Ledger has served as a director since February 2010. Mr. Ledger founded and has been Managing Partner of Tamalpais
Partners since 2002, and previously founded, and served as Managing Partner of eCompanies Venture Group from 1999 to 2002,
where he managed an Internet focused, strategic venture capital fund with investors that included Sprint, Disney, EarthLink and
Sun America. Prior to founding eCompanies Venture Group, Mr. Ledger served as Managing Partner and Portfolio Manager at San
Francisco Investment Group and Kayne Anderson Investment Management. He began his career at Fidelity Management and
Research as an Equity Research Analyst and Portfolio Manager. Mr. Ledger also serves on the board of directors of Acorn Energy,
Inc., a Nasdaq Global Market-listed company. Mr. Ledger is a graduate of the University of Connecticut. We believe Mr. Ledger‘s
qualifications to serve on our board of directors include his extensive operational expertise combined with corporate finance and
business development experience developed from 26 years of experience in the financial services industry.
Board of Directors
    Board Composition and Election of Directors
    We operate under the direction of our board of directors. Our board of directors is responsible for the management of our
business and affairs. Our certificate of incorporation provides that the number of directors may be determined pursuant to our
bylaws, which provide that such number may be determined from time to time by our board of directors. However, under our
bylaws, the number of directors shall not be less than one. Our directors hold office until their successors have been elected and
qualified or until their earlier death, resignation or removal. There are no family relationships among any of our directors or
executive officers.
    Independent Directors
    Our board of directors is currently composed of six members. Messrs. Brackett, Ledger, Pearce, Howe and Hartnett qualify as
independent directors in accordance with the listing requirements of The Nasdaq Stock Market. The Nasdaq independence
definition includes a series of objective tests, such as that the director is not, and has not been for at least three years, one of our
employees and that neither the director, nor any of his family members has engaged in various types of business dealings with us.
In addition, as further required by the Nasdaq rules, our board of directors has made a subjective determination as to each
independent director that no relationships exist which, in the opinion of our board of directors, would interfere with the exercise of
independent judgment in carrying out the responsibilities of a director. In making these determinations, our board of directors
reviewed and discussed information provided by the directors and us with regard to each director‘s business and personal activities
and relationships as they may relate to us and our management.
Board Committees
    Our board of directors has established an audit committee and a compensation committee. Each committee operates under a
charter approved by our board of directors. Copies of each committee‘s charter are posted on the Corporate Governance section of
our website, www.crossroads.com .
    Audit Committee
    The members of our audit committee are Mssrs. Brackett, Ledger and Pearce. Mr. Ledger chairs the audit committee. Our board
of directors has determined that Mr. Ledger is an ―audit committee financial expert‖ as defined in applicable SEC rules. Our audit
committee‘s responsibilities include:
   •    appointing, compensating, retaining and overseeing the work of any public accounting firm engaged by us for the purpose
        of preparing or issuing an audit report or performing other audit, review or attest services;
   •    reviewing and discussing with management and the external auditors our audited financial statements;
   •    considering the effectiveness of our internal control system;

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   •    reviewing management‘s compliance with our code of business conduct;
   •    reviewing the effectiveness of our internal audit function;
   •    discussing with management our risk management policies;
   •    establishing our policy regarding our hiring of employees or former employees of the external auditors and procedures for
        the receipt, retention and treatment of accounting related complaints and concerns;
   •    meeting independently with our internal auditors, external auditors and management;
   •    reviewing and approving related person transactions; and
   •    preparing the audit committee report required by the proxy rules of the SEC.
    All audit and non-audit services, other than de minimus non-audit services, to be provided to us by our external advisors must
be approved in advance by our audit committee.
   Compensation Committee
   The members of our compensation committee are Mssrs. Brackett, Ledger and Pearce. Mr. Brackett chairs the compensation
committee. Our compensation committee‘s responsibilities include:
   •    annually reviewing and approving corporate goals and objectives relevant to Chief Executive Officer compensation;
   •    determining our Chief Executive Officer‘s compensation;
   •    reviewing and approving, or making recommendations to our board with respect to, the compensation of our other
        executive officers;
   •    overseeing an evaluation of our senior executives;
   •    overseeing and administering our cash and equity incentive plans;
   •    reviewing and making recommendations to our board with respect to director compensation;
   •    reviewing and discussing annually with management our ―Compensation Discussion and Analysis‖ disclosure required by
        SEC rules; and
   •    preparing the annual compensation committee report required by SEC rules.
   Compensation Committee Interlocks and Insider Participation
   None of the members of our compensation committee is or has at any time during the past year been an officer or employee of
ours. None of our executive officers currently serves or in the past year has served as a member of the board of directors or
compensation committee of any entity that has one or more executive officers serving on our board or compensation committee.
Code of Business Conduct and Ethics
   We have adopted a written code of business conduct and ethics that applies to our senior management and financial employees.
A current copy of the code is posted on the Corporate Governance section of our website, www.crossroads.com .

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Executive Compensation
   Summary Compensation Table for Fiscal Year 2010
   The following table sets forth the total compensation awarded to, earned by, or paid to Mr. Sims, Mr. Cerf and Mr. Bianchi,
who are referred to as our ―named executive officers,‖ during the year ended October 31, 2010.


        Name and Principal        Year         Salary           Bonus           Stock         Option            Total
        Position                                ($)              ($) (1)       Awards         Awards             ($)
                                                                                ($) (2)        ($) (3)
        Robert C. Sims            2010         275,000          105,407         57,670         134,297         572,374
        President and Chief
        Executive Officer
        David Cerf                2010         225,000           16,373         33,229         107,438         382,040
        Executive Vice
        President of
        Business and
        Corporate
        Development
        Brian Bianchi             2010         200,000           18,333         33,553          26,859         278,745
        Chief Operating
        Officer



(1) On January 7, 2010, we awarded cash bonuses of $28,417, $16,373, and $16,533 to Messrs. Sims, Cerf, and Bianchi,
    respectively. Mr. Sims also receives a bonus of 1% of certain IP revenue, receiving an additional $76,990 categorized as bonus,
    during fiscal year 2010.
(2) On January 7, 2010, we awarded 183,333, 105,635, and 106,667 shares of common stock to Messrs. Sims, Cerf, and Bianchi,
    respectively. The dollar amounts in the table represent the total grant date fair value of the award in accordance with the
    authoritative guidance issued by the Financial Accounting Standards Board (―FASB‖) on stock compensation based on the
    closing price of our common stock on the Pink Sheets or the date of grant.
(3) We granted options to purchase 250,000, 200,000, and 50,000 shares of common stock on August 25, 2010 to Messrs. Sims,
    Cerf, and Bianchi, respectively, at a grant date fair value of $0.27 per share. These awards vest 25% on the one-year
    anniversary of the award, and 6.25% quarterly for the following three years. We also granted options to purchase 250,000,
    200,000, and 50,000 shares of common stock on August 25, 2010 to Messrs. Sims, Cerf, and Bianchi, respectively, at a grant
    date fair value of $0.27 per share. These awards vest 50% on the first anniversary of the award, and 50% on the second
    anniversary of the awards.

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   Outstanding Equity Awards at Fiscal Year-End 2010
   The following table sets forth information regarding unexercised options held by each of our named executive officers as of
October 31, 2010.


        Name                              Number of              Number of            Options             Options
                                           Securities             Securities          Exercise           Expiration
                                          Underlying             Underlying           Price ($)            Date
                                          Unexercised            Unexercised
                                          Options (#)            Options (#)
                                          Exercisable           Unexercisable
        Robert C. Sims                      32,500 (1)                    —       $      2.65               7/31/2011
                                             7,500 (2)                    —       $      2.65               7/31/2011
                                           100,000 (3)                    —              1.55               5/31/2012
                                            21,875 (4)                    —              1.14               2/12/2013
                                            28,125 (5)                    —              1.14               2/12/2013
                                            15,625 (6)                    —              1.87               8/21/2013
                                            34,375 (7)                    —              1.87               8/21/2013
                                            58,405 (8)                    —              2.43               9/30/2013
                                            66,595 (9)                    —              2.43               9/30/2013
                                           170,993 (10)                   —              1.33              10/19/2014
                                            79,007 (11)                   —              1.33              10/19/2014
                                           144,000 (12)                   —              0.88               3/31/2016
                                           250,749 (13)               16,717             1.12               1/31/2017
                                                — (14)               250,000             0.39               8/25/2020
                                                — (15)               250,000             0.39               8/25/2020
        David Cerf                         230,000 (16)                   —              0.85               4/20/2015
                                            15,000 (12)                   —              0.88               3/31/2016
                                            59,387 (13)                3,960             1.12               1/31/2017
                                                — (14)               200,000             0.39               8/25/2020
                                                — (15)               200,000             0.39               8/25/2020
        Brian Bianchi                        7,499 (17)                   —              2.65               7/31/2011
                                            22,501 (2)                    —              2.65               7/31/2011
                                            27,923 (18)                   —              1.55               5/31/2012
                                            27,077 (3)                    —              1.55               5/31/2012
                                            20,700 (7)                    —              1.87               8/21/2013
                                            50,000 (19)                   —              2.66               2/04/2014
                                             1,853 (20)                   —              1.39               9/29/2014
                                            42,147 (21)                   —              1.39               9/29/2014
                                            49,000 (22)                   —              1.14               8/31/2015
                                            48,176 (12)                   —              0.88               3/31/2016
                                           164,966 (13)               10,998             1.12               1/31/2017
                                                — (14)                50,000             0.39               8/25/2020
                                                — (15)                50,000             0.39               8/25/2020



(1) This award was fully vested on October 31, 2004.
(2) This award was fully vested on July 31, 2005.
(3) This award was fully vested on May 31, 2004.
(4) This award was fully vested on November 12, 2004.
(5) This award was fully vested on February 12, 2007.
(6) This award was fully vested on November 21, 2004.
(7) This award was fully vested on August 21, 2007.

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(8) This award was fully vested on December 31, 2006.
(9) This award was fully vested on September 30, 2007.
(11) This award was fully vested on October 19, 2007.
(10) This award was fully vested on October 19, 2008.
(12) This award was fully vested on March 31, 2010.
(13) Messrs. Sims, Cerf and Bianchi were awarded options to purchase 267,466, 63,347, and 175,964 shares of common stock,
     respectively, on January 31, 2007. These awards vest 25% on the one-year anniversary of the award, and 6.25% quarterly for
     the following three years. These awards are fully vested as of January 31, 2011.
(14) Messrs. Sims, Cerf and Bianchi were awarded options to purchase 250,000, 200,000, and 50,000 shares of common stock,
     respectively, on August 25, 2010. These awards vest 25% on the one-year anniversary of the award, and 6.25% quarterly for
     the following three years. These awards are fully vested as of August 25, 2014.
(15) Messrs. Sims, Cerf and Bianchi were awarded options to purchase 250,000, 200,000, and 50,000 shares of common stock,
     respectively, on August 25, 2010. These awards vest 100% on the two-year anniversary of the award. These awards are fully
     vested as of August 25, 2012.
(16) This award was fully vested on April 15, 2009.
(17) This award was fully vested on October 31, 2003.
(18) This award was fully vested on December 31, 2003.
(19) This award was fully vested on February 4, 2008.
(20) This award was fully vested on December 29, 2005.
(21) This award was fully vested on September 29, 2008.
(22) This award was fully vested on August 31, 2009.
    Employment Agreements and Severance Arrangements
    Robert C. Sims Employment Agreement . We entered into an amended and restated employment agreement with Robert C.
Sims, our President and Chief Executive Officer, in April 2009. Mr. Sims‘ employment is on an ―at-will‖ basis and may be
terminated at any time, upon written notice, with or without cause, at our option or Mr. Sims‘ option, subject to the severance
benefit program described below. Mr. Sims‘ annual base salary is currently $275,000. Pursuant to the agreement, Mr. Sims is
eligible to participate in our bonus plans and to receive such benefits as may be in effect from time to time and as afforded to other
of our executives.
    Severance Benefit Program . We have a severance benefit program for certain members of management, including Mr. Sims,
Mr. Bianchi, and Mr. Cerf. Under the program, should the executive‘s employment with us terminate by reason of an involuntary
termination at any time, the executive will become entitled to receive the following severance benefits:
   •    each outstanding option the executive holds at the time of the involuntary termination will immediately vest in full and
        become exercisable until the earlier of the expiration of the option term or the end of the twelve (12)-month period
        following the date of the involuntary termination. Any options not exercised prior to the expiration of the applicable
        post-service exercise period will lapse and cease to remain exercisable, which we refer to as the ―severance period;‖
   •    the executive will be entitled to receive severance payments equal to his or her monthly rate of base salary for a period 12
        months, subject to his or her agreement not to provide any services, advice or assistance to any entity that provides
        products or services which are or may be competitive with those offered or proposed to be offered by us, solicit any of our
        customers, clients, suppliers, agents or other of our associated parties or solicit any of our employees or contractors to alter
        their relationship with us or accept employment or a consulting arrangement with any person other than us; and
   •    we will, at our expense, continue to provide the executive and his or her eligible dependents with our paid portion of health
        care coverage under our medical/dental plan until the earlier of the expiration of that number of months equal to one-half
        of the severance period measured from the

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        first day of the first month following the effective date of the involuntary termination or the first date that he or she is
        covered under another employer‘s health benefit program which provides substantially the same level of benefits without
        exclusion for pre-existing medical conditions.
    The aggregate present value of the benefits to which the executive may become entitled at the time of the involuntary
termination will in no event exceed in amount the dollar amount which yields the greatest after-tax amount of benefits after taking
into account any excise tax imposed under Section 4999 of the Internal Revenue Code of 1986, as amended, referred to as the
Code, on the payments and benefits which are provided under the severance benefit program or any other compensation made to
the executive in connection with a change in control and which qualifies as parachute payments within the meaning of Section
280G(b)(2) of the Code and the regulations issued thereunder.
2010 Stock Incentive Plan
    General
    The purpose of the plan is to provide a means through which we may attract able persons to serve as our employees, directors,
or consultants and to provide a means whereby those individuals upon whom the responsibilities of our successful administration
and management rest, and whose present and potential contributions to our welfare are of importance, may acquire and maintain
stock ownership, thereby strengthening their concern for our welfare. A further purpose of the plan is to provide such individuals
with additional incentive and reward opportunities designed to enhance our profitable growth. Accordingly, the plan provides for
granting incentive stock options, options that do not constitute incentive stock options, restricted stock awards, or any combination
of the foregoing, as is best suited to the circumstances of the particular employee, consultant, or director as provided in the plan.
    Administration
    The plan is administered by a committee of, and appointed by, our board of directors. In the absence of such a committee to
administer the plan, the board of directors will serve as the committee. From and after the date upon which we become a ―publicly
held corporation‖ (as defined in section 162(m) of the Code and applicable interpretive authority under the Code), the plan will be
administered by a committee of, and appointed by, our board of directors that will be comprised solely of two or more ―outside
directors‖ within the meaning of used in section 162(m) of the Code and applicable interpretive authority under the Code and
within the meaning of ―Non-employee Director‖ as defined in Rule 16b-3 under the Securities Exchange Act of 1934, as amended,
referred to as the Exchange Act.
    The committee has the authority, in its discretion, to determine which employees, consultants, or directors will receive an
award, the time or times when an award will be made, whether an incentive stock option or nonstatutory stock option will be
granted, and the number of shares to be subject to each option or restricted stock award. In making such determinations, the
committee will take into account the nature of the services rendered by the respective employees, consultants, or directors, their
present and potential contribution to our success, and such other factors as it in its discretion will deem relevant.
    Duration of the Plan
    No further awards may be granted under the plan after ten years from the date of adoption of the plan. The plan will remain in
effect until all options granted under the plan have been exercised, forfeited, assumed, substituted, satisfied or expired and all
restricted stock awards granted under the plan have vested or been forfeited.
    Shares Subject to the Plan
    The aggregate number of shares of our common stock that may be issued under the plan will not exceed 10,000,000 shares.
Shares will be deemed to have been issued under the plan only to the extent actually issued and delivered pursuant to an award or to
the extent an award is settled in cash. To the extent that an award lapses or the rights of its holder terminate, any shares of common
stock subject to such award will again be available for the grant of an award. From and after the date upon which we become a
publicly held corporation, the limitation set forth in the preceding sentences will be applied in a manner that will permit

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compensation generated under the plan to constitute ―performance-based‖ compensation for purposes of section 162(m) of the
Code, including, without limitation, counting against such maximum number of shares, to the extent required under section 162(m)
of the Code and applicable interpretative authority under the Code, any shares subject to options that are canceled or repriced.
    The total number of shares that will be reserved, and that may be issued, under the plan shall automatically increase on the first
trading day of each calendar year, beginning with calendar year 2011, by a number of shares equal to four percent (4%) of the total
outstanding shares on the last day of the prior calendar year, subject to a maximum annual increase of 1,000,000.
   Eligibility
   Awards may be granted only to persons who, at the time of grant, are employees, consultants, or directors.
   Stock Options
   The term of each option will be as specified by the committee at the date of grant.
    An option will be vested or exercisable in whole or in part and at such times as determined by the committee and set forth in the
notice of grant and option agreement. The holder will be entitled to all the privileges and rights of a stockholder only with respect
to such shares of common stock as have been purchased under the option and for which certificates of stock have been registered in
the holder‘s name. The committee in its discretion may provide that an option will be vested or exercisable upon:
   •       the attainment of one or more performance goals or targets established by the committee, which are based on:
       •      the price of a share of common stock,
       •      our earnings per share,
       •      our market share,
       •      the market share of a business unit designated by the committee,
       •      our sales,
       •      the sales of a business unit designated by the committee,
       •      our net income or the net income of a business unit designated by the committee,
       •      our cash flow return on investment or of any business unit designated by the committee,
       •      our earnings before or after interest, taxes, depreciation, or amortization or of any business unit designated by the
              committee,
       •      the economic value added, or
       •      the return on stockholders‘ equity;
   •       the holder‘s continued employment as an employee with us or continued service as a consultant or director for a specified
           period of time;
   •       the occurrence of any event or the satisfaction of any other condition specified by the committee in its sole discretion; or
   •       a combination of any of the foregoing.
    Each option may, in the discretion of the committee, have different provisions with respect to vesting or exercise of the option.
An incentive stock option may be granted only to an individual who is an employee at the time the option is granted. No incentive
stock option will be granted to an individual if, at the time the option is granted, such individual owns stock possessing more than
10% of the total combined voting power of all classes of our stock or of our parent or subsidiary corporation, within the meaning of
section 422(b)(6) of the Code, unless (1) at the time such option is granted the option price is at least 110% of the fair market

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value of the common stock subject to the option and (2) such option by its terms is not exercisable after the expiration of five years
from the date of grant.
    If an option is designated as an incentive stock option in the notice of grant, to the extent that such option (together with all
incentive stock options granted to the optionee under the plan and all other of our stock option plans and our parent and
subsidiaries) becomes exercisable for the first time during any calendar year for shares having a fair market value greater than
$100,000, the portion of each such incentive stock option that exceeds such amount will be treated as a nonstatutory stock option. If
the Code is amended to provide for a different limitation from that described in this paragraph, the different limitation will be
deemed incorporated in the plan effective as of the date required or permitted by such amendment to the Code. If the option is
treated as an incentive stock option in part and as a nonstatutory stock option in part by reason of the limitation described in this
paragraph, the optionee may designate which portion of such option the optionee is exercising. In the absence of such designation,
the optionee will be deemed to have exercised the incentive stock option portion of the option first. An incentive stock option will
not be transferable otherwise than by will or the laws of descent and distribution and will be exercisable during the holder‘s lifetime
only by such holder or his guardian or legal representative. The price at which a share of common stock may be purchased upon
exercise of an incentive stock option will not be less than 100% of the fair market value of a share of common stock on the date
such option is granted.
    Except with respect to limitations on incentive stock options described above, the price at which a share of common stock may
be purchased upon exercise of an option will be determined by the committee, but in no event will the price be less than 100% of
the fair market value of a share of common stock on the date such option is granted.
    Restricted Stock Awards
    Shares of common stock that are the subject of a restricted stock award will be subject to restrictions on disposition by the
holder and an obligation of the holder to forfeit and surrender the shares to us under certain circumstances. The forfeiture
restrictions will be determined by the committee in its sole discretion, and the committee may provide that the forfeiture restrictions
will lapse upon:
   •       the attainment of one or more performance goals or targets established by the committee, which are based on:
       •      the price of a share of common stock,
       •      our earnings per share,
       •      our market share,
       •      the market share of a business unit designated by the committee,
       •      our sales,
       •      the sales of a business unit designated by the committee,
       •      our net income or the net income of a business unit designated by the committee,
       •      our cash flow return on investment or of any business unit designated by the committee,
       •      our earnings before or after interest, taxes, depreciation, or amortization or of any business unit designated by the
              committee,
       •      the economic value added, or
       •      the return on stockholders‘ equity;
   •       the holder‘s continued employment as an employee with us or continued service as a consultant or director for a specified
           period of time;
   •       the occurrence of any event or the satisfaction of any other condition specified by the committee in its sole discretion; or
   •       a combination of any of the foregoing.

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   Each restricted stock award may, in the discretion of the committee, have different forfeiture restrictions.
    The committee may, in its discretion and as of a date determined by the committee, fully vest any or all common stock awarded
to a holder pursuant to a restricted stock award, and, upon such vesting, all restrictions applicable to such restricted stock award
will lapse as of such date. Any action by the committee pursuant to this Section may vary among individual holders and may vary
among the restricted stock awards held by any individual holder. However, from and after the date upon which we become a
―publicly held corporation,‖ the committee may not take any such action with respect to a restricted stock award that has been
granted after such date to a ―covered employee‖ (within the meaning of Treasury Regulation section 1.162-27(c)(2)) if such award
has been designed to meet the exception for performance-based compensation under section 162(m) of the Code.
    The committee will determine the amount and form of any payment for common stock received pursuant to a restricted stock
award, provided that, in the absence of such a determination, a holder will not be required to make any payment for common stock
received pursuant to a restricted stock award, except to the extent otherwise required by law.
    Recapitalization or Reorganization
    The existence of the plan and the awards granted under the plan will not affect in any way the right or power of our board of
directors or stockholders to make or authorize:
   •    any adjustment, recapitalization, reorganization, or other change in our capital structure or business,
   •    any merger, share exchange, or consolidation of us or any subsidiary,
   •    any issue of debt or equity securities ranking senior to or affecting common stock or the rights of common stock,
   •    the dissolution or liquidation of us or of any subsidiary,
   •    any sale, lease, exchange, or other disposition of all or any part of our assets or business, or
   •    any other corporate act or proceeding.
    If we recapitalize, reclassify our capital stock, or otherwise change our capital structure, the number and class of shares of
common stock covered by an outstanding option will be adjusted so that the option will thereafter cover the number and class of
shares of stock and securities to which the holder would have been entitled pursuant to the terms of the recapitalization if,
immediately prior to the recapitalization, the holder had been the holder of record of the number of shares of common stock then
covered by such option.
    The shares with respect to which options may be granted are shares of common stock as presently constituted, but if, and
whenever, prior to the expiration of an option theretofore granted, we effect a subdivision or consolidation of shares of common
stock or the payment of a stock dividend on common stock without receipt of consideration by us, the number of shares of common
stock with respect to which such option may thereafter be exercised:
   •    in the event of an increase in the number of outstanding shares, will be proportionately increased, and the purchase price
        per share will be proportionately reduced, and
   •    in the event of a reduction in the number of outstanding shares, will be proportionately reduced, and the purchase price per
        share will be proportionately increased, without changing the aggregate purchase price or value as to which outstanding
        awards remain exercisable or subject to restrictions.
   If a ―corporate change‖ occurs, then no later than:
   •    10 days after the approval by our stockholders of the corporate change, other than a corporate change resulting from a
        person or entity acquiring or gaining ownership or control of more than 50% of the outstanding shares of our voting stock,
        or
   •    30 days after a corporate change resulting from a person or entity acquiring or gaining ownership or control of more than
        50% of the outstanding shares of our voting stock,

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the committee, acting in its sole discretion and without the consent or approval of any holder, will effect one or more of the
following alternatives, which may vary among individual holders and which may vary among options held by any individual
holder:
   •    accelerate the vesting of any options then outstanding;
   •    accelerate the time at which some or all of the options then outstanding may be exercised so that such options, or any
        portion of such options, may be exercised for a limited period of time on or before a specified date, after which specified
        date all unexercised options and all rights of holders under such options will terminate;
   •    require the mandatory surrender to us by selected holders of some or all of the outstanding options held by such holders;
   •    make such adjustments to options then outstanding as the committee deems appropriate to reflect such corporate change; or
   •    provide that the number and class of shares of common stock covered by an outstanding option will be adjusted so that
        such option will thereafter cover the number and class of shares of stock or other securities or property to which the holder
        would have been entitled pursuant to the terms of the agreement of merger, consolidation, or sale of assets or dissolution if,
        immediately prior to such merger, consolidation, or sale of assets or dissolution, the holder had been the holder of record of
        the number of shares of common stock then covered by such option.
   A ―corporate change‖ means either:
   •    we will not be the surviving entity in any merger, share exchange, or consolidation or survive only as a subsidiary of an
        entity;
   •    we sell, lease, or exchange, or agree to sell, lease, or exchange, all or substantially all of our assets to any other person or
        entity;
   •    we are to be dissolved and liquidated;
   •    any person or entity, including a ―group‖ as contemplated by Section 13(d)(3) of the Exchange Act, acquires or gains
        ownership or control of more than 50% of the outstanding shares of our voting stock; or
   •    at such time as we become a reporting company under the Exchange Act as a result of or in connection with a contested
        election of directors, the persons who were directors before such election will cease to constitute a majority of our board of
        directors.
   Amendment and Termination
   Our board of directors in its discretion may terminate the plan at any time with respect to any shares of common stock for
which awards have not theretofore been granted.
    Our board of directors has the right to alter or amend the plan or any part of the plan from time to time; provided that no change
in any award theretofore granted may be made that would impair the rights of the holder without the consent of the holder.
However, our board of directors may not, without approval of the stockholders, amend the plan to increase the maximum aggregate
number of shares that may be issued under the plan, change the class of individuals eligible to receive awards under the plan, or
otherwise modify the plan in a manner that would require shareholder approval under applicable exchange rules.

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2010 Director Compensation
    The following table sets forth the compensation awarded to, earned by, or paid to each person who served as a director during
the year ended October 31, 2010, other than a director who also served as an executive officer.


         Name                                                        Fees Earned          Option               Total
                                                                      or Paid in          Awards                ($)
                                                                        Cash              ($) (1) (2)
                                                                         ($) (1)
         Don Pearce                                                       18,750              22,659             41,409
         Elliott Brackett                                                 18,750              22,659             41,409
         Alan B. Howe                                                     18,750              22,659             41,409
         Steven Ledger                                                    55,000                  —              55,000



(1) Beginning in the second quarter of fiscal 2010, Mssrs. Pearce, Brackett and Howe receive quarterly payments of $6,250 in cash
    and $6,250 worth of options, based on the intrinsic value of our common stock on the last day of the quarter. As of December
    1, 2009, Mr. Ledger receives $5,000 per month.
(2) We granted options to purchase 78,206 shares of common stock on August 25, 2010 to each of Messrs. Pearce, Brackett, and
    Howe at a grant date fair value of $0.24 per share. The options have an exercise price of $0.39 per share and a term of 10 years.
    These awards vest immediately upon grant. We also granted options to purchase 5,208 shares of common stock on October 31,
    2010 to each of Messrs. Pearce, Brackett, and Howe at a grant date fair value of $0.74 per share. The options have an exercise
    price of $1.20 per share and a term of 10 years. These awards vest immediately upon grant.

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                               CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
    Since November 1, 2009, there has not been, nor is there currently proposed, any transaction or series of similar transactions to
which we were or are a party in which the amount involved exceeded or exceeds $120,000 and in which any of our directors,
executive officers, holders of more than 5% of any class of our voting securities or any member of the immediate family of any of
the foregoing persons, had or will have a direct or indirect material interest, other than compensation arrangements with directors
and executive officers, which are described in ―Compensation of Named Executive Officers,‖ and the transactions described or
referred to below. The audit committee of our board of directors is responsible for reviewing and approving any related person
transactions.

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                                               PRINCIPAL STOCKHOLDERS
    The following table provides information concerning beneficial ownership of our capital stock as of March 4 , 2011 by:
    •   each stockholder, or group of affiliated stockholders, that we know owns more than 5% of our outstanding capital stock;
    •   each of our executive officers;
    •   each of our directors; and
    •   all of our directors and executive officers as a group.
    The following table lists the applicable percentage beneficial ownership based on 43,282,290 shares of common stock
outstanding as of March 4, 2011. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange
Commission, and generally includes voting power or investment power with respect to the securities held. Shares of common stock
subject to options currently exercisable or exercisable within 60 days of March 4, 2011 are deemed outstanding and beneficially
owned by the person holding such options for purposes of computing the number of shares and percentage beneficially owned by
such person, but are not deemed outstanding for purposes of computing the percentage beneficially owned by any other person.
Except as indicated in the footnotes to this table, and subject to applicable community property laws, the persons or entities named
have sole voting and investment power with respect to all shares of our common stock shown as beneficially owned by them.
   Unless otherwise indicated, the principal address of each of the stockholders below is c/o Crossroads Systems, Inc., 11000
North Mo-Pac Expressway, Austin, Texas 78759.


        Name and Address of Beneficial Owner                                         Number of                 Percent
                                                                                       Shares
                                                                                     Beneficially
                                                                                       Owned
        5% Stockholders
          Compass Global Fund, LTD                                                     4,687,500 (1)             10.6 %
          Revelation Capital Management Ltd.                                           3,281,250 (2)              8.0 %
          Strome Alpha Fund, LP                                                        3,125,000 (3)              7.1 %
          Diker Management, LLC                                                        2,261,081 (4)              5.2 %
        Executive Officers and Directors
          Robert C. Sims                                                               1,620,274 (5)              3.7 %
          Brian Bianchi                                                                  879,512 (6)              2.0 %
          David Cerf                                                                     651,767 (7)              1.5 %
          Jennifer Ray Crane                                                             514,228 (8)              1.2 %
          Bernd R. Krieger                                                                 9,687 (9)                *
          Don Pearce                                                                     308,414 (10)               *
          Elliott Brackett                                                               217,555 (11)               *
          Joseph J. Hartnett                                                                  —                     *
          Alan B. Howe                                                                   267,116 (12)               *
          Steven Ledger                                                                1,804,803 (13)             4.2 %
          All current directors and executive officers as a group (10                  6,273,356 (14)            13.7 %
             persons)



*   Less than 1%.
(1) Includes 937,500 shares of common stock issuable upon exercise of warrants exercisable within 60 days of March 4, 2011.
    Thomas L. Wallace is the Managing Director of Compass Global Management, LTD, a Cayman Islands corporation whose
    address for Compass Global Management, LTD is 795 Ridgelake Blvd., Suite 106, Memphis, Tennessee 38120.

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(2) Includes 656,250 shares of common stock issuable upon exercise of warrants exercisable within 60 days of March 4, 2011.
    Chris Kuchanny is the Chairman of Revelation Capital Management Ltd., a Bermuda incorporated mutual fund company
    whose address is SA Waterloo Lane, Pembroke, HM 08 Bermuda.
(3) Consists of (a) 1,250,000 shares of common stock and 312,500 shares of common stock issuable upon exercise of warrants
    exercisable within 60 days of March 4, 2011 held by Strome Alpha Fund, LP, a Delaware limited partnership (―Fund‖), and (b)
    1,250,000 shares of common stock and 312,500 shares of common stock issuable upon exercise of warrants exercisable within
    60 days of March 4, 2011 held by Strome Alpha Offshore LTD, a Cayman Islands limited partnership (―Offshore‖). Craig
    Bove is the director of each of Fund and Offshore. The address for each of Fund and Offshore is 100 Wilshire Blvd., #1750,
    Santa Monica, California 90401.
(4) According to Schedule 13G/A, filed February 14, 2011. Diker GP, LLC, a Delaware limited liability company (―Diker GP‖) is
    the beneficial owner of 1,851,097 shares of common stock as the general partner to the Delaware limited partnership the Diker
    Value Tech Fund, LP, Diker Value Tech QP Fund, LP, Diker Micro-Value Fund, LP, the Diker Micro-Value QP Fund, LP,
    Diker Micro & Small Cap Fund LP and Diker M&S Cap Master Ltd (collectively, the ―Diker Funds‖). Diker Management,
    LLC, a Delaware limited liability company (―Diker Management‖), is the beneficial owner of 2,261,081 shares of common
    stock as the investment manager of the Diker Funds, with respect to the shares of common stock held by the Diker Funds. As
    the sole general partner of the Diker Funds, Diker GP, has the power to vote and dispose of the shares of the common stock
    owned by the Diker Funds and, accordingly, may be deemed the beneficial owner of such shares. Pursuant to investment
    advisory agreements, Diker Management serves as the investment manager of the Diker Funds. Accordingly, Diker
    Management may be deemed the beneficial owner of shares held by the Diker Funds. Charles M. Diker and Mark N. Diker are
    the managing members of each of Diker GP and Diker Management, and in that capacity direct their operations may be
    beneficial owners of shares beneficially owned by Diker GP and Diker Management. The address for each of Diker GP, Diker
    Management, Charles M. Diker and Mark N. Diker is 730 Fifth Avenue, 15th Floor, New York, New York 10019.
(5) Includes 1,026,466 shares of common stock issuable upon exercise of options exercisable within 60 days of March 4, 2011.
(6) Includes 472,840 shares of common stock issuable upon exercise of options exercisable within 60 days of March 4, 2011.
(7) Includes 308,347 shares of common stock issuable upon exercise of options exercisable within 60 days of March 4, 2011.
(8) Includes 313,283 shares of common stock issuable upon exercise of options exercisable within 60 days of March 4, 2011.
(9) Includes of 4,687 shares of common stock issuable upon exercise of options exercisable within 60 days of March 4, 2011.
(10) Includes 108,414 shares of common stock issuable upon exercise of options exercisable within 60 days of March 4, 2011.
(11) Includes 167,555 shares of common stock issuable upon exercise of options exercisable within 60 days of March 4, 2011.
(12) Consists of 267,116 shares of common stock issuable upon exercise of options exercisable within 60 days of March 4, 2011.
(13) Consists of 1,804,803 shares of common stock held by a partnership of which Mr. Ledger is a partner.
(14) Includes 2,668,708 shares of common stock issuable upon exercise of options exercisable within 60 days of March 4, 2011.

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                                              DESCRIPTION OF CAPITAL STOCK
General
    The following is a summary of the rights of our capital stock and certain provisions of our certificate of incorporation and
bylaws. For more detailed information, please see our certificate of incorporation and bylaws filed as exhibits to the registration
statement of which this prospectus is a part.
   Our authorized capital stock consists of 100,000,000 shares, with a par value of $0.001 per share, of which:
   •    75,000,000 shares are designated as common stock; and
   •    25,000,000 shares are designated as preferred stock.
    At March 4, 2011, we had outstanding 43,282,290 shares of common stock, held of record by 234 stockholders. In addition, as
of March 4, 2011, we had outstanding options to acquire 7,683,463 shares of common stock and warrants exercisable for 4,296,875
shares of common stock.
Common Stock
    Each share of common stock has one vote on each matter submitted to a vote of our stockholders. Subject to preferences that
may be applicable to any outstanding shares of preferred stock, holders of common stock are entitled to receive ratably such
dividends as may be declared by our board of directors out of funds legally available therefor. In the event we dissolve, holders of
common stock are entitled to share ratably the net assets remaining after payment of liabilities and the liquidation preferences of
any outstanding shares of preferred stock. Holders of common stock have no preemptive, conversion or subscription rights. There
are no redemption or sinking fund provisions applicable to the common stock. All outstanding shares of common stock are fully
paid and nonassessable.
Warrants
    In connection with our October 2010 private placement, we issued warrants to purchase an aggregate of 4,296,875 shares of our
common stock at an exercise price of $0.80 per share, subject to anti-dilution adjustments. The warrants contain a ―cashless
exercise‖ provision, by which a warrant holder may elect to exercise the warrants without paying cash. Pursuant to that provision, a
warrant holder may exercise a warrant to receive a number of shares of our common stock equal in market value to the difference
between the average of the five day closing bid price for the shares issuable upon exercise and the total cash exercise price of the
part of the warrant being exercised. A cashless exercise is not available in the event there is a then effective registration statement
on file for the resale of the shares of common stock underlying the warrant.
    Each outstanding warrant is exercisable into shares of common stock by the registered holder thereof, in whole or in part with
respect to any portion of such warrant. Each warrant may be exercised on or before the first to occur of:
   •    October 22, 2015, and
   •    the closing of any capital reorganization, reclassification of our capital stock, consolidation or merger of our company with
        or into another corporation, other than a consolidation or merger in which we are the surviving entity, or any transfer of all
        or substantially all of our assets.
Preferred Stock
    Our board of directors has the authority, without further action by the stockholders, to issue from time to time the preferred
stock in one or more series, to fix the number of shares of any such series and the designation thereof and to fix preferences,
conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of
redemption granted to or imposed upon such preferred stock, including dividend rate, rights and terms of redemption, sinking fund
terms, if any, conversion rights, voting rights, rights in the event of liquidation, dissolution or winding-up or any other relative
rights, powers, preferences, qualifications, limitations or restrictions, any or all of which may be greater than or senior to the rights
of the common stock. The issuance of preferred stock could adversely affect the voting

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power of holders of common stock and reduce the likelihood that such holders will receive dividend payments and payments upon
liquidation. Such issuance could have the effect of decreasing the market price of our common stock. The issuance of preferred
stock or even the ability to issue preferred stock could have the effect of delaying, deterring or preventing a change in control. In
connection with the creation of the shareholder rights plan described under ―Shareholder Rights Plan‖ below, our board of directors
designated 175,000 shares of our preferred stock as Series A Junior Participating Preferred Stock for issuance under the shareholder
rights plan.
Shareholder Rights Plan
    On August 21, 2002, our board of directors declared a dividend of one preferred share purchase right for each outstanding share
of our common stock. Each right entitles the registered holder to purchase from us one unit consisting of one-thousandth of a share
of our Series A junior participating preferred stock at a price of $12.00 per unit. The description and terms of the rights are set forth
in a rights agreement dated as of August 21, 2002 by and between us and American Stock Transfer & Trust Company, as Rights
Agent.
    Until the earlier to occur of (i) the close of business on the tenth day after a public announcement that a person or group of
affiliated or associated persons has acquired beneficial ownership of 15% or more of the outstanding common stock or (ii) 10
business days (or such later date as may be determined by action of our board of directors prior to such time as any person becomes
an acquiring person) following the commencement of, or announcement of an intention to make, a tender offer or exchange offer
the consummation of which would result in the bidder‘s beneficial ownership of 15% or more of the outstanding common stock
(the earlier of such dates being called the distribution date), the rights will be evidenced by our common stock certificates. The
rights agreement specifically provides that our former Chairman, President and Chief Executive Officer, Brian R. Smith, who
currently owns no common stock, may acquire up to an aggregate of 20% of our common stock without triggering the
exercisability of the rights. Additionally, Austin Ventures and its affiliates currently beneficially own none of our common stock.
The rights agreement provides that so long as Austin Ventures and its affiliates do not acquire any additional shares of our common
stock, their ownership of our common stock will not trigger the exercisability of the rights in the event that their ownership
percentage rises above 15%.
    The rights agreement provides that, until the distribution date, the rights will be transferred with and only with the common
stock. Until the distribution date or earlier redemption or expiration of the rights, new common stock certificates issued after the
record date, upon transfer or new issuance of common stock will contain a notation incorporating the rights agreement by
reference. Until the distribution date or earlier redemption or expiration of the rights, the surrender for transfer of any certificates of
common stock will also constitute the transfer of the rights associated with the common stock represented by such certificate. As
soon as practicable following the distribution date, separate certificates evidencing the rights will be mailed to holders of record of
the common stock as of the close of business on the distribution date and such separate rights certificates alone will evidence the
rights.
    The rights are not exercisable until the distribution date. The rights will expire at the close of business on September 3, 2012
unless the final expiration date is extended or we earlier redeem or exchange the rights.
    The purchase price payable and the number of units of Series A preferred stock or other securities or property issuable upon
exercise of the rights are subject to adjustment from time to time to prevent dilution (a) in the event of a stock dividend on, or a
subdivision, combination or reclassification of, the Series A preferred stock, (b) upon the grant to holders of the units of Series A
preferred stock of certain rights or warrants to subscribe for or purchase units of Series A preferred stock at a price, or securities
convertible into units of Series A preferred stock with a conversion price, less than the then current market price of the units of
Series A preferred stock or (c) upon the distribution to holders of the units of Series A preferred stock of evidences of indebtedness
or assets (excluding regular periodic cash dividends paid out of earnings or retained earnings or dividends payable in units of Series
A preferred stock) or of subscription rights or warrants.
    The number of outstanding rights and the number of units of Series A preferred stock issuable upon exercise of each right are
also subject to adjustment in the event of a stock split of the common stock or a stock dividend on the common stock payable in
common stock or subdivisions, consolidations or combinations of the common stock occurring, in any such case, prior to the
distribution date.

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    Shares of Series A preferred stock purchasable upon exercise of the rights will not be redeemable. Each share of Series A
preferred stock will be entitled to a dividend of 1,000 times the dividend declared per share of common stock. In the event of
liquidation, the holders of shares of Series A preferred stock will be entitled to a payment of 1,000 times the payment made per
share of common stock. Each share of Series A preferred stock will have 1,000 votes, voting together with the common stock.
Finally, in the event of any merger, consolidation or other transaction in which shares of common stock are exchanged, each share
of Series A preferred stock will be entitled to receive 1,000 times the amount received per share of common stock. These rights are
protected by customary anti-dilution provisions.
   Because of the nature of the dividend, liquidation and voting rights, the value of each unit of Series A preferred stock
purchasable upon exercise of each right should approximate the value of one share of common stock.
     If, after the rights become exercisable, we are acquired in a merger or other business combination transaction with an acquiring
person or one of its affiliates, or 50% or more of its consolidated assets or earning power are sold to an acquiring person or one of
its affiliates, provision will be made so that each holder of a right will have the right to receive, upon exercise at the then current
exercise price of the right, that number of shares of common stock of the acquiring company which at the time of such transaction
has a market value of two times the exercise price of the right.
    If any person or group of affiliated or associated persons becomes the beneficial owner of 15% or more of the outstanding
shares of common stock, provision will be made so that each holder of a right, other than rights beneficially owned by the acquiring
person, which will be void, will have the right to receive upon exercise that number of shares of Series A preferred stock or cash,
other securities or property having a market value of two times the exercise price of the right.
    At any time after the acquisition by a person or group of affiliated or associated persons of beneficial ownership of 15% or
more of the outstanding shares of common stock and prior to the acquisition by such person or group of 50% or more of the
outstanding common stock, our board of directors may exchange the rights, other than rights owned by that person or group which
have become void, in whole or in part, at an exchange ratio per unit of Series A preferred stock which shall equal the purchase price
divided by the then current market price per unit of Series A preferred stock on the earlier of (a) the date on which any person
becomes an acquiring person and (b) the date on which a tender or exchange offer is announced that would result in the bidder‘s
beneficial ownership of 15% or more of the shares of common stock then outstanding.
    With certain exceptions, no adjustment in the purchase price will be required until cumulative adjustments require an
adjustment of at least 1% in such purchase price. No fractional shares of Series A preferred stock will be issued, other than
fractions which are integral multiples of one-hundred-thousandth of a share of Series A preferred stock, which may, at our election,
be evidenced by depositary receipts and, in lieu thereof, an adjustment in cash for fractional shares will be made based on the
market price per unit of Series A preferred stock on the last trading day prior to the date of exercise.
    At any time on or prior to the earlier of (a) the close of business on the tenth day after a public announcement that a person or
group has acquired beneficial ownership of 15% or more of the common stock or (b) the tenth business day after a person
commences, or announces its intention to commence, a tender offer or exchange offer that would result in the bidder‘s beneficial
ownership of 15% or more of the shares of common stock, our board of directors may redeem the rights in whole, but not in part, at
a price of $0.01 per right. The redemption of the rights may be made effective at such time, on such basis and with such conditions
as the board of directors in its sole discretion may establish. Immediately upon any redemption of the rights, the rights will no
longer be exercisable and the only right of the holders of rights will be to receive the redemption price. The rights are also
redeemable under other circumstances as specified in the rights agreement.
   The terms of the rights may be amended by our board of directors of without the consent of the holders of the rights except that
from and after a distribution date no amendment may adversely affect the interests of the holders of the rights.

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    Until a right is exercised, the holder of a right will have no rights by virtue of ownership as a stockholder, including, without
limitation, the right to vote or to receive dividends.
   The rights may have certain anti-takeover effects. The rights will cause substantial dilution to a person or group that attempts to
acquire our company on terms not approved by our board of directors, except pursuant to an offer conditioned on a substantial
number of rights being acquired. The rights should not interfere with any merger or other business combination approved by the
board of directors since we may redeem the rights at the redemption price prior to the occurrence of a distribution date.
Registration Rights
    We have entered into a registration rights agreement in October 2010 with the purchasers in our October 2010 private
placement. Subject to the terms of this agreement, the holders, or their permitted transferees, of an aggregate of 12,500,000 shares
of our common stock, 3,125,000 warrants to purchase shares of our common stock and 3,125,000 shares of our common stock
issuable upon the exercise or otherwise pursuant to the warrants, which we refer to as the registrable securities, are entitled to rights
with respect to the registration of these securities under the Securities Act. These rights include demand registration rights,
short-form registration rights and piggyback registration rights.
   MDB Capital Group, LLC acted as sole placement agent in the private placement and received $750,000 and warrants to
purchase 1, 171,875 shares of our common stock as placement agent fees. We also agreed to include those warrants and the
underlying shares of common stock in this registration statement.
    Demand Registration Rights
    Under the terms of the registration rights agreement, we are required to file a registration statement by May 1, 2011 relating to
the resale of the registrable securities to be effective by August 31, 2011.
      Piggyback Registration Rights
      In the event that all registrable securities are not registered for resale, should we at any time prior to the expiration of the earlier
of:
      •   the date on which all of the registrable securities covered by a registration statement pursuant to the registration rights
          agreement have been sold; and
      •   the date on which the registrable securities may be immediately sold to the public by non-affiliates without registration or
          restriction,
determine to file with the SEC a registration statement under the Securities Act of 1933 relating any of our equity securities, the
holders of the registrable securities under the registration rights agreement are entitled to include all or any part of their registrable
securities in the registration subject to certain exceptions relating to acquisitions and employee benefit plans.
   Expenses
   All reasonable expenses, other than underwriting discounts and commissions, incurred in connection with the registrations
pursuant to the registration rights agreement will be borne by us.
Anti-Takeover Effects of Delaware Law and Our Certificate of Incorporation and Bylaws
    Certain provisions of Delaware law and our certificate of incorporation and our bylaws contain provisions that could have the
effect of delaying, deferring or discouraging another party from acquiring control of us. These provisions, which are summarized
below, may have the effect of discouraging coercive takeover practices and inadequate takeover bids. These provisions are also
designed, in part, to encourage persons seeking to acquire control of us to first negotiate with our board of directors. We believe
that the benefits of increased protection of our potential ability to negotiate with an unfriendly or unsolicited acquirer outweigh the
disadvantages of discouraging a proposal to acquire us because negotiation of these proposals could result in an improvement of
their terms.

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    Authorized but Unissued Shares
    Our authorized but unissued shares of common stock and preferred stock will be available for future issuance without
stockholder‘s approval. We may use additional shares for a variety of corporate purposes, including future public offerings to raise
additional capital, corporate acquisitions and employee benefit plans. In addition, as discussed above, our board of directors has the
ability to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change
control of us. The existence of authorized but unissued shares of common stock and preferred stock could render more difficult or
discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.
    Stockholder Action by Written Consent
    Our certificate of incorporation provides that our stockholders may not act by written consent. This limit on the ability of our
stockholders to act by written consent may lengthen the amount of time required to take stockholder actions. As a result, a holder
controlling a majority of our capital stock would not be able to amend our bylaws or remove directors without holding a meeting of
our stockholders called in accordance with our bylaws. In addition, our bylaws provide that special meetings of the stockholders
may be called only by our board of directors. Our bylaws prohibit a stockholder from calling a special meeting, which may delay
the ability of our stockholders to force consideration of a proposal or for holders controlling a majority of our capital stock to take
any action, including the removal of directors.
    Advance Notice of Nominations and Proposals
    Our bylaws include advance notice procedures with respect to stockholder proposals and the nomination of candidates for
election as directors, other than nominations made by or at the direction of our board of directors or a committee of our board of
directors. Our bylaws may have the effect of precluding the conduct of certain business at a meeting if the proper procedures are
not followed. These provisions may also discourage or deter a potential acquirer from conducting a solicitation of proxies to elect
the acquirer‘s own slate of directors or otherwise attempting to obtain control of our company.
    Board Vacancies Filled by Majority of Directors
    Vacancies and newly created seats on our board of directors may be filled only by the vote of a majority of the remaining
members of our board of directors. Only our board of directors may determine the number of directors on our board of directors.
The inability of stockholders to determine the number of directors or to fill vacancies or newly created seats on our board of
directors makes it more difficult to change the composition of our board of directors.
    No Cumulative Voting
    The Delaware General Corporation Law provides that stockholders are not entitled to the right to cumulate votes in the election
of directors unless our certificate of incorporation provides otherwise. Our certificate of incorporation and bylaws do not expressly
provide for cumulative voting.
   Removal of Directors
   Our certificate of incorporation provides that directors may be removed by stockholders only for cause.
    Delaware Anti-Takeover Statute
    We are subject to Section 203 of the DGCL, an anti-takeover statute. In general, Section 203 prohibits a publicly held Delaware
corporation from engaging in a ―business combination‖ with an ―interested stockholder‖ for a period of three years following the
time the person became an interested stockholder, unless (with certain exceptions) the business combination or the transaction in
which the person became an interested stockholder is approved in a prescribed manner. Generally, a ―business combination‖
includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. Generally, an
―interested stockholder‖ is a person who, together with affiliates and associates, owns (or within three years prior to the
determination of interested stockholder status, did own) 15% or more of a corporation‘s voting stock. The existence of this
provision would be expected to have an anti-takeover effect with respect to transactions not approved in advance by the board of
directors, including discouraging

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attempts that might result in a premium over the market price for the shares of common stock held by stockholders. The provisions
of Delaware law and our certificate of incorporation and our bylaws could have the effect of discouraging others from attempting
hostile takeovers and, as a consequence, they may also inhibit temporary fluctuations in the market price of our common stock that
often result from actual or rumored hostile takeover attempts. These provisions may also have the effect of preventing changes in
our management. It is possible that these provisions could make it more difficult to accomplish transactions that stockholders may
otherwise deem to be in their best interests.
Transfer Agent and Registrar
   The transfer agent and registrar for our common stock is American Stock Transfer & Trust Company.

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                                            SHARES ELIGIBLE FOR FUTURE SALE
    Future sales of substantial amounts of common stock in the public market could adversely affect prevailing market prices.
Furthermore, since only a limited number of shares may be available for sale shortly after this offering because of contractual and
legal restrictions on resale described below, sales of substantial amounts of common stock in the public market after the restrictions
lapse could adversely affect the prevailing market price for our common stock as well as our ability to raise equity capital in the
future.
    As of March 4, 2011, 43,282,290 shares of common stock are outstanding. All of the shares sold in this offering will be freely
tradable unless held by an affiliate of ours. Of the remaining shares, 29,400,824 will be eligible for sale immediately as of the date
of this prospectus, and the remaining shares will generally become available for sale in the public market from time to time
thereafter upon expiration of their respective holding periods under Rule 144, a portion of which will be subject to Rule 144
volume limitations.
Rule 144
    In general, under Rule 144 as currently in effect, beginning 90 days after the effective date of the registration statement of
which this prospectus is a part, any person who is not deemed to have been an affiliate of ours for purposes of the Securities Act at
any time during 90 days preceding a sale and who has beneficially owned their shares for at least six months, including the holding
period of any prior owner other than one of our affiliates, may sell shares without restriction, subject to compliance with the public
information requirements of Rule 144. In addition, under Rule 144, any person who is not an affiliate of ours and has held their
shares for at least one year, including the holding period of any prior owner other than one of our affiliates, would be entitled to sell
an unlimited number of shares immediately upon the closing of this offering without complying with any of the requirements of
Rule 144.
   In general, under Rule 144, as currently in effect, our affiliates or persons selling shares on behalf of our affiliates who
beneficially owns shares that were purchased from us, or any affiliate, at least six months previously, are entitled to sell upon
expiration of the lock-up agreements described below, within any three-month period beginning 90 days after the date of this
prospectus, a number of shares that does not exceed the greater of:
   •    1% of the number of shares of our common stock then outstanding, which will equal approximately shares immediately
        after this offering; or
   •    the average weekly trading volume of our common stock during the four calendar weeks preceding the filing of a notice on
        Form 144 with respect to the sale.
    Sales of restricted shares under Rule 144 held by our affiliates or persons selling shares on behalf of our affiliates are also
subject to requirements regarding the manner of sale, notice and the availability of current public information about us. Rule 144
also provides that affiliates relying on Rule 144 to sell shares of our common stock that are not restricted shares must nonetheless
comply with the same restrictions applicable to restricted shares, other than the holding period requirement.
Rule 701
    Under Rule 701, shares of our common stock acquired upon the exercise of currently outstanding options or pursuant to other
rights granted under our stock plans may be resold, by:
   •    persons other than affiliates, beginning 90 days after the effective date of the registration statement of which this
        prospectus is a part, subject only to the manner-of-sale provisions of Rule 144; and
   •    our affiliates, beginning 90 days after the effective date of the registration statement of which this prospectus is a part,
        subject to the manner-of-sale and volume limitations, current public information and filing requirements of Rule 144, in
        each case, without compliance with the six-month holding period requirement of Rule 144.
   As of March 4, 2011, options to purchase a total of 7,683,463 shares of common stock were outstanding, of which 4,999,650
were vested.

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Registration Rights
    The holders of 12,500,000 shares of our common stock, 4,296,875 warrants to purchase shares of our common stock and
4,296,875 shares of our common stock issuable upon the exercise or otherwise pursuant to the warrants will be entitled to rights
with respect to the registration of their shares under the Securities Act of 1933. Registration of these shares under the Securities Act
would result in the shares becoming freely tradable without restriction under the Securities Act, except for shares purchased by
affiliates, immediately upon the effectiveness of the registration statement of which this prospectus is a part. Any sales of securities
by these stockholders could have a material adverse effect on the trading price of our common stock. See ―Description of Capital
Stock — Registration Rights.‖
Equity Incentive Plans
    We intend to file one or more registration statements on Form S-8 under the Securities Act after the closing of this offering to
register the shares of our common stock that are issuable pursuant to our 1999 Stock Incentive Plan and 2010 Stock Incentive Plan.
The registration statement is expected to be filed and become effective as soon as practicable after the closing of this offering.
Accordingly, shares registered under the registration statement will be available for sale in the open market following its effective
date, subject to vesting of such shares, Rule 144 volume limitations and the lock-up agreements described above, if applicable.
Lock-Up Agreement
    In connection with our October 2010 private placement, Robert C. Sims, our President and Chief Executive Officer, agreed that
he would not sell, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar
transaction with the same economic effect as a sale of, any of our common stock or other securities held by him during the 180-day
period following the effective date of this registration statement. Notwithstanding the foregoing, Mr. Sims may transfer any of our
securities pursuant to the exercise and issuance of options or vesting of options, restricted stock or performance awards, as a bona
fide gift or gifts or by will or intestacy, provided that the transferee or trustees agree to be bound in writing by the restrictions set
forth in the lock-up agreement, to any trust for the direct or indirect benefit of Mr. Sims or his immediate family, provided that the
trustee of the trust agrees to be bound in writing by the restrictions set forth herein, or any transfer required under any benefit or
incentive plans or our organizational documents.

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                                                SELLING SECURITY HOLDERS
    On October 23, 2010, we sold 12,500,000 shares of our common stock and issued warrants to purchase an additional 3,125,000
shares of common stock to a group of institutional investors for gross proceeds to us of $10.0 million. The net proceeds of the
offering, after deducting placement agent fees and estimated financing expenses, were approximately $9.2 million. MDB Capital
Group LLC acted as sole placement agent for the private placement and received $750,000 and warrants to purchase 1,171,875
shares of our common stock as placement agent fees.
    Pursuant to a registration rights agreement with the purchasers in the private placement, we agreed to file with the Securities
and Exchange Commission a registration statement covering the resale of all of our registrable securities under the registration
rights agreement they own pursuant to Rule 415 of the Securities Act of 1933. Accordingly, we filed a registration statement on
Form S-1 of which this prospectus forms a part with respect to the resale of these securities from time to time. In addition, we
agreed in the registration rights agreement to use our best efforts to cause the registration statement to be declared effective under
the Securities Act of 1933 by August 1, 2011 and to use our best efforts to keep the registration statement effective until the shares
of our common stock they own covered by this prospectus have been sold or may be sold without registration or prospectus
delivery requirements under the Securities Act of 1933, subject to certain restrictions.
Selling Security Holders Table
    We have filed a registration statement with the Securities and Exchange Commission, of which this prospectus forms a part,
with respect to the resale of our securities covered by this prospectus from time to time under Rule 415 of the Securities Act of
1933. Our securities being offered by this prospectus is being registered to permit secondary public trading of our securities.
Subject to the restrictions described in this prospectus, the selling security holders may offer our securities covered under this
prospectus for resale from time to time. In addition, subject to the restrictions described in this prospectus, the selling security
holders may sell, transfer or otherwise dispose of all or a portion of our securities being offered under this prospectus in
transactions exempt from the registration requirements of the Securities Act of 1933. See ―Plan of Distribution.‖
    The table below presents information as of March 4, 2011, regarding the selling security holders and the securities that the
selling security holders (and their donees, pledgees, assignees, transferees and other successors in interest) may offer and sell from
time to time under this prospectus. More specifically, the following table sets forth as to the selling security holders:
   •    the number of shares of our common stock and warrants that the selling security holders beneficially owned prior to the
        offering for resale of any of the shares of our common stock being registered by the registration statement of which this
        prospectus is a part;
   •    the number of shares of our common stock and warrants that may be offered for resale for the selling security holders‘
        account under this prospectus; and
   •    the number and percent of shares of our common stock and warrants to be held by the selling security holders after the
        offering of the resale securities, assuming all of the resale securities are sold by the selling security holders and that the
        selling security holders do not acquire any other shares of our common stock or warrants prior to their assumed sale of all
        of the resale shares.
    The table is prepared based on information supplied to us by the selling security holders. Although we have assumed for
purposes of the table below that the selling security holders will sell all of the securities offered by this prospectus, because the
selling security holders may offer from time to time all or some of its securities covered under this prospectus, or in another
permitted manner, no assurances can be given as to the actual number of securities that will be resold by the selling security holders
or that will be held by the selling security holders after completion of the resales. In addition, the selling security holders may have
sold, transferred or otherwise disposed of the securities in transactions exempt from the registration requirements of the Securities
Act of 1933 since the date the selling security holders provided the information regarding their securities holdings. Information
covering the selling security holders may change from time to time and changed information will be presented in a supplement to
this prospectus if and when necessary and required.

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Except as described above, there are currently no agreements, arrangements or understandings with respect to the resale of any of
the securities covered by this prospectus.
    The applicable percentages of ownership are based on an aggregate of 43,282,290 shares of our common stock issued and
outstanding on March 4, 2011. The number of shares beneficially owned by the selling security holders is determined under rules
promulgated by the Securities and Exchange Commission.

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Name of Selling Security Holder (1)     Number of      Number of        Maximum                   Beneficial Ownership
                                        Shares of       Warrants        Number of        After Resale of Notes or Common Stock
                                      Common Stock     Beneficially     Shares of
                                       Beneficially      Owned        Common Stock
                                       Owned (1) (2)                    That May
                                                                        Be Sold (3)
                                                                                      Number of     Percent     Number       Percent
                                                                                      Warrants                     of
                                                                                         (4)
                                                                                                                Shares
                                                                                                                   of
                                                                                                                Commo
                                                                                                                   n
                                                                                                                Stock (4)
1999 Clifford Family Trust                   15,000          3,750          18,750        —            —           —             —
Dated 12/22/99
Robert C. Clifford &
Rachel L. Clifford Co-TTEEs (6)
(21)

Aaron A. Grunfeld                            10,000          2,500          12,500        —            —           —             —
Aaron A. Grunfeld TTEE                       20,000          5,000          25,000        —            —           —             —
The Law Offices of
Aaron Grunfeld & Associates
Retirement Fund
Act Capital Partners, L.P. (7) (22)         360,000        90,000           450,000       —            —           —             —
Amir L. Ecker (21)                          275,000        68,750           343,750       —            —           —             —
Cary Hurwitz (21)                                —          7,500                —        —            —           —             —
Catalysis Offshore, Ltd. (8)                 67,500        16,875            84,375       —            —           —             —
Catalysis Partners, LLC (9)                 182,500        45,625           228,125       —            —           —             —
Compass Global Fund, LTD (10)             3,750,000       937,500         4,687,500       —            —           —             —
Del Rey Management LP (11)                  250,000        62,500           312,500       —            —           —             —
Delaware Charter Guarantee &                718,750       179,687           898,437       —            —           —             —
Trust Company TTEE FBO
Thomas B. Akin IRA (12)
Gary Schuman (21)                            37,500        16,875           54,375        —            —           —             —
George Brandon (21)                              —        242,969          242,969        —            —           —             —
James P. Tierney                             20,000         5,000           25,000        —            —           —             —
Kevin Cotter (21)                                —         36,500           36,500        —            —           —             —
MDB Capital Group, LLC (13) (22)                 —        585,937          585,937        —            —           —             —
NFS/FMTC IRA FBO                            150,000        37,500          187,500        —            —           —             —
Amir L. Ecker (14) (21)
Nicholas A. Foley                           375,000        93,750           468,750       —            —           —             —
Nicholas Lewin                              125,000        31,250           156,250       —            —           —             —
Peter Conley (21)                                —        212,969           212,969       —            —           —             —
Revelation Capital Management             2,625,000       656,250         3,281,250       —            —           —             —
Ltd. (15)
Robert Clifford (21)                             —          78,500          78,500        —            —           —             —
Stephen Walker TTEE,                         50,000         12,500          62,500        —            —           —             —
Stephen Walker Family Trust
V/A 8-22-99 (16)
Strome Alpha Fund, LP (17)                1,250,000       312,500         1,562,500       —            —           —             —
Strome Alpha Offshore LTD (18)            1,250,000       312,500         1,562,500       —            —           —             —
Talkot Fund, L.P. (19)                      718,750       179,687           898,437       —            —           —             —
Thomas A. McCall and                        125,000        31,250           156,250       —            —           —             —
Karen A. McCall JT Tenants in
Common (20)
Thomas L. Wallace                           125,000         31,250         156,250        —            —           —             —
Any donees, pledgees,                            —              —               —         —            —           —             —
assignees, transferees and other
successors in interest of the
selling security holders (1) (5)
*   Less than 1%.

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(1) Information concerning other selling security holders will be set forth in one or more prospectus supplements from time to
    time, if required.
(2) Does not include shares of common stock issuable upon exercise of the warrants listed in this table.
(3) Represents (1) the number of outstanding shares being offered hereby, and (2) the shares issuable upon exercise of the warrants
    being offered hereby.
(4) Assumes that either all of the shares of common stock, warrants to purchase shares of common stock and shares of common
    stock issued upon exercise of the warrants offered hereby are sold by the selling security holder.
(5) Assumes that any pledgees, assignees, transferees and other successors in interest do not beneficially own any of our common
    stock other than common stock set forth in this prospectus.
(6) Robert C. Clifford 1999 Clifford Family Trust Dated 12/22/99 Robert C. Clifford & Rachel L. Clifford Co-TTEEs and has
    voting and dispositive power over the securities held by 1999 Clifford Family Trust Dated 12/22/99 Robert C. Clifford &
    Rachel L. Clifford Co-TTEEs.
(7) Amir L. Ecker is the General Partner of Act Capital Partners, L.P. and has voting and dispositive power over the securities held
    by Act Capital Partners, L.P.
(8) John Francis is the Investment Manager Catalysis Offshore, Ltd. and has voting and dispositive power over the securities held
    by Catalysis Offshore, Ltd.
(9) John Francis is the Manager of Francis Capital Management, LLC, the Managing Member of Catalysis Partners, LLC and has
    voting and dispositive power over the securities held by Catalysis Partners, LLC.
(10) Thomas L. Wallace is the Managing Director of Compass Global Fund, LTD and has voting and dispositive power over the
     securities held by Compass Global Fund LTD.
(11) Gregory A. Bied is the Managing Partner of Del Rey Management LP and has voting and dispositive power over the
     securities held by Del Rey Management LP.
(12) Thomas B. Akin has voting and dispositive power over the securities held by Delaware Charter Guarantee & Trust Company
     TTEE FBO Thomas B. Akin IRA.
(13) MDB Capital Group, LLC was the placement agent in our October 2010 private placement. Christopher Marlett is the CEO
     of MDB Capital Group, LLC and has voting and dispositive power over the securities held by MDB Capital Group, LLC.
(14) Amir L. Ecker has voting and dispositive power over the securities held by NFS/FMTC IRA FBO Amir L. Ecker.
(15) Chris Kuchanny is the Chairman of Revelation Capital Management Ltd. and has voting and dispositive power over the
     securities held by Revelation Capital Management Ltd..
(16) Stephen Walker is the Trustee of Stephen Walker TTEE, Stephen Walker Family Trust V/A 8-22-99 and has voting and
     dispositive power over the securities held by Stephen Walker TTEE, Stephen Walker Family Trust V/A 8-22-99.
(17) Craig Bove is the Director of Strome Alpha Fund, LP and has voting and dispositive power over the securities held by Strome
     Alpha Fund, LP.
(18) Craig Bove is the Director Strome Alpha Offshore LTD and has voting and dispositive power over the securities held by
     Strome Alpha Offshore LTD.
(19) M. Case Fitz-Gerald is the Chief Compliance Officer of Talbot Fund, L.P. and has voting and dispositive power over the
     securities held by Talbot Fund, L.P.
(20) Thomas A. McCall and Karen A. McCall have shared voting and dispositive power over the securities held by Thomas A.
     McCall and Karen A. McCall JT Tenants in Common.
(21) This selling security holder is an affiliate of a broker-dealer.
(22) This selling security holder is a broker-dealer.

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                                                      PLAN OF DISTRIBUTION
    We are registering the shares of our common stock, warrants to purchase shares of our common stock and shares of our
common stock issuable upon the exercise of warrants covered by this prospectus and any applicable prospectus supplement on
behalf of the selling security holders to permit the resale of these securities by the selling security holders from time to time after
the date of this prospectus. The selling security holders may offer the securities through agents, to or through underwriters, through
broker-dealers (acting as agent or principal), through a specific bidding or auction process or otherwise, through a combination of
any such methods or through any methods described in a prospectus supplement.
    We will not receive any of the proceeds from such sales. We have agreed to bear all other costs, fees and expenses incurred in
effecting the registration of the securities covered by the registration statement of which this prospectus is a part, however, we will
not bear the costs of any underwriting discounts and commissions and expenses that the selling security holders incur for
brokerage, accounting or tax or legal services or any other expenses they incur in disposing of the securities. The aggregate
proceeds to the selling security holders from the sale of the securities offered by them will be the purchase price of the securities,
less any discounts or commissions. Each of the selling security holders reserves the right to accept and, together with its agents
from time to time, to reject, in whole or in part, any proposed purchase of securities to be made directly or through agents.
    The selling security holders, which as used herein includes donees, pledgees, assignees, transferees or other
successors-in-interest selling securities or interests in securities received after the date of this prospectus from a selling security
holder as a gift, pledge or other transfer, may, from time to time, sell, transfer or otherwise dispose of any or all of their securities
or interests in securities on any stock exchange, market or trading facility on which the common stock is traded or in private
transactions. These dispositions may be at fixed prices, at prevailing market prices at the time of sale, at prices related to the
prevailing market price, at varying prices determined at the time of sale, or at negotiated prices. The consideration may be in cash
or another form negotiated by the parties. The compensation may be in the form of discounts, concessions or commissions to be
received from the selling security holders or from the purchasers of the securities.
   The securities covered by the registration statement of which this prospectus is a part may be sold by one or more of, or a
combination of, the following methods, to the extent permitted by applicable law:
   •    on any national securities exchange or quotation service on which our common stock or warrants may be listed or quoted at
        the time of sale;
   •    in the over-the-counter market;
   •    in transactions other than on these exchanges or systems or in the over-the-counter market;
   •    in ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
   •    in block trades in which the broker-dealer will attempt to sell the securities as agent, but may position and resell a portion
        of the block as principal to facilitate the transaction;
   •    in purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
   •    in an exchange distribution in accordance with the rules of the applicable exchange;
   •    in privately negotiated transactions;
   •    in put or call option transactions;
   •    in transactions involving short sales through broker-dealers;
   •    in transactions wherein the selling security holder sells securities short themselves and delivers the securities to close out
        short positions;
   •    through the writing or settlement of options or other hedging transactions, whether through an options exchange or
        otherwise;
   •    in transactions that may involve crosses or block transactions;

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   •    in transactions where broker-dealers may agree with the selling security holders to sell a specified number of securities at a
        stipulated price per security;
   •    a combination of any such methods of sale; or
   •    in any other method permitted by applicable law.
    The selling security holders are not required to sell any securities covered by this prospectus and may transfer these securities
by other means not described in this prospectus. Each selling security holder may sell all, some or none of the securities covered by
this prospectus or interests therein.
    The selling security holders may, from time to time, pledge or grant a security interest in some or all of the securities owned by
them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell
securities, from time to time, under this prospectus, or under an amendment or supplement to this prospectus amending the list of
selling security holders to include the pledgee, transferee or other successors in interest as selling security holders under this
prospectus. The selling security holders also may transfer securities in other circumstances, in which case the transferees, pledgees
or other successors in interest will be the selling beneficial owners for purposes of this prospectus.
    In connection with the sale of securities or interests therein, the selling security holders may enter into hedging transactions
with broker-dealers or other financial institutions, which may in turn engage in short sales of the securities in the course of hedging
the positions they assume. Unless otherwise prohibited by law, the selling security holders may also sell securities short and deliver
these securities to close out their short positions, or loan or pledge securities to broker-dealers that in turn may sell these securities.
The selling security holders may also enter into option or other transactions with broker-dealers or other financial institutions or the
creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of
securities covered by this prospectus, which securities such broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).
    Any selling security holder and any broker-dealers, agents or underwriters that participate with that selling security holder in
the distribution of the securities may be deemed to be ―underwriters‖ within the meaning of the Securities Act, in which event any
commissions received by these broker-dealers, agents or underwriters and any profits realized by the selling security holder on the
resales of the securities may be deemed to be underwriting commissions or discounts under the Securities Act. If any selling
security holder is deemed to be an underwriter, such selling security holder may be subject to certain statutory and regulatory
liabilities, including liabilities imposed pursuant to Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under the Exchange
Act. In addition, because a selling security holder may be deemed an ―underwriter‖ within the meaning of Section 2(11) of the
Securities Act, such selling security holder will be subject to the prospectus delivery requirements of the Securities Act.
   Agents may from time to time solicit offers to purchase the securities. If required, we will name in the applicable prospectus
supplement any agent involved in the offer or sale of the securities. Unless otherwise indicated in a prospectus supplement, any
agent will be acting on a best efforts basis for the period of its appointment.
    If underwriters are used in a sale, the securities will be acquired by the underwriters for their own account and may be resold
from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices
determined at the time of sale, or under delayed delivery contracts or other contractual commitments. The securities may be offered
to the public either through underwriting syndicates represented by one or more managing underwriters or directly by one or more
firms acting as underwriters. If an underwriter or underwriters are used in the sale of the securities, an underwriting agreement will
be executed with the underwriter or underwriters at the time an agreement for the sale is reached. The applicable prospectus
supplement will set forth the managing underwriter or underwriters, as well as any other underwriter or underwriters, with respect
to a particular underwritten offering of securities, and will set forth the terms of the transactions, including compensation of the
underwriters and dealers and the public offering price, if applicable. The prospectus and the applicable prospectus supplement will
be used by the underwriters to resell the securities.

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    If a dealer is used in the sale of the securities, the selling security holders or an underwriter will sell the securities to the dealer,
as principal. The dealer may then resell the securities to the public at varying prices to be determined by the dealer at the time of
resale. To the extent required, we will set forth in the prospectus supplement the name of the dealer and the terms of the
transactions.
   Any securities covered by the registration statement of which this prospectus is a part that qualify for sale in reliance on Rule
144 under the Securities Act may be sold in reliance on Rule 144 rather than pursuant to this prospectus.
    Any selling security holder and any other person participating in a distribution will be subject to applicable provisions of the
Exchange Act and the rules and regulations under that statute, including, without limitation, possibly Regulation M. This may limit
the timing of purchases and sales of any of the securities by a selling security holder and any other participating person. Regulation
M may also restrict the ability of any person engaged in the distribution of the securities to engage in market-making activities with
respect to the securities. All of the foregoing may affect the marketability of the securities and the ability of any person or entity to
engage in market-making activities with respect to the securities.
    In order to comply with the securities laws of some states, if applicable, the securities may be sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in some states the securities may not be sold unless it has been
registered or qualified for sale or an exemption from registration or qualification requirements is available and is complied with.
    To the extent required, the securities to be sold, the names of the selling security holders, the respective purchase prices and
public offering prices, the names of any agent, dealer or underwriter, and any applicable commissions or discounts with respect to a
particular offer will be set forth in an accompanying prospectus supplement or, if necessary, a post-effective amendment to the
registration statement of which this prospectus forms a part.
    We have agreed with the selling security holders to use our reasonable best efforts to keep the registration statement of which
this prospectus constitutes a part current.
   Once sold under the registration statement of which this prospectus forms a part, the securities will be freely tradable in the
hands of persons other than our affiliates.
    As a result of requirements of the Financial Industry Regulatory Authority (FINRA), formerly the National Association of
Securities Dealers, Inc. (NASD), the maximum commission or discount to be received by any FINRA member or independent
broker/dealer may not be greater than eight percent (8%) of the gross proceeds received by any selling security holder for the sale
of any securities. If more than 10% of the net proceeds of any offering of securities of common stock made under this prospectus
will be received by FINRA members participating in the offering or affiliates or associated persons of such FINRA members, the
offering will be conducted in accordance with NASD Conduct Rule 2710(h).

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                                            VALIDITY OF COMMON STOCK
   The validity of the common stock being offered hereby will be passed upon for the company by Hunton & Williams LLP,
Dallas, Texas.

                                                             EXPERTS
    PMB Helin Donovan, LLP, an independent registered public accounting firm, has audited our consolidated financial statements
at October 31, 2009 and 2010, and for each of the two years in the period ended October 31, 2010, as set forth in their report. We
have included our consolidated financial statements in the prospectus and elsewhere in the registration statement in reliance on the
report of PMB Helin Donovan, LLP, an independent registered public accounting firm, given on their authority as experts in
accounting and auditing.

                                        WHERE YOU CAN FIND MORE INFORMATION
    We have filed a registration statement on Form S-1 with the Securities and Exchange Commission. This prospectus, which
forms a part of that registration statement, does not contain all of the information included in the registration statement and the
exhibits and schedules thereto as permitted by the rules and regulations of the Securities and Exchange Commission. For further
information with respect to us and the shares of our common stock offered hereby, please refer to the registration statement,
including its exhibits and schedules. Statements contained in this prospectus as to the contents of any contract or other document
referred to herein are not necessarily complete and, where the contract or other document is an exhibit to the registration statement,
each such statement is qualified in all respects by the provisions of such exhibit, to which reference is hereby made. You may
review a copy of the registration statement at the Securities and Exchange Commission‘s public reference room at 100 F Street,
N.E., Washington, DC 20549. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further information on
the operation of the public reference rooms. The registration statement can also be reviewed by accessing the Securities and
Exchange Commission‘s website at http://www.sec.gov . Upon the completion of this offering, we will be subject to the
information and reporting requirements of the Securities Exchange Act of 1934 and, in accordance therewith, file periodic reports,
proxy statements or information statements, and other information with the Securities and Exchange Commission. These reports
can also be reviewed by accessing the Securities and Exchange Commission‘s website.
    You should rely only on the information provided in this prospectus, any prospectus supplement or as part of the
registration statement filed on Form S-1 of which this prospective is a part, as such registration statement is amended and
in effect with the Securities and Exchange Commission. We have not authorized anyone else to provide you with different
information. We are not making an offer of these securities in any state where the offer is not permitted. You should not
assume that the information in this prospectus, any prospectus supplement or any document incorporated by reference is
accurate as of any date other than the date of those documents.

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                              INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


       Financial Statements:
         Report of Independent Registered Public Accounting Firm                                F-2
         Consolidated Balance Sheets                                                            F-3
         Consolidated Statements of Operations                                                  F-4
         Consolidated Statements of Changes in Stockholders‘ Equity and Comprehensive Loss      F-5
         Consolidated Statements of Cash Flows                                                  F-6
         Notes to Consolidated Financial Statements                                             F-7
       Financial Statement Schedule:
         Schedule II: Valuation and Qualifying Accounts for the Years Ended October 31, 2009   F-22
           and 2010

                                                           F-1
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                       REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders of
Crossroads Systems, Inc. and Subsidiaries
    We have audited the accompanying consolidated balance sheets of Crossroads Systems, Inc. and subsidiaries (the Company) as
of October 31, 2009 and 2010, and the related consolidated statements of operations, changes in stockholders‘ equity and
comprehensive loss, and cash flows for the fiscal years then ended. Our audits also included the financial statement schedule listed
in the accompanying index. These financial statements and financial statement schedule are the responsibility of the Company‘s
management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on
our audits.
    We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit includes consideration of internal control over financial reporting as a basis for designing
audit procedures that are appropriate in the circumstances, but not for expressing an opinion on the effectiveness of the Company‘s
internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
    In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated
financial position of the Company as of October 31, 2009 and 2010, and the results of its operations and its cash flows for the fiscal
years then ended in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion,
the related financial statement schedule presents fairly, in all material respects, the information set forth therein when considered in
relation to the basic consolidated financial statements.
/s/ PMB HELIN DONOVAN, LLP
Austin, Texas
March 9, 2011

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                                  CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES

                                         CONSOLIDATED BALANCE SHEETS
                                           (In thousands, except share data)




                                                                                           OCTOBER 31,
                                                                                   2009                  2010
                                     ASSETS
       Current assets:
          Cash and cash equivalents                                            $      5,297       $        13,811
          Accounts receivable, net of allowance for doubtful accounts of $34          5,124                 5,607
            and $19, respectively
          Inventories, net of allowance for excess and obsolete inventory of              111                   93
            $477 and $221, respectively
          Prepaid expenses and other current assets                                     423                   293
            Total current assets                                                     10,955                19,804
       Property and equipment, net                                                      830                   575
       Intangible assets, net                                                         1,988                   739
       Other assets                                                                      69                    60
            Total assets                                                       $     13,842       $        21,178

              LIABILITIES AND STOCKHOLDERS’ EQUITY
       Current liabilities:
         Accounts payable                                                      $      1,037       $           990
         Accrued expenses                                                             1,895                 2,271
         Deferred revenue                                                               199                 1,517
         Line of credit                                                               1,973                 1,973
           Total current liabilities                                                  5,104                 6,751
       Long term liabilities                                                             59                   103
       Commitments and contingencies (See Note 9)                                        —                     —
       Stockholders‘ equity:
         Common stock, $.001 par value, 75,000,000 shares authorized,                      29                   43
           29,233,370 and 42,945,102 shares issued and outstanding,
           respectively
         Additional paid-in capital                                                 188,769               198,697
         Accumulated other comprehensive loss                                           (38 )                 (49 )
         Accumulated deficit                                                       (180,081 )            (184,367 )
           Total stockholders‘ equity                                                 8,679                14,324
           Total liabilities and stockholders‘ equity                          $     13,842       $        21,178
See accompanying notes to the consolidated financial statements.

                             F-3
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                                   CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES

                                   CONSOLIDATED STATEMENTS OF OPERATIONS
                                     (In thousands, except share and per share data)




                                                                                        Year Ended
                                                                                        October 31,
                                                                            2009                      2010
       Revenue:
          Product                                                  $             5,870         $          4,243
          IP license, royalty and other                                         10,978                   12,125
            Total revenue                                                       16,848                   16,368
       Cost of revenue:
          Product                                                                  653                      422
          IP license, royalty and other                                          2,081                    2,070
            Total cost of revenue                                                2,734                    2,492
       Gross profit                                                             14,114                   13,876
       Operating expenses:
          Sales and marketing                                                    5,494                    5,270
          Research and development                                               9,730                    8,907
          General and administrative                                             2,116                    2,623
          Amortization of intangible assets                                      1,267                    1,248
            Total operating expenses                                            18,607                   18,048
       Loss from operations                                                     (4,493 )                 (4,172 )
       Interest expense                                                           (113 )                   (110 )
       Other income (expense)                                                       12                       (4 )
       Net loss                                                    $            (4,594 )       $         (4,286 )

       Basic and diluted net loss per share                        $               (0.16 )     $             (0.14 )

       Basic and diluted average common shares outstanding                  29,032,451                30,345,374



                                See accompanying notes to the consolidated financial statements.

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                            CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES

                  CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
                                   AND COMPREHENSIVE LOSS
                                   (In thousands, except share data)




                                                      Additional       Accumulated      Accumulated            Total
                          Common Stock                 Paid-In            Deficit          Other           Stockholders’
                                                       Capital                         Comprehensive          Equity
                                                                                           Loss
                         Shares          Amount

Balance at October 31,   28,171,247      $ 28     $     188,053    $     (175,487)     $    (87)       $      12,507
  2008
Exercise of stock             5,625        —                   1                —             —                     1
  options
Stock-based               1,056,498         1               715                 —             —                   716
  compensation
Foreign currency                  —        —                  —                 —             49                   49
  translation
  adjustment
Net loss                          —        —                  —             (4,594 )          —                (4,594 )

Balance at October 31,   29,233,370        29           188,769          (180,081)          (38)                8,679
   2009
Issuance of common       12,500,000        13            9,165                 —              —           9,178
   stock
Stock-based               1,211,732         1                763               —              —            764
   compensation
Foreign currency                 —         —                  —                —             (11 )          (11 )
   translation
   adjustment
Net loss                         —         —                  —            (4,286 )           —          (4,286 )

Balance at October 31,   42,945,102     $ 43      $   198,697      $    (184,367)       $    (49)    $   14,324
  2010



                          See accompanying notes to the consolidated financial statements.

                                                       F-5
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                                  CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES

                                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                (In thousands)




                                                                                          Years Ended
                                                                                          October 31,
                                                                                   2009                 2010
       Cash flows from operating activities:
         Net loss                                                              $   (4,594 )      $      (4,286 )
         Adjustments to reconcile net loss to net cash provided by (used in)
            operating activities:
            Depreciation                                                              839                  553
            Amortization of intangible assets                                       1,267                1,248
            Loss on disposal of fixed assets                                            1                   —
            Stock-based compensation                                                  716                  764
            Provision for doubtful accounts receivable                                (70 )                (16 )
            Provision for excess and obsolete inventory                               108                   20
         Changes in assets and liabilities:
            Accounts receivable                                                       527                 (468 )
            Inventories                                                               110                   (2 )
            Prepaids and other current assets                                         (77 )                128
            Accounts payable                                                         (698 )                126
            Accrued expenses                                                           54                  425
            Deferred revenue                                                         (151 )              1,329
               Net cash used in operating activities                               (1,968 )               (179 )
       Cash flows from investing activities:
         Purchase of property and equipment                                          (216 )               (320 )
               Net cash used in investing activities                                 (216 )               (320 )
       Cash flows from financing activities:
         Proceeds from issuance of common stock, net of expenses                        1                9,178
         Paydown of line of credit                                                    (51 )                 —
               Net cash (used in) provided by financing activities                    (50 )              9,178
       Effect of exchange rate on cash                                                445                 (165 )
       Net (decrease) increase in cash and cash equivalents                        (1,789 )              8,514
       Cash and cash equivalents, beginning of period                               7,086                5,297
       Cash and cash equivalents, end of period                                $    5,297        $      13,811

       Supplemental disclosure of cash flow information:
       Cash paid for interest                                                  $      110        $             90
       Cash paid for taxes                                                     $       52        $             41
See accompanying notes to the consolidated financial statements.

                             F-6
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                                     CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES

                                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
     The accompanying consolidated financial statements include the accounts of Crossroads Systems, Inc. (―Crossroads‖ or the
―Company‖) and its wholly-owned subsidiaries. Headquartered in Austin, Texas, Crossroads Systems, a Delaware corporation, is a
global leading provider of solutions to connect, protect, and secure business-critical data for enterprise storage and the cloud
computing marketplace. The Company‘s solutions are based on patented core routing messaging interface, or RMI, technology.
The Company offers innovative, cost effective products and solutions that are built on superior quality, reliability and performance
that allow customers to protect and manage their corporate data assets.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
    The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant
intercompany transactions have been eliminated in consolidation.
Use of Estimates
    The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during
the reporting periods. Actual results could differ from those estimates, and such differences may be material to the consolidated
financial statements.
Cash and Cash Equivalents
    Cash and cash equivalents consist of cash on deposit and highly liquid investments with original maturities of 90 days or less at
date of purchase. While the Company‘s cash and cash equivalents are on deposit with high quality FDIC insured financial
institutions, at times such deposits exceed insured limits. As of October 31, 2010, total uninsured deposits were $13.6 million. The
Company has not experienced any losses in such accounts.
Allowance for Doubtful Accounts
    The allowance for doubtful accounts is based on the Company‘s assessment of the collectibility of customer accounts. The
Company evaluates the adequacy of its allowance on a regular basis by considering factors such as historical experience, credit
quality, age of the accounts receivable balances, and current economic conditions that may affect a customer‘s ability to pay. The
Company makes adjustments to the allowance balance if the evaluation of allowance requirements differs from the actual aggregate
reserve. This evaluation is inherently subjective and estimates may be revised as more information becomes available.
Fair Value of Financial Instruments
    Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. To increase the comparability of fair value measurements, a three-tier fair
value hierarchy, which prioritizes the inputs used in the valuation methodologies, is as follows:
   Level 1 — Valuations based on quoted prices for identical assets and liabilities in active markets.
   Level 2 — Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for
   similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not
   active, or other inputs that are observable or can be corroborated by observable market data.
   Level 3 — Valuations based on unobservable inputs reflecting management‘s assumptions, consistent with reasonably
   available assumptions made by other market participants. These valuations require significant judgment.

                                                                   F-7
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                                     CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES

                                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (continued)
    As of October 31, 2009 and 2010, the fair value of the Company‘s financial instruments, including cash and cash equivalents,
accounts receivable, accounts payable, and accrued expenses, approximates book value due to the short maturity of these
instruments.
    At October 31, 2010, the Company had no assets or liabilities that were measured at fair value on a non-recurring basis. The
estimated fair value of the Company‘s line of credit approximates the carrying value presented in its consolidated balance sheet
based on discounting the expected future cash flows using current market rates as of October 31, 2010.
Inventories
     Inventories are stated at the lower of cost or market. Cost is determined using standard cost, which approximates the first-in,
first-out method. Provisions, when required, are made to reduce excess and obsolete inventories to their estimated net realizable
values. The allowance is measured as the difference between the cost of the inventory and its market value based upon assumptions
about future demand and charged to the provision for inventory, which is a component of cost of sales. At the point of the loss
recognition, a new, lower cost basis for that inventory is established, and subsequent changes in facts and circumstances do not
result in the restoration of the original cost basis or increases in the newly established cost basis.
Property and Equipment
    Property and equipment are stated at historical cost, net of accumulated depreciation. Depreciation is recognized using the
straight-line method over the estimated useful lives of the respective assets (Note 4). Expenditures for repairs and maintenance are
charged to expense when incurred; major replacements and betterments are capitalized at cost. Leasehold improvements are
amortized on a straight-line basis over the shorter of the estimated useful life of the related asset or the remaining life of the lease.
Upon retirement or disposition of property and equipment, the cost and related accumulated depreciation are removed from the
accounts and any resulting gain or loss is reflected in operations.
Intangible Assets
    Intangible assets are originally recorded at their fair values at the date of acquisition. Indefinite-lived intangible assets are not
amortized, but are tested annually for impairment, or more frequently if impairment indicators occur. Definite-lived intangibles are
amortized over their estimated useful lives and are evaluated for impairment annually, or more frequently if impairment indicators
are present, using a process similar to that used to test other long-lived assets for impairment.
Impairment of Long-lived Assets
    The Company reviews long-lived tangible and intangible assets for impairment whenever events or changes in circumstances
indicate the carrying amount of an asset may not be recoverable. Recoverability of these assets is measured by comparison of its
carrying amount to future undiscounted cash flows the assets are expected to generate. The Company considers historical
performance and future estimated results in its evaluation of impairment.
   The Company measures the amount of impairment by comparing the carrying amount of the asset to its fair value, generally
measured by discounting expected future cash flows at the rate it utilizes to evaluate potential investments. Because the Company
operates as a single reporting unit, the Company is considered as a whole when evaluating long-lived assets for impairment.
    The impairment test for intangible assets requires management to make judgments in connection with identifying reporting
units, assigning assets and liabilities to reporting units and determining fair value of each reporting unit. Significant judgments
required to estimate the fair value of reporting units include projecting future cash flows, determining appropriate discount rates
and other assumptions. The projections are based on historical performance and future estimated results.

                                                                  F-8
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                                    CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (continued)
Revenue Recognition
    Revenue consists of sales of hardware, software and services, as well as royalties the Company earns for the license of certain
intellectual property. Revenue is recognized from the sale of products and services when it is realizable and earned. Revenue is
considered realizable and earned when: persuasive evidence of an arrangement exists; delivery has occurred or services have been
rendered; the price to the buyer is fixed or determinable; and when collectability is reasonably assured. Royalty revenue is
recognized when earned or amounts can be reasonably estimated.
Product Revenue — Hardware
    Revenue for hardware products sold to distributors, value added resellers (―VAR‖s), original equipment manufacturers
(―OEM‖s) and end users is generally recognized upon shipment. When significant post-delivery obligations exist, the related
revenue is deferred until such obligations are fulfilled. If there are customer acceptance criteria in the contract, the Company
recognizes revenue upon end user acceptance, which typically occurs after delivery and installation are completed.
    In the period revenue is recognized, allowances are provided for future product returns. These allowances are based on
programs in existence at the time revenue is recognized and historical product return rates. Since the Company has historically been
able to reliably estimate the amount of returns, revenue is recognized, net of allowances for future returns, upon shipment to our
customers.
Product Revenue — Software
    Software revenue is generally recognized upon shipment or electronic delivery and when vendor-specific objective evidence
(―VSOE‖) of fair value for the undelivered elements exists. For arrangements with multiple elements, the residual method is used
to determine the amount of product revenue to be recognized. Under the residual method, the VSOE of fair value for the
undelivered elements is deferred and the remaining portion of the arrangement is recognized as product revenue, assuming all other
revenue recognition criteria of appropriate revenue guidance have been met. Revenue from post-contract customer support
agreements, which entitle customers to both telephone support and any unspecified upgrades and enhancements during the term of
the agreement, is recognized ratably over the term of the support agreement.
Royalty and Other Revenue
    Royalty and other revenue consist of revenue from the licensing of intellectual property (―IP‖), royalty payments, and sales of
service contracts. IP licensing arrangements typically consist of upfront nonrefundable fees. These fees are collected as
consideration for either past or future sales of licensee products. When a license agreement is signed, delivery of the license has
occurred and no obligations remain outstanding, we record revenue from upfront nonrefundable IP licensing arrangements. License
arrangements can also include a royalty stream that is recognized quarterly based on reports from the licensee. Revenue from
royalty payments is recognized based on reports from IP licensees.
    Revenue for service is generally recognized upon services being rendered. Service revenue consists of customer field support
agreements for the Company‘s hardware products, installation and professional services and out-of-warranty repairs. For customer
field support agreements, revenue equal to the separately stated price of these service contracts for hardware products is initially
deferred and recognized as revenue ratably over the contract period. Installation and professional services are recognized upon
completion. Out-of-warranty repair revenue is recognized upon completion of the repair.
Multiple Element Arrangements
     When elements such as hardware, software and services are contained in a single arrangement, or in related arrangements with
the same customer, the Company allocates revenue to the separate elements based on relative fair value, provided the fair value for
all elements of the arrangement are known. If, in an arrangement, the undelivered elements have fair value, but the delivered
element does not, the fair value of

                                                                 F-9
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                                    CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (continued)
the undelivered elements is deferred and the residual revenue is allocated to the delivered elements. If fair value does not exist for
undelivered elements, then revenue for the entire arrangement is deferred until all elements have been delivered.
Shipping and Handling
   Shipping and handling costs are presented as a part of cost of product sales, when related to revenue producing activities.
Shipping and handling costs were immaterial for the periods presented.
Guarantees and Warranty Reserve
    Generally, the Company indemnifies, under pre-determined conditions and limitations, its customers for infringement of
third-party intellectual property rights by its products or services. The Company seeks to limit its liability for such indemnity to an
amount not to exceed the sales price of the products or services. The Company does not believe, based on information available,
that it is probable that any material amounts will be paid under these guarantees.
    The Company provides for the estimated cost to repair or replace products under warranty and technical support costs when the
related product revenue is recognized. The Company warrants products for a period from 12 to 39 months following the sale of its
products. A reserve for warranty costs is recorded based upon the historical level of warranty claims and management‘s estimate of
future costs.
Income Taxes
    The Company accounts for income taxes in accordance with the asset and liability method. Under the asset and liability
method, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences
between the financial reporting and tax bases of assets and liabilities using enacted tax rates that are expected to apply to taxable
income in the periods in which the deferred tax asset or liability is expected to be realized or settled. Valuation allowances are
established when necessary to reduce deferred tax assets to the amounts expected to be realized. The Company has provided a full
valuation allowance against its deferred tax assets because the realization of the related tax benefits is not considered more likely
than not.
    The Company accounts for uncertain tax positions in accordance with the authoritative guidance issued by the Financial
Accounting Standards Board (―FASB‖) on income taxes, which addresses the determination of whether tax benefits claimed or
expected to be claimed on a tax return should be recorded in the financial statements. Pursuant to the authoritative guidance, the
Company recognizes the tax benefit from an uncertain tax position only if it meets the ―more likely than not‖ threshold that the
position will be sustained upon examination by the taxing authority, based on the technical merits of the position. The tax benefits
recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty
percent likelihood of being realized upon ultimate settlement. The Company includes interest and penalties related to its uncertain
tax positions as part of income tax expense within its consolidated statement of operations (Note 12).
Computation of Net Loss Per Share
    Basic loss per share is computed by dividing net loss available to common stockholders by the weighted average number of
common shares outstanding for the period. Diluted earnings per share is computed by giving effect to all dilutive potential common
shares that were outstanding during the period. Basic earnings per share excludes the dilutive effect of common stock equivalents
such as stock options and warrants, while earnings per share, assuming dilution, includes such dilutive effects. Future
weighted-average shares outstanding calculations will be impacted by the following factors, among others: (i) the ongoing issuance
of common stock associated with stock option and warrant exercises; (ii) any fluctuations in the Company‘s stock price, which
could cause changes in the number of common stock equivalents included in the earnings per share, assuming dilution
computation; and (iii) the issuance of common stock to effect business combinations should the Company enter into such
transactions.

                                                                 F-10
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                                    CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (continued)
     The Company has excluded all outstanding common stock equivalents from the calculation of diluted net loss per share because
all such common stock equivalents are antidilutive for all periods presented. The total number of common stock equivalents
excluded from the calculations of diluted net loss per common share were 6,283,451 and 11,827,969 for the years ended October
31, 2009 and 2010, respectively. The dilutive common stock equivalents for the year ended October 31, 2010 include warrants to
purchase 4,296,875 shares of common stock, issued in 2010 (Note 10).
Advertising Costs
   The Company expenses all advertising costs as incurred. Advertising costs for the years ended October 31, 2009 and 2010 were
approximately $19,000 and $24,000, respectively.
Research and Development Costs
   Expenditures relating to the development of new products are expensed as incurred. These costs include expenditures for
employee compensation, materials used in the development effort, other internal costs, as well as expenditures for third party
professional services. Software development costs required to be capitalized have not been material to date.
Stock-based Compensation
    Stock based compensation expense is measured at the grant date, based on the fair value of the award, and is recognized as an
expense over the requisite employee service period (generally the vesting period), net of estimated forfeitures. The Company
estimates the fair value of share-based payments using the Black-Scholes option-pricing model, which requires a number of
assumptions to determine the model inputs. The estimation of share-based awards that will ultimately vest requires judgment, and
to the extent actual results or updated estimates differ from the Company‘s current estimates, such amounts will be recorded as a
cumulative adjustment in the period estimates are revised. The Company considers many factors when estimating expected
forfeitures, including types of awards, employee class and historical experience. Additionally, the fair value of share-based awards
to non-employees are expensed over the period in which the related services are rendered. All share-based awards are expected to
be fulfilled with new shares of common stock.
Foreign Currency Translation
    The Company‘s wholly-owned subsidiary outside the United States (―U.S.‖), Crossroads Europe GmbH, has a functional
currency other than the U.S. dollar. Accordingly, all balance sheet accounts of this subsidiary are translated into U.S. dollars using
the current exchange rate in effect at the balance sheet date, and revenues and expenses are translated using the average exchange
rate in effect during the period. The gains and losses from foreign currency translation of this subsidiary‘s financial statements are
recorded directly as a separate component of stockholders‘ equity and represent all of the balance under the caption ―Accumulated
other comprehensive loss.‖
   Net losses recorded by Crossroads Europe GmbH, and reported in Consolidated Operations during fiscal years 2009 and 2010
were $0.7 million and $0.7 million, respectively. Assets of Crossroads Europe GmbH account for approximately 1% of the
consolidated net assets for fiscal years 2009 and 2010.
Recently Issued Accounting Pronouncements
    In October 2009, the FASB issued Accounting Standards Update (―ASU‖) 2009-13, Revenue Recognition (Topic 605):
Multiple-Deliverable Revenue Arrangements — a consensus of the FASB Emerging Issues Task Force (―ASU 2009-13‖). ASU
2009-13 changes accounting for certain multiple deliverable arrangements. ASU 2009-13 addresses the separation of deliverables
and how to measure and allocate the arrangement consideration to one or more units of accounting in multiple deliverable
arrangements. Currently, under the residual method of allocation, we use objective and reliable evidence of the fair value of the
undelivered elements to separate deliverables in multiple deliverable arrangements. ASU 2009-13 eliminates the residual

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                                     CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES

                                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (continued)
method and requires that consideration from the arrangement be allocated to all deliverables using the relative selling price method.
ASU 2009-13 requires additional disclosures related to multiple deliverable revenue arrangements upon adoption and is effective
for fiscal years beginning after June 15, 2010, or the beginning of our fiscal 2012. In addition, ASU 2009-13 may be early adopted.
It may be implemented with either prospective or retrospective application; however, if early adoption is chosen, the entity must
either adopt at the beginning of its fiscal year, or adopt using retrospective application. We are still evaluating the impact of
adoption; however, based on a preliminary assessment, we do not expect the adoption of this guidance to have a material impact on
our consolidated financial statements.
     In October 2009, the FASB issued ASU 2009-14, Software (Topic 985): Certain Revenue Arrangements That Include Software
Elements — a consensus of the FASB Emerging Issues Task Force (―ASU 2009-14‖). ASU 2009-14 changes the accounting for
revenue arrangements that include both tangible products and software elements. Tangible products containing software
components and non-software components that function together to deliver the tangible product‘s essential functionality are no
longer within the scope of the software revenue guidance. Under prior guidance, such arrangements were accounted for as software
if the software was determined to be more than incidental. ASU 2009-14 requires that any hardware components of such
arrangements be excluded from software revenue guidance and that any essential software that is sold with or embedded within the
product also be excluded from software revenue guidance. This ASU is effective for fiscal years beginning after June 15, 2010, or
the beginning of our fiscal 2012. In addition, ASU 2009-14 may be early adopted. ASU 2009-14 may be implemented with either
prospective or retrospective application; however, if early adoption is chosen, the entity must either adopt at the beginning of its
fiscal year, or adopt using retrospective application. Further, ASU 2009-14 must be adopted in the same period and with the same
implementation method as ASU 2009-13. We are still evaluating the impact of adoption; however, based on a preliminary
assessment, we do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.
    In August 2009, the FASB issued ASU 2009-05, Fair Value Measurements and Disclosures (Topic 820) — Measuring
Liabilities at Fair Value (―ASU 2009-05‖). ASU 2009-05 clarifies that in circumstances in which a quoted price in an active
market for the identical liability is not available, an entity must measure fair value using either the quoted price of the identical
liability when traded as an asset, quoted prices for similar liabilities or similar liabilities when traded as assets or another valuation
technique consistent with fair value measurements such as an income approach or a market approach. ASU 2009-05 clarifies that
no separate input, or adjustment to other inputs, must be made for the existence of a restriction that prevents the transfer of a
liability when measuring fair value of a liability. We adopted ASU 2009-05 on November 1, 2009 and it did not have an impact on
our consolidated financial statements.
    In January 2010, the FASB issued ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820) — Improving
Disclosures about Fair Value Measurements (―ASU 2010-06‖). ASU 2010-06 increases disclosures to include transfers in and out
of Levels 1 and 2 and clarified inputs, valuation techniques and the level of disaggregation to be disclosed. This ASU is effective
for fiscal years beginning after December 15, 2010. In addition, ASU 2010-06 may be early adopted. We are still evaluating the
impact of adoption; however, based on a preliminary assessment, we do not expect the adoption of this guidance to have an impact
on our consolidated financial statements.
     In February 2010, the FASB issued ASU No. 2010-09, Subsequent Events (Topic 855) (―ASU 2010-09‖). ASU 2010-09
provides an update to Topic 855, Subsequent Events. This update clarifies that a Securities and Exchange Commission (―SEC‖)
filer is required to evaluate subsequent events through the date that the financial statements are issued and removes the requirement
for SEC filers to disclose the date through which subsequent events have been evaluated. This guidance became effective upon
issuance and has been adopted by the Company. The Company has evaluated the financial statements for subsequent events
through March 9, 2011.

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                                       CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. INVENTORY
    Inventory, net consists of the following (in thousands):




                                                                                                    OCTOBER 31,
                                                                                             2009                 2010
              Raw materials                                                       $           466           $       225
              Finished goods                                                                  122                    89
                                                                                              588                   314
                Less: Allowance for excess and obsolete inventory                            (477 )                (221 )
                                                                                  $           111           $        93

4. PROPERTY AND EQUIPMENT
    Property and equipment, net consist of the following (in thousands, except number of years):




                                                                                              OCTOBER 31,
                                                                  Life                2009                      2010
                                                                (years)
              Equipment                                         1–3         $         18,504            $         18,269
              Furniture and fixtures                             5                       707                         706
             Leasehold improvements                                                        487                    511
                                                                                        19,698                 19,486
                Less: Accumulated depreciation and                                     (18,868 )              (18,911 )
                  amortization
                                                                               $           830       $            575

   Depreciation expense was approximately $839,000 and $553,000 for fiscal years 2009 and 2010, respectively.
5. INTANGIBLE ASSETS
    The following table presents details of intangible assets acquired (in thousands, except number of years):




                                                              Amortization                      OCTOBER 31,
                                                              Period (Years)
                                                                                         2009                 2010

             Intangible assets:
                Technology                                          5              $      6,407          $      6,407
                Accumulated amortization                                                 (4,419 )              (5,668 )
             Net carrying value                                                    $      1,988          $        739

    Amortization expense was approximately $1,267,000 and $1,248,000 for fiscal years 2009 and 2010, respectively. As of
October 31, 2010, amortization for existing intangible assets is expected to be $630,000 and $109,000 for the years ended October
31, 2011 and 2012, respectively. Such assets will be fully amortized at October 31, 2012.

                                                               F-13
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                                     CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES

                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. ACCRUED EXPENSES AND DEFERRED REVENUE
    Accrued expenses consist of the following (in thousands):




                                                                                            OCTOBER 31,
                                                                                     2009                 2010
             Professional services                                               $       648       $          596
             Payroll related                                                             955                1,368
             Warranty reserve                                                             18                   30
             Other                                                                       274                  277
                                                                                 $     1,895       $        2,271

   Included in payroll related accrued expenses as of October 31, 2010 was $335,000 related to bonus compensation which was
subsequently settled in December 2010 with 333,438 shares of common stock.
   Warranty reserve activity during the years ended October 31, 2009 and 2010 was as follows (in thousands):




                                                     Balance at     Charged to       Deductions           Balance at
                                                     Beginning      Costs and                              End of
                                                     of Period       Expenses                              Period
             Year ended October 31, 2009
             Warranty reserve                      $       24          $    15        $      (21 )        $      18

             Year ended October 31, 2010
             Warranty reserve                      $       18          $    12        $       —           $      30

   Deferred revenue consists of the following (in thousands):




                                                                                                 OCTOBER 31,
                                                                                          2009                2010
             Product                                                                  $      47       $         1,345
             Services                                                                       140                   165
             Other                                                                           12                     7
                                                                                      $     199       $         1,517

7. CONCENTRATIONS
    Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash
equivalents and accounts receivable.
    The Company‘s sales are primarily concentrated in the United States and are primarily derived from sales to OEMs in the
computer storage and server industry. Revenue is concentrated with several major customers. The loss of a major customer, a
change of suppliers or a significant technological change in the industry could adversely affect operating results. The Company
performs credit evaluations of its customers and generally does not require collateral on accounts receivable balances and provides
allowances for potential credit losses and product sales returns. The Company has not experienced material credit losses in any of
the periods presented.
   The Company relies on a limited number of suppliers for its products. The inability of any supplier to fulfill supply
requirements could materially impact future operating results.

                                                                F-14
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                                   CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES

                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. CONCENTRATIONS – (continued)
    The percentage of sales to significant customers was as follows:




                                                                                      Year Ended October 31,
                                                                                     2009                2010
             Customer A                                                               54.2 %              49.1 %
             Customer B                                                                0.0 %              15.4 %
             Customer C                                                                0.0 %              10.5 %
             Customer D                                                               11.9 %               0.0 %
   The percentage of accounts receivable, net from significant customers was as follows:




                                                                                      Year Ended October 31,
                                                                                     2009                2010
             Customer A                                                               18.3 %               7.5 %
             Customer B                                                                0.0 %              44.6 %
             Customer C                                                                0.0 %               0.0 %
             Customer D                                                               39.0 %               0.0 %
   The level of sales to any customer may vary from quarter to quarter. However, the Company expects that significant customer
concentration will continue for the foreseeable future. The loss of any one of these customers, or a decrease in the level of sales to
any one of these customers, could have a material adverse impact on the Company‘s financial condition or results of operations.
8. LINE OF CREDIT
    The Company has a line of credit with its bank. The committed revolving line provides for an advance of up to $4.0 million
with a borrowing base of 80% of eligible accounts receivable. Interest accrues monthly at a rate of Prime Rate, plus a margin of
0.25%. The Company is required to satisfy certain financial and reporting covenants in conjunction with the line of credit. The line
of credit will mature on December 28, 2011. As of October 31, 2009 and 2010, there was $1.97 million drawn and outstanding on
the line of credit, and the Company is in compliance with all covenants.
   Interest expense was approximately $115,000 and $90,000 for the years ended October 31, 2009 and 2010, respectively.
9. COMMITMENTS AND CONTINGENCIES
Leases
    The Company leases office space and equipment under long-term operating lease agreements that expire on various dates
through February 28, 2015. Rental expense under these agreements was approximately $533,000 and $516,000 for the years ended
October 31, 2009 and 2010, respectively. Crossroads leases its headquarters, approximately 37,800 square feet of general office,
laboratory, data center and administrative space in Austin, Texas. The original lease was effective October 31, 2005, and extended
in accordance with an extension agreement through February 28, 2015. The term of the extension agreement is five years, from
March 1, 2010 through February 28, 2015, and represents a lease commitment of $364,000 per year through the lease term.
    In conjunction with entering into the lease agreement, Crossroads signed an unconditional, irrevocable letter of credit with a
bank for $420,000, which is secured by accounts receivable, in conjunction with the Company‘s $4.0 million line of credit (Note
8).

                                                                F-15
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                                      CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES

                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. COMMITMENTS AND CONTINGENCIES – (continued)
    The minimum annual future payments under the terms of these leases and other commitments at October 31, 2010 are as
follows (in thousands):




             Fiscal Year                                                                               Operating
                                                                                                        Leases
             2011                                                                                 $           391
             2012                                                                                             386
             2013                                                                                             384
             2014                                                                                             393
             2015                                                                                             130
             Thereafter                                                                                        —
                                                                                                  $         1,684

Legal Proceedings
   Intellectual Property Litigation
    The Company recently filed a lawsuit against 3Par, Inc., American Megatrends, Inc., Rorke Data, Inc., D-Link Systems, Inc.,
Chelsio Communications, Inc., DataCore Software Corporation, and IStor Networks, Inc. in a lawsuit styled Crossroads Systems,
Inc. v. 3Par, Inc. et al, Civil Action No. 1:10-CV-652-SS (W.D. Tex — Austin Division) alleging infringement by each of the
defendants of one or both of U.S. Patent Nos. 6,425,035 and 7,051,147. The defendants have been granted extensions of time to
answer the complaint. The lawsuit has not yet entered into the discovery phase.
   Other
   From time to time, the Company may be involved in litigation relating to claims arising out of its ordinary course of business.
Management believes that there are no claims or actions pending or threatened against the Company, the ultimate disposition of
which would have a material impact on the Company‘s financial position, results of operations or cash flows.
10. STOCKHOLDERS’ EQUITY
    On October 23, 2010 the Company sold 12,500,000 shares of its common stock at $0.80 per share for gross proceeds to the
Company of $10.0 million. In conjunction with this private placement, the Company also issued warrants to purchase an additional
4,296,875 shares of common stock with an exercise price of $0.80 per share. Fees in the amount of $0.8 million relating to the
stock placement were netted against proceeds. The warrants were valued at $1.3 million using the Black-Sholes model. The
Black-Sholes inputs used were: expected dividend rate of 0%, expected volatility of 68%, risk free interest rate of 1.47%, and
expected term of 2.5 years. The warrants were exercisable immediately upon issue, and expire October 22, 2015.
   Registration Rights Agreement
    In connection with the October 2010 private placement, the Company has agreed to provide certain registration rights to the
investors that participated in the private placement. Under the agreement, the Company agreed to register the common shares
issued to the investors as well the common shares underlying the common stock warrants issued. The registration rights clause
provides for liquidated damages and for the issue of common shares under a cashless exercise formula in the event a registration
statement was not declared effective by the SEC by August 2011. The liquidated damages total an amount equal to one percent of
the purchase price of the common stock issued for each thirty (30) day period effectiveness of a registration statement is not
declared effective. The Company may be granted relief from these penalties in certain circumstances if the SEC does not allow the
Company to register the total number of shares of common stock issued and all the common stock underlying the Warrants
pursuant to a limitation to the registration under Section 415a(1) of the Securities Act of 1933.

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                                   CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES

                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. STOCKHOLDERS’ EQUITY – (continued)
    In connection therewith, on March 11, 2011, the Company filed on Form S-1, a preliminary registration statement under the
Securities Act of 1933, related to the resale of all common stock that is issued or issuable by the Company in connection with the
October 2010 private placement. The effectiveness of the registration statement is subject to review and approval by the SEC. The
Company does not believe that it is probable that it will incur any liquidated damages with respect to the registration rights
agreement, and as such has recorded no liability in accordance with FASB Accounting Standards Codification No. 450,
Contingencies . The Company‘s maximum potential liability for such liquidated damages shall not exceed $2.5 million.
11. STOCK OPTIONS AND STOCK BASED COMPENSATION
    Crossroads Systems, Inc. has a stock-based compensation plan available to grant incentive stock options, non-qualified stock
options and restricted stock to employees and non-employee members of the Board of Directors and advisors.
   The Company‘s 1999 Stock Option/Stock Issuance Plan (the ―1999 Plan‖) was succeeded by the 2010 Stock Incentive Plan (the
―2010 Plan‖). No further options will be granted under the 1999 Plan.
    The 2010 Plan was approved by the board of directors on May 26, 2010 and became effective on August 13, 2010, upon
approval by shareholders. A maximum of 10,000,000 shares of Crossroads common stock may be awarded. During the year ended
October 31, 2010, 2,090,557 stock options were granted, and as of October 31, 2010, a total of 7,525,469 stock options were
outstanding, of which 4,773,811 were vested, and 2,468,906 stock options were available for future grants. The exercise price, term
and other conditions applicable to each stock option granted under the 2010 Plan are determined by the Board of Directors. The
exercise price of stock options is set on the grant date and may not be less than the fair market value per share of the Company‘s
stock on that date (at market close). The 2010 Plan options generally become exercisable over a four year period (vesting 25% after
1 year, the remaining 75% vesting quarterly thereafter) and expire after ten years. Stock option exercises are fulfilled with new
shares of common stock.
    The Company realized share-based compensation expense for all awards issued under the Company‘s stock plans in the
following line items in the consolidated statements of operations:




                                                                                              OCTOBER 31,
                                                                                           2009             2010
             Cost of revenue                                                          $       7       $       18
             Sales and marketing                                                            100              128
             Research and development                                                       256              218
             General and administrative                                                     353              400
               Total stock-based compensation                                         $     716       $      764


                                                              F-17
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                                    CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. STOCK OPTIONS AND STOCK BASED COMPENSATION – (continued)
    The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. Expected
volatility is based on historical volatility of Crossroads stock. The expected term represents an estimate of the time options are
expected to remain outstanding. The Company‘s options that are exercised are restricted for one year from the date of exercise,
therefore we do not believe the actual history of shares exercised is an accurate method of calculating expected term and use the
simplified method to derive an expected term. The risk-free rate for periods within the contractual life of the option is based on the
U.S. treasury yield curve in effect at the time of grant. The variables used in the Black-Sholes calculation are listed below for the
respective periods:




                                                                                       OCTOBER 31,
                                                                             2009                         2010
              Expected dividend yield                                         0%                           0%
              Expected volatility                                          58 – 62%                     63 – 68%
              Risk-free interest rate                                     1.6 – 2.7%                   1.2 – 2.6%
              Expected term (years)                                           6.1                          6.1
   The following table summarizes information about stock option activity for the years ended October 31, 2009 and 2010:




                                                       Number of            Weighted       Weighted              Average
                                                        Shares              Average         Average              Intrinsic
                                                                            Exercise       Remaining              Value
                                                                             Price      Contractual         ($M)
                                                                                        Term (years)
             Outstanding at October 31,                 6,311,235        $    1.33           5.34       $      —
               2008
               Granted                                  1,151,946        $    0.20
               Forfeited                               (1,179,730 )      $    1.01

                Exercised                                   (5,625 )     $    0.23

             Outstanding at October 31,                 6,277,826        $    1.19           5.68       $      —
               2009
               Granted                                  2,090,557        $    0.41
               Forfeited                                 (842,914 )      $    1.47

               Exercised                                       —         $      —
             Outstanding and expected to                7,525,469        $    0.94           6.60       $     3.4
               vest at October 31, 2010
             Exercisable at October 31,                 4,773,811        $    1.25           5.11       $     1.1
               2010
    The weighted average fair value per option granted during the years ended October 31, 2009 and 2010 was $0.16 and $0.25
respectively. The total intrinsic value of options (which is the amount by which the stock price exceeded the exercise price of the
options on the date of exercise) exercised during the year ended October 31, 2009 and 2010 was $400 and $0, respectively. During
the year ended October 31, 2009 and 2010, the amount of cash received from the exercise of stock options was $1,300 and $0,
respectively.
    The Company granted options to purchase 30,000 shares to non-employees during the year ended October 31, 2010 which were
immediately vested and exercisable. The weighted average fair value of these grants was $0.74. Stock based compensation expense
for fiscal year 2010 for non-employee grants was $22,000.
    At October 31, 2010, there was approximately $617,000 of total unrecognized compensation cost related to non-vested stock
option awards which is expected to be recognized over a weighted-average period of 1.49 years. There were 842,141 and 1,394,243
options that became vested during the year ended October 31, 2009 and 2010, respectively, with the total fair value of these awards
of approximately $440,000 and $563,000 respectively.

                                                               F-18
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                                    CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES

                                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. STOCK OPTIONS AND STOCK BASED COMPENSATION – (continued)
    The following table shows information about outstanding stock options at October 31, 2010:




                                                       Options Outstanding                       Options Exercisable
        Range of Exercise Prices               Shares           Weighted       Weighted          Shares          Weighted
                                             Outstanding        Average        Average                           Average
                                                               Remaining       Exercise                          Exercise
                                                               Contractual      Price                             Price
                                                                 Term
        $0.16000 – $0.37000                      782,651            8.67      $   0.19             246,917      $      0.20
        $0.39000 – $0.39000                    1,955,573            9.82      $   0.39             241,618      $      0.39
        $0.44000 – $0.45000                      758,410            7.70      $   0.45             396,591      $      0.45
        $0.50000 – $0.88000                      907,664            5.43      $   0.84             855,073      $      0.85
        $0.94000 – $1.14000                    1,165,760            5.52      $   1.13           1,122,494      $      1.13
        $1.15000 – $1.49000                      778,494            5.21      $   1.32             734,201      $      1.33
        $1.52000 – $2.65000                      925,425            1.89      $   1.98             925,425      $      1.98
        $2.66000 – $5.62500                      251,492            2.64      $   3.48             251,492      $      3.48
                                               7,525,469            6.60      $   0.94           4,773,811      $      1.25
12. INCOME TAXES
    There was no recorded income tax benefit related to the losses of fiscal years 2009 or 2010 due to the uncertainty of the
Company generating taxable income to utilize its net operating loss carryforwards. The provision for income taxes due to
continuing operations differs from the amount computed by applying the federal statutory rate of 35% to the loss before income
taxes as follows (in thousands):
                                                            Year Ended October 31,
                                                          2009                  2010
Federal tax benefit at statutory rate                 $   (1,608 )       $       (1,500 )
State income tax, net of federal tax benefit                 (33 )                  (12 )
Effect of foreign operations                                  49                     47
Research and experimentation credit                         (321 )                 (264 )
Stock based compensation                                     258                    921
Permanent differences and other                               14                     12
Loss on impairment of assets                                  —                      —
Change in valuation allowance                              1,641                    796
Tax benefit                                           $       —          $           —


                                               F-19
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                                    CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. INCOME TAXES – (continued)
    Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company‘s deferred
taxes at October 31, 2009 and 2010 are as follows (in thousands):




                                                                                       Year Ended October 31,
                                                                                    2009                    2010
              Deferred Tax Assets:
                Net operating losses                                        $         36,116        $           36,538
                Research and experimentation credits                                   3,731                     3,996
                Inventory and other reserves                                           1,524                     2,215
                Basis of property and equipment                                           —                        345
                Deferred stock compensation                                            2,210                     1,255
                Deferred tax asset                                                    43,581                    44,349
              Deferred Tax Liabilities:
                Basis of property and equipment                                          (28 )                   —
                Deferred tax liabilities                                                 (28 )                   —
              Valuation allowance                                                    (43,553 )              (44,349 )
                Net deferred tax asset                                      $             —         $            —

    In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion
or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation
of future taxable income during the periods in which those temporary differences become deductible. At the end of the fiscal years
ended October 31, 2009 and 2010, a full valuation allowance has been provided due to uncertainties regarding the future realization
of the net deferred tax assets.
     The Company had federal net operating loss carryforwards available to reduce future taxable income of approximately $96.8
million and $97.4 million for the fiscal years ended October 31, 2009 and 2010, respectively. The Company had federal research
and experimentation credits available to reduce future tax of approximately $3.7 million and $4.0 million for the fiscal years ended
October 31, 2009, and 2010, respectively. The valuation allowance increased by approximately $1.6 million and $0.8 million
during the fiscal years ended October 31, 2009, and 2010 respectively, primarily as a result in the changes in the net operating
losses. A portion of the valuation allowance relates to tax benefits for stock option deductions included in the net operating loss
carryforward which, when realized, will be allocated directly to contributed capital to the extent the benefits exceed amounts
attributable to deferred stock compensation expense. The Company also had foreign net operating loss carryforwards available to
reduce future foreign income of approximately $3.5 million and $4.2 million for fiscal years ended October 31, 2009 and 2010,
respectively.
    The federal net operating loss carryforwards and research and experimentation credit carryforwards expire from 2011 to 2030,
if not utilized prior to that time. Utilization of the federal net operating losses and tax credits may be subject to substantial annual
limitation due to the ―change in ownership‖ provisions of the Internal Revenue Code of 1986. Any annual limitation may result in
the expiration of net operating losses and research and experimentation credits before utilization.
    The Company does not foresee any recognition of any unrecognized tax benefits during the next twelve months. The major
jurisdictions in which the Company files income tax returns include the U.S. and Germany. The Company‘s income tax returns are
not currently under examination by the Internal Revenue Service or other tax authorities. As of October 31, 2010, the earliest year
that the Company was subject to examination

                                                                 F-20
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                                   CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES

                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. INCOME TAXES – (continued)
in these jurisdictions was 2006. The Company recognizes interest and penalties accrued on any unrecognized tax benefits as a
component of income tax expense, if any.
13. EMPLOYEE BENEFITS
    In 1996, the Company established the Crossroads Systems, Inc. 401(k) Savings Plan (the ―Savings Plan‖), which is a qualified
plan under section 401(k) of the Internal Revenue Code. All employees who have attained 18 years of age are eligible to enroll in
the Savings Plan. The Company may make matching contributions to those employees participating in the Savings Plan based upon
Company productivity and profitability. Company contributions vest over a period of six years. In October 2000, the Company
adopted a new 401(k) Savings Plan that meets all of the criteria set forth above in the Savings Plan. The Company made no
matching contributions under any plan for the years ended October 31, 2009 and 2010.
14. STOCKHOLDER RIGHTS PLAN
    On August 21, 2002, the Company‘s board of directors approved, adopted and entered into a Stockholder Rights Plan (―Rights
Plan‖). Under the Rights Plan, the Company declared and paid a dividend of one Right for each share of common stock held by
stockholders of record as of the close of business on September 3, 2002 (the ―Rights‖). Each Right allows its holder to purchase
one share of the Company‘s preferred stock at $12 per share. The Rights are not exercisable unless a person or group acquires or
announces a tender or exchange offer that would result in the acquisition of 20% or more of the Company‘s common stock. The
Company has the right to redeem each Right for $0.01 per Right, and the Rights expire on September 3, 2012.

                                                              F-21
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                                CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES

                          SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS
                                             (in thousands)




                                                 Balance at    Charged to Costs       Deductions       Balance at
                                                 Beginning      and Expenses                            End of
                                                 of Period                                              Period
       Year ended October 31, 2009
       Deducted from asset accounts:
         Allowance for doubtful accounts     $        73       $       34         $       (73 )    $        34
         Allowance for excess and obsolete           384              109                 (16 )            477
           inventory
       Year ended October 31, 2010
       Deducted from asset accounts:
         Allowance for doubtful accounts     $        34       $        3         $       (18 )    $        19
         Allowance for excess and obsolete           477               20                (276 )            221
           inventory

                                                        F-22
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                     16,796,875 Shares of Common Stock
                             4,296,875 Warrants




                    CROSSROADS SYSTEMS, INC.




                                 Prospectus
   Until       , 2011, all dealers that buy, sell or trade the common stock may be required to deliver a prospectus,
regardless of whether they are participating in this offering. This is in addition to the dealers’ obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
TABLE OF CONTENTS

                                                     PART II
                                     INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
    The following table presents the costs and expenses in connection with the issuance and distribution of the securities to be
registered, other than underwriting discounts and commissions, payable by us in connection with the sale of common stock being
registered. Except as otherwise noted, we will pay all of these amounts. All amounts are estimates except the SEC registration fee.




         SEC registration fee                                                                            $            1,668
         Accounting fees and expenses                                                                    $           15,000
         Legal fees and expenses                                                                         $          150,000
         Miscellaneous fees and expenses                                                                 $           25,000
         Total                                                                                           $          191,668

Item 14. Indemnification of Directors and Officers
    Our certificate of incorporation and bylaws contain provisions relating to the limitation of liability and indemnification of
directors and officers. Our certificate of incorporation provides that a director will not be personally liable to us or our stockholders
for monetary damages for breach of fiduciary duty as a director, except for liability:
   •    for any breach of the director‘s duty of loyalty to us or our stockholders;
   •    for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;
   •    under Section 174 of the Delaware General Corporation Law (the ―DGCL‖); or
   •    for any transaction from which the director derived any improper personal benefit.
    Our certificate of incorporation also provides that if the DGCL is amended to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of our directors will be eliminated or limited to the fullest extent
permitted by the DGCL.
    Our bylaws provide that we will indemnify our directors and officers to the fullest extent not prohibited by the DGCL;
provided, however, that we may limit the extent of such indemnification by individual contracts with our directors and executive
officers; and provided, further, that we are not required to indemnify any director or executive officer in connection with any
proceeding (or part thereof) initiated by such person or any proceeding by such person against us or our directors, officers,
employees or other agents unless:
   •    such indemnification is expressly required to be made by law;
   •    the proceeding was authorized by the board of directors; or
   •    such indemnification is provided by us, in our sole discretion, pursuant to the powers vested in us under the DGCL.
     Our bylaws provide that we shall advance, prior to the final disposition of any proceeding, promptly following request therefor,
all expenses by any director or executive officer in connection with any such proceeding upon receipt of any undertaking by or on
behalf of such person to repay said amounts if it should be determined ultimately that such person is not entitled to e indemnified
under Article XI of our bylaws or otherwise. Notwithstanding the foregoing, unless otherwise determined, no advance shall be
made by us if a determination is reasonably and promptly made by the board of directors by a majority vote of a quorum of
directors who were not parties to the proceeding, or if such a quorum is not obtainable, or even if obtainable, a quorum of
disinterested directors so directs, by independent legal counsel in a written opinion, that the facts known to the decision-making
party at the time such determination is made demonstrate clearly and convincingly that such person acted in bad faith or in a
manner that such person did not believe to be in or not opposed to our best interests.

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    Our bylaws also authorize us to purchase insurance on behalf of any person required or permitted to be indemnified pursuant to
Article XI of our bylaws.
    Section 145(a) of the DGCL authorizes a corporation to indemnify any person who was or is a party, or is threatened to be
made a party, to a threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation), by reason of the fact that the person is or was a director,
officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys‘ fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit
or proceeding, if the person acted in good faith and in a manner the person reasonably believed to be in, or not opposed to, the best
interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe the person‘s
conduct was unlawful.
    Section 145(b) of the DGCL provides in relevant part that a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure
a judgment in its favor by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys‘ fees) actually and reasonably incurred by the person in
connection with the defense or settlement of such action or suit if the person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and
only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.
    The DGCL also provides that indemnification under Section 145(d) can only be made upon a determination that
indemnification of the present or former director, officer or employee or agent is proper in the circumstances because such person
has met the applicable standard of conduct set forth in Section 145(a) and (b).
    Section 145(g) of the DGCL also empowers a corporation to purchase and maintain insurance on behalf of any person who is or
was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted
against such person and incurred by such person in any such capacity, or arising out of such person‘s status as such, whether or not
the corporation would have the power to indemnify such person against such liability under Section 145 of the DGCL.
     Section 102(b)(7) of the DGCL permits a corporation to provide for eliminating or limiting the personal liability of one of its
directors for any monetary damages related to a breach of fiduciary duty as a director, as long as the corporation does not eliminate
or limit the liability of a director for acts or omissions which (1) which breached the director‘s duty of loyalty to the corporation or
its stockholders, (2) which were not in good faith or which involve intentional misconduct or knowing violation of law, (3) under
Section 174 of the DGCL; or (4) from which the director derived an improper personal benefit.
   We have obtained directors‘ and officers‘ insurance to cover our directors and officers for certain liabilities.

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Item 15. Recent Sales of Unregistered Securities
   Since January 1, 2008, we have issued the following securities that were not registered under the Securities Act of 1933:
   1. October 2010 Private Placement
      On October 23, 2010, we sold 12,500,000 shares of our common stock and issued warrants to purchase an additional
      4,296,875 shares of common stock to a group of institutional investors for gross proceeds to us of $10.0 million. The net
      proceeds of the offering, after deducting placement agent fees and estimated financing expenses, were approximately
      $9.2million. MDB Capital Group LLC acted as sole placement agent for the private placement and received $750,000 and
      warrants to purchase 1,171,875 shares of our common stock as placement agent fees.
   2. 1999 Stock Incentive Plan
      From March 31, 2008 through May 26, 2010, we granted to our employees, executive officers and directors options to
      purchase an aggregate of 2,731,091 shares of common stock at prices ranging from $0.16 to $0.77 per share under our 1999
      Stock Incentive Plan.
   3. 2010 Stock Incentive Plan
      From August 25, 2010 through January 31, 2011, we granted to our employees, executive officers and directors options to
      purchase an aggregate of 2,247,517 shares of common stock at prices ranging from $0.39 to $1.20 per share under our 2010
      Stock Incentive Plan.
   4. Stock Grants
      On November 20, 2008, we issued 806,498 shares of common stock to various employees as bonuses for an aggregate
      consideration of $129,846.
       On May 29, 2009, we issued 200,000 shares of common stock to our non-employee directors for an aggregate consideration
       of $50,000.
       On August 31, 2009, we issued 50,000 shares of common stock to our non-employee directors for an aggregate
       consideration of $13,000.
       On January 7, 2010, we issued 896,732 shares of common stock to various employees as bonuses for an aggregate
       consideration of $277,987.
       On May 5, 2010, we issued 315,000 shares of common stock pursuant to an option exercise for an aggregate purchase price
       of $63,000.
       On February 1, 2011, we issued 333,438 shares of common stock to various employees as bonuses for an aggregate
       consideration of $323,435.
   5. Option Exercises
      On January 31, 2009, we issued 5,625 shares of common stock pursuant to an option exercise for an aggregate purchase
      price of $1,312.
       On December 17, 2010, we issued 3,750 shares of common stock pursuant to an option exercise for an aggregate purchase
       price of $675.
    Except as otherwise described above, none of the foregoing transactions involved any underwriters, underwriting discounts or
commissions, or any public offering, and the registrant believes the transactions were exempt from the registration requirements of
the Securities Act of 1933 in reliance on Section 4(2) thereof, and the rules and regulations promulgated thereunder, or Rule 701
thereunder, as transactions by an issuer not involving a public offering or transactions pursuant to compensatory benefit plans and
contracts relating to compensation as provided under such Rule 701. The recipients of securities in such transactions represented
their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution
thereof, and appropriate legends were affixed to the share certificates and instruments issued in such transactions. All recipients of
securities pursuant to Item 1 above were accredited or sophisticated and each recipient of securities pursuant to Items 1 through 5
above either received adequate information about the registrant or had access, through their relationships with the registrant, to such
information.

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Item 16. Exhibits and Financial Statement Schedules
   (a) Exhibits . The exhibits are incorporated by reference to the Exhibit Index attached hereto and a part hereof by reference.
    (b) Financial Statements. See page F-1 for an index of the financial statements and financial statement schedules included in
the Registration Statement.
Item 17. Undertakings
   (a) The undersigned registrant hereby undertakes:
       (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration
   statement:
           (i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;
           (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the
       most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in
       the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of
       securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any
       deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus
       filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more
       than 20% change in the maximum aggregate offering price set forth in the ―Calculation of Registration Fee‖ table in the
       effective registration statement.
           (iii) To include any material information with respect to the plan of distribution not previously disclosed in the
       registration statement or any material change to such information in the registration statement;
       (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment
   shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at
   that time shall be deemed to be the initial bona fide offering thereof.
      (3) To remove from registration by means of a post-effective amendment any of the securities being registered which
   remain unsold at the termination of the offering.
       (4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed
   pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on
   Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the
   registration statement as of the date it is first used after effectiveness. Provided, however , that no statement made in a
   registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed
   incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a
   purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the
   registration statement or prospectus that was part of the registration statement or made in any such document immediately prior
   to such date of first use.
    (b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

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                                                           SIGNATURES
    Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of Austin, State of Texas, on March 10, 2011.




                                                              CROSSROADS SYSTEMS, INC.
                                                              By:
                                                                  /s/ Robert C.
                                                                  Sims




                                                                    Robert C. Sims
                                                                    President and Chief Executive Officer

                                                      POWER OF ATTORNEY
     KNOW ALL MEN BY THESE PRESENTS , that each person whose signature appears below hereby constitutes and
appoints Robert C. Sims and Jennifer Ray Crane, or each of them individually, his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all
amendments to this Registration Statement, and any additional related registration statement filed pursuant to Rule 462(b) under the
Securities Act of 1933, as amended (including post-effective amendments to the registration statement and any such related
registration statements), and to file the same, with all exhibits thereto, and any other documents in connection therewith, granting
unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
    Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the
following persons in the capacities and on the dates indicated.




                    Signature                                        Title                                    Date
        /s/ Don                             Director, Chairman of the Board of Directors                March 10, 2011
        Pearce




         Don Pearce
        /s/ Robert C.                       Director, President and Chief Executive Officer             March 10, 2011
        Sims                                (Principal Executive Officer)
 Robert C. Sims
/s/ Jennifer Ray      Chief Financial Officer         March 10, 2011
Crane                 (Principal Financial Officer)




 Jennifer Ray Crane
/s/ Elliott           Director                        March 10, 2011
Brackett
 Elliott Brackett
/s/ Joseph J.         Director   March 10, 2011
Hartnett




 Joseph J. Hartnett
/s/ Alan B.           Director   March 10, 2011
Howe




 Alan B. Howe
/s/ Steven            Director   March 10, 2011
Ledger
Steven Ledger
TABLE OF CONTENTS

                                                    INDEX TO EXHIBITS




        Exhibit                                                   Description
         No.
         3.1        Sixth Amended and Restated Certificate of Incorporation of Crossroads Systems, Inc.
         3.2        Bylaws of Crossroads Systems, Inc.
         3.2.1      Amendment No. 1 to Bylaws of Crossroads Systems, Inc.
         4.1        Form of Warrant by Crossroads Systems, Inc. in favor of the purchasers in the October 2010 private
                    placement
         4.2        Rights Agreement, dated as of August 21, 2002, between Crossroads Systems, Inc. and American
                    Stock Transfer & Trust Company, which includes the form of Certificate of Designation for the
                    Series A junior participating preferred stock as Exhibit A, the form of Rights Certificate as Exhibit B
                    and the Summary of Rights to Purchase Series A Preferred Stock as Exhibit C.
          5.1*      Opinion of Hunton & Williams LLP
         10.1       Crossroads Systems, Inc. 2010 Stock Incentive Plan
         10.2       Employment Agreement, dated as of October 13, 2003, by and between Crossroads Systems, Inc.
                    and Robert Sims
         10.3       Severance Benefit Plan, dated February 11, 2002, between Crossroads Systems, Inc. and Robert
                    Sims
         10.4       Severance Benefit Plan, dated October 21, 2004, between Crossroads Systems, Inc. and Brian
                    Bianchi
         10.5       Severance Benefit Plan, dated April 15, 2009, between Crossroads Systems, Inc. and David Cerf
         10.6       Severance Benefit Plan, dated April 15, 2009, between Crossroads Systems, Inc. and Jennifer Crane
         10.7       Form of Indemnity Agreement between Crossroads Systems, Inc. and each of the directors and
                    executive officers thereof
        10.8.1      Third Amended and Restated Loan and Security Agreement, dated December 31, 2007, between
                    Silicon Valley Bank and Crossroads Systems, Inc.
        10.8.2      First Amendment to Loan and Security Agreement, dated February 11, 2008, by and between Silicon
                    Valley Bank and Crossroads Systems, Inc.
        10.8.3      Second Amendment to Loan and Security Agreement, dated January 8, 2009, by and between
                    Silicon Valley Bank and Crossroads Systems, Inc.
        10.8.4      Third Amendment to Loan and Security Agreement, dated July 29, 2009, by and between Silicon
                    Valley Bank and Crossroads Systems, Inc.
        10.8.5      Fourth Amendment to Loan and Security Agreement, dated January 14, 2010, by and between
                    Silicon Valley Bank and Crossroads Systems, Inc.
        10.8.6      Fifth Amendment to Loan and Security Agreement, dated December 29, 2010, by and between
                    Silicon Valley Bank and Crossroads Systems, Inc.
         10.9       Securities Purchase Agreement, dated as of October 23, 2010, by and between Crossroads Systems,
                    Inc. and the purchasers party thereto
        10.10       Registration Rights Agreement, dated as of October 23, 2010, by and between Crossroads Systems,
                    Inc. and the purchasers party thereto
         10.11*     Hardware and Software Purchase Agreement, dated December 5, 2003, by and between
                    Hewlett-Packard Company and Tape Laboratories, Inc.
          21.1      List of Subsidiaries
          23.1*     Consent of Hunton & Williams LLP (included in Exhibit 5.1)
          23.2      Consent of PMB Helin Donovan, LLP
          24.1      Power of Attorney (included in signature page to registration statement)




*   To be filed by amendment.
                                                                                                                                  Exhibit 3.1

                                                   SIXTH AMENDED AND RESTATED
                                                   CERTIFICATE OF INCORPORATION
                                                                OF
                                                     CROSSROADS SYSTEMS, INC.

            Crossroads Systems, Inc., a corporation organized and existing under the Delaware General Corporation Law (the ―DGCL‖)
DOES HEREBY CERTIFY:

                FIRST: The original Certificate of Incorporation of this corporation was filed with the Secretary of State of Delaware on
September 26, 1996 under the name ―Crossroads Holding Corporation.‖

                  SECOND: The Sixth Amended and Restated Certificate of Incorporation of Crossroads Systems, Inc. in the form attached
hereto as Annex A has been duly adopted in accordance with the provisions of Sections 245 and 242 of the DGCL by the directors and
stockholders of the Corporation.

                  THIRD: The Sixth Amended and Restated Certificate of Incorporation so adopted reads in full as set forth in Annex A
attached hereto and is hereby incorporated herein by this reference.

                   IN WITNESS WHEREOF, Crossroads Systems, Inc. has caused this Sixth Amended and Restated Certificate to be signed by
its duly authorized and elected President this ___ day of ___________, 1999.

                                                                       CROSSROADS SYSTEMS, INC.

                                                                       By:
                                                                             James H. Moore
                                                                             President
                                                                                                                                         ANNEX A

                                                     SIXTH AMENDED AND RESTATED
                                                     CERTIFICATE OF INCORPORATION
                                                                  OF
                                                       CROSSROADS SYSTEMS, INC.

                                                                    ARTICLE I

                  The name of this Corporation shall be Crossroads Systems, Inc. (the ―Corporation‖).

                                                                   ARTICLE II

               The address of the registered office of the Corporation in the State of Delaware is 1209 Orange Street, City of Wilmington,
County of New Castle, State of Delaware. The name of the registered agent at that address is The Corporation Trust Company.

                                                                   ARTICLE III

                The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the
Delaware General Corporation Law.

                                                                   ARTICLE IV

          4.1 Prior to a Qualified Public Offering (as defined in Section B.8 of this Section 4.1 of this Article IV hereof), the Corporation‘s
capital stock shall be comprised as set forth in this Section 4.1 as follows:

         A. Classes of Stock. The Corporation is authorized to issue two classes of capital stock to be designated, respectively, ―Common
Stock‖ and ―Preferred Stock.‖ The total number of shares of capital stock authorized to be issued is Sixty Million (60,000,000) shares.
Forty-Nine Million (49,000,000) shares shall be Common Stock, par value $0.001 per share, and Eleven Million (11,000,000) shares shall be
Preferred Stock, par value $0.001 per share, 4,000,000 of which shall be designated as ―Series A Convertible Preferred Stock‖ (the ―Series A
Preferred Stock‖), 2,294,688 of which shall be designated as ―Series B Convertible Preferred Stock‖ (the ―Series B Preferred Stock‖),
1,250,000 of which shall be designated as ―Series C Convertible Preferred Stock‖ (the ―Series C Preferred Stock‖), 1,070,210 of which shall be
designated as ―Series D Convertible Preferred Stock‖ (the ―Series D Preferred Stock‖) and 866,667 of which shall be designated as ―Series E
Convertible Preferred Stock‖ (the ―Series E Preferred Stock‖).


                                                                         1
          B. Rights, Preferences and Restrictions of Preferred Stock. Undesignated Preferred Stock, if any, authorized under this Sixth Amended
and Restated Certificate of Incorporation of the Corporation (as the same may hereafter be amended, the ―Restated Certificate‖) may be issued
from time to time in one or more series. The Board of Directors is hereby authorized to fix or alter the rights, preferences, privileges and
restrictions granted to or imposed upon additional series of Preferred Stock, and the number of shares constituting any such series and the
designation thereof, or of any of them. Subject to compliance with applicable protective voting rights which have been or may be granted to the
Preferred Stock or series thereof in Certificates of Designation or the Restated Certificate, as the same may hereafter be amended (―Protective
Provisions‖), but notwithstanding any other rights of the Preferred Stock or any series thereof, the rights, privileges, preferences and
restrictions of any such additional series may be subordinated to, pari passu with (including, without limitation, inclusion in provisions with
respect to liquidation and acquisition preferences, redemption and/or approval of matters by vote or written consent), or senior to any of those
of any present or future class or series of Preferred Stock or Common Stock. Subject to compliance with applicable Protective Provisions, the
Board of Directors is also authorized to increase or decrease the number of shares of any series, prior or subsequent to the issue of that series,
but not below the number of shares of such series then outstanding. In case the number of shares of any series shall be so decreased, the shares
constituting such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of
such series. The respective rights, preferences, privileges and restrictions granted to and imposed on the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock are as set forth below in this Division B of
Article IV.

             1.   Dividend Provisions.

                    (a) The holders of shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock shall be entitled to receive dividends, out of any assets legally available therefor, prior and in preference to
any declaration or payment of any dividend (payable other than in Common Stock or other securities and rights convertible into or entitling the
holder thereof to receive, directly or indirectly, additional shares of Common Stock of the Corporation) on the Common Stock of the
Corporation, at the rate of $0.07, $0.16, $0.28, $0.38 and $1.05 per share per annum, respectively, (as adjusted to reflect stock dividends, stock
splits, combinations, recapitalizations or the like after the date upon which shares of Series E Preferred Stock were first issued (the ―Initial
Series E Issue Date‖)), payable quarterly when, as and if declared by the Board of Directors, except as provided in the following sentence.
Until May 1, 2004 such dividends shall not be cumulative; from and after such date, such dividends shall be cumulative and shall accrue on
each share from May 1, 2004, from day to day, whether not earned or declared. Any accumulation of dividends on the Series A Preferred
Stock, the Series B Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock or the Series E Preferred Stock shall not bear
interest. Cumulative dividends with respect to each share of Series A Preferred Stock, each share of Series B Preferred Stock, each share of
Series C Preferred Stock, each share of Series D Preferred Stock and each share of Series E Preferred Stock which are accrued, payable and/or
in arrears shall, upon conversion of such share to Common Stock, be convertible into additional shares of Common Stock at the applicable
Conversion Price (as defined below) then in effect for such series of shares of Preferred Stock (with any fractional share rounded to the nearest
whole share, with 0.5 of a share rounding to 1).
                  (b) Any dividend or distribution which is declared by the Corporation and payable with assets of the Corporation other than
cash shall be governed by the provisions of Subsection 2(d)(ii) below.

              2.   Liquidation Preference.

                   (a) In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary, the holders
of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock shall be
entitled to receive, prior and in preference to any distribution of any of the assets of the Corporation to the holders of Common Stock by reason
of their ownership thereof, an amount per share of each Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock or Series E Preferred Stock then held by them equal to the sum of (i) $1.00, $2.30, $4.00, $5.45 and $15.00, respectively (as
adjusted to reflect stock dividends, stock splits, combinations, recapitalizations or the like), plus (ii) an amount equal to all accrued, or declared
but unpaid, dividends on such share of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock
and Series E Preferred Stock, as the case may be, held by such holder. If upon the occurrence of such event, the assets and funds thus
distributed among the holders of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and
Series E Preferred Stock shall be insufficient to permit the payment to such holders of the full aforesaid preferential amounts, then the entire
assets and funds of the Corporation legally available for distribution shall be distributed ratably among the holders of the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock in proportion to the relative
liquidation preference each such holder is otherwise entitled to receive.

                   (b) [Intentionally omitted.]

                    (c) After the distributions described in Subsection (a) above have been paid, the remaining assets of the Corporation available
for distribution to stockholders shall be distributed among the holders of Common Stock pro rata based on the number of shares of Common
Stock held by each.

                    (d) (i) For purposes of this Section 2, a liquidation, dissolution or winding up of the Corporation shall be deemed to be
occasioned by, or to include, (A) the acquisition of the Corporation by another entity by means of any transaction or series of related
transactions (including, without limitation, any reorganization, merger or consolidation); or (B) a sale of all or substantially all of the assets of
the Corporation, including a sale of all or substantially all of the assets of the Corporation‘s subsidiaries, if such assets constitute substantially
all of the assets of the Corporation and such subsidiaries taken as a whole; unless the Corporation‘s stockholders of record as constituted
immediately prior to such acquisition or sale will, immediately after such acquisition or sale (by virtue of securities issued as consideration for
the Corporation‘s acquisition or sale or otherwise) hold at least 50% of the voting power of the surviving or acquiring entity.


                                                                           2
                      (ii) In any of such events, if the consideration received by the Corporation is other than cash, its value will be deemed its
fair market value. Any securities to be delivered to the holders of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock, Series E Preferred Stock or Common Stock, as the case may be, shall be valued as follows:

                           (A) If traded on a securities exchange or through the Nasdaq National Market, the value shall be deemed to be the
average of the closing prices of the securities on such exchange over the thirty-day period ending three (3) days prior to the closing;

                           (B) If actively traded over-the-counter, the value shall be deemed to be the average of the closing bid or sale prices
(whichever is applicable) over the thirty-day period ending three (3) days prior to the closing; and

                           (C) If there is no active public market, the value shall be the fair market value thereof, as mutually determined by the
Corporation and the holders of at least a majority of the then outstanding shares of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock.

                      (iii) In the event the requirements of this Subsection 2(d) are not complied with, the Corporation shall forthwith either:

                           (A) Cause such closing to be postponed until such time as the requirements of this Section 2 have been complied
with; or

                           (B) Cancel such transaction, in which event the respective rights, preferences and privileges of the holders of the
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock shall revert
to and be the same as such rights, preferences and privileges existing immediately prior to the date of the first notice referred to in Subsection
2(d)(iv) below.

                        (iv) The Corporation shall give each holder of record of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock written notice of such impending transaction not later than twenty (20)
days prior to the stockholders‘ meeting called to approve such transaction, or twenty (20) days prior to the closing of such transaction,
whichever is earlier, and shall also notify such holders in writing of the final approval of such transaction. The first of such notices shall
describe the material terms and conditions of the impending transaction and the provisions of this Section 2, and the Corporation shall
thereafter give such holders prompt notice of any material changes. The transaction shall in no event take place sooner than twenty (20) days
after the Corporation has given the first notice provided for herein or sooner than ten (10) days after the Corporation has given notice of any
material changes provided for herein; provided, however, that such periods may be shortened upon the Corporation‘s receipt of written consent
of the holders of at least 75% of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and
Series E Preferred Stock entitled to such notice rights or similar notice rights.


                                                                         3
             3.   Redemption.

                  (a) (i) The holders of 67% of the aggregate number of shares of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock then outstanding, at any time after the seventh anniversary of the Initial
Series E Issue date and upon thirty (30) days prior written notice to the Corporation of such election (the ―Redemption Notice‖), may require
the Corporation to redeem (each a ―Mandatory Redemption‖) on the dates referenced below (each, a ―Mandatory Redemption Date‖) the
number of shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock set forth opposite such Mandatory Redemption Date below at a price per share equal to the Redemption Price (as defined in
paragraph 3 (b)):

              MANDATORY REDEMPTION DATE                                                           NUMBER OF SHARES

                   The date which is 30 days after                                              One-half (1/2) of the shares of
                     the date of the Redemption                                              Series A Preferred Stock, Series B
                    Notice (the ―First Mandatory                                             Preferred Stock, Series C Preferred
                         Redemption Date‖)                                                     Stock, Series D Preferred Stock
                                                                                              and Series E Preferred Stock then
                                                                                                         outstanding

                          First Anniversary                                                     One-half (1/2) of the shares of
                       of the First Mandatory                                                Series A Preferred Stock, Series B
                          Redemption Date                                                    Preferred Stock, Series C Preferred
                                                                                               Stock, Series D Preferred Stock
                                                                                              and Series E Preferred Stock then
                                                                                                         outstanding

                        Second Anniversary                                                    All remaining shares of Series A
                       of the First Mandatory                                                Preferred Stock, Series B Preferred
                          Redemption Date                                                     Stock, Series C Preferred Stock,
                                                                                                Series D Preferred Stock and
                                                                                                Series E Preferred Stock then
                                                                                                         outstanding

Upon receipt of the Redemption Notice from the holders of at least sixty-seven percent (67%) of the shares of Series A Preferred Stock, Series
B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock then outstanding, the Corporation (and each
holder of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock)
will be obligated to redeem the number of shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock specified above on each Mandatory Redemption Date.


                                                                        5
                    (b) The holders of Series A Preferred Stock shall be entitled to receive from the Corporation on a Mandatory Redemption
Date an amount in cash for each share of Series A Preferred Stock to be redeemed on such Mandatory Redemption Date (the ―Series A
Redemption Price‖) equal to $1.00 (as adjusted to reflect stock dividends, stock splits, combinations, recapitalizations or the like), plus any
accrued, or declared but unpaid, dividends on the Series A Preferred Stock as of the First Mandatory Redemption Date. The holders of Series B
Preferred Stock shall be entitled to receive from the Corporation on a Mandatory Redemption Date an amount in cash for each share of Series
B Preferred Stock to be redeemed on such Mandatory Redemption Date (the ―Series B Redemption Price‖) equal to $2.30 (as adjusted to
reflect stock dividends, stock splits, combinations, recapitalizations or the like) plus any accrued, or declared but unpaid, dividends on the
Series B Preferred Stock as of the First Mandatory Redemption Date. The holders of Series C Preferred Stock shall be entitled to receive from
the Corporation on a Mandatory Redemption Date an amount in cash for each share of Series C Preferred Stock to be redeemed on such
Mandatory Redemption Date (the ―Series C Redemption Price‖) equal to $4.00 (as adjusted to reflect stock dividends, stock splits,
combinations, recapitalizations or the like) plus any accrued, or declared but unpaid, dividends on the Series C Preferred Stock as of the First
Mandatory Redemption Date. The holders of Series D Preferred Stock shall be entitled to receive from the Corporation on a Mandatory
Redemption Date an amount in cash for each share of Series D Preferred Stock to be redeemed on such Mandatory Redemption Date (the
―Series D Redemption Price‖) equal to $5.45 (as adjusted to reflect stock dividends, stock splits, combinations, recapitalizations or the like)
plus any accrued, or declared but unpaid, dividends on the Series D Preferred Stock as of the First Mandatory Redemption Date. The holders of
Series E Preferred Stock shall be entitled to receive from the Corporation on a Mandatory Redemption Date an amount in cash for each share of
Series E Preferred Stock to be redeemed on such Mandatory Redemption Date (the ―Series E Redemption Price‖) equal to $15.00 (as adjusted
to reflect stock dividends, stock splits, combinations, recapitalizations or the like) plus any accrued, or declared but unpaid, dividends on the
Series E Preferred Stock as of the First Mandatory Redemption Date. As used herein and in Subsections (3)(c) and (3)(d) below, the term
―Redemption Date‖ shall refer to the date on which shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock are scheduled to be redeemed as provided in Subsection 3(a) and the term ―Redemption
Price‖ shall refer to the Series A Redemption Price, the Series B Redemption Price, the Series C Redemption Price, the Series D Redemption
Price and the Series E Redemption Price, as the case may be. At least fifteen (15) but no more than thirty (30) days prior to the Redemption
Date, written notice shall be mailed, first class postage prepaid, to each holder of record (at the close of business on the business day next
preceding the day on which notice is given) of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock to be redeemed, at the address last shown on the records of the Corporation for such holder,
notifying such holder of the redemption to be effected, specifying the number of shares to be redeemed from such holder, the Redemption Date,
the Redemption Price, the place at which payment may be obtained and calling upon such holder to surrender to the Corporation, in the manner
and at the place designated, his, her or its certificate or certificates representing the shares of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock to be redeemed (the ―Company Redemption Notice‖).
Except as provided in Subsection (3)(c), on or after the Redemption Date, each holder of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock to be redeemed shall surrender to the Corporation the
certificate or certificates representing such shares, in the manner and at the place designated in the Company Redemption Notice, and
thereupon the Redemption Price of each such share shall be payable to the order of the person whose name appears on such certificate or
certificates as the owner thereof and each surrendered certificate shall be cancelled. In the event less than all the shares represented by any such
certificate are redeemed, a new certificate shall be issued representing the unredeemed shares.


                                                                         6
                   (c) From and after the Redemption Date, unless there shall have been a default in payment of the Redemption Price, all rights
of the holders of shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock designated for redemption in the Company Redemption Notice as holders of such shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock (except the right to receive the applicable
Redemption Price without interest upon surrender of their certificate or certificates) shall cease with respect to such shares, and such shares
shall not thereafter be transferred on the books of the Corporation or be deemed to be outstanding for any purpose whatsoever. If the funds of
the Corporation legally available for redemption of shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock on any Redemption Date are insufficient to redeem the total number of shares of Series
A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock to be redeemed
on such date, those funds which are legally available will be used to redeem the maximum possible number of such shares ratably among the
holders of such shares to be redeemed based upon their holdings of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock and Series E Preferred Stock. The shares of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock not redeemed shall remain outstanding and entitled to all the rights and
preferences provided herein. At any time thereafter when additional funds of the Corporation are legally available for the redemption of shares
of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock, such
funds will immediately be used to redeem the balance of the shares which the Corporation has become obliged to redeem on any Redemption
Date but which it has not redeemed.

                    (d) On or prior to each Redemption Date, the Corporation shall deposit the Redemption Price of all shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock designated for
redemption in the Company Redemption Notice, and not yet redeemed or converted, with a bank or trust corporation having aggregate capital
and surplus in excess of $100,000,000 as a trust fund for the benefit of the respective holders of the shares designated for redemption and not
yet redeemed, with irrevocable instructions and authority to the bank or trust corporation to publish the notice of redemption thereof and pay
the applicable Redemption Price for such shares to their respective holders on or after the Redemption Date, upon receipt of notification from
the Corporation that such holder has surrendered his, her or its share certificate to the Corporation pursuant to Subsection (3)(b) above. As of
the date of such deposit (even if prior to the Redemption Date), the deposit shall constitute full payment of the shares to their holders. From and
after the date of such deposit the shares so called for redemption shall be redeemed and shall be deemed to be no longer outstanding, and the
holders thereof shall cease to be stockholders with respect to such shares and shall have no rights with respect thereto, except the rights to
receive from the bank or trust corporation payment of the Redemption Price of the shares, without interest, upon surrender of their certificates
therefor and the right to convert such shares as provided in Section 4 below. Such instructions shall also provide that any monies deposited by
the Corporation pursuant to this Subsection (3)(d) for the redemption of shares thereafter converted into shares of the Corporation‘s Common
Stock pursuant to Section 4 below prior to the Redemption Date shall be returned to the Corporation forthwith upon such conversion. The
balance of any monies deposited by the Corporation pursuant to this Subsection (3)(d) remaining unclaimed at the expiration of two (2) years
following the final Redemption Date shall thereafter be returned to the Corporation upon its request expressed in a resolution of its Board of
Directors.


                                                                        7
             4. Conversion. The holders of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock shall have conversion rights as follows (the ―Conversion Rights‖):

                  (a) Right to Convert.

                        (i) Each share of Series A Preferred Stock shall be convertible, at the option of the holder thereof, at any time after the
date of issuance of such share, at the office of the Corporation or any transfer agent for such stock, into such number of fully paid and
nonassessable shares of Common Stock as is determined, with respect to each share of Series A Preferred Stock, by dividing $1.00 plus any
accrued, or declared but unpaid, dividends with respect to the Series A Preferred Stock by the Series A Conversion Price in effect on the date
the certificate is surrendered for conversion. After giving effect to the Corporation‘s 3-for-2 split of its Common Stock effected by means of a
dividend of 0.5 shares of Common Stock to each share of outstanding Common Stock on August 12, 1999 (the ―Stock Split‖) pursuant to
Subsection 4(d) below, the Conversion Price per share for the Series A Preferred Stock (the ―Series A Conversion Price‖) shall be $0.667;
provided, however that such Series A Conversion Price shall be subject to further adjustment as provided in the previous sentence and as set
forth in Subsection 4(d) below.

                        (ii) Each share of Series B Preferred Stock shall be convertible, at the option of the holder thereof, at any time after the
date of issuance of such share, at the office of the Corporation or any transfer agent for such stock, into such number of fully paid and
nonassessable shares of Common Stock as is determined, with respect to each share of Series B Preferred Stock, by dividing $2.30 plus any
accrued, or declared but unpaid, dividends with respect to the Series B Preferred Stock by the Series B Conversion Price in effect on the date
the certificate is surrendered for conversion. After giving effect to the Stock Split pursuant to Subsection 4(d) below, the Conversion Price per
share for the Series B Preferred Stock (the ―Series B Conversion Price‖) shall be $1.533; provided, however, that such Series B Conversion
Price shall be subject to further adjustment as provided in the previous sentence and as set forth in Subsection 4(d) below.


                                                                          8
                        (iii) Each share of Series C Preferred Stock shall be convertible, at the option of the holder thereof, at any time after the
date of issuance of such share, at the office of the Corporation or any transfer agent for such stock, into such number of fully paid and
nonassessable shares of Common Stock as is determined, with respect to each share of Series C Preferred Stock, by dividing $4.00 plus any
accrued, or declared but unpaid, dividends with respect to the Series C Preferred Stock by the Series C Conversion Price in effect on the date
the certificate is surrendered for conversion. After giving effect to the Stock Split pursuant to Subsection 4(d) below, the Conversion Price per
share for the Series C Preferred Stock (the ―Series C Conversion Price‖) shall be $2.667; provided, however, that such Series C Conversion
Price shall be subject to further adjustment as provided in the previous sentence and as set forth in Subsections 4(d) and 4(e) below.

                        (iv) Each share of Series D Preferred Stock shall be convertible, at the option of the holder thereof, at any time after the
date of issuance of such share, at the office of the Corporation or any transfer agent for such stock, into such number of fully paid and
nonassessable shares of Common Stock as is determined, with respect to each share of Series D Preferred Stock, by dividing $5.45 plus any
accrued, or declared but unpaid, dividends with respect to the Series D Preferred Stock by the Series D Conversion Price in effect on the date
the certificate is surrendered for conversion. After giving effect to the Stock Split pursuant to Subsection 4(d) below, the Conversion Price per
share for the Series D Preferred Stock (the ―Series D Conversion Price‖) shall be $3.633; provided, however, that such Series D Conversion
Price shall be subject to further adjustment as provided in the previous sentence and as set forth in Subsections 4(d) and 4(e) below.

                        (v) Each share of Series E Preferred Stock shall be convertible, at the option of the holder thereof, at any time after the
date of issuance of such share, at the office of the Corporation or any transfer agent for such stock, into such number of fully paid and
nonassessable shares of Common Stock as is determined, with respect to each share of Series E Preferred Stock, by dividing $15.00 plus any
accrued, or declared but unpaid, dividends with respect to the Series E Preferred Stock by the Series E Conversion Price in effect on the date
the certificate is surrendered for conversion. After giving effect to the Stock Split pursuant to Subsection 4(d) below, the Conversion Price per
share for the Series E Preferred Stock (the ―Series E Conversion Price‖) shall be $10.00; provided, however, that such Series E Conversion
Price shall be subject to further adjustment as provided in the previous sentence and as set forth in Subsections 4(d) and 4(e) below.


                                                                          9
                    (b) Automatic Conversion. Each share of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
shall automatically be converted into shares of Common Stock at the then effective Series A Conversion Price, Series B Conversion Price or
Series C Conversion Price, respectively, at the time in effect immediately upon the earlier of (i) except as provided below in Subsection 4(c),
the Corporation‘s sale of its Common Stock in a firm commitment underwritten public offering pursuant to a registration statement under the
Securities Act of 1933, as amended (the ―Securities Act‖), the public offering price per share of which is not less than $6.67 (which number
gives effect to the Stock Split) (as adjusted to reflect stock dividends, stock splits, combinations, recapitalizations or the like subsequent to the
Stock Split) and with gross proceeds to the Corporation and selling stockholders therein of at least $10,000,000 in the aggregate or (ii) the date
specified by written consent or agreement of the holders of at least sixty-seven percent (67%) of the then outstanding shares of Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock voting together as a single class. Each share of Series D Preferred Stock
shall automatically be converted into shares of Common Stock at the then effective Series D Conversion Price at the time in effect immediately
upon the earlier of (i) except as provided below in Subsection 4(c), the Corporation‘s sale of its Common Stock in a firm commitment
underwritten public offering pursuant to a registration statement under the Securities Act, the public offering price per share of which is not less
than $6.67 (which number gives effect to the Stock Split) (as adjusted to reflect stock dividends, stock splits, combinations, recapitalizations or
the like subsequent to the Stock Split) and with gross proceeds to the Corporation and selling stockholders therein of at least $10,000,000 in the
aggregate or (ii) the date specified by written consent or agreement of the holders of at least sixty-seven percent (67%) of the then outstanding
shares of Series D Preferred Stock voting together as a single class. Each share of Series E Preferred Stock shall automatically be converted
into shares of Common Stock at the then effective Series E Conversion Price at the time in effect immediately upon the earlier of (i) except as
provided below in Subsection 4(c), the Corporation‘s sale of its Common Stock in a firm commitment underwritten public offering pursuant to
a registration statement under the Securities Act, the public offering price per share of which is not less than $10.00 (which number gives effect
to the Stock Split) (as adjusted to reflect stock dividends, stock splits, combinations, recapitalizations or the like subsequent to the Stock Split)
and with gross proceeds to the Corporation and selling stockholders therein of at least $10,000,000 in the aggregate or (ii) the date specified by
written consent or agreement of the holders of at least sixty-seven percent (67%) of the then outstanding shares of Series E Preferred Stock
voting together as a single class.

                   (c) Mechanics of Conversion. Before any holder of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock or Series E Preferred Stock shall be entitled to convert the same into shares of Common Stock pursuant to
Subsection 4(a) above, such holder shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Corporation or of
any transfer agent for such Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or Series E
Preferred Stock, and shall give written notice to the Corporation at its principal corporate office, of the election to convert the same and shall
state therein the name or names in which the certificate or certificates for shares of Common Stock are to be issued. The Corporation shall, as
soon as practicable thereafter, issue and deliver at such office to such holder of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock or Series E Preferred Stock, or to the nominee or nominees of such holder, a certificate or certificates
for the number of shares of Common Stock to which such holder shall be entitled as aforesaid. Such conversion shall be deemed to have been
made immediately prior to the close of business on the date of such surrender of the shares of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock or Series E Preferred Stock to be converted, and the person or persons entitled to
receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such
shares of Common Stock as of such date. If the conversion is in connection with an underwritten offering of securities registered pursuant to
the Securities Act, the conversion shall be conditioned upon the closing with the underwriters of the sale of securities pursuant to such offering,
in which event the person(s) entitled to receive the Common Stock upon conversion of the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock or Series E Preferred Stock shall not be deemed to have converted such Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or Series E Preferred Stock until immediately prior to the
closing of such sale of securities.


                                                                         10
                  (d) Proportional Conversion Price Adjustments of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock and Series E Preferred Stock. In addition to the weighted average anti-dilution adjustments with respect to the
Series C Conversion Price, Series D Conversion Price and Series E Conversion Price as provided in Subsection 4(e) below, the Series A
Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion Price and Series E Conversion Price each shall
be subject to proportional adjustments from time to time as follows:

                       (i) In the event the Corporation should at any time or from time to time after the Initial Series E Issue Date (other than the
Stock Split, which is already reflected herein) fix a record date for the effectuation of a split or subdivision of the outstanding shares of
Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional
shares of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional
shares of Common Stock (hereinafter referred to as ―Common Stock Equivalents‖) without payment of any consideration by such holder for
the additional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of such dividend distribution, split or subdivision if no record date is
fixed), the Series A Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion Price and Series E
Conversion Price shall be appropriately decreased so that the number of shares of Common Stock issuable on conversion of each share of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock shall be
increased in proportion to such increase of the aggregate of shares of Common Stock outstanding and those issuable with respect to such
Common Stock Equivalents.

                       (ii) If the number of shares of Common Stock outstanding at any time after the Initial Series E Issue Date is decreased by
a combination of the outstanding shares of Common Stock, then, following the record date of such combination, the Series A Conversion Price,
Series B Conversion Price, Series C Conversion Price, Series D Conversion Price and Series E Conversion Price shall be appropriately
increased so that the number of shares of Common Stock issuable on conversion of each share of each such series shall be decreased in
proportion to such decrease in outstanding shares.

                   (e) Weighted Average Conversion Price Adjustments of Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock.

                     (i) In order to limit dilution of the conversion rights granted under this Section 4, the Series C Conversion Price, Series D
Conversion Price and Series E Conversion Price also will be subject to adjustment from time to time pursuant to this Subsection 4(e).


                                                                         11
                       (ii) Except with respect to issuances set forth below in this subparagraph (ii), and except as provided elsewhere in this
Subsection 4(e), if and whenever on or after the Initial Series E Issue Date, the Corporation issues or sells, or is deemed to have issued or sold,
any shares of its Preferred Stock, including Preferred Stock Equivalents (as defined in Subsection 4(f)(i) below), for consideration per share
less than the Series C Conversion Price, Series D Conversion Price or Series E Conversion Price in effect immediately prior to the time of such
issue or sale, then immediately upon such issue or sale the Series C Conversion Price, Series D Conversion Price or Series E Conversion Price,
as the case may be will be reduced to the price (rounded to the nearest whole cent) determined by multiplying the Series C Conversion Price,
Series D Conversion Price or Series E Conversion Price, as the case may be by a fraction, the numerator of which shall be (a) the number of
shares of Common Stock outstanding plus the number of shares of Common Stock issuable upon conversion of the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, the Series D Preferred Stock and the Series E Preferred Stock (the ―Common Stock
Deemed Outstanding‖) immediately prior to such issue or sale, plus (b) the number of shares of Preferred Stock which the aggregate
consideration received by the Corporation for the total number of additional shares of Preferred Stock so issued or sold would purchase at the
Series C Conversion Price, Series D Conversion Price or Series E Conversion Price, as the case may be then in effect and the denominator of
which shall be the number of shares of Common Stock outstanding immediately prior to such issue or sale plus the number of shares of
Common Stock Deemed Outstanding plus the number of additional shares of Preferred Stock so issued. For example, if after the Initial Series E
Issue Date, the Corporation issues 3,000,000 shares of Preferred Stock for consideration per share of $6.67 and assuming 6,750,000 shares of
Common Stock are outstanding and that there are 14,000,000 shares of Common Stock Deemed Outstanding (for a total of 20,750,000)
immediately prior to such issuance, the initial Series E Conversion Price would be reduced to the price determined by multiplying $10.00, the
Series E Conversion Price then in effect (and after having given effect to the Stock Split), by the following fraction:

                                                                                           $6.67 x 3,000,000
                                                                                           20,750,000 + $10.00
                                                                                           20,750,000 + 3,000,000

                                                                                                        $20,010,000
                                                                             =             20,750,000 + $10.00
                                                                                               23,750,000

                                                                             =             20,750,000 + 2,001,000
                                                                                               23,750,000

                                                                             =             22,751,000
                                                                                           23,750,000

                                                                             =             0.95794

resulting in an adjusted Series E Conversion Price of $9.5794 ($10.00 x 0.95794), and an adjusted Series E conversion rate of 1.0439
($10.00/$9.5794).


                                                                        12
         No adjustment shall be made to the Series C Conversion Price, Series D Conversion Price or Series E Conversion Price, including
Preferred Stock Equivalents (as defined below), issued or issuable: (1) pursuant to a transaction or event for which adjustment of the Series A
Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion Price or Series E Conversion Price is made
pursuant to Subsection 4(d) above; (2) pursuant to a bona fide business or asset acquisition; or (3) to a lender to the Corporation under
agreements approved by the Board of Directors at a duly convened meeting or by unanimous written consent.

                  (f) Effect on Series C Conversion Price, Series D Conversion Price and Series E Conversion Price of Certain Events. For
purposes of determining the adjusted Series C Conversion Price, Series D Conversion Price and Series E Conversion Price under Section 4(e)
above, the following will be applicable:

                   (i) If the Corporation in any manner issues or grants any rights, warrants or options to subscribe for or to purchase Preferred
Stock or securities convertible into or exchangeable for Preferred Stock (collectively, ―Preferred Stock Equivalents‖) and the price per share for
which Preferred Stock is issuable upon the exercise of, or upon conversion or exchange of, such Preferred Stock Equivalent is less than the
Series C Conversion Price, Series D Conversion Price or Series E Conversion Price, as the case may be, in effect immediately prior to the time
of the granting of such, then the total maximum number of shares of Preferred Stock issuable upon the exercise of, or upon conversion or
exchange of, the total maximum amount of such will be deemed to be outstanding and to have been issued and sold by the Corporation for such
price per share. For purposes of this paragraph (f)(i), the ―price per share for which Preferred Stock is issuable‖ will be determined by dividing
(a) the total amount, if any, received or receivable by the Corporation as consideration for the granting of such, plus the minimum aggregate
amount of additional consideration payable to the Corporation upon exercise of, or conversion or exchange of such Preferred Stock
Equivalents, by (b) the total maximum number of shares of Preferred Stock issuable upon the exercise of, or upon the conversion or exchange
of, all such Preferred Stock Equivalents. If such Preferred Stock Equivalents by their terms provide, with the passage of time or otherwise, for
any increase in the consideration payable to the Corporation, or decrease in the number of shares of Preferred Stock issuable upon the exercise,
conversion or exchange thereof, then the Series C Conversion Price, Series D Conversion Price or Series E Conversion Price, as the case may
be, computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto), and any subsequent adjustments
based thereon, shall, upon any such increase or decrease becoming effective, be recomputed to reflect such increase or decrease insofar as it
affects such Preferred Stock Equivalents or the rights of conversion or exchange under such Preferred Stock Equivalents. Otherwise, no further
adjustment of the Series C Conversion Price, Series D Conversion Price or Series E Conversion Price, as the case may be, will be made when
Preferred Stock is actually issued upon the exercise of, or the conversion or exchange of, such Preferred Stock Equivalents.


                                                                       13
                        (ii) If the purchase price provided for in any Preferred Stock Equivalents, the additional consideration, if any, payable
upon the conversion or exchange of any Preferred Stock Equivalents, or the rate at which any Preferred Stock Equivalents are convertible into
or exchangeable for Preferred Stock changes at any time, the Series C Conversion Price, Series D Conversion Price or Series E Conversion
Price, as the case may be, in effect at the time of such change will be readjusted to the Series C Conversion Price, Series D Conversion Price or
Series E Conversion Price, as the case may be, which would have been in effect at such time had such Preferred Stock Equivalents still
outstanding provided for such changed purchase price, additional consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold.

                      (iii) Upon the expiration of, or the termination of any right to convert or exchange, any Preferred Stock Equivalents
without the exercise or conversion or exchange of any such Preferred Stock Equivalents, the Series C Conversion Price, Series D Conversion
Price or Series E Conversion Price, as the case may be, then in effect hereunder will be adjusted to the Series C Conversion Price, Series D
Conversion Price or Series E Conversion Price, as the case may be, which would have been in effect at the time of such expiration or
termination had such Preferred Stock Equivalents, to the extent outstanding immediately prior to such expiration or termination, never been
issued.

                      (iv) If any Preferred Stock or Preferred Stock Equivalents is issued or sold or deemed to have been issued or sold for
cash, the consideration received therefor will be deemed to be the net amount received by the Corporation therefor. In case any Preferred Stock
or Preferred Stock Equivalents are issued or sold for a consideration other than cash, the amount of the consideration other than cash received
by the Corporation will be the fair market value, as determined by a majority of the Board of Directors (the ―Fair Market Value‖), thereof as of
the date of receipt.

                        (v) In case any Preferred Stock Equivalent is issued after the Initial Series E Issue Date in connection with the issue or
sale of other securities of the Corporation, together comprising one integrated transaction in which no specific consideration is allocated to such
Preferred Stock Equivalent by the parties thereto, the Preferred Stock Equivalent will be deemed to have been issued for a consideration of
$0.01.

                       (vi) If the Corporation takes a record of the holders of Preferred Stock for the purpose of entitling them (a) to receive a
dividend or other distribution payable in Preferred Stock or Preferred Stock Equivalents or (b) to subscribe for or purchase Preferred Stock or
Preferred Stock Equivalents, then such record date will be deemed to be the date of the issue or sale of the shares of Preferred Stock deemed to
have been issued or sold upon the declaration of such dividend or upon the making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.

                  (g) Other Distributions. In the event the Corporation shall declare a dividend or distribution payable in securities of other
persons, evidences of indebtedness issued by the Corporation or other persons, assets (excluding cash dividends) or Common Stock
Equivalents, then, in each such case, the holders of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock shall be entitled to a proportionate share of any such distribution as though they were the holders
of the number of shares of Common Stock of the Corporation into which their shares of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock or Series E Preferred Stock, as the case may be, are convertible as of the record date fixed
for the determination of the holders of Common Stock of the Corporation entitled to receive such dividend or distribution.


                                                                        14
                   (h) Recapitalizations. If at any time or from time to time after the Initial Series E Issue Date, there shall be a recapitalization
of the Common Stock (other than a subdivision, combination or merger or sale of assets transaction provided for elsewhere in this Section 4 or
in Section 2 above) provision shall be made so that the holders of the Series A Preferred Stock, the holders of the Series B Preferred Stock, the
holders of the Series C Preferred Stock, the holders of the Series D Preferred Stock and the holders of Series E Preferred Stock shall thereafter
be entitled to receive upon conversion of their shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock, as the case may be, the number of shares of stock or other securities or property of the
Corporation or otherwise, to which a holder of Common Stock deliverable upon conversion would have been entitled on such recapitalization.
In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 4 with respect to the rights of the
holders of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred
Stock after the recapitalization to the end that the provisions of this Section 4 (including adjustment of the Series A Conversion Price, Series B
Conversion Price, Series C Conversion Price, Series D Conversion Price or Series E Conversion Price then in effect and the number of shares
purchasable upon conversion of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and
Series E Preferred Stock) shall be applicable after that event as nearly equivalent as may be practicable.

                    (i) No Impairment. The Corporation will not, by amendment of this Restated Certificate or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in
good faith assist in the carrying out of all the provisions of this Section 4 and in the taking of all such action as may be necessary or appropriate
in order to protect the Conversion Rights of the holders of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock against impairment.

                  (j) No Fractional Shares and Certificate as to Adjustments.

                       (i) No fractional shares shall be issued upon the conversion of any share or shares of the Series A Preferred Stock, Series
B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or Series E Preferred Stock, and the number of shares of Common Stock
to be issued shall be rounded to the nearest whole share (with 0.5 being rounded up). Whether or not fractional shares are issuable upon such
conversion shall be determined on the basis of the total number of shares of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock which the holder is at the time converting into Common Stock and the
number of shares of Common Stock issuable upon such aggregate conversion.


                                                                          15
                         (ii) Upon the occurrence of each adjustment or readjustment of the Series A Conversion Price, Series B Conversion
Price, Series C Conversion Price, Series D Conversion Price or Series E Conversion Price pursuant to this Section 4, the Corporation, at its
expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder
of such Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or Series E Preferred Stock, as
the case may be, a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any time of any holder of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock or Series E Preferred Stock, furnish or cause to be furnished to such holder a like
certificate setting forth (A) such adjustment and readjustment, (B) the Series A Conversion Price, Series B Conversion Price, Series C
Conversion Price, Series D Conversion Price or Series E Conversion Price at the time in effect, and (C) the number of shares of Common Stock
and the amount, if any, of other property which at the time would be received upon the conversion of a share of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or Series E Preferred Stock, as the case may be.

                   (k) Notices of Record Date. In the event of any taking by the Corporation of a record of the holders of any class of securities
for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution,
any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any
other right, the Corporation shall mail to each holder of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock, at least twenty (20) days prior to the date specified therein, a notice specifying the date on which
any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend,
distribution or right.

                   (l) Reservation of Stock Issuable Upon Conversion. The Corporation shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock; and if at any time the number of authorized
but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock, in addition to such other remedies as
shall be available to the holder of such Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock
and Series E Preferred Stock, the Corporation will take such corporate action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without
limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to this Restated Certificate.


                                                                        16
                  (m) Notices. Any notice required by the provisions of this Section 4 to be given to the holders of shares of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or Series E Preferred Stock shall be deemed given if
deposited in the United States mail, postage prepaid, and addressed to each holder of record at such holder‘s address appearing on the books of
the Corporation.

              5.   Voting Rights.

                  (a) The holder of each share of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock (i) shall have the right to one (1) vote for each share of Common Stock into which such holder‘s
shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock
could then be converted, with full voting rights and powers equal to the voting rights and powers of the holders of Common Stock, except as
required by law or as expressly provided herein, including the Protective Provisions in Section 6 below; (ii) shall be entitled, notwithstanding
any provision hereof, to notice of any stockholders‘ meeting in accordance with the Bylaws of the Corporation; and (iii) shall be entitled to
vote, together with holders of Common Stock, with respect to any question upon which holders of Common Stock have the right to vote.
Fractional votes shall not, however, be permitted and any fractional voting rights available on an as-converted basis (after aggregating all
shares into which shares of Preferred Stock held by each holder could be converted) shall be rounded to the nearest whole number (with 0.5
being rounded upward).

                  (b) The holders of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and
Series E Preferred Stock, voting together as a separate class, shall be entitled to elect one (1) director; the holders of the Common Stock, voting
together as a separate class, shall be entitled to elect two (2) directors; and the holders of Series A Preferred Stock, the holders of Series B
Preferred Stock, the holders of Series C Preferred Stock, the holders of Series D Preferred Stock, the holders of Series E Preferred Stock and
the holders of Common Stock, voting together as a single class, shall be entitled to elect the remaining members of the Board, if any.

              6.   Protective Provisions.

                  (a) So long as an aggregate of 250,000 shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock and/or Series E Preferred Stock are outstanding, the Corporation shall not, without first obtaining the approval
(by vote or written consent, as permitted by law) of the holders of at least sixty-seven percent (67%) of the then outstanding shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock, voting or acting, as
the case may be, as a single class (unless a greater percentage is required below):

                       (i) sell, convey or otherwise dispose of all or substantially all of its property or business; liquidate, dissolve or wind up
the Corporation‘s business; or merge into or consolidate with any other Corporation (other than a wholly-owned subsidiary corporation); or
effect any transaction or series of related transactions in which more than fifty percent (50%) of the voting power of the Corporation is
disposed of (a ―Corporate Transaction‖), unless the Corporation‘s stockholders of record as constituted immediately prior to such Corporate
Transaction will, immediately after such Corporate Transaction, hold at least fifty percent (50%) of the voting power of the surviving or
acquiring entity;


                                                                          17
                       (ii) declare and distribute any cash dividends among the holders of Common Stock, nor shall the Corporation purchase,
redeem or acquire any shares of Common Stock or pay funds into or set aside or make available a sinking fund for the purchase, redemption or
acquisition of shares of Common Stock. After payment in full of such preferred dividends, approved as provided above, any further payment of
dividends shall be paid pro rata to the holders of Common Stock, Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock (determined on an as-converted basis with respect to outstanding shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock); provided,
however, the foregoing restrictions shall not apply to the repurchase of shares of Common Stock held by employees, officers, directors,
consultants or other persons performing services for the Corporation or any wholly owned subsidiary of the Corporation (including, but not by
way of limitation, distributors and sales representatives) that are subject to restrictive agreements under which the Corporation has the option to
repurchase such shares upon the occurrence of certain events, such as the proposed sale of such shares;

                       (iii) amend or modify any provision of the Restated Certificate or Bylaws so as to affect adversely the rights, preferences
or privileges of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or Series E Preferred
Stock;

                     (iv) increase, or otherwise take any action that would have the effect of increasing, the authorized number of directors of
the Corporation to more than seven (7);

                      (v) increase or decrease (other than by redemption or conversion) the total number of authorized shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or Series E Preferred Stock;

                       (vi) authorize or issue, or authorize or effect any reclassification of, or obligate itself to issue, any equity security (other
than the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or Series E Preferred Stock),
including any other security convertible into or exercisable for any equity security, so as to cause such security to have a preference over, or be
on a parity with, the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or Series E
Preferred Stock with respect to voting, redemption, dividends or upon liquidation;

                      (vii) create any subsidiary of the Corporation, other than a wholly owned subsidiary, or permit any wholly owned
subsidiary of the Corporation to issue or sell, except to the Corporation or any other wholly owned subsidiary of the Corporation, any equity
security, including any other security convertible into or exercisable for any equity security, of such subsidiary;


                                                                          18
                        (viii) authorize or issue, or obligate itself to issue, any equity security, including any other security convertible into or
exercisable for any equity security, of the Corporation to any employee of the Corporation, other than up to 2,500,000 shares of Common
Stock, that may be reserved for issuance or otherwise issued under any stock option or other plan or agreement of the Corporation, including,
but not limited to, the Corporation‘s 1996 Stock Option/Stock Issuance Plan, together with options granted thereunder to purchase such shares,
and including any such increases to such stock option or other plan or agreement that the Board of Directors may approve hereafter from time
to time; or

                      (ix) amend any of the provisions set forth in this Section 6, which shall require the approval of the holders of seventy-five
percent (75%) of the then outstanding shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock voting or acting, as the case may be, as a single class.

                   (b) Except where the vote or written consent of the holders of a greater number of shares of the Corporation is required by
law, and in addition to any other vote required by the Restated Certificate, so long as there are (v) any shares of Series A Preferred Stock then
outstanding, with respect to any change made to the Series A Preferred Stock, (w) any shares of Series B Preferred Stock then outstanding, with
respect to any change made to the Series B Preferred Stock pursuant to this Subsection 6(b), (x) any shares of Series C Preferred Stock then
outstanding, with respect to any change made to the Series C Preferred Stock, (y) any shares of Series D Preferred Stock then outstanding, with
respect to any change made to the Series D Preferred Stock, or (z) any shares of Series E Preferred Stock then outstanding, with respect to any
change made to the Series E Preferred Stock, the Corporation will not, without the approval of the holders of a majority of the then outstanding
shares of any adversely affected series, voting separately as a series:

                       (i) amend this Restated Certificate to change or modify in an adverse manner any of the rights, preferences or privileges
of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or Series E Preferred Stock, as the
case may be; or

                      (ii) amend this Restated Certificate to increase or decrease (other than by redemption pursuant to Section 3 or conversion
pursuant to Section 4) the total number of authorized shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock or Series E Preferred Stock, as the case may be.


                                                                         19
              7. Status of Converted or Redeemed Stock. In the event any shares of Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock, Series D Preferred Stock or Series E Preferred Stock shall be converted pursuant to Section 4 above, or in the event any
shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or Series E Preferred Stock
shall be redeemed pursuant to Section 3 above, the shares so converted or redeemed shall be cancelled and shall not be issuable by the
Corporation. The Restated Certificate shall be amended at such time or times as the Corporation deems it reasonably practicable to effect the
corresponding reduction in the Corporation‘s authorized capital stock.

             8. Qualified Public Offering. A ―Qualified Public Offering‖ means any underwritten offering by the Corporation of shares of
Common Stock to the public pursuant to an effective registration statement under the Securities Act of 1933, as amended, then in effect, or any
comparable statement under any similar federal statute then in force, in which (a) the aggregate cash proceeds to be received by the
Corporation and selling shareholders from such offering (without deducting underwriting discounts, expenses and commissions) are at least
$10,000,000, and (b) the price per share paid by the public for such shares is at least $10.00 (as appropriately adjusted for any stock split, stock
dividends, combinations, recapitalizations and the like subsequent to the Stock Split).

        4.2 Effective as of a Qualified Public Offering (as defined in Section B.8 of Section 4.1 above), the Corporation‘s capital stock shall
be comprised as follows:

         A. Authorized Shares. The aggregate number of shares that the Corporation shall have authority to issue is 200,000,000, (a)
175,000,000 shares of which shall be Common Stock, par value $0.001 per share, and (b) 25,000,000 of which shall be Preferred Stock, par
value $0.001 per share.

          B. Common Stock. Each share of Common Stock shall have one vote on each matter submitted to a vote of the stockholders of the
Corporation. Subject to the provisions of applicable law and the rights of the holders of the outstanding shares of Preferred Stock, if any, the
holders of shares of Common Stock shall be entitled to receive, when and as declared by the Board of Directors of the Corporation, out of the
assets of the Corporation legally available therefor, dividends or other distributions, whether payable in cash, property or securities of the
Corporation. The holders of shares of Common Stock shall be entitled to receive, in proportion to the number of shares of Common Stock held,
the net assets of the Corporation upon dissolution after any preferential amounts required to be paid or distributed to holders of outstanding
shares of Preferred Stock, if any, are so paid or distributed.

         C. Preferred Stock.

                   1. Series. The Preferred Stock may be issued from time to time by the Board of Directors as shares of one or more series. The
description of shares of each additional series of Preferred Stock, including any designations, preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption shall be as set forth in resolutions
adopted by the Board of Directors.


                                                                         20
                   2. Rights and Preferences. The Board of Directors is expressly authorized, at any time, by adopting resolutions providing for
the issuance of, or providing for a change in the number of, shares of any particular series of Preferred Stock and, if and to the extent from time
to time required by law, by filing certificates of amendment or designation which are effective without stockholder action, to increase or
decrease the number of shares included in each series of Preferred Stock, but not below the number of shares then issued, and to set in any one
or more respects the designations, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications,
or terms and conditions of redemption relating to the shares of each such series. The authority of the Board of Directors with respect to each
series of Preferred Stock shall include, but not be limited to, setting or changing the following:

                          (a) the dividend rate, if any, on shares of such series, the times of payment and the date from which dividends shall
be accumulated, if dividends are to be cumulative;

                          (b) whether the shares of such series shall be redeemable and, if so, the redemption price and the terms and
conditions of such redemption;

                            (c) the obligation, if any, of the Corporation to redeem shares of such series pursuant to a sinking fund;

                             (d) whether shares of such series shall be convertible into, or exchangeable for, shares of stock of any other class of
classes and, if so, the terms and conditions of such conversion or exchange, including the price or prices or the rate or rates of conversion or
exchange and the terms of adjustment, if any;

                            (e) whether the shares of such series shall have voting rights, in addition to the voting rights provided by law, and, if
so, the extent of such voting rights;

                         (f) the rights of the shares of such series in the event of voluntary or involuntary liquidation, dissolution or
winding-up of the Corporation; and

                            (g) any other relative rights, powers, preferences, qualifications, limitations or restrictions thereof relating to such
series.

                                                                    ARTICLE VI

          A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (a) for any breach of the director‘s duty of loyalty to the Corporation or its stockholders, (b) for
acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (c) under Section 174 of the
Delaware General Corporation Law or (d) for any transaction from which the director derived any improper personal benefit. If the Delaware
General Corporation Law is amended after approval by the stockholders of this Article to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law as so amended.


                                                                          21
                                                                  ARTICLE VII

        The management of the business and the conduct of the affairs of the Corporation shall be vested in its Board of Directors. The
number of directors which shall constitute the whole Board of Directors shall be fixed by, or in the manner provided in, the Bylaws of the
Corporation.

                                                                  ARTICLE VIII

         Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws may provide. The books of the
Corporation may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be
designated from time to time by the Board of Directors or in the Bylaws of the Corporation.

                                                                   ARTICLE IX

        Election of directors at an annual or special meeting of stockholders need not be by written ballot unless the Bylaws of the
Corporation shall so provide.

                                                                   ARTICLE X

          A. At each annual meeting of stockholders, directors of the Corporation shall be elected to hold office until the expiration of the term
for which they are elected, and until their successors have been duly elected and qualified. At the first annual meeting of stockholders following
the closing of the initial public offering (the ―First Public Company Annual Meeting‖) of the Corporation‘s capital stock pursuant to an
effective registration statement filed under the Securities Act of 1933, as amended (the ―Initial Public Offering‖), the directors of the
Corporation shall be divided into three classes as nearly equal in size as is practicable, hereby designated as Class I, Class II and Class III. The
term of office of the initial Class I directors shall expire at the next succeeding annual meeting of stockholders, the term of office of the initial
Class II directors shall expire at the second succeeding annual meeting of stockholders and the term of office of the initial Class III directors
shall expire at the third succeeding annual meeting of stockholders. For the purposes hereof, the initial Class I, Class II and Class III directors
shall be those directors designated and elected at the First Public Company Annual Meeting. At each annual meeting after the First Public
Company Annual Meeting, directors to replace those of a Class whose terms expire at such annual meeting shall be elected to hold office until
the third succeeding annual meeting and until their respective successors shall have been duly elected and qualified. If the number of directors
is hereafter changed, any newly created directorships or decrease in directorships shall be so apportioned among the classes as to make all
classes as nearly equal in number as is practicable.

        B. Vacancies occurring on the Board of Directors for any reason may be filled by vote of a majority of the remaining members of the
Board of Directors, although less than a quorum, at a meeting of the Board of Directors. A person so elected by the Board of Directors to fill a
vacancy shall hold office until the next succeeding annual meeting of stockholders of the Corporation and until his or her successor shall have
been duly elected and qualified.


                                                                         22
                                                                  ARTICLE XI

        In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter,
amend or repeal the Bylaws of the Corporation.

                                                                  ARTICLE XII

         Effective upon the closing of the Initial Public Offering, stockholders of the Corporation may not take action by written consent in lieu
of a meeting but must take any actions at a duly called annual or special meeting.

                                                                 ARTICLE XIII

         Notwithstanding any other provisions of this Certificate of Incorporation or any provision of law which might otherwise permit a
lesser vote or no vote, but in addition to any affirmative vote of the holders of the capital stock required by law or this Certificate of
Incorporation, the affirmative vote of the holders of at least two-thirds (2/3) of the combined voting power of all of the then-outstanding shares
of the Corporation entitled to vote shall be required to alter, amend or repeal Articles IX, XI or XII or any provisions thereof.

                                                                 ARTICLE XIV

        The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred on stockholders herein are granted subject to this reservation.

                                                                      ***


                                                                        23
                                                    CERTIFICATE OF DESIGNATION

                                                                      OF

                                      SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

                                                                      OF

                                                      CROSSROADS SYSTEMS, INC.,

                                                        (Pursuant to Section 151 of the
                                                      Delaware General Corporation Law)




                    Crossroads Systems, Inc., a corporation organized and existing under the General Corporation Law of the State of
Delaware (hereinafter called the ―Corporation‖), hereby certifies that the following resolution was adopted by the board of directors of the
Corporation as required by Section 151 of the General Corporation Law at a meeting duly called and held on August 21, 2002;

                      RESOLVED, that pursuant to the authority granted to and vested in the board of directors of the Corporation (hereinafter
the ―Board‖) in accordance with the provisions of the certificate of incorporation of the Corporation, as currently in effect, the Board hereby
creates a series of Preferred Stock, par value $0.001 per share (the ―Preferred Stock‖), of the Corporation and hereby states the designation and
number of shares, and fixes the relative rights, preferences, and limitations thereof as follows:

                    Series A Junior Participating Preferred Stock:

             Section 1. Designation and Amount . The shares of such series shall be designated as ―Series A Junior Participating Preferred
Stock‖ (the ―Series A Preferred Stock‖) and the number of shares constituting the Series A Preferred Stock shall be One Hundred Seventy-Five
Thousand (175,000). Such number of shares may be increased or decreased by resolution of the Board of Directors ; provided that no
decrease shall reduce the number of shares of Series A Preferred Stock to a number less than the number of shares then outstanding plus the
number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding
securities issued by the Corporation convertible into Series A Preferred Stock.
           Section 2. Dividends and Distributions .

            (a) Subject to the rights of the holders of any shares of any series of Preferred Stock (or any similar stock) ranking prior and
superior to the Series A Preferred Stock with respect to dividends, each holder of a share of Series A Preferred Stock, in preference to the
holders of shares of common stock, par value $0.001 per share (the ―Common Stock‖), of the Corporation, and of any other junior stock, shall
be entitled to receive, when declared by the Board out of funds legally available for the purpose, dividends in an amount per share (rounded to
the nearest cent) equal to, subject to the provision for adjustment hereinafter set forth, 1,000 times the aggregate per share amount of all cash
dividends, and 1,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a
dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise),
declared on the Common Stock. In the event the Corporation shall, at any time after August 21, 2002 (the ―Rights Declaration Date‖), declare
or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in snares of Common Stock) into a
greater or lesser number of shares of Common Stock (and an equivalent dividend is not declared on the Series A Preferred Stock or the Series
A Preferred Stock is not similarly subdivided or combined), then in each such case the amount to which holders of shares of Series A Preferred
Stock were entitled immediately prior to such event under the preceding sentence shall be adjusted by multiplying such amount by a fraction,
the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to such event.

           (b) The Corporation shall declare a dividend or distribution on the shares of Series A Preferred Stock as provided in Section 2(a)
immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock);
provided, however , that, in no event shall a dividend or distribution be declared by the Board on the Common Stock for which it does not
declare and pay the dividend required to be declared on the Preferred Stock pursuant to Section 2(a).

            (c) Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Preferred Stock in an amount
less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board may fix a record date for the determination of holders of shares of Series A Preferred
Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than sixty days prior to the
date fixed for the payment thereof.

           Section 3. Voting Rights . The holders of shares of Series A Preferred Stock shall have the following voting rights:

            (a) Subject to the provision for adjustment hereinafter set forth, each share of Series A Preferred Stock shall entitle the holder
thereof to 1,000 votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall, at any time
after the Rights Declaration Date, declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock (and an equivalent dividend is not declared
on the Series A Preferred Stock or the Series A Preferred Stock is not similarly subdivided or combined), then in each such case the number of
votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by
multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.


                                                                        2
           (b) Except as otherwise provided herein, in the Certificate of Incorporation, in any other Certificate of Designation creating a series
of Preferred Stock or any similar stock, or by law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock
and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of
stockholders of the Corporation.

            (c) Except as set forth herein, or as otherwise provided by law, holders of Series A Preferred Stock shall have no special voting
rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein)
for taking any corporate action.

           Section 4. Certain Restrictions .

           (a) Whenever quarterly dividends or other dividends or distributions payable on the Series A Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A
Preferred Stock outstanding shall have been paid in full, the Corporation shall not:

                     (i) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends
or upon liquidation, dissolution or winding up) to the Series A Preferred Stock;

                     (ii) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except dividends paid ratably on the shares of
Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;

                    (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A Preferred Stock; provided, that the Corporation may at any time redeem,
purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to
dividends or upon dissolution, liquidation or winding up) to the Series A Preferred Stock; or

           (b) redeem or purchase or otherwise acquire for consideration any shares of Series A Preferred Stock, or any shares of stock
ranking on a parity with the Series A Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as
determined by the Board) to all holders of such shares upon such terms as the Board, after consideration of the respective annual dividend rates
and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable
treatment among the respective series or classes.


                                                                        3
            Section 5. The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could, under Section 4(a), purchase or otherwise acquire such shares at such time and
in such manner.

            Section 6. Reacquired Shares . Any shares of Series A Preferred Stock purchased or otherwise acquired by the Corporation in any
manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and
restrictions on issuance set forth herein, in the certificate of incorporation, or in any other certificate of designation creating a series of
Preferred Stock or any similar stock or as otherwise required by law.

           Section 7. Liquidation, Dissolution or Winding Up .

            (a) Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (i) to the holders of shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock unless, prior thereto,
the holders of shares of Series A Preferred Stock shall have received the greater of (x) $1,000 per share, plus an amount equal to accrued and
unpaid dividends and distributions thereon to the date of such payment (the ―Series A Liquidation Preference‖) and (y) an aggregate amount
per share, subject to the provision for adjustment hereinafter set forth, equal to the product of 1,000 times the aggregate amount to be
distributed per share to holders of shares of Common Stock, or (ii) to the holders of shares of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except distributions made ratably on the Series A Preferred
Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up. In the event the Corporation shall, at any time after the Rights Declaration Date declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of
shares of Common Stock (and an equivalent dividend is not declared on the Series A Preferred Stock or the Series A Preferred Stock is not
similarly subdivided or combined), then in each such case the aggregate amount to which holders of shares of Series A Preferred Stock were
entitled immediately prior to such event under the proviso in clause (i) of the preceding sentence shall be adjusted by multiplying such amount
by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

            (b) In the event, however, that there are not sufficient assets available to permit payment in full of the Series A Liquidation
Preference and the liquidation preferences of all other series of Preferred Stock, if any, which rank on a parity with the Series A Preferred
Stock, then such remaining assets shall be distributed ratably to the holders of Series A Preferred Stock and such parity shares in proportion to
their respective liquidation preferences.


                                                                         4
            Section 8. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other
transaction in which the shares of Common Stock are exchanged for or converted or changed into other stock or securities, cash and/or any
other property (or into the right to receive any of the foregoing), then in any such case each share of Series A Preferred Stock shall at the same
time be similarly exchanged, converted or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal
to 1,000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for
which each share of Common Stock is converted, changed or exchanged. In the event the Corporation shall, at any time after the Rights
Declaration Date declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in
shares of Common Stock) into a greater or lesser number of shares of Common Stock (and an equivalent dividend is not declared on the Series
A Preferred Stock or the Series A Preferred Stock is not similarly subdivided or combined), then in each such case the amount set forth in the
preceding sentence with respect to the conversion, exchange or change of shares of Series A Preferred Stock shall be adjusted by multiplying
such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

           Section 9. No Redemption . The shares of Series A Preferred Stock shall not be redeemable.

            Section 10. Rank . The Series A Preferred Stock shall rank, with respect to the payment of dividends and the distribution of assets,
junior to all series of any other class of the Corporation‘s Preferred Stock.

            Section 11. Amendment . The certificate of incorporation of the Corporation shall not be amended, including any amendment
through consolidation, merger, combination or other transaction, in any manner which would materially alter or change the powers, preferences
or special rights of the Series A Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least a majority
of the outstanding shares of Series A Preferred Stock, voting together as a single class.

                                                            [Signature page follows]


                                                                        5
                 IN WITNESS WHEREOF, this Certificate of Designation is executed on behalf of the Corporation as of the date first
written above.

                                                                  CROSSROADS SYSTEMS, INC.

                                                                  By:    /s/ Brian R. Smith
                                                                         Name: Brian R. Smith
                                                                         Title: Chairman, President and Chief
                                                                         Executive Officer
                                                                                                  State of Delaware
                                                                                                  Secretary of State
                                                                                              Division of Corporations
                                                                                           Delivered 06:21 PM 04/28/2006
                                                                                            FILED 06:21 PM 04/28/2006
                                                                                           SRV 060399538 - 2662618 FILE

                                       CERTIFICATE OF AMENDMENT TO THE
                            SIXTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
                                                      OF
                                            CROSSROADS SYSTEMS, INC.




                                                  Adopted in accordance with the provisions of
                                                    Section 242 of the General Corporation
                                                         Law of the State of Delaware




        CROSSROADS SYSTEMS, INC., a Delaware corporation, HEREBY CERTIFIES AS FOLLOWS:

        1.      The name of the Corporation is Crossroads Systems, Inc.

        2.    The Sixth Amended and Restated Certificate of Incorporation of the Corporation was filed by the Secretary of State of
Delaware on October 19,1999.

         3.      Article IV of the Sixth Amended and Restated Certificate of Incorporation is hereby amended and restated in full to be and
read as follows:

                                                                ―ARTICLE IV

               4.1       Intentionally Omitted.

               4.2       The Corporation‘s capital stock shall be comprised as follows:

                        A.        Authorized Shares . The aggregate number of shares that the Corporation shall have authority to issue is
        100,000,000, (a) 75,000,000 shares of which shall be Common Stock, par value $0.001 per share, and (b) 25,000,000 of which shall
        be Preferred Stock, par value $0.001 per share.

                        B.        Common Stock . Each share of Common Stock shall have one vote on each matter submitted to a vote of the
        stockholders of the Corporation. Subject to the provisions of applicable law and the rights of the holders of the outstanding shares of
        Preferred Stock, if any, the holders of shares of Common Stock shall be entitled to receive, when and as declared by the Board of
        Directors of the Corporation, out of the assets of the Corporation legally available therefor, dividends or other distributions, whether
        payable in cash, property or securities of the Corporation. The holders of shares of Common Stock shall be entitled to receive, in
        proportion to the number of shares of Common Stock held, the net assets of the Corporation upon dissolution after any preferential
        amounts required to be paid or distributed to holders of outstanding shares of Preferred Stock, if any, are so paid or distributed.
                C.     Preferred Stock .

                    1.          Series . The Preferred Stock may be issued from time to time by the Board of Directors as shares of one
or more series. The description of shares of each additional series of Preferred Stock, including any designations, preferences,
conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of
redemption shall be as set forth in resolutions adopted by the Board of Directors.

                     2.         Rights and Preferences . The Board of Directors is expressly authorized, at any time, by adopting
resolutions providing for the issuance of, or providing for a change in the number of, shares of any particular series of Preferred Stock
and, if and to the extent from time to time required by law, by filing certificates of amendment or designation which are effective
without stockholder action, to increase or decrease the number of shares included in each series of Preferred Stock, but not below the
number of shares then issued, and to set in any one or more respects the designations, preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications, or terms and conditions of redemption relating to the shares of each
such series. The authority of the Board of Directors with respect to each series of Preferred Stock shall include, but not be limited to,
setting or changing the following:

                            (a)     the dividend rate, if any, on shares of such series, the times of payment and the date from which
dividends shall be accumulated, if dividends are to be cumulative;

                             (b)  whether the shares of such series shall be redeemable and, if so, the redemption price and the
terms and conditions of such redemption;

                              (c)   the obligation, if any, of the Corporation to redeem shares of such series pursuant to a sinking
fund;

                               (d)    whether shares of such series shall be convertible into, or exchangeable for, shares of stock of any
other class or classes and, if so, the terms and conditions of such conversion or exchange, including the price or prices or the rate or
rates of conversion or exchange and the terms of adjustment, if any;

                               (e)    whether the shares of such series shall have voting rights, in addition to the voting rights provided
by law, and, if so, the extent of such voting rights;

                             (f)    the rights of the shares of such series in the event of voluntary or involuntary liquidation,
dissolution or winding-up of the Corporation; and


                                                                2
                                      (g)    any other relative rights, powers, preferences, qualifications, limitations or restrictions thereof
        relating to such series. ‖

       4.          Article X, Paragraph A. of the Sixth Amended and Restated Certificate of Incorporation of the Corporation is hereby
amended in full to be and read as follows:

                         ―A.    At each annual meeting of stockholders, including the annual meeting of stockholders in 2006, the terms of all
        directors shall expire upon the election and qualification of their successors and all directors shall be elected to hold office for a term
        expiring at the next succeeding annual meeting of stockholders and until their successors are duly elected and qualified.‖

                                                       *       *        *       *       *


                                                                        3
           IN WITNESS WHEREOF, Crossroads Systems, Inc. has caused this certificate to be signed by its duly authorized officer this April
28,2006.

                                                                         CROSSROADS SYSTEMS, INC.

                                                                       By:          /s/ ROBERT C. SIMS
                                                                                    Robert C. Sims
                                                                                    President and Chief
                                                                                    Executive Officer
                            Exhibit 3.2

        BYLAWS
          OF
CROSSROADS SYSTEMS, INC.,
A DELAWARE CORPORATION
                                                        TABLE OF CONTENTS

ARTICLE I. Offices                                                                                 1
      Section 1.1       Registered Office                                                          1
      Section 1.2       Other Offices                                                              1

ARTICLE II. Corporate Seal                                                                         1

ARTICLE III. Stockholders‘ Meetings                                                                1
      Section 3.1      Place of Meetings                                                           1
      Section 3.2      Annual Meeting                                                              1
      Section 3.3      Special Meetings                                                            3
      Section 3.4      Notice of Meetings                                                          4
      Section 3.5      Quorum                                                                      4
      Section 3.6      Adjournment and Notice of Adjourned Meetings                                5
      Section 3.7      Voting Rights                                                               5
      Section 3.8      Joint Owners of Stock                                                       5
      Section 3.9      List of Stockholders                                                        5
      Section 3.10     No Action Without Meeting                                                   6
      Section 3.11     Organization                                                                6

ARTICLE IV. Directors                                                                               7
      Section 4.1       Number and Term of Office; Classification                                   7
      Section 4.2       Powers                                                                      7
      Section 4.3       Vacancies                                                                   7
      Section 4.4       Resignation                                                                 7
      Section 4.5       Removal                                                                     8
      Section 4.6       Meetings                                                                    8
      Section 4.7       Quorum and Voting                                                           9
      Section 4.8       Action Without Meeting                                                      9
      Section 4.9       Fees and Compensation                                                       9
      Section 4.10      Committees                                                                 10

ARTICLE V. Officers                                                                                11
      Section 5.1       Officers Designated                                                        11
      Section 5.2       Tenure and Duties of Officers                                              11
      Section 5.3       Delegation of Authority                                                    14
      Section 5.4       Resignations                                                               14
      Section 5.5       Removal                                                                    14

ARTICLE VI. Execution of Corporate Instruments and Voting of Securities Owned by the Corporation   14
      Section 6.1     Execution of Corporate Instruments                                           14
      Section 6.2     Voting of Securities Owned by the Corporation                                15

ARTICLE VII. Shares of Stock                                                                       15


                                                                    i
        Section 7.1      Form and Execution of Certificates                      15
        Section 7.2      Lost Certificates                                       15
        Section 7.3      Transfers                                               16
        Section 7.4      Fixing Record Dates                                     16
        Section 7.5      Registered Stockholders                                 17

ARTICLE VIII. Other Securities of the Corporation                                17
      Section 8.1      Execution of Other Securities                             17

ARTICLE IX. Dividends                                                            17
      Section 9.1     Declaration of Dividends                                   17
      Section 9.2     Dividend Reserve                                           17

ARTICLE X. Fiscal Year                                                           18

ARTICLE XI. Indemnification of Directors, Officers, Employees and Other Agents   18
      Section 11.1    Directors and Executive Officers                           18
      Section 11.2    Other Officers, Employees and Other Agents                 18
      Section 11.3    Good Faith                                                 18
      Section 11.4    Expenses                                                   19
      Section 11.5    Enforcement                                                19
      Section 11.6    Non-Exclusivity of Rights                                  20
      Section 11.7    Survival of Rights                                         20
      Section 11.8    Insurance                                                  20
      Section 11.9    Amendments                                                 20
      Section 11.10 Savings Clause                                               20
      Section 11.11 Certain Definitions                                          20

ARTICLE XII. Notices                                                             21
      Section 12.1       Notice to Stockholders                                  21
      Section 12.2       Notice to Directors                                     21
      Section 12.3       Address Unknown                                         22
      Section 12.4       Affidavit of Mailing                                    22
      Section 12.5       Time Notices Deemed Given                               22
      Section 12.6       Failure to Receive Notice                               22
      Section 12.7       Notice to Person with Whom Communication Is Unlawful    22
      Section 12.8       Notice to Person with Undeliverable Address             22

ARTICLE XIII. Amendments                                                         23
      Section 13.1  Amendments                                                   23
      Section 13.2  Application of Bylaws                                        23

ARTICLE XIV. Loans to Officers                                                   23


                                                                  ii
                                                              BYLAWS
                                                                OF
                                                      CROSSROADS SYSTEMS, INC.,
                                                      A DELAWARE CORPORATION

                                                                  ARTICLE I.

                                                                   OFFICES

 SECTION 1.1 REGISTERED OFFICE . The registered office of the corporation shall be the registered office named in the certificate of
incorporation of the corporation, or such other office as may be designated from time to time by the Board of Directors in the manner provided
by law.

 SECTION 1.2 OTHER OFFICES . The corporation may have offices at such other places both within and without the State of Delaware as the
Board of Directors may from time to time determine or the business of the corporation may require. The books of the corporation may be kept
(subject to any provision contained in the Delaware General Corporation Law) outside the State of Delaware at such place or places as may be
designated from time to time by the Board of Directors or in these Bylaws.

                                                                  ARTICLE II.

                                                             CORPORATE SEAL

 The corporate seal shall consist of a die bearing the name of the corporation. Said seal may be used by causing it, or a facsimile thereof, to be
impressed, affixed or reproduced.

                                                                 ARTICLE III.

                                                       STOCKHOLDERS‘ MEETINGS

 SECTION 3.1 PLACE OF MEETINGS . Meetings of the stockholders of the corporation shall be held at such place, either within or without
the State of Delaware, as may be designated from time to time by the Board of Directors, or, if not so designated, then at the principal executive
offices of the corporation.

 SECTION 3.2 ANNUAL MEETING .

            (a) The annual meeting of the stockholders of the corporation, for the purpose of election of Directors and for such other business
as may lawfully come before it, shall be held on such date and at such time as may be designated from time to time by the Board of Directors.


                                                                        1
              (b) At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before
the meeting. To be properly brought before an annual meeting, business must be: (A) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the Board of Directors; (B) otherwise properly brought before the meeting by or at the direction of the
Board of Directors; or (C) otherwise properly brought before the meeting by a stockholder. For business to be properly brought before an
annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the corporation. To be
timely, a stockholder‘s notice must be delivered to or mailed and received by the Secretary of the corporation not later than the close of
business on the one hundred twentieth (120th) day prior to the first anniversary of the date of the proxy statement delivered to stockholders in
connection with the preceding year‘s annual meeting; provided, however, that if either (i) the date of the annual meeting is advanced more than
thirty (30) days or delayed (other than as a result of adjournment) more than sixty (60) days from such an anniversary date or (ii) no proxy
statement was delivered to stockholders in connection with the preceding year‘s annual meeting, notice by the stockholder to be timely must be
so delivered not earlier than the close of business on the ninetieth (90th) day prior to such annual meeting and not later than the close of
business on the later of the sixtieth (60th) day prior to such annual meeting or the close of business on the tenth (10th) day following the day on
which public announcement of the date of such meeting is first made by the corporation. To be in proper form, a stockholder‘s notice to the
Secretary shall set forth as to each matter the stockholder proposes to bringbefore the annual meeting:

              (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such
business at the annual meeting;

              (ii) a representation that the stockholder is a holder of record of stock of the corporation entitled to vote at such meeting and, if
applicable, intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice or introduce the
business specified in the notice;

             (iii) the name and address, as they appear on the corporation‘s books, of the stockholder proposing such business;

             (iv) the class and number of shares of the corporation which are beneficially owned by the stockholder;

             (v) any material interest of the stockholder in such business; and

           (vi) any other information that is required to be provided by the stockholder pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (the ― Exchange Act ‖), in such stockholder‘s capacity as a proponent of a stockholder proposal.


                                                                        2
         The chairman of the meeting shall determine whether any business proposed to be transacted by the stockholders has been properly
brought before the meeting and, if any proposed business has not been properly brought before the meeting, the chairman shall declare that
such proposed business shall not be presented for stockholder action at the meeting. For purposes of this Section 3.2 , ―public announcement‖
shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a
document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange
Act. Notwithstanding any provision in this Section 3.2 to the contrary, requests for inclusion of proposals in the corporation‘s proxy statement
made pursuant to Rule 14a-8 under the Exchange Act shall be deemed to have been delivered in a timely manner if delivered in accordance
with such Rule. Notwithstanding compliance with the requirements of this Section 3.2 , the chairman presiding at any meeting of the
stockholders may, in his sole discretion, refuse to allow a stockholder or stockholder representative to present any proposal which the
corporation would not be required to include in a proxy statement under any rule promulgated by the Securities and Exchange Commission.

  (c) Only persons who are nominated in accordance with the procedures set forth in this paragraph shall be eligible for election as Directors.
Nominations of persons for election to the Board of Directors of the corporation may be made at a meeting of stockholders by or at the
direction of the Board of Directors or by any stockholder of the corporation entitled to vote in the election of Directors at the meeting who
complies with the notice procedures set forth in this paragraph. Such nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary of the corporation in accordance with the provisions of paragraph
(b) of this Section 3.2 . Such stockholder‘s notice shall set forth (i) as to each person, if any, whom the stockholder proposes to nominate for
election or re-election as a Director: (A) the name, age, business address and residence address of such person; (B) the principal occupation or
employment of such person; (C) the class and number of shares of the corporation which are beneficially owned by such person; (D) a
description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such
person or persons) pursuant to which the nominations are to be made by the stockholder; and (E) any other information relating to such person
that is required to be disclosed in solicitations of proxies for election of Directors, or is otherwise required in each case pursuant to Regulation
14A under the 1934 Act (including without limitation such person‘s written consent to being named in the proxy statement, if any, as a
nominee and to serving as a Director if elected); and (ii) as to such stockholder giving notice, the information required to be provided pursuant
to paragraph (b) of this Section 3.2 . At the request of the Board of Directors, any person nominated by a stockholder for election as a Director
shall furnish to the Secretary of the corporation that information required to be set forth in the stockholder‘s notice of nomination which
pertains to the nominee. No person shall be eligible for election as a Director of the corporation unless nominated in accordance with the
procedures set forth in this paragraph. The chairman of the meeting shall, if the facts warrant, determine and declare at the meeting that a
nomination was not made in accordance with the procedures prescribed by these Bylaws, and if the chairman should so determine, the
chairman shall so declare at the meeting, and the defective nomination shall be disregarded.

 SECTION 3.3 SPECIAL MEETINGS .

           (a) Special meetings of the stockholders of the corporation may only be called, for any purpose or purposes, by the Board of
Directors pursuant to a resolution adopted by a majority of the total number of authorized Directors (whether or not there exist any vacancies in
previously authorized directorships at the time any such resolution is presented to the Board of Directors for adoption).


                                                                         3
            (b) No business may be transacted at such special meeting otherwise than specified in the resolution calling for the meeting. The
Board of Directors shall determine the time and place of such special meeting, which shall be held not less than thirty-five (35) nor more than
one hundred twenty (120) days after the date of the receipt of the request other than any actions effected prior to an Initial Public Offering (as
defined below). Upon determination of the time and place of the meeting, notice shall be given to the stockholders entitled to vote, in
accordance with the provisions of Section 3.4 of these Bylaws. If the notice is not given within sixty (60) days after the receipt of the request,
the person or persons requesting the meeting may set the time and place of the meeting and give the notice. Nothing contained in this paragraph
(b) shall be construed as limiting, fixing or affecting the time when a meeting of stockholders may be held.

 SECTION 3.4 NOTICE OF MEETINGS . Except as otherwise provided by law or the certificate of incorporation of the corporation, as the
same may be amended or restated from time to time and including any certificates of designation thereunder (hereinafter, the ― Certificate of
Incorporation ‖), and for actions effected prior to an Initial Public Offering (for which no notice need be given) written notice of each meeting
of stockholders shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to
vote at such meeting, such notice to specify the place, date, time and purpose or purposes of the meeting. Notice of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice thereof, either before or after such meeting, and will be waived by any
stockholder by his attendance thereat in person or by proxy, except when the stockholder attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Any
stockholder so waiving notice of such meeting shall be bound by the proceedings of any such meeting in all respects as if due notice thereof
had been given.

 SECTION 3.5 QUORUM . At all meetings of stockholders, except where otherwise provided by statute or by the Certificate of Incorporation,
or by these Bylaws, the presence, in person or by duly authorized proxy, of the holders of a majority of the outstanding shares of stock entitled
to vote shall constitute a quorum for the transaction of business. In the absence of a quorum, any meeting of stockholders may be adjourned,
from time to time, either by the chairman of the meeting or by vote of the holders of a majority of the shares represented thereat, but no other
business shall be transacted at such meeting. The stockholders present at a duly called or convened meeting, at which a quorum is present, may
continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by law, the Certificate of Incorporation or these Bylaws, all actions taken by the holders of a majority of the votes cast,
excluding abstentions, at any meeting at which a quorum is present shall be valid and binding upon the corporation; provided, however, that
Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote
on the election of Directors. Where a separate vote by a class or classes is required, a majority of the outstanding shares of such class or classes,
present in person or represented by proxy, shall constitute a quorum entitled to take action with respect to that vote on that matter and the
affirmative vote of the majority (plurality, in the case of the election of Directors) of shares of such class or classes present in person or
represented by proxy at the meeting shall be the act of such class.


                                                                         4
 SECTION 3.6 ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS . Any meeting of stockholders, whether annual or special,
may be adjourned from time to time either by the chairman of the meeting or by the vote of a majority of the shares casting votes, excluding
abstentions. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the corporation may transact any business
which might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at
the meeting.

 SECTION 3.7 VOTING RIGHTS . For the purpose of determining those stockholders entitled to vote at any meeting of the stockholders,
except as otherwise provided by law, only persons in whose names shares stand on the stock records of the corporation on the record date, as
provided in Section 7.5 of these Bylaws, shall be entitled to vote at any meeting of stockholders. Every person entitled to vote or execute
consents shall have the right to do so either in person or by an agent or agents authorized by a written proxy executed by such person or his
duly authorized agent, which proxy shall be filed with the Secretary at or before the meeting at which it is to be used. An agent so appointed
need not be a stockholder. No proxy shall be voted after three (3) years from its date of creation unless the proxy provides for a longer period.
Elections of Directors need not be by written ballot, unless otherwise provided in the Certificate of Incorporation.

 SECTION 3.8 JOINT OWNERS OF STOCK . If shares or other securities having voting power stand of record in the names of two (2) or
more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety, or otherwise, or if two
(2) or more persons have the same fiduciary relationship respecting the same shares, unless the Secretary is given written notice to the contrary
and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their acts with
respect to voting shall have the following effect: (a) if only one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the majority
so voting binds all; or (c) if more than one (1) votes, but the vote is evenly split on any particular matter, each faction may vote the securities in
question proportionally, or may apply to the Delaware Court of Chancery for relief as provided in the Delaware General Corporation Law,
Section 217(b). If the instrument filed with the Secretary shows that any such tenancy is held in unequal interests, a majority or even-split for
the purpose of clause (c) shall be a majority or even-split in interest.

 SECTION 3.9 LIST OF STOCKHOLDERS . The Secretary shall prepare and make, at least ten (10) days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical order, showing the address of each
stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not specified, at the place
where the meeting is to be held. The list shall be produced and kept at the time and place of meeting during the whole time thereof and may be
inspected by any stockholder who is present.


                                                                           5
 SECTION 3.10 NO ACTION WITHOUT MEETING . Effective upon the closing of the corporation‘s initial public offering of its capital
stock pursuant to an effective registration statement filed under the Securities Act of 1933, as amended (the ― Initial Public Offering ‖), the
stockholders of the corporation may not take action by written consent without a meeting and must take any actions at a duly called annual or
special meeting.

 SECTION 3.11 ORGANIZATION .

    (a) At every meeting of stockholders, unless another officer of the corporation has been appointed by the Board of Directors, the Chairman
of the Board of Directors, or, if a Chairman has not been appointed, is absent, or designates the next senior officer present to so act, the
President, or, if the President is absent, the most senior Vice President present, or, in the absence of any such officer, a chairman of the meeting
chosen by a majority in interest of the stockholders entitled to vote, present in person or by proxy, shall act as chairman. The Secretary, or, in
his absence, an Assistant Secretary directed to do so by the President, shall act as secretary of the meeting.

    (b) The Board of Directors of the corporation shall be entitled to make such rules or regulations for the conduct of meetings of stockholders
as it shall deem necessary, appropriate or convenient. Subject to such rules and regulations of the Board of Directors, if any, the chairman of
the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of
such chairman, are necessary, appropriate or convenient for the proper conduct of the meeting, including, without limitation, establishing an
agenda or order of business for the meeting, rules and procedures for maintaining order at the meeting and the safety of those present,
limitations on participation in such meeting to stockholders of record of the corporation and their duly authorized and constituted proxies and
such other persons as the chairman shall permit, restrictions on entry to the meeting after the time fixed for the commencement thereof,
limitations on the time allotted to questions or comments by participants and regulation of the opening and closing of the polls for balloting on
matters which are to be voted on by ballot. Unless and to the extent determined by the Board of Directors or the chairman of the meeting,
meetings of stockholders shall not be required to be held in accordance with rules of parliamentary procedure.


                                                                         6
                                                                  ARTICLE IV.

                                                                  DIRECTORS

 SECTION 4.1 NUMBER AND TERM OF OFFICE; CLASSIFICATION .

            (a) The number of directors which shall constitute the whole Board of Directors shall be determined from time to time by the Board
of Directors (provided that no decrease in the number of directors which would have the effect of shortening the term of an incumbent director
may be made by the Board of Directors), provided that the number of directors shall be not less than one (1). At each annual meeting of
stockholders, Directors of the corporation shall be elected to hold office until the expiration of the term for which they are elected, and until
their successors have been duly elected and qualified or until such Director‘s earlier death, resignation or due removal; except that if any such
election shall not be so held, such election shall take place at a stockholders‘ meeting called and held in accordance with the Delaware General
Corporation Law. Directors need not be stockholders unless so required by the Certificate of Incorporation. If, for any reason, the Directors
shall not have been elected at an annual meeting, they may be elected as soon thereafter as convenient at a special meeting of the stockholders
called for that purpose in the manner provided in these Bylaws.

            (b) At the first annual meeting of stockholders following the closing of the Initial Public Offering (the ― First Public Company
Annual Meeting ‖), the Directors of the corporation shall be divided into three classes as nearly equal in size as is practicable, hereby
designated Class I, Class II and Class III. The initial Class I, Class II and Class III directors shall be those directors designated and elected at
the First Public Company Annual Meeting. The term of office of the initial Class I directors shall expire at the next succeeding annual meeting
of stockholders, the term of office of the initial Class II directors shall expire at the second succeeding annual meeting of stockholders, and the
term of office of the initial Class III directors shall expire at the third succeeding annual meeting of stockholders. At each annual meeting of
stockholders following the First Public Company Annual Meeting, Directors to replace those of the Class whose terms expire at such annual
meeting shall be elected to hold office until the third succeeding annual meeting and until their respective successors shall have been duly
elected and qualified. If the number of directors is hereafter changed, any newly created directorships or decrease in directorships shall be so
apportioned among the classes as to make all classes as nearly equal in number as is practicable.

 SECTION 4.2 POWERS . The powers of the corporation shall be exercised, its business conducted and its property controlled by the Board of
Directors, except as may be otherwise provided by statute or by the Certificate of Incorporation.

 SECTION 4.3 VACANCIES . Vacancies occurring on the Board of Directors may be filled by vote of a majority of the remaining members of
the Board of Directors, although less than a quorum. Each Director so elected shall hold office for the unexpired portion of the term of the
Director or newly created directorship whose place shall be vacant and until his or her successor shall have been duly elected and qualified or
until such Director‘s earlier death, resignation or due removal. A vacancy in the Board of Directors shall be deemed to exist under this Section
4.3 in the case of (i) the death, removal or resignation of any Director; (ii) an increase in the authorized number of Directors pursuant to Section
4.1(a) above; or (iii) if the stockholders fail at any meeting of stockholders at which Directors are to be elected (including any meeting referred
to in Section 4.6 below) to elect the number of Directors then constituting the whole Board of Directors.


                                                                         7
          SECTION 4.4 RESIGNATION . Any Director may resign at any time by delivering his or her written resignation to the Secretary,
such resignation to specify whether it will be effective at a particular time, upon receipt by the Secretary or at the pleasure of the Board of
Directors. If no such specification is made, it shall be deemed effective at the pleasure of the Board of Directors. When one or more Directors
shall resign from the Board of Directors, effective at a future date, a majority of the Directors then in office, including those who have so
resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become
effective, and each Director so chosen shall hold office for the unexpired portion of the term of the Director whose place shall be vacated and
until his successor shall have been duly elected and qualified.

 SECTION 4.5 REMOVAL . At a special meeting of stockholders called for such purpose and in the manner provided herein, subject to any
limitations imposed by law or the Certificate of Incorporation, the Board of Directors, or any individual Director, may only be removed from
office for cause, and a new Director or Directors shall be elected by a vote of stockholders holding a majority of the outstanding shares entitled
to vote at an election of Directors.

 SECTION 4.6 MEETINGS .

           (a) Annual Meetings. Unless the Board shall determine otherwise, the annual meeting of the Board of Directors shall be held
immediately before or after the annual meeting of stockholders and at the place where such meeting is held. No notice of an annual meeting of
the Board of Directors shall be necessary and such meeting shall be held for the purpose of electing officers and transacting such other business
as may lawfully come before it.

           (b) Regular Meetings. Except as hereinafter otherwise provided, regular meetings of the Board of Directors shall be held in the
principal executive offices of the corporation. Unless otherwise restricted by the Certificate of Incorporation, regular meetings of the Board of
Directors may also be held at any place within or without the State of Delaware which has been designated by resolution of the Board of
Directors or the written consent of all directors.

          (c) Special Meetings. Unless otherwise restricted by the Certificate of Incorporation, and subject to the notice requirements
contained herein, special meetings of the Board of Directors may be held at any time and place within or without the State of Delaware
whenever called by the Chairman of the Board, the President or any two of the Directors.

            (d) Telephone Meetings. Any member of the Board of Directors, or of any committee thereof, may participate in a meeting by
means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each
other, and participation in a meeting by such means shall constitute presence in person at such meeting.

            (e) Notice of Meetings. Written notice of the time and place of all special meetings of the Board of Directors shall be given at least
one (1) day before the date of the meeting. Such notice need not state the purpose or purposes of such meeting, except as may otherwise be
required by law or provided for in the Certificate of Incorporation or these Bylaws. Notice of any meeting may be waived in writing at any time
before or after the meeting and will be deemed waived by any Director by attendance thereat, except when the Director attends the meeting
solely for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened.


                                                                        8
     (f) Waiver of Notice. The transaction of all business at any meeting of the Board of Directors, or any committee thereof, however called or
noticed, or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum be present and if,
either before or after meeting, each of the Directors not present shall sign a written waiver of notice, or a consent to holding such meeting, or an
approval of the minutes thereof. All such waivers, consents or approvals shall be filed with the corporate records or made a part of the minutes
of the meeting.

 SECTION 4.7 QUORUM AND VOTING .

           (a) Unless the Certificate of Incorporation requires a greater number and except with respect to indemnification questions arising
under Article XI hereof, for which a quorum shall be one-third of the exact number of Directors fixed from time to time in accordance with
Section 4.1 hereof, but not less than one (1), a quorum of the Board of Directors shall consist of a majority of the exact number of directors
fixed from time to time in accordance with Section 4.1 of these Bylaws, but not less than one (1); provided, however, at any meeting whether a
quorum be present or otherwise, a majority of the Directors present may adjourn from time to time until the time fixed for the next regular
meeting of the Board of Directors, without notice other than by announcement at the meeting.

           (b) At each meeting of the Board of Directors at which a quorum is present, all questions and business shall be determined by a vote
of the majority of the Directors present, unless a different vote is required by law, the Certificate of Incorporation or these Bylaws.

 SECTION 4.8 ACTION WITHOUT MEETING . Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action
required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all
members of the Board of Directors or committee, as the case may be, consent thereto in writing, and such writing or writings are filed with the
minutes of proceedings of the Board of Directors or committee.

 SECTION 4.9 FEES AND COMPENSATION . Directors shall be entitled to such compensation for their services as may be approved by the
Board of Directors, including, if so approved, by resolution of the Board of Directors, a fixed sum and expenses of attendance, if any, for
attendance at each regular or special meeting of the Board of Directors and at any meeting of a committee of the Board of Directors. Nothing
herein contained shall be construed to preclude any Director from serving the corporation in any other capacity as an officer, agent, employee,
or otherwise and receiving compensation therefor.


                                                                         9
         SECTION 4.10 COMMITTEES .

     (a) Executive Committee. The Board of Directors may by resolution passed by a majority of the whole Board of Directors appoint an
Executive Committee to consist of one (1) or more members of the Board of Directors. The Executive Committee, to the extent permitted by
law and specifically granted by the Board of Directors, shall have, and may exercise when the Board of Directors is not in session, all powers
of the Board of Directors in the management of the business and affairs of the corporation except such committee shall not have the power or
authority to amend the Certificate of Incorporation, to adopt an agreement of merger or consolidation, to recommend to the stockholders the
sale, lease or exchange of all or substantially all of the corporation‘s property and assets, to recommend to the stockholders of the corporation a
dissolution of the corporation or a revocation of a dissolution, or to amend these Bylaws.

    (b) Other Committees. The Board of Directors may, by resolution passed by a majority of the whole Board of Directors, from time to time
appoint such other committees as may be permitted by law. Such other committees appointed by the Board of Directors shall consist of one (1)
or more members of the Board of Directors and shall have such powers and perform such duties as may be prescribed by the resolution or
resolutions creating such committees, but in no event shall such committee have the powers denied to the Executive Committee in these
Bylaws.

    (c) Term. Each member of a committee of the Board of Directors shall serve a term on the committee coexistent with such member‘s term
on the Board of Directors. The Board of Directors, subject to the provisions of paragraphs (a) and (b) of this Section 4.10 may at any time
increase or decrease the number of members of a committee or terminate the existence of a committee. The membership of a committee
member shall terminate on the date of his or her death or voluntary resignation from the committee or from the Board of Directors. The Board
of Directors may at any time for any reason remove any individual committee member and the Board of Directors may fill any co mmittee
vacancy created by death, resignation, removal or increase in the number of members of the committee. The Board of Directors may designate
one or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the
committee, and, in addition, in the absence or disqualification of any member of a committee, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in the place of any such absent or disqualified member.

     (d) Meetings. Unless the Board of Directors shall otherwise provide, regular meetings of the Executive Committee or any other committee
appointed pursuant to this Section 4.10 shall be held at such times and places as are determined by the Board of Directors, or by any such
committee, and when notice thereof has been given to each member of such committee, no further notice of such regular meetings need be
given thereafter. Special meetings of any such committee may be held at any place which has been determined from time to time by such
committee, and may be called by any Director who is a member of such committee, upon written notice to the members of such committee of
the time and place of such special meeting given in the manner provided for the giving of written notice to members of the Board of Directors
of the time and place of special meetings of the Board of Directors. Notice of any special meeting of any committee may be waived in writing
at any time before or after the meeting and will be waived by any Director by attendance thereat, except when the Director attends such special
meeting solely for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is
not lawfully called or convened. A majority of the authorized number of members of any such committee shall constitute a quorum for the
transaction of business, and the act of a majority of those present at any meeting at which a quorum is present shall be the act of such
committee.


                                                                        10
     (e) Organization. The Chairman of the Board shall preside at every meeting of the Board of Directors, if present. In the case of any
meeting, if there is no Chairman of the Board or if the Chairman is not present, the Vice Chairman (if there be one) shall preside, or if there be
no Vice Chairman or if the Vice Chairman is not present, a chairman chosen by a majority of the Directors present shall act as chairman of
such meeting. The Secretary of the corporation or, in the absence of the Secretary, any person appointed by the Chairman shall act as secretary
of the meeting.

                                                                  ARTICLE V.

                                                                   OFFICERS

 SECTION 5.1 OFFICERS DESIGNATED . The officers of the corporation shall include a President and a Secretary, and, if and when
designated by the Board of Directors, Chairman of the Board of Directors, one or more executive and non-executive Vice Presidents (any one
or more of which executive Vice Presidents may be designated as Executive Vice President or Senior Vice President or a similar title), and a
Treasurer. The Board of Directors also may, at its discretion, create additional officers and assign such duties to those offices as it may deem
appropriate from time to time, which offices may include a Vice Chairman of the Board of Directors, a Chief Executive Officer, a Chief
Operating Officer, a Chief Financial Officer, one or more Assistant Secretaries and Assistant Treasurers, and one or more other officers which
may be created at the discretion of the Board of Directors. Any one person may hold any number of offices of the corporation at any one time
unless specifically prohibited therefrom by law. The salaries and other compensation of the officers of the corporation shall be fixed by or in
the manner designated by the Board of Directors.

 SECTION 5.2 TENURE AND DUTIES OF OFFICERS .

    (a) General. All officers shall hold office at the pleasure of the Board of Directors and until their successors shall have been duly elected
and qualified, unless sooner removed. Any officer elected or appointed by the Board of Directors may be removed at any time by the Board of
Directors. If the office of any officer becomes vacant for any reason, the vacancy may be filled by the Board of Directors. Except for the
Chairman of the Board and the Vice Chairman of the Board, no officer need be a director.

    (b) Duties of Chairman of the Board of Directors. The Chairman of the Board of Directors, when present, shall preside at all meetings of
the Board of Directors and, unless the Chairman has designated the next senior officer to so preside, at all meetings of the stockholders. The
Chairman of the Board of Directors shall perform other duties commonly incident to such office and shall also perform such other duties and
have such other powers as the Board of Directors shall designate from time to time.


                                                                       11
            (c) Powers and Duties of the Vice Chairman of the Board. The Board of Directors may but is not required to assign areas of
responsibility to a Vice Chairman of the Board, and, in such event, and subject to the overall direction of the Chairman of the Board and the
Board of Directors, the Vice Chairman of the Board shall be responsible for supervising the management of the affairs of the corporation and
its subsidiaries within the area or areas assigned and shall monitor and review on behalf of the Board of Directors all functions within such
corresponding area or areas of the corporation and each such subsidiary of the corporation. In the absence of the President, or in the event of
the President‘s inability or refusal to act, the Vice Chairman of the Board shall perform the duties of the President, and when so acting shall
have all the powers of and be subject to all the restrictions upon the President. Further, the Vice Chairman of the Board shall have such other
powers and duties as designated in accordance with these Bylaws and as from time to time may be assigned to the Vice Chairman of the Board
by the Board of Directors or the Chairman of the Board.

            (d) Duties of President. Unless the Board of Directors otherwise determines (including by election of Chief Executive Officer) and
subject to the provisions of paragraph (e) below, the President shall be the chief executive and chief operating officer of the corporation. Unless
the Board of Directors otherwise determines, he shall, in the absence of the Chairman of the Board or Vice Chairman of the Board or if there be
no Chairman of the Board or Vice Chairman of the Board, preside at all meetings of the stockholders and (should he be a director) of the Board
of Directors. The President shall have such other powers and duties as designated in accordance with these Bylaws and as from time to time
may be assigned to him by the Board of Directors.

            (e) Duties of the Chief Executive and Chief Operating Officers. Subject to the control of the Board of Directors, the chief executive
officer shall have general executive charge, management and control, of the properties, business and operations of the corporation with all such
powers as may be reasonably incident to such responsibilities; and subject to the control of the chief executive officer, the chief operating
officer shall have general operating charge, management and control, of the properties, business and operations of the corporation with all such
powers as may be reasonably incident to such responsibilities.

           (f) Duties of Vice Presidents. Vice Presidents, by virtue of their appointment as such, shall not necessarily be deemed to be
executive officers of the corporation, such status as an executive officer only being conferred if and to the extent such Vice President is placed
in charge of a principal business unit, division or function (e.g., sales, administration or finance) or performs a policy-making function for the
corporation (within the meaning of Section 16 of the 1934 Act and the rules and regulations promulgated thereunder). Each executive Vice
President shall at all times possess, and upon the authority of the President or the chief executive officer any non-executive Vice President shall
from time to time possess, power to sign all certificates, contracts and other instruments of the corporation, except as otherwise limited
pursuant to Article VI hereof or by the Chairman of the Board, the President, chief executive officer or the Vice Chairman of the Board. The
Vice Presidents shall perform other duties commonly incident to their office and shall also perform such other duties and have such other
powers as the Board of Directors or the President shall designate from time to time.


                                                                        12
           (g) Duties of Secretary. The Secretary shall keep the minutes of all meetings of the Board of Directors, committees of the Board of
Directors and the stockholders, in books provided for that purpose; shall attend to the giving and serving of all notices; may in the name of the
corporation affix the seal of the corporation to all contracts and attest the affixation of the seal of the corporation thereto; may sign with the
other appointed officers all certificates for shares of capital stock of the corporation; and shall have charge of the certificate books, transfer
books and stock ledgers, and such other books and papers as the Board of Directors may direct, all of which shall at all reasonable times be
open to inspection of any director upon application at the office of the corporation during business hours. The Secretary shall perform all other
duties given in these Bylaws and other duties commonly incident to such office and shall also perform such other duties and have such other
powers as the Board of Directors shall designate from time to time. The chief executive officer may direct any Assistant Secretary to assume
and perform the duties of the Secretary in the absence or disability of the Secretary, and each Assistant Secretary shall perform other duties
commonly incident to such office and shall also perform such other duties and have such other powers as the Board of Directors or the chief
executive officer, shall designate from time to time.

            (h) Assistant Secretaries. Each Assistant Secretary shall have the usual powers and duties pertaining to such offices, together with
such other powers and duties as designated in these Bylaws and as from time to time may be assigned to an Assistant Secretary by the Board of
Directors, the Chairman of the Board, the President, the Vice Chairman of the Board, or the Secretary. The Assistant Secretaries shall exercise
the powers of the Secretary during that officer‘s absence or inability or refusal to act.

           (i) Duties of Treasurer.

                   (i) The Treasurer shall keep or cause to be kept the books of account of the corporation in a thorough and proper manner and
shall render statements of the financial affairs of the corporation in such form and as often as required by the Board of Directors, the Chairman
of the Board, the Vice Chairman of the Board, chief executive officer, if one be designated, the Chief Financial Officer. The Treasurer, subject
to the order of the Board of Directors, shall have the custody of all funds and securities of the corporation. The Treasurer shall perform other
duties commonly incident to such office and shall also perform such other duties and have such other powers as the Board of Directors, the
Chairman of the Board, the Vice Chairman of the Board or the President shall designate from time to time.

                   (ii) In absence of a designated Chief Financial Officer, unless otherwise determined by the Board of Directors or chief
executive officer, the Treasurer shall serve as the chief financial officer subject to control of the chief executive officer.

                  (iii) The Chief Financial Officer, if any be designated, may, but need not serve as the Treasurer.

    (j) Assistant Treasurers. Each Assistant Treasurer shall have the usual powers and duties pertaining to such office, together with such other
powers and duties as designated in these Bylaws and as from time to time may be assigned to each Assistant Treasurer by the Board of
Directors, the Chairman of the Board, the President, the Vice Chairman of the Board, or the Treasurer. The Assistant Treasurers shall exercise
the powers of the Treasurer during that officer‘s absence or inability or refusal to act.


                                                                        13
 SECTION 5.3 DELEGATION OF AUTHORITY . For any reason that the Board of Directors may deem sufficient, the Board of Directors
may, except where otherwise provided by statute, delegate the powers or duties of any officer to any other person, and may authorize any
officer to delegate specified duties of such office to any other person. Any such delegation or authorization by the Board shall be effected from
time to time by resolution of the Board of Directors.

 SECTION 5.4 RESIGNATIONS . Any officer may resign at any time by giving written notice to the Board of Directors or to the President or
to the Secretary. Any such resignation shall be effective when received by the person or persons to whom such notice is given, unless a later
time is specified therein, in which event the resignation shall become effective at such later time. Unless otherwise specified in such notice, the
acceptance of any such resignation shall not be necessary to make it effective. Any resignation shall be without prejudice to the rights, if any,
of the corporation under any contract with the resigning officer.

 SECTION 5.5 REMOVAL . Any officer may be removed from office at any time, either with or without cause, by the vote or written consent
of a majority of the Directors in office at the time, or by any committee or superior officers upon whom such power of removal may have been
conferred by the Board of Directors.

                                                                  ARTICLE VI.

                                      EXECUTION OF CORPORATE INSTRUMENTS AND VOTING
                                          OF SECURITIES OWNED BY THE CORPORATION

 SECTION 6.1 EXECUTION OF CORPORATE INSTRUMENTS . The Board of Directors may, in its discretion, determine the method and
designate the signatory officer or officers, or other person or persons, to execute on behalf of the corporation any corporate instrument or
document, or to sign on behalf of the corporation the corporate name without limitation, or to enter into contracts on behalf of the corporation,
except where otherwise provided by law or these Bylaws, and such execution or signature shall be binding upon the corporation.

 Unless otherwise specifically determined by the Board of Directors or otherwise required by law, promissory notes, deeds of trust, mortgages
and other evidences of indebtedness of the corporation, and other corporate instruments or documents requiring the corporate seal, and
certificates of shares of stock owned by the corporation, shall be executed, signed or endorsed by the Chairman of the Board of Directors, the
President, Chief Executive Officer or any executive Vice President and if any be designated, Chief Financial Officer, Treasurer, Assistant
Secretary or Assistant Treasurer, and upon the authority conferred by the Board of Directors, President or Chief Executive Officer, any
non-executive Vice President, and by the Secretary. All other instruments and documents requiring the corporate signature, but not requiring
the corporate seal, may be executed as aforesaid or in such other manner as may be directed by the Board of Directors.


                                                                        14
 All checks and drafts drawn on banks or other depositaries on funds to the credit of the corporation or in special accounts of the corporation
shall be signed by such person or persons as the Board of Directors shall authorize so to do.

 Unless authorized or ratified by the Board of Directors or within the agency power of an officer, no officer, agent or employee shall have any
power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any
amount.

 SECTION 6.2 VOTING OF SECURITIES OWNED BY THE CORPORATION . All stock and other securities of other corporations owned
or held by the corporation for itself, or for other parties in any capacity, shall be voted, and all proxies with respect thereto shall be executed, by
the person authorized so to do by resolution of the Board of Directors, or, in the absence of such authorization, by the Chairman or Vice
Chairman of the Board of Directors, Chief Executive Officer, the President, or any executive Vice President.

                                                                   ARTICLE VII.

                                                               SHARES OF STOCK

 SECTION 7.1 FORM AND EXECUTION OF CERTIFICATES . Certificates for the shares of stock of the corporation shall be in such form
as is consistent with the Certificate of Incorporation and applicable law. Every holder of stock in the corporation shall be entitled to have a
certificate signed by or in the name of the corporation by the Chairman or Vice Chairman of the Board of Directors, the Chief Executive
Officer, the President or any executive Vice President and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer,
certifying the number of shares and the class or series owned by him in the corporation. Where such certificate is countersigned by a transfer
agent other than the corporation or its employee, or by a registrar other than the corporation or its employee, any other signature on the
certificate may be a facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon
a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued with the same
effect as if he were such officer, transfer agent, or registrar at the date of issue.

 SECTION 7.2 LOST CERTIFICATES . A new certificate or certificates shall be issued in place of any certificate or certificates theretofore
issued by the corporation alleged to have been lost, stolen, or destroyed, upon the making of an affidavit of that fact by the person claiming the
certificate of stock to be lost, stolen, or destroyed. The corporation may require, as a condition precedent to the issuance of a new certificate or
certificates, the owner of such lost, stolen, or destroyed certificate or certificates, or his legal representative, to advertise the same in such
manner as it shall require or to give the corporation a surety bond in such form and amount as it may direct as indemnity against any claim that
may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed.


                                                                          15
 SECTION 7.3 TRANSFERS .

             (a) Transfers of record of shares of stock of the corporation shall be made only on its books by the holders thereof, in person or by
attorney duly authorized and upon the surrender of a properly endorsed certificate or certificates for a like number of shares. Upon surrender to
the corporation or a transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession,
assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books. The Board of Directors shall have the power and authority to make all such other rules and
regulations as they may deem expedient concerning the issue, transfer and registration or the replacement of certificates for shares of capital
stock of the corporation.

           (b) The corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more
classes of stock of the corporation to restrict the transfer of shares of stock of the corporation of any one or more classes owned by such
stockholders in any manner not prohibited by the Delaware General Corporation Law.

 SECTION 7.4 FIXING RECORD DATES .

            (a) In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty (60) nor less than ten
(10) days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is
given, or if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned meeting.

           (b) In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or
allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which record date shall not precede the date upon
which the resolution fixing the record date is adopted, and which record date shall be not more than sixty (60) days prior to such action. If no
record date is fixed by the Board of Directors, the record date for determining stockholders for any such purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution relating thereto.


                                                                         16
          SECTION 7.5 REGISTERED STOCKHOLDERS . The corporation shall be entitled to recognize the exclusive right of a person
registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of any other person whether or not it shall have express or other notice
thereof, except as otherwise provided by the laws of Delaware.

                                                                 ARTICLE VIII.

                                               OTHER SECURITIES OF THE CORPORATION

 SECTION 8.1 EXECUTION OF OTHER SECURITIES . All bonds, debentures and other corporate securities of the corporation, other than
stock certificates (covered in Section 7.1 ), may be signed by the Chairman or Vice Chairman of the Board of Directors, the Chief Executive
Officer, the President or any executive Vice President, or such other person as may be authorized by the Board of Directors, and the corporate
seal impressed thereon or a facsimile of such seal imprinted thereon and attested by the signature of the Secretary or an Assistant Secretary, or
the Treasurer or an Assistant Treasurer; provided, however, that where any such bond, debenture or other corporate security shall be
authenticated by the manual signature of a trustee under an indenture pursuant to which such bond, debenture or other corporate security shall
be issued, the signatures of the persons signing and attesting the corporate seal on such bond, debenture or other corporate security may be the
imprinted facsimile of the signatures of such persons. Interest coupons appertaining to any such bond, debenture or other corporate security,
authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an Assistant Treasurer of the corporation or such other person as may
be authorized by the Board of Directors, or bear imprinted thereon the facsimile signature of such person. In case any officer who shall have
signed or attested any bond, debenture or other corporate security, or whose facsimile signature shall appear thereon or on any such interest
coupon, shall have ceased to be such officer before any bond, debenture or other corporate security so signed or attested shall have been
delivered, such bond, debenture or other corporate security nevertheless may be adopted by the corporation and issued and delivered as though
the person who signed the same or whose facsimile signature shall have been used thereon had not ceased to be such officer of the corporation.

                                                                  ARTICLE IX.

                                                                  DIVIDENDS

 SECTION 9.1 DECLARATION OF DIVIDENDS . Dividends upon the capital stock of the corporation, subject to the provisions of the
Certificate of Incorporation, if any, may be declared by the Board of Directors pursuant to law at any regular or special meeting. Dividends
may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation.

 SECTION 9.2 DIVIDEND RESERVE . Before payment of any dividend, there may be set aside out of any funds of the corporation available
for dividends such sum or sums as the Board of Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to
meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the
Board of Directors shall think conducive to the interests of the corporation, and the Board of Directors may modify or abolish any such reserve
in the manner in which it was created.


                                                                        17
                                                                 ARTICLE X.

                                                                FISCAL YEAR

The fiscal year of the corporation shall end as of October 31st, unless otherwise fixed by resolution of the Board of Directors.

                                                                 ARTICLE XI.

                        INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER AGENTS

 SECTION 11.1 DIRECTORS AND EXECUTIVE OFFICERS . The corporation shall indemnify its Directors and executive officers to the
fullest extent not prohibited by the Delaware General Corporation Law; provided, however, that the corporation may limit the extent of such
indemnification by individual contracts with its Directors and executive officers; and, provided, further, that the corporation shall not be
required to indemnify any Director or executive officer in connection with any proceeding (or part thereof) initiated by such person or any
proceeding by such person against the corporation or its Directors, officers, employees or other agents unless (i) such indemnification is
expressly required to be made by law, (ii) the proceeding was authorized by the Board of Directors of the corporation, or (iii) such
indemnification is provided by the corporation, in its sole discretion, pursuant to the powers vested in the corporation under the Delaware
General Corporation Law.

 SECTION 11.2 OTHER OFFICERS, EMPLOYEES AND OTHER AGENTS . The corporation shall have power to indemnify its other
officers, employees and other agents as set forth in the Delaware General Corporation Law.

 SECTION 11.3 GOOD FAITH .

              (a) For purposes of any determination under this Article XI , a Director or executive officer shall be deemed to have acted in good
faith and in a manner such officer reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, to have had no reasonable cause to believe that such officer‘s conduct was unlawful, if such officer‘s action is
based on information, opinions, reports and statements, including financial statements and other financial data, in each case prepared or
presented by:

                 (i) one or more officers or employees of the corporation whom the Director or executive officer believed to be reliable and
competent in the matters presented;

                 (ii) counsel, independent accountants or other persons as to matters which the Director or executive officer believed to be
within such person‘s professional competence; and


                                                                       18
                   (iii) with respect to a Director, a committee of the Board upon which such Director does not serve, as to matters within such
committee‘s designated authority, which committee the Director believes to merit confidence; so long as, in each case, the Director or
executive officer acts without knowledge that would cause such reliance to be unwarranted.

    (b) The termination of any proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent shall
not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any criminal proceeding, that such person had reasonable cause to
believe that his conduct was unlawful.

    (c) The provisions of this Section 11.3 shall not be deemed to be exclusive or to limit in any way the circumstances in which a person may
be deemed to have met the applicable standard of conduct set forth by the Delaware General Corporation Law.

 SECTION 11.4 EXPENSES . The corporation shall advance, prior to the final disposition of any proceeding, promptly following request
therefor, all expenses incurred by any Director or executive officer in connection with such proceeding upon receipt of an undertaking by or on
behalf of such person to repay said amounts if it should be determined ultimately that such person is not entitled to be indemnified under this
Article XI or otherwise.

 Notwithstanding the foregoing, unless otherwise determined pursuant to Section 11.5 of this Article XI , no advance shall be made by the
corporation if a determination is reasonably and promptly made (i) by the Board of Directors by a majority vote of a quorum consisting of
Directors who were not parties to the proceeding, or (ii) if such quorum is not obtainable, or, even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, that the facts known to the decision-making party at the time such
determination is made demonstrate clearly and convincingly that such person acted in bad faith or in a manner that such person did not believe
to be in or not opposed to the best interests of the corporation.

 SECTION 11.5 ENFORCEMENT . Without the necessity of entering into an express contract, all rights to indemnification and advances to
Directors and executive officers under this Article XI shall be deemed to be contractual rights and be effective to the same extent and as if
provided for in a contract between the corporation and the Director or executive officer. Any right to indemnification or advances granted by
this Article XI to a Director or executive officer shall be enforceable by or on behalf of the person holding such right in any court of competent
jurisdiction if (i) the claim for indemnification or advances is denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. The claimant in such enforcement action, if successful in whole or in part, also shall be entitled to be paid
the expense of prosecuting his claim. The corporation shall be entitled to raise as a defense to any such action that the claimant has not met the
standards of conduct that make it permissible under the Delaware General Corporation Law for the corporation to indemnify the claimant for
the amount claimed. Neither the failure of the corporation (including its Board of Directors, independent legal counsel or its stockholders) to
have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances
because such person has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination
by the corporation (including its Board of Directors, independent legal counsel or its stockholders) that the claimant has not met such
applicable standard of conduct, shall be a defense to the action or create a presumption that claimant has not met the applicable standard of
conduct.


                                                                        19
 SECTION 11.6 NON-EXCLUSIVITY OF RIGHTS . The rights conferred on any person by this Article XI shall not be exclusive of any other
right which such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, Bylaws, agreement, vote
of stockholders or disinterested Directors or otherwise, both as to action in his official capacity and as to action in another capacity while
holding office. The corporation is specifically authorized to enter into individual contracts with any or all of its Directors, officers, employees
or agents respecting indemnification and advances, to the fullest extent not prohibited by the Delaware General Corporation Law.

 SECTION 11.7 SURVIVAL OF RIGHTS . The rights conferred on any person by this Article XI shall continue as to a person who has ceased
to be a Director, officer, employee or other agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

 SECTION 11.8 INSURANCE . To the fullest extent permitted by the Delaware General Corporation Law, the corporation, upon approval by
the Board of Directors, may purchase insurance on behalf of any person required or permitted to be indemnified pursuant to this Article XI .

 SECTION 11.9 AMENDMENTS . Any repeal or modification of this Article XI shall only be prospective and shall not affect the rights under
this Article XI in effect at the time of the alleged occurrence of any action or omission to act that is the cause of any proceeding against any
agent of the corporation.

 SECTION 11.10 SAVINGS CLAUSE . If this Article XI or any portion hereof shall be invalidated on any ground by any court of competent
jurisdiction, then the corporation shall nevertheless indemnify each Director and executive officer to the full extent not prohibited by any
applicable portion of this Article XI that shall not have been invalidated, or by any other applicable law.

 SECTION 11.11 CERTAIN DEFINITIONS . For the purposes of this Article XI , the following definitions shall apply:

    (a) The term ―proceeding‖ shall be broadly construed and shall include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony in, any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative.


                                                                        20
          (b) The term ―expenses‖ shall be broadly construed and shall include, without limitation, court costs, attorneys‘ fees, witness fees,
fines, amounts paid in settlement or judgment and any other costs and expenses of any nature or kind incurred in connection with any
proceeding.

            (c) The term the ―corporation‖ shall include, in addition to the resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of
such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article XI
with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had
continued.

            (d) References to a ―director,‖ ―officer,‖ ―employee,‖ or ―agent‖ of the corporation shall include without limitation, situations where
such person is serving at the request of the corporation as a director, officer, employee, trustee or agent of another corporation, partnership,
joint venture, trust or other enterprise.

            (e) References to ―other enterprises‖ shall include employee benefit plans; references to ―fines‖ shall include any excise taxes
assessed on a person with respect to an employee benefit plan; and references to ―serving at the request of the corporation‖ shall include any
service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer,
employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have
acted in a manner ―not opposed to the best interests of the corporation‖ as referred to in this Article XI .

                                                                  ARTICLE XII.

                                                                    NOTICES

 SECTION 12.1 NOTICE TO STOCKHOLDERS . Unless the Certificate of Incorporation requires otherwise, whenever, under any provisions
of these Bylaws, notice is required to be given to any stockholder, it shall be given in writing, timely and duly deposited in the United States
mail, postage prepaid, and addressed to such stockholder‘s last known post office address as shown by the stock record of the corporation or its
transfer agent.

 SECTION 12.2 NOTICE TO DIRECTORS . Any notice required to be given to any Director may be given by the method stated in Section
12.1 , or by facsimile, telex or telegram, except that such notice other than one which is delivered personally shall be sent to such address as
such Director shall have filed in writing with the Secretary, or, in the absence of such filing, to the last known post office address of such
Director. It shall not be necessary that the same method of giving notice be employed in respect of all Directors, but one permissible method
may be employed in respect of any one or more, and any other permissible method or methods may be employed in respect of any other or
others.


                                                                        21
 SECTION 12.3 ADDRESS UNKNOWN . If no address of a stockholder or Director be known, notice may be sent to the principal executive
officer of the corporation.

 SECTION 12.4 AFFIDAVIT OF MAILING . An affidavit of mailing, executed by a duly authorized and competent employee of the
corporation or its transfer agent appointed with respect to the class of stock affected, specifying the name and address or the names and
addresses of the stockholder or stockholders, or Director or Directors, to whom any such notice or notices was or were given, and the time and
method of giving the same, shall be conclusive evidence of the statements therein contained.

 SECTION 12.5 TIME NOTICES DEEMED GIVEN . All notices given by mail, as above provided, shall be deemed to have been given as at
the time of mailing, and all notices given by facsimile, telex or telegram shall be deemed to have been given as of the sending time recorded at
the time of transmission.

 SECTION 12.6 FAILURE TO RECEIVE NOTICE . The period or limitation of time within which any stockholder may exercise any option
or right, or enjoy any privilege or benefit, or be required to act, or within which any Director may exercise any power or right, or enjoy any
privilege, pursuant to any notice sent such person in the manner above provided, shall not be affected or extended in any manner by the failure
of such stockholder or such Director to receive such notice.

 SECTION 12.7 NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL . Whenever notice is required to be given,
under any provision of law or of the Certificate of Incorporation or Bylaws of the corporation, to any person with whom communication is
unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or
agency for a license or permit to give such notice to such person. Any action or meeting which shall be taken or held without notice to any such
person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. In the event that the
action taken by the corporation is such as to require the filing of a certificate under any provision of the Delaware General Corporation Law,
the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such
persons with whom communication is unlawful.

 SECTION 12.8 NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS . Whenever notice is required to be given, under any
provision of law or the Certificate of Incorporation or Bylaws of the corporation, to any stockholder to whom (i) notice of two consecutive
annual meetings, and all notices of meetings to such person during the period between such two consecutive annual meetings, or (ii) all, and at
least two, payments (if sent by first class mail) of dividends or interest on securities during a twelve-month period, have been mailed addressed
to such person at such person‘s address as shown on the records of the corporation and have been returned undeliverable, the giving of such
notice to such person shall not be required. Any action or meeting which shall be taken or held without notice to such person shall have the
same force and effect as if such notice had been duly given. If any such person shall deliver to the corporation a written notice setting forth
such person‘s then current address, the requirement that notice be given to such person shall be reinstated. In the event that the action taken by
the corporation is such as to require the filing of a certificate under any provision of the Delaware General Corporation Law, the certificate
need not state that notice was not given to persons to whom notice was not required to be given pursuant to this paragraph.


                                                                          22
                                                                 ARTICLE XIII.

                                                                AMENDMENTS

 SECTION 13.1 AMENDMENTS . Except as otherwise provided in the Certificate of Incorporation, these Bylaws may be altered, amended or
repealed, or new Bylaws may be adopted, by the holders of a majority of the outstanding voting shares or by the Board of Directors, when such
power is conferred upon the Board of Directors by the Certificate of Incorporation, at any regular meeting of the stockholders or of the Board
of Directors or at any special meeting of the stockholders or of the Board of Directors if notice of such alteration, amendment, repeal or
adoption of new Bylaws be contained in the notice of such special meeting. If the power to adopt, amend or repeal Bylaws is conferred upon
the Board of Directors by the Certificate of Incorporation, it shall not divest or limit the power of the stockholders to adopt, amend or repeal
Bylaws.

 SECTION 13.2 APPLICATION OF BYLAWS . In the event that any provisions of these Bylaws is or may be in conflict with any law of the
United States, of the state of incorporation of the corporation or of any other governmental body or power having jurisdiction over this
corporation, or over the subject matter to which such provision of these Bylaws applies, or may apply, such provision of these Bylaws shall be
inoperative to the extent only that the operation thereof unavoidably conflicts with such law, and shall in all other respects be in full force and
effect.

                                                                 ARTICLE XIV.

                                                            LOANS TO OFFICERS

           The corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the
corporation or of its subsidiaries, including any officer or employee who is a Director of the corporation or its subsidiaries, whenever, in the
judgment of the Board of Directors, such loan, guarantee or assistance may reasonably be expected to benefit the corporation. The loan,
guarantee or other assistance may be with or without interest and may be unsecured, or secured in such manner as the Board of Directors shall
approve, including, without limitation, a pledge of shares of stock of the corporation. Nothing in this Bylaw shall be deemed to deny, limit or
restrict the powers of guaranty or warranty of the corporation at common law or under statute.


                                                                        23
                                                       AMENDMENT NO. 1
                                                              TO
                                               BYLAWS OF CROSSROADS SYSTEMS, INC.

         The Bylaws of Crossroads Systems, Inc., a Delaware corporation (the ― Company ‖), are hereby amended effective October 12, 2010,
by deleting Article IV, Section 4.1(b) in its entirety and deleting the word ―Classification‖ from the title of Article IV, Section 4.1, all pursuant
to the approval of the Board of Directors.

         Certified by the Secretary of the Company on this 12 th day of October, 2010.


                                                                                         Jennifer Ray-Crane, Secretary
                                                                                                                                  Exhibit 4.1

        THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN
        REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED, SOLD
        OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
        SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT
        REQUIRED UNDER SAID ACT.

                                                     CROSSROADS SYSTEMS, INC.

                                              COMMON STOCK PURCHASE WARRANT

                                                                                                                           Warrant No.: ____

                                                          ________________, 2010

This COMMON STOCK PURCHASE WARRANT certifies that _____________________, having an address
at___________________________________________, or permitted assignees is the registered holder (the ― Holder ‖) of this Common Stock
Purchase Warrant (the ― Warrant ‖) to purchase shares of the common stock, par value $.001 per share (the ― Common Stock ‖), of
Crossroads Systems, Inc., a Delaware corporation (the ― Company ‖). This Warrant has been issued to the Holder in connection with the
private placement of securities offered pursuant to that certain Securities Purchase Agreement, dated _______, 2010 (the ― Securities Purchase
Agreement ‖). The Holder takes this Warrant subject to the terms and restrictions set forth in the Transaction Documents (as defined in the
Securities Purchase Agreement) and shall be entitled to certain rights and privileges as set forth in the Transaction Documents.

         FOR VALUE RECEIVED , the Company hereby certifies that the Holder is entitled to purchase from the Company
____________________ duly authorized, validly issued, fully paid and nonassessable shares of Common Stock (the ― Warrant Shares ‖) at a
purchase price per share set forth in Section 3 below, and otherwise subject to the terms, conditions and adjustments set forth below in this
Warrant and in the Transaction Documents. The Holder is the person or entity in whose name this Warrant is registered on the records of the
Company regarding registration and transfers of this Warrant (the ― Warrant Register ‖) and is the owner and holder thereof for all purposes,
except as described in Section 9 hereof.

         1.        Exercise of Warrant . This Warrant will be exercisable at any time, in the sole discretion of the Holder, commencing on the
date hereof (the ― Commencement Date ‖).

       2.        Expiration of Warrant . This Warrant shall expire on the first to occur of the following: (a) 5:00 p.m., Pacific time, on
_______, 2015, and (b) the closing of a Merger or Consolidation (as defined in Section 11 ) (such earlier date, the ― Expiration Date ‖).

         3.        Warrant Price . At any time through the Expiration Date, all or any portion of this Warrant may be exercised for Warrant
Shares, in the Holder‘s sole discretion, at a price (the ― Warrant Price ‖) equal to $0.80 per share.
         4.       Exercise of Warrant . This Warrant shall be exercisable as follows:

                  4.1      Manner of Exercise . This Warrant may be exercised into shares of Common Stock by the Holder hereof, in
accordance with the terms and conditions hereof, in whole or in part with respect to any portion of this Warrant and in the discretion of the
Holder, during the period beginning on the Commencement Date and ending on the Expiration Date. Any exercise shall be undertaken during
normal business hours on any day other than a Saturday or a Sunday or a day on which commercial banking institutions in New York, New
York, or Los Angeles, California are authorized by law to be closed (a ― Business Day ‖) on or prior to the Expiration Date with respect to
such portion of this Warrant, by surrender of this Warrant to the Company at its office maintained pursuant to Section 9.2(a) hereof,
accompanied by an exercise notice in substantially the form attached to this Warrant as Exhibit A duly executed by or on behalf of the Holder
together with the payment of the Warrant Price in cash by bank check or wire transfer of immediately available funds.

                   4.2       When Exercise Effective . Each exercise of this Warrant shall be deemed to have been effected immediately prior
to the close of business on the Business Day on which this Warrant shall have been surrendered to the Company as provided in Section 4.1
hereof (― Exercise Date ‖), and, at such time, the corporation, association, partnership, organization, business, individual, government or
political subdivision thereof or a governmental agency (a ― Person ‖ or the ― Persons ‖) in whose name or names any certificate or certificates
for shares of Common Stock shall be issuable upon exercise as provided herein shall be deemed to have become the holder or holders of record
thereof.

                   4.3      Delivery of Stock Certificates . As soon as practicable after each exercise of this Warrant, in whole or in part, and
in any event within ten (10) Business Days thereafter, the Company, at its expense (including the payment by it of any applicable issue taxes),
will cause to be issued in the name of and delivered to the Holder hereof or, subject to Section 9 hereof, as the Holder (upon payment by the
Holder of any applicable transfer taxes) may direct:

                            (a)       a certificate or certificates (with appropriate restrictive legends, as applicable) for the number of duly
authorized, validly issued, fully paid and nonassessable shares of Common Stock to which the Holder shall be entitled upon exercise plus, in
lieu of any fractional share to which the Holder would otherwise be entitled, all issuances of Common Stock shall be rounded up to the nearest
whole share.

                          (b)       in case exercise is in part only, a new Warrant of like tenor, dated the date hereof and stating on the face
thereof for the number of shares of Common Stock equal to the number of shares called for on the face of this Warrant minus the number of
shares designated by the Holder upon exercise as provided in Section 4.1 hereof (without giving effect to any adjustment thereof).

                 4.4       Shares to be Fully Paid . The Company covenants and agrees that all shares of Common Stock which may be
issued upon the exercise of rights presented by this Warrant will, upon issuance by the Company, be validly issued, fully paid and
nonassessable, and free from preemptive rights and free from all taxes, liens and charges with respect thereto.

                   4.5       Company to Reaffirm Obligations . The Company will, at the time of each exercise of this Warrant, upon the
written request of the Holder hereof, acknowledge in writing its continuing obligation to afford to the Holder all rights (including without
limitation any rights to registration of the shares of Common Stock issued upon exercise) to which the Holder shall continue to be entitled after
exercise in accordance with the terms of this Warrant; provided, however, that if the Holder shall fail to make a request, the failure shall not
affect the continuing obligation of the Company to afford the rights to such Holder.


                                                                       2
                 4.6     Cashless Exercise . In the event that an effective registration statement is not on file for the resale of the Common
Stock underlying this Warrant (and which registration statement can then be used to actually resell such shares of Common Stock), this
Warrant may be exercised at any time by means of a ―cashless exercise‖ in which the Holder shall be entitled to receive a certificate for the
number of shares of Common Stock equal to the quotient obtained by dividing [(A-B)(X)] by (A), where:

                  (A) = the average 4:00 p.m. (Eastern time) closing bid price of the Common Stock over the five (5) trading days immediately
                  preceding the date of such election, as such closing price is reported on the Bloomberg system;

                  (B) = the Exercise Price of this Warrant, as adjusted pursuant to Section 5 hereof; and

                  (X) = the number of shares of Common Stock then issuable upon exercise of this Warrant in accordance with the terms of
                  this Warrant by means of a cash exercise rather than a cashless exercise.

For the avoidance of doubt, the ―cashless exercise‖ provided by this Section 4.6 shall not be available in the event there is a then effective
registration statement on file for the resale of the Common Stock underlying this Warrant, which registration statement can then be used to
actually resell such shares of Common Stock.

         5.        Adjustments .

                   5.1       Splits, Subdivisions, etc . In the event that the Company should at any time or from time to time, after the date first
referenced above, fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock, or the
determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or
other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly additional shares of Common Stock
(hereinafter referred to as ― Common Stock Equivalents ‖) without payment of any consideration by such holder for the additional shares of
Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock issuable upon conversion or exercise
thereof), then, as of such record date (or the date of such dividend, distribution, split or subdivision if no record date is fixed), the Warrant Price
shall be appropriately decreased so that the number of shares of Common Stock issuable on exercise of this Warrant shall be increased in
proportion to such increase in the aggregate number of shares of the Common Stock outstanding.

                 5.2        Combinations . If the number of shares of Common Stock outstanding at any time after the date first referenced
above is decreased by a combination of the outstanding shares of Common Stock, then, following the record date of such combination, the
Warrant Price shall be appropriately increased so that the number of shares of Common Stock issuable upon exercise of this Warrant shall be
decreased in proportion to such decrease in outstanding shares.

                  5.3      Notice of Adjustments . Upon any adjustment of the terms of this Warrant pursuant to this Section 5, then and in
each such case the Company shall promptly deliver a notice to the registered Holder of this Warrant, which notice shall state the Warrant Price
resulting from such adjustment and the changes, if any, in the number of Warrant Shares or kind of securities or other property purchasable at
such price upon the exercise hereof, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is
based.


                                                                          3
                 5.4      Adjustment in Number of Securities . Upon each adjustment of the Warrant Price pursuant to the provisions of this
Section 5, the number of securities issuable upon the exercise of each Warrant shall be adjusted to the nearest full amount by multiplying a
number equal to the Warrant Price in effect immediately prior to such adjustment by the number of Warrant Shares issuable upon exercise of
the Warrants immediately prior to such adjustment and dividing the product so obtained by the adjusted Warrant Price.

                 5.5       No Fractional Shares . No fractional shares shall be issuable upon exercise of this Warrant and the number of
Warrant Shares to be issued shall be rounded down to the nearest whole share.

          6.       Reservation of Shares . The Company shall at all times reserve and keep available out of its authorized but unissued shares
of Common Stock, free from all taxes, liens and charges with respect to the issue thereof, and not subject to preemptive rights or other similar
rights of stockholders of the Company, solely for the purpose of issuing the shares of Common Stock underlying this Warrant, such number of
its shares of Common Stock as shall from time to time be sufficient to effect the issuance or exercise thereof, and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to issue the Common Stock and effect the exercise of this Warrant, in
addition to such other remedies as shall be available to Holder, the Company shall take such corporate action as may, in the opinion of its
counsel, be necessary to increase the number of authorized but unissued shares of Common Stock to such number of shares as shall be
sufficient for such purposes, including without limitation, using its best efforts to obtain the requisite stockholder approval necessary to
increase the number of authorized shares of the Company‘s Common Stock. All shares of Common Stock issuable upon exercise of this
Warrant shall be duly authorized and, when issued upon exercise, shall be validly issued and, in the case of shares, fully paid and nonassessable
and free from preemptive rights and free from taxes, liens and charges with respect thereto.

          7.        No Impairment . The Company will not, by amendment of its charter or through reorganization, consolidation, merger,
dissolution, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this
Warrant but will at all times carry out all such terms and take all such action as may be reasonably necessary or appropriate in order to protect
the rights of the holder of this Warrant against impairment.

         8.        Restrictions on Transfer .

                   8.1       Restrictive Legends . This Warrant and each Warrant issued upon transfer or in substitution for this Warrant
pursuant to Section 9 , each certificate for Common Stock issued upon the exercise of any Warrant and each certificate issued upon the transfer
of any such Common Stock shall be transferable only upon satisfaction of the conditions specified in this Section 8 . Each of the foregoing
securities shall be stamped or otherwise imprinted with a legend reflecting the restrictions on transfer set forth in this Section 8 and any
restrictions required under the Securities Act of 1933, as amended (the ― Securities Act ‖).

                  8.2       Notice of Proposed Transfer; Opinion of Counsel . Prior to any transfer of any securities which are not registered
under an effective registration statement under the Securities Act (― Restricted Securities ‖), the Holder will give written notice to the
Company of the Holder's intention to affect a transfer and to comply in all other respects with this Section 8.2 . Each notice: (i) shall describe
the manner and circumstances of the proposed transfer, and (ii) shall designate counsel for the Holder giving the notice. The Holder giving
notice will submit a copy thereof to the counsel designated in the notice. The following provisions shall then apply:


                                                                        4
                              (a)       If in the opinion of counsel for the Holder reasonably satisfactory to the Company the proposed transfer
may be effected without registration of Restricted Securities under the Securities Act (which opinion shall state the basis of the legal
conclusions reached therein), the Holder shall thereupon be entitled to transfer the Restricted Securities in accordance with the terms of the
notice delivered by the Holder to the Company. Each certificate representing the Restricted Securities issued upon or in connection with any
transfer shall bear the restrictive legends required by Section 8.1 hereof.

                            (b)        If the opinion called for in (a) above is not delivered, the Holder shall not be entitled to transfer the
Restricted Securities until either: (i) receipt by the Company of a further notice from such Holder pursuant to the foregoing provisions of this
Section 8.2 and fulfillment of the provisions of clause (a) above, or (ii) such Restricted Securities have been effectively registered under the
Securities Act.

                   8.3        Termination of Restrictions . The restrictions imposed by this Section 8 upon the transferability of Restricted
Securities shall cease and terminate as to any particular Restricted Securities: (a) which Restricted Securities shall have been effectively
registered under the Securities Act, or (b) when, in the opinions of both counsel for the Holder thereof and counsel for the Company, such
restrictions are no longer required in order to insure compliance with the Act or Section 8 hereof. Whenever such restrictions shall cease and
terminate as to any Restricted Securities, the Holder thereof shall be entitled to receive from the Company, without expense (other than
applicable transfer taxes, if any), new securities of like tenor not bearing the applicable legends required by Section 8.1 hereof.

         9.       Ownership, Transfer and Substitution of Warrant .

                  9.1        Ownership of Warrant . The Company may treat the person in whose name this Warrant is registered in the
Warrant Register maintained pursuant to Section 9.2(b) hereof as the owner and holder thereof for all purposes, notwithstanding any notice to
the contrary, except that, if and when any Warrant is properly assigned in blank, the Company may (but shall not be obligated to) treat the
bearer thereof as the owner of such Warrant for all purposes, notwithstanding any notice to the contrary. Subject to Section 8 hereof, this
Warrant, if properly assigned, may be exercised by a new holder without a new Warrant first having been issued.

                  9.2      Office; Transfer and Exchange of Warrant .

                          (a)      The Company will maintain its principal offices as the office where notices, presentations and demands in
respect of this Warrant may be made upon it until the Company notifies the holder of this Warrant of any change of location of the office.

                            (b)      The Company shall cause to be kept at its office maintained pursuant to Section 9.2(a) hereof a Warrant
Register for the registration and transfer of this Warrant. The names and addresses of holders of this Warrant, the transfers thereof and the
names and addresses of transferees of this Warrant shall be registered in such Warrant Register. The Person in whose name any Warrant shall
be so registered shall be deemed and treated as the owner and holder thereof for all purposes of this Warrant, and the Company shall not be
affected by any notice or knowledge to the contrary.

                            (c)      Upon the surrender of this Warrant, properly endorsed, for registration of transfer or for exchange at the
office of the Company maintained pursuant to Section 9.2(a) hereof, the Company at its expense will (subject to compliance with Section 8
hereof, if applicable) execute and deliver to or upon the order of the Holder thereof a new Warrant of like tenor, in the name of such holder or
as such holder (upon payment by such holder of any applicable transfer taxes) may direct, calling in the aggregate on the face thereof for the
number of shares of Common Stock called for on the face of this Warrant so surrendered.


                                                                        5
                   9.3       Replacement of Warrant . Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction of this Warrant, upon delivery of indemnity
reasonably satisfactory to the Company in form and amount or, in the case of any mutilation, upon surrender of this Warrant for cancellation at
the office of the Company maintained pursuant to Section 9.2(a) hereof, the Company at its expense will execute and deliver, in lieu thereof, a
new Warrant of like tenor and dated the date hereof.

          10.       No Rights or Liabilities as Stockholder . No Holder shall be entitled to vote or receive dividends or be deemed the holder of
any shares of Common Stock or any other securities of the Company which may at any time be issuable on the exercise hereof for any purpose,
nor shall anything contained herein be construed to confer upon the Holder, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to
any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value, consolidation, merger,
conveyance, or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until this Warrant shall
have been exercised and the shares of Common Stock purchasable upon the exercise hereof shall have become deliverable, as provided
herein. The Holder will not be entitled to share in the assets of the Company in the event of a liquidation, dissolution or the winding up of the
Company.

          11.        Notices of Record Date, etc . In case the Company shall take a record of the holders of its Common Stock (or other stock or
securities at the time deliverable upon the exercise of this Warrant) for the purpose of entitling or enabling them to receive any dividend or
other distribution, or to receive any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any
other right; or of any capital reorganization of the Company, any reclassification of the capital stock of the Company, any consolidation or
merger of the Company with or into another corporation (other than a consolidation or merger in which the Company is the surviving entity), or
any transfer of all or substantially all of the assets of the Company (any such event, a ― Merger or Consolidation ‖); or of the voluntary or
involuntary dissolution, liquidation or winding-up of the Company, then, and in each such case, the Company will mail or cause to be mailed to
the registered holder of this Warrant a notice specifying, as the case may be: (i) the date on which a record is to be taken for the purpose of such
dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, or (ii) the effective date on which
such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is to take place, and the time, if any
is to be fixed, as of which the holders of record of Common Stock (or such other stock or securities at the time deliverable upon the exercise of
this Warrant) shall be entitled to exchange their shares of Common Stock (or such other stock or securities) for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up. Such notice shall
be mailed at least ten (10) days prior to the record date or effective date for the event specified in such notice unless such prior notice is waived
by the registered holder of this Warrant.

         12.       Notices . Any notice or other communication in connection with this Warrant shall be deemed to be given if in writing (or in
the form of a facsimile) addressed as hereinafter provided and actually delivered at said address: (a) if to any Holder, at the registered address
of such holder as set forth in the Warrant Register kept at the office of the Company maintained pursuant to Section 8.2(a) hereof, or (b) if to
the Company, to the attention of its Chief Executive Officer at its office maintained pursuant to Section 9.2(a) hereof; provided, however, that
the exercise of any Warrant shall be effective in the manner provided in Section 4 hereof.


                                                                         6
        13.       Payment of Taxes . The Company will pay all documentary stamp taxes attributable to the issuance of shares of Common
Stock underlying this Warrant upon exercise of this Warrant; provided, however , that the Company shall not be required to pay any tax which
may be payable in respect of any transfer involved in the registration of any certificate for shares of Common Stock underlying this Warrant in
a name other that of the Holder. The Holder is responsible for all other tax liability that may arise as a result of holding or transferring this
Warrant or receiving shares of Common Stock underlying this Warrant upon exercise hereof.

         14.      Governing Law; Jurisdiction; Waiver of Jury Trial .

             (a)  THIS WARRANT SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF TEXAS APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN
SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW.

             (b)   THE COMPANY HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE OF TEXAS OR
UNITED STATES FEDERAL COURTS LOCATED IN AUSTIN, TEXAS WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS
WARRANT. THE COMPANY IRREVOCABLY WAIVES THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE
OF SUCH SUIT OR PROCEEDING. THE COMPANY FURTHER AGREES THAT SERVICE OF PROCESS UPON IT MAILED BY
FIRST CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE COMPANY IN
ANY SUCH SUIT OR PROCEEDING. NOTHING HEREIN SHALL AFFECT THE HOLDER‘S RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW. THE COMPANY AGREES THAT A FINAL NON-APPEALABLE JUDGMENT IN ANY
SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON
SUCH JUDGMENT OR IN ANY OTHER LAWFUL MANNER.

             (c)   THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING
OUT OF THIS WARRANT.

          15.       Miscellaneous . Any provision of this Warrant and the observance of any term hereof may be amended, waived or modified
(either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and the
holders of greater than 50% of the outstanding Warrants and Warrant Shares, on a combined and fully diluted basis, issued to the Purchasers
(as defined in the Securities Purchase Agreement). If one or more provisions of this Warrant are held to be unenforceable under applicable
law, such provisions shall be excluded from this Warrant, and the balance of this Warrant shall be interpreted as if such provisions were so
excluded and shall be enforceable in accordance with its terms. The section headings in this Warrant are for purposes of convenience only and
shall not constitute a part hereof.


                                                                        7
        IN WITNESS WHEREOF , the Company has caused this Common Stock Purchase Warrant to be duly executed as of the date first
above written.

                                                     CROSSROADS SYSTEMS, INC.

                                                     By:
                                                           Name: Brian Bianchi
                                                           Title: Chief Operating Officer


                                                               8
                                                                EXHIBIT A

                                                            PURCHASE FORM

To: Crossroads Systems, Inc.

Dated:____________

        The undersigned, pursuant to the provisions set forth in the attached Warrant (No. ___), hereby elects to [check applicable subsection]
:

________         (a)       Purchase ____________ shares of ________________ of Crossroads Systems, Inc. pursuant to the terms of the
                           attached Warrant and payment of the Warrant Price per share required under such Warrant accompanies this notice;

                 OR

________         (b)       Exercise the attached Warrant for [all of the shares] [______ of the shares] [ cross out inapplicable phrase ]
                           purchasable under the Warrant pursuant to the cashless exercise provisions of Section 4.66 of such Warrant.

        Please issue a certificate or certificates representing said shares of Crossroads Systems, Inc. the name of the undersigned or in such
other name as is specified below:


                                       Print or Type Name


                        (Signature must conform in all respects to name of holder as specified on the face of Warrant)


                                       (Street Address)


                                       (City)              (State)   (Zip Code)
                                           EXHIBIT 4



           RIGHTS AGREEMENT

            BY AND BETWEEN

        CROSSROADS SYSTEMS, INC.

                  AND

AMERICAN STOCK TRANSFER & TRUST COMPANY,

            AS RIGHTS AGENT

              DATED AS OF

             AUGUST 21, 2002
                                                    TABLE OF CONTENTS

                                                                                                PAGE
Section 1.    Certain Definitions                                                                      1

Section 2.    Appointment of Rights Agent                                                              6

Section 3.    Issue of Rights Certificates                                                             6

Section 4.    Form of Rights Certificates                                                              8

Section 5.    Countersignature and Registration                                                        9

Section 6.    Transfer, Split-Up, Combination and Exchange of Rights Certificates; Mutilated,
              Destroyed, Lost or Stolen Rights Certificates                                            9

Section 7.    Exercise of Rights; Purchase Price; Expiration Date of Rights                            10

Section 8.    Cancellation and Destruction of Rights Certificates                                      12

Section 9.    Reservation and Availability of Preferred Stock                                          12

Section 10.   Preferred Stock Record Date                                                              13

Section 11.   Adjustment of Purchase Price, Number of Shares or Number of Rights                       13

Section 12.   Certificate of Adjusted Purchase Price or Number of Shares                               22

Section 13.   Consolidation, Merger or Sale or Transfer of Assets or Earning Power                     22

Section 14.   Fractional Rights and Fractional Shares                                                  25

Section 15.   Rights of Action                                                                         25

Section 16.   Agreement of Rights Holders                                                              26

Section 17.   Rights Certificate Holder Not Deemed a Stockholder                                       27

Section 18.   Concerning the Rights Agent                                                              27

Section 19.   Merger or Consolidation or Change of Name of Rights Agent                                27

Section 20.   Duties of Rights Agent                                                                   28

Section 21.   Change of Rights Agent                                                                   30

Section 22.   Issuance of New Rights Certificates                                                      31

Section 23.   Redemption and Termination                                                               31


                                                                i
Section 24.   Exchange                                                                              33

Section 25.   Notice of Certain Events                                                              34

Section 26.   Notices                                                                               35

Section 27.   Supplements and Amendments                                                            36

Section 28.   Successors                                                                            36

Section 29.   Determinations and Actions by the Board of Directors                                  36

Section 30.   Benefits of This Agreement                                                            37

Section 31.   Severability                                                                          37

Section 32.   Governing Law                                                                         37

Section 33.   Counterparts                                                                          37

Section 34.   Descriptive Headings                                                                  37

EXHIBITS

Exhibit A     Form of Certificate of Designation of Series A Junior Participating Preferred Stock

Exhibit B     Form of Rights Certificate

Exhibit C     Summary of Rights to Purchase Shares of Series A Preferred Stock


                                                               ii
                                                           RIGHTS AGREEMENT

                  THIS RIGHTS AGREEMENT, dated as of August 21, 2002 (the "Agreement"), is entered into by and between Crossroads
Systems, Inc., a Delaware corporation (the "Company"), and American Stock Transfer & Trust Company, a New York corporation (the "Rights
Agent").

                   WHEREAS, effective August 21, 2002 (the "Rights Dividend Declaration Date"), the board of directors of the Company
authorized and declared a distribution of one Right (each, a "Right") for each share of Common Stock (as hereinafter defined) of the Company
outstanding as of the Close of Business (as hereinafter defined) on September 3, 2002 (the "Record Date"), each Right initially representing the
right to purchase one one-thousandth of a share (a "Unit") of Preferred Stock (as hereinafter defined) upon the terms and subject to the
conditions in this Agreement, and has further authorized and directed the issuance of one Right with respect to each share of Common Stock of
the Company that shall become outstanding between the Record Date and the earliest of the Distribution Date, the Redemption Date and the
Final Expiration Date (as such terms are hereinafter defined).

                  NOW, THEREFORE, in consideration of the foregoing and the mutual agreements herein set forth, the parties hereto,
intending to be legally bound, hereby agree as follows:

                  Section 1. Certain Definitions. For purposes of this Agreement, the following terms have the meanings indicated:

                  "Acquiring Person" shall mean any Person (as such term is hereinafter defined) who or which, together with all Affiliates and
Associates (as such terms are hereinafter defined) of such Person, shall be the Beneficial Owner (as such term is hereinafter defined) of 15% or
more of the shares of Common Stock of the Company then outstanding, but shall not include (1) the Company, any Subsidiary (as such term is
hereinafter defined) of the Company, any employee benefit plan of the Company or any Subsidiary of the Company, or any entity holding
shares of Common Stock of the Company for or pursuant to the terms of any such plan, (2) Brian R. Smith ("Smith") or any of his Affiliates or
Associates (collectively with Smith, the "Smith Investor Group") to the extent that the members of the Smith Investor Group shall beneficially
own in the aggregate up to, but not exceeding, 20% of the shares of Common Stock of the Company then outstanding, or (3) Austin Ventures
IV-A, L.P. ("Austin Ventures") or any of its Affiliates or Associates (collectively with Austin Ventures, the "AV Investor Group") to the extent
that the members of the AV Investor Group beneficially own shares of Common Stock of the Company as of the close of business on the date
hereof (other than as a result of a stock dividend, stock split or similar transaction effected by the Company in which all holders of Common
Stock of the Company are treated equally). Smith and Austin Ventures shall collectively be known as the "Permitted Investors" and the Smith
Investor Group and AV Investor Group shall collectively be known as the "Investor Groups". Notwithstanding the foregoing:


                                                                       1
                  (i) no Person shall become an "Acquiring Person" as the result of an acquisition of shares of Common Stock by the
        Company which, by reducing the number of shares outstanding, increases the proportionate number of shares beneficially owned by
        such Person to 15% or more of the shares of Common Stock of the Company then outstanding; (or, in the case of the Smith Investor
        Group, more than 20% of the shares of Common Stock of the Company then outstanding); provided, however, that if a Person shall
        become the Beneficial Owner of 15% or more of the shares of Common Stock of the Company then outstanding (or, in the case of the
        Smith Investor Group, more than 20% of the shares of Common Stock of the Company then outstanding) as a result of any such
        acquisition of shares of Common Stock by the Company and shall, after such acquisition of shares by the Company, become the
        Beneficial Owner of any additional shares of Common Stock of the Company (other than as a result of a stock dividend, stock split or
        similar transaction effected by the Company in which all holders of Common Stock of the Company are treated equally) (or, in the
        case of the members of the Investor Groups, become the Beneficial Owner of any additional shares of Common Stock of the
        Company), then such Person shall be deemed to be an "Acquiring Person" hereunder;

                  (ii) no Person who, alone or together with all Affiliates and Associates of such Person (including, but not limited to, the AV
        Investor Group), was, at the time of the public announcement by the Company of the declaration by its Board of Directors on August
        21, 2002 of the dividend distribution of the Rights, the Beneficial Owner of 15% or more of the Common Stock of the Company then
        outstanding shall be deemed to have become an Acquiring Person unless and until such time as (A) such Person or any Affiliate or
        Associate of such Person thereafter becomes the Beneficial Owner of any additional Common Stock of the Company (other than as a
        result of a stock dividend, stock split or similar transaction effected by the Company in which all holders of Common Stock of the
        Company are treated equally); and

                  (iii) if the board of directors of the Company determines in good faith that a Person who would otherwise be an "Acquiring
        Person" as defined pursuant to the provisions of subparagraph (i), has become such inadvertently, and such Person divests as promptly
        as practicable a sufficient number of shares of Common Stock of the Company so that such Person would no longer be an "Acquiring
        Person," then such Person shall not be deemed to be an "Acquiring Person" for any purpose of this Agreement.

                 "Adjustment Shares" shall have the meaning set forth in Section 11(a)(ii).

                  "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the Exchange Act
Regulations (as hereinafter defined) as in effect on the date of this Agreement.

                 A Person shall be deemed the "Beneficial Owner" of, and shall be deemed to "beneficially own," any securities:

                 (i) which such Person or any of such Person's Affiliates or Associates beneficially owns, directly or indirectly, for purposes
        of Section 13(d) of the Exchange Act (as hereinafter defined) and Rule 13d-3 thereunder (or any comparable or successor law or
        regulation); or


                                                                       2
                  (ii) which such Person or any of such Person's Affiliates or Associates, directly or indirectly, has (A) the right to acquire
        (whether such right is exercisable immediately, contingently or only after the passage of time) pursuant to any agreement, arrangement
        or understanding (whether or not in writing, other than customary agreements with and between underwriters and selling group
        members with respect to a bona fide public offering of securities), or upon the exercise of conversion rights, exchange rights, rights
        (other than the Rights), warrants or options, or otherwise; provided, however, that a Person shall not be deemed the Beneficial Owner
        of, or to beneficially own, securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of
        such Person's Affiliates or Associates until such tendered securities are accepted for purchase or exchange; or (B) the right to vote
        pursuant to any agreement, arrangement or understanding; provided further, however, that a Person shall not be deemed the
        "Beneficial Owner" of, or to "beneficially own," any security under this subparagraph (ii) as a result of any agreement, arrangement or
        understanding to vote such security if such agreement, arrangement or understanding: (x) arises solely from a revocable proxy given in
        response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable provisions of the Exchange
        Act and the Exchange Act Regulations, and (y) is not reportable by such Person on Schedule 13D under the Exchange Act (or any
        comparable or successor report); or

                 (iii) which are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with
        which such first mentioned Person (or any of such first mentioned Person's Affiliates or Associates) has any agreement, arrangement
        or understanding (whether or not in writing, other than customary agreements with and between underwriters and selling group
        members with respect to a bona fide public offering of securities), for the purpose of acquiring, holding, voting (except to the extent
        contemplated by the proviso to clause (B) of subparagraph (ii) above) or disposing of any securities of the Company; provided,
        however, that in no case shall any officer or director of the Company be deemed (A) the Beneficial Owner of any securities
        beneficially owned by another officer or director of the Company solely by reason of actions undertaken by such persons in their
        capacity as officers or directors of the Company or (B) the Beneficial Owner of securities held of record by the trustee of any
        employee benefit plan of the Company or any Subsidiary of the Company for the benefit of any employee of the Company or any
        Subsidiary of the Company, other than such officer or director, by reason of any influence that such officer or director may have over
        the voting of the securities held in the plan;

Notwithstanding anything in this definition of "Beneficial Owner" and "beneficially own" to the contrary, the phrase "then outstanding," when
used with reference to a Person who is the Beneficial Owner of securities of the Company, shall mean the number of such securities then issued
and outstanding together with the number of such securities not then actually issued and outstanding which such Person would be deemed to
beneficially own hereunder.

                "Business Day" shall mean any day other than a Saturday, a Sunday, or a day on which banking institutions in The City of
New York are authorized or obligated by law or executive order to close.


                                                                       3
                   "Close of Business" on any given date shall mean 5:00 p.m., New York City time, on such date; provided, however, that if
such date is not a Business Day it shall mean 5:00 p.m., New York City time, on the next succeeding Business Day.

                 "Common Stock" when used with reference to the Company shall mean the shares of common stock, par value $0.001 per
share, of the Company.

                   "Common Stock" when used with reference to any Person other than the Company shall mean the capital stock (or other
equity interest) with the greatest voting power of such other Person or, if such other Person is a Subsidiary of another Person, the Person or
Persons which ultimately control such first-mentioned Person.

                  "Company" shall have the meaning set forth in the forepart of this Agreement.

                  "Current Per Share Market Price" shall have the meaning set forth in Section 11(d)(i).

                  "Current Value" shall have the meaning set forth in Section 11(a)(iii).

                  "Distribution Date" shall have the meaning set forth in Section 3(a).

                  "Equivalent Preferred Stock" shall have the meaning set forth in Section 11(b).

                  "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any successor statute.

                  "Exchange Act Regulations" shall mean the Rules and
                  Regulations under the Exchange Act, as amended from time to time (including any successor rules).

                  "Expiration Date" shall have the meaning set forth in Section 7(a).

                  "Final Expiration Date" shall have the meaning set forth in Section 7(a).

                  "Nasdaq" shall have the meaning set forth in Section 11(d).

                  "Person" shall mean any individual, firm, corporation or other entity, and shall include any successor (by merger or
otherwise) of such entity.

               "Preferred Stock" shall mean shares of Series A Junior Participating Preferred Stock, par value $0.001 per share, of the
Company, having the rights and preferences set forth in the Form of Certificate of Designation attached to this Agreement as Exhibit A.

                  "Preferred Stock Equivalents" shall have the meaning set forth in Section 11(a)(iii).

                  "Principal Party" shall have the meaning set forth in Section 13.

                  "Purchase Price" shall have the meaning set forth in Section 7(b).

                  "Record Date" shall have the meaning set forth in the recitals to this Agreement.


                                                                        4
                  "Redemption Date" shall have the meaning set forth in Section 7(a).

                  "Redemption Price" shall have the meaning set forth in Section 23(a).

                  "Right" shall have the meaning set forth in the recitals to this Agreement.

                "Rights Agent" shall have the meaning set forth in the forepart of this Agreement and shall include any Person that shall
become a successor Rights Agent pursuant to the terms of this Agreement.

                  "Rights Certificate" shall have the meaning set forth in Section 3(a).

                  "Rights Dividend Declaration Date" shall have the meaning set forth in the recitals to this Agreement.

                  "Section 11(a)(ii) Event" shall mean any event described in Section 11(a)(ii)(A), (B) or (C).

                  "Section 11(a)(iii) Trigger Date" shall have the meaning set forth in Section 11(a)(iii).

                  "Section 13 Event" shall have the meaning set forth in Section 13.

                  "Section 24(a) Exchange Ratio" shall have the meaning set forth in Section 24(a).

                  "Securities Act" shall mean the Securities Act of 1933, as amended, or any successor statute.

                   "Share Acquisition Date" shall mean the first date of public announcement (which, for purposes of this definition, shall
include, without limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by the Company or an Acquiring Person that an
Acquiring Person has become such.

                  "Spread" shall have the meaning set forth in Section 11(a)(iii).

                   "Subsidiary" of any Person shall mean any corporation or other entity of which a majority of the voting power of the voting
equity securities or equity interest is owned, directly or indirectly, by such Person.

                  "Summary of Rights" shall have the meaning set forth in Section 3(b).

                  "Trading Day" shall have the meaning set forth in Section 11(d)(i).

                  "Triggering Event" shall mean any Section 11(a)(ii) Event or any Section 13 Event.

                  "Unit" shall have the meaning set forth in the recitals to this Agreement.


                                                                         5
                  Section 2. Appointment of Rights Agent. The Company hereby appoints the Rights Agent to act as agent for the Company in
accordance with the terms and conditions of this Agreement, and the Rights Agent hereby accepts such appointment. The Company may from
time to time appoint co-Rights Agents as it may deem necessary or desirable upon ten days' prior written notice to the Rights Agent and any
co-Rights Agents. The Rights Agent shall have no duty to supervise, and in no event shall be liable for, the acts or omissions of any such
co-Rights Agent.

                  Section 3. Issue of Rights Certificates.

          (a) Until the earlier of (i) the Close of Business on the tenth day after the Share Acquisition Date and (ii) the Close of Business on
the tenth day (or such later date as may be determined by action of the Company's board of directors prior to such time as any Person becomes
an Acquiring Person and of which later date the Company will give the Rights Agent prompt written notice) after the date that a tender or
exchange offer by any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company or any Person holding shares of Common Stock for or pursuant to the terms of any such plan) is commenced within
the meaning of Rule 14d-2(a) of the Exchange Act Regulations or of the first public announcement of the intention of any Person (other than
the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company or any entity
holding shares of Common Stock for or pursuant to the terms of any such plan) to commence a tender or exchange offer, if upon consummation
thereof such Person would be the Beneficial Owner of 15% or more of the shares of Common Stock of the Company then outstanding (the
earlier of the events described in (i) and (ii) above being the "Distribution Date"), (x) the Rights will be evidenced (subject to the provisions of
Section 3(b)) by the certificates for shares of Common Stock of the Company registered in the names of the holders thereof (which certificates
shall also be deemed to be Rights Certificates) and not by separate Rights Certificates, and (y) the right to receive Rights Certificates will be
transferable only in connection with the transfer of shares of Common Stock of the Company. As soon as practicable after the Distribution
Date, the Company will notify the Rights Agent of the occurrence of the Distribution Date and the Company will prepare and execute, the
Rights Agent will countersign, and the Company will send or cause to be sent (and the Rights Agent will, if requested and provided with all
necessary information, send) by first-class, insured, postage-prepaid mail, to each record holder of shares of Common Stock of the Company as
of the Close of Business on the Distribution Date, at the address of such holder shown on the records of the Company, a Rights Certificate, in
substantially the form of Exhibit B (a "Rights Certificate"), evidencing one Right for each share of Common Stock so held. From and after the
Distribution Date, the Rights will be evidenced solely by such Rights Certificates. The Rights Agent shall have no duty or obligation to take
any action under any section of this Agreement which requires the payment by a Rights holder of applicable taxes and governmental charges
unless and until the Rights Agent is satisfied that all such taxes and/or charges have been paid.

          (b) On the Record Date, or as soon as practicable thereafter, the Company will send, or cause to be sent, a copy of a Summary of
Rights to Purchase Preferred Stock, in substantially the form of Exhibit C (the "Summary of Rights"), by first-class, postage-prepaid mail, to
each record holder of shares of Common Stock of the Company as of the Close of Business on the Record Date, at the address of such holder
shown on the records of the Company. Until the earlier of the Distribution Date or the Expiration Date, the surrender for transfer of any
certificate for shares of Common Stock of the Company shall also constitute the transfer of the Rights associated with the shares of Common
Stock represented thereby.


                                                                         6
         (c) Certificates evidencing shares of Common Stock of the Company which become outstanding (whether originally issued or
delivered from the Company's treasury) or are otherwise transferred after the Record Date but prior to the earlier of the Distribution Date and
the Expiration Date shall have impressed on, printed on, written on or otherwise affixed to them the following legend (or such other legend as
the Company may deem appropriate that is not inconsistent with the provisions of this Agreement but which does not affect the rights, duties or
indemnities of the Rights Agent):

                 THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO CERTAIN RIGHTS AS SET
                 FORTH IN A RIGHTS AGREEMENT BETWEEN CROSSROADS SYSTEMS, INC. AND AMERICAN STOCK
                 TRANSFER & TRUST COMPANY, DATED AS OF AUGUST 21, 2002 (THE "RIGHTS AGREEMENT"), THE TERMS
                 OF WHICH ARE HEREBY INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH IS ON FILE AT
                 THE PRINCIPAL EXECUTIVE OFFICES OF CROSSROADS SYSTEMS, INC. UNDER CERTAIN CIRCUMSTANCES,
                 AS SET FORTH IN THE RIGHTS AGREEMENT, SUCH RIGHTS WILL BE EVIDENCED BY SEPARATE
                 CERTIFICATES AND WILL NO LONGER BE EVIDENCED BY THIS CERTIFICATE. CROSSROADS SYSTEMS,
                 INC. WILL MAIL TO THE HOLDER OF THIS CERTIFICATE A COPY OF THE RIGHTS AGREEMENT WITHOUT
                 CHARGE AFTER RECEIPT OF A WRITTEN REQUEST THEREFOR. UNDER CERTAIN CIRCUMSTANCES, AS SET
                 FORTH IN THE RIGHTS AGREEMENT, RIGHTS ISSUED TO ANY PERSON WHO BECOMES AN ACQUIRING
                 PERSON (AS DEFINED IN THE RIGHTS AGREEMENT), WHETHER CURRENTLY HELD BY OR ON BEHALF OF
                 SUCH PERSON OR BY ANY SUBSEQUENT HOLDER, MAY BECOME NULL AND VOID.

If the Company purchases or acquires any shares of Common Stock of the Company prior to the Distribution Date, any Rights associated with
such shares of Common Stock of the Company shall be deemed cancelled and retired so that the Company shall not be entitled to exercise any
Rights associated with any shares of Common Stock of the Company which are no longer outstanding.


                                                                       7
                  Section 4. Form of Rights Certificates.

                   (a) The Rights Certificates (and the forms of election to purchase Units and of assignment to be printed on the reverse
thereof) shall be substantially the same as Exhibit B and may have such marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate (but which do not affect the rights, duties or immunities of the Rights
Agent) and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any
rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange or transaction reporting system on which the
Rights may from time to time be listed or traded, or to conform to usage. Subject to the provisions of Sections 11 and 22, the Rights
Certificates shall entitle the holders thereof to purchase the number of Units as shall be set forth therein at the price per Unit set forth therein,
but the number of such Units and the Purchase Price shall be subject to adjustment as provided herein.

                   (b) Any Rights Certificate issued pursuant to this Agreement that represents Rights beneficially owned by: (i) an Acquiring
Person or any Associate or Affiliate of an Acquiring Person; (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee after the Acquiring Person becomes such; or (iii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) that becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to
either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to
any Person with whom such Acquiring Person has any continuing agreement, arrangement or understanding regarding the transferred Rights or
(B) a transfer which the board of directors of the Company has determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect avoidance of Section 7(e); shall in each case contain (to the extent the Rights Agent has notice thereof and to the
extent feasible) the following legend:

                  THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A
                  PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
                  ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT BY AND BETWEEN
                  CROSSROADS SYSTEMS, INC. AND AMERICAN STOCK TRANSFER & TRUST COMPANY, AS RIGHTS AGENT,
                  DATED AS OF AUGUST 21, 2002 (THE "RIGHTS AGREEMENT")). ACCORDINGLY, THIS RIGHTS CERTIFICATE
                  AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES
                  SPECIFIED IN SECTION 7(e) OF THE RIGHTS AGREEMENT.


                                                                          8
                  Section 5. Countersignature and Registration.

         (a) The Rights Certificates shall be executed on behalf of the Company by any officer of the Company, either manually or by
facsimile signature, shall have affixed thereto the Company's seal or a facsimile thereof, and shall be attested by the Secretary or an Assistant
Secretary of the Company, either manually or by facsimile signature. The Rights Certificates shall be countersigned by the Rights Agent and
shall not be valid for any purpose unless countersigned. In case any officer of the Company who shall have signed any of the Rights
Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the
Company, such Rights Certificates, nevertheless, may be countersigned by the Rights Agent and issued and delivered by the Company with the
same force and effect as though the person who signed such Rights Certificates had not ceased to be such officer of the Company. Any Rights
Certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Rights Certificate, shall be a
proper officer of the Company to sign such Rights Certificate, although at the date of this Agreement any such person was not such an officer.

           (b) Following the Distribution Date and receipt by the Rights Agent of notice thereof, the Rights Agent will keep or cause to be kept,
at its office designated for such purpose, books for registration and transfer of the Rights Certificates issued under this Agreement. Such books
shall show the names and addresses of the respective holders of the Rights Certificates, the number of Rights evidenced on its face by each of
the Rights Certificates and the date of each of the Rights Certificates.

                  Section 6. Transfer, Split-Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights
Certificates.

          (a) Subject to the provisions of Sections 4(b), 7(e) and 14, at any time after the Close of Business on the Distribution Date, and at or
prior to the Close of Business on the Expiration Date, any Rights Certificate or Rights Certificates may be transferred, split up, combined or
exchanged for another Rights Certificate or Rights Certificates evidencing exercisable Rights, entitling the registered holder to purchase a like
number of Units (or, following a Triggering Event, other securities, cash or other assets, as the case may be) as the Rights Certificate or Rights
Certificates surrendered then entitled such holder to purchase. Any registered holder desiring to transfer, split up, combine or exchange any
Rights Certificate or Rights Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Rights
Certificate or Rights Certificates to be transferred, split up, combined or exchanged at the office of the Rights Agent designated for such
purpose. Neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the transfer of any such
surrendered Rights Certificate or Rights Certificates until the registered holder shall have properly completed and signed the certificate
contained in the form of assignment on the reverse side of such Rights Certificate or Rights Certificates and shall have provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company or the Rights
Agent shall reasonably request. Thereupon the Rights Agent shall, subject to Sections 4(b), 7(e) and 14, countersign and deliver to the Person
entitled thereto a Rights Certificate or Rights Certificates, as the case may be, as so requested. The Company may require payment from
holders of Rights Certificates of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer,
split up, combination or exchange of Rights Certificates. The Rights Agent shall have no duty or obligation to take any action under any section
of this Agreement which requires the payment by a Rights holder of applicable taxes and governmental charges unless and until the Rights
Agent is satisfied that all such taxes and/or charges have been paid.


                                                                        9
         (b) Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Rights Certificate, and of indemnity or security reasonably satisfactory to them, and, at the Company's request, reimbursement
to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Rights Certificate if mutilated, the Company will make and deliver a new Rights Certificate of like tenor to the Rights Agent for
countersignature and delivery to the registered holder in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.

                  Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.

         (a) The registered holder of any Rights Certificate evidencing exercisable Rights may exercise the Rights evidenced thereby (except
as otherwise provided in this Agreement) in whole or in part at any time after the Distribution Date upon surrender of the Rights Certificate,
with the form of election to purchase and the related certification properly completed and duly executed, to the Rights Agent at the office of the
Rights Agent designated for such purpose, together with payment of the Purchase Price for each Right being exercised (as such amount may be
reduced (including to zero) pursuant to Section 11(a)(iii)) and an amount equal to any applicable transfer tax or charge required to be paid by
the holder of such Rights Certificate in accordance with Section 9 in cash, or by certified check, wire transfer or bank draft payable to the order
of the Company), at or prior to the earliest of (i) the Close of Business on the tenth anniversary hereof (the "Final Expiration Date"), (ii) the
time at which the Rights are redeemed as provided in Section 23 (the "Redemption Date"), and (iii) the time at which such Rights are
exchanged as provided in Section 24 (the earliest of (i), (ii) and (iii) being the "Expiration Date").

        (b) The Purchase Price for each Unit pursuant to the exercise of a Right shall initially be $12.00 and, shall be subject to adjustment
from time to time as provided in Sections 11 and 13 and shall be payable in lawful money of the United States of America in accordance with
paragraph (c) below.

          (c) Upon receipt of a Rights Certificate evidencing exercisable Rights (with the form of election to purchase and certification
properly completed and duly executed) accompanied by payment as provided in Section 7(a), the Rights Agent shall, subject to Section 20(k),
thereupon promptly (i) (A) requisition from any transfer agent of the Preferred Stock a certificate or certificates for the number of Units to be
purchased and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests or (B) if the Company shall have
elected to deposit the total number of Units issuable upon exercise of the Rights hereunder with a depositary agent, requisition from the
depositary agent of a depositary receipt or depositary receipts representing such number of Units as are to be purchased (in which case
certificates for the Units represented by such receipt or receipts shall be deposited by the transfer agent with the depositary agent) and the
Company hereby directs the depositary agent to comply with such requests; (ii) when appropriate, requisition from the Company the amount of
cash to be paid in lieu of issuance of fractional shares in accordance with Section 14; (iii) after receipt of such certificates or depositary
receipts, cause the same to be delivered to or upon the order of the registered holder of such Rights Certificate, registered in such name or
names as may be designated by such holder; and (iv) when appropriate, after receipt thereof, deliver such cash to or upon the order of the
registered holder of such Rights Certificate. If the Company is obligated to issue other securities of the Company, pay cash and/or distribute
other property pursuant to Section 11(a), the Company will make all arrangements necessary so that such other securities, cash and/or other
property are available for distribution by the Rights Agent, if and when necessary to comply with the terms of this Agreement.


                                                                        10
         (d) If the registered holder of any Rights Certificate shall exercise less than all the Rights evidenced thereby, a new Rights
Certificate evidencing a number of Rights equivalent to the number of Rights remaining unexercised shall be issued by the Rights Agent to the
registered holder of such Rights Certificate or to such registered holder's duly authorized assigns, subject to Section 14.

          (e) Notwithstanding anything in this Agreement to the contrary, from and after the first occurrence of a Triggering Event, any Rights
beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring Person; (ii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate thereof) who becomes a transferee after the Acquiring Person becomes such; (iii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate thereof) who becomes a transferee prior to or concurrently with the Acquiring Person
becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to
holders of equity interests in such Acquiring Person or to any Person with whom the Acquiring Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer which the board of directors of the Company has determined is
part of a plan, arrangement or understanding which has as a primary purpose or effect the avoidance of this Section 7(e); or (iv) any subsequent
transferee shall not be exercisable without any further action and no holder of such Rights shall have any rights whatsoever with respect to such
Rights or any Rights Certificate which formerly evidenced such Rights, and neither the Company nor the Rights Agent shall have any
obligations whatsoever with respect to such Rights or any Rights Certificate, whether under any provision of this Agreement or otherwise. The
Company shall use commercially reasonable efforts to ensure that the provisions of Section 4(b) and this Section 7(e) are complied with, but
neither the Company nor the Rights Agent shall have no liability to any holder of Rights Certificates or to any other Person as a result of its
making or failing to make any determinations with respect to an Acquiring Person or any of such Acquiring Person's Affiliates, Associates or
transferees or taking or failing to take any actions with respect any Rights or Rights Certificates of any such Person.

         (f) Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder upon the occurrence of any purported exercise as set forth in this Section 7 unless such
registered holder shall have (i) properly completed and duly executed the certificate contained in the form of election to purchase set forth on
the reverse side of the Rights Certificate surrendered for such exercise and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company or the Rights Agent shall reasonably
request.


                                                                       11
                    Section 8. Cancellation and Destruction of Rights Certificates. All Rights Certificates surrendered for the purpose of exercise,
transfer, split up, combination or exchange shall, if surrendered to the Company or to any of its agents, be delivered to the Rights Agent for
cancellation or in cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights Certificates shall be issued in
lieu thereof except as expressly permitted by this Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement,
and the Rights Agent shall so cancel and retire, any other Rights Certificate purchased or acquired by the Company otherwise than upon the
exercise thereof. The Rights Agent shall deliver all cancelled Rights Certificates to the Company, or shall, at the written request of the
Company, destroy such cancelled Rights Certificates, and in such case shall deliver a certificate of destruction thereof to the Company.

                  Section 9. Reservation and Availability of Preferred Stock.

         (a) The Company covenants and agrees that it will use its best efforts to cause to be reserved and kept available out of, and to the
extent of, its authorized and unissued Preferred Stock not reserved for another purpose a number of shares that will be sufficient to permit the
exercise in full of all outstanding Rights. Upon the occurrence of any events resulting in an increase in the aggregate number of shares of
Preferred Stock (or other equity securities of the Company) issuable upon exercise of all outstanding Rights above the number then reserved,
the Company shall make appropriate increases in the number of shares so reserved.

         (b) If the Units to be issued and delivered upon the exercise of the Rights are at any time listed on a national securities exchange or
included for quotation on any transaction reporting system, the Company shall during the period from the Distribution Date to the Expiration
Date use its best efforts to cause all shares reserved for such issuance to be listed on such exchange or included for quotation on any such
transaction reporting system upon official notice of issuance upon such exercise.

          (c) The Company shall use its best efforts to (i) file, as soon as practicable following the earliest date after the first occurrence of a
Section 11(a)(ii) Event in which the consideration to be delivered by the Company upon exercise of the Rights has been determined in
accordance with Section 11(a)(iii), or as soon as is required by law following the Distribution Date, as the case may be, a registration statement
under the Securities Act, with respect to the securities purchasable upon exercise of the Rights on an appropriate form, (ii) cause such
registration statement to become effective as soon as reasonably practicable after such filing, and (iii) cause such registration statement to
remain effective (with a prospectus at all times meeting the requirements of the Securities Act) until the earlier of (A) the date as of which the
Rights are no longer exercisable for such securities and (B) the Expiration Date. The Company will also take such action as may be appropriate
under, or to ensure compliance with, the securities or "blue sky" laws of the various states in connection with the exercisability of the Rights.
Notwithstanding any provision of this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction, unless the requisite
qualification of the offering made upon exercise of the Rights in such jurisdiction shall have been obtained, or an exemption therefrom shall be
available and until a registration statement has been declared effective.


                                                                        12
          (d) The Company covenants and agrees that it will take all such action as may be necessary to ensure that all Units (and, following
the occurrence of a Triggering Event, any other securities that may be delivered upon exercise of Rights) shall, at the time of delivery of the
certificates for such Units or other securities subject to payment of the Purchase Price, be duly and validly authorized and issued and fully paid
and non-assessable.

         (e) The Company further covenants and agrees that it will pay when due and payable any and all governmental transfer taxes and
charges which may be payable in respect of the issuance or delivery of the Rights Certificates or of any Units (and, following the occurrence of
a Triggering Event, any other securities that may be delivered upon exercise of Rights) upon the exercise of Rights. The Company shall not,
however, be required to pay any transfer tax or charge which may be payable in respect of any transfer or delivery of Rights Certificates to a
Person other than, or the issuance or delivery of certificates or depositary receipts for Units in a name other than that of, the registered holder of
the Rights Certificate evidencing Rights surrendered for exercise or to issue or to deliver any certificates or depositary receipts for Units (or
other securities that may be delivered upon the exercise of any Rights) until any such tax shall have been paid (any such tax or charge being
payable by the holder of such Rights Certificate at the time of surrender) or until it has been established to the Company's or the Rights Agent's
reasonable satisfaction that no such tax or charge is due.

                    Section 10. Preferred Stock Record Date. Each Person in whose name any certificate for Units (or, following the occurrence
of a Triggering Event, other securities that may be delivered upon exercise of Rights) is issued upon the exercise of Rights shall for all
purposes be deemed to have become the holder of record of the Units (or, following the occurrence of a Triggering Event other securities that
may be delivered upon the exercise of the Rights) represented thereby on, and such certificate shall be dated, at the Close of Business on the
date upon which the Rights Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and any applicable
transfer taxes or charges) was made; provided, however, that if the date of such surrender and payment is a date upon which the Preferred Stock
(or, following the occurrence of a Triggering Event, other securities that may be delivered upon the exercise of the Rights) transfer books of the
Company are closed, such person shall be deemed to have become the record holder of such shares at the Close of Business on, and such
certificate shall be dated, the next succeeding Business Day on which such transfer books are open; provided further, however, that if delivery
of Units (or following the occurrence of a Triggering Event, other securities that may be delivered upon the exercise of the Rights) is delayed
pursuant to Section 9(c), such Persons shall be deemed to have become the record holders of such Units (or following the occurrence of a
Triggering Event, other securities that may be delivered upon the exercise of the Rights) only when such Units first become deliverable. Prior
to the exercise of the Rights evidenced thereby, the holder of a Rights Certificate shall not be entitled to any rights of a stockholder of the
Company with respect to securities for which the Rights shall be exercisable, including, without limitation, the right to vote, to receive
dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the
Company, except as expressly provided in this Agreement.

                  Section 11. Adjustment of Purchase Price, Number of Shares or Number of Rights. The Purchase Price, the number and kinds
of securities covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this
Section 11.


                                                                         13
         (a) (i) In the event the Company shall at any time after the date of this Agreement (A) declare a dividend on the Preferred
Stock payable in shares of Preferred Stock, (B) subdivide the outstanding shares of Preferred Stock, (C) combine the outstanding
Preferred Stock into a smaller number of shares Preferred Stock, or (D) issue any shares of its capital stock in a reclassification of the
Preferred Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the
continuing or surviving corporation), except as otherwise provided in this Section 11(a), the Purchase Price in effect at the time of the
record date for such dividend or of the effective date of such subdivision, combination or reclassification, and the number and kind of
shares of capital stock for which the Rights shall be exercisable, shall be proportionately adjusted so that the holder of any Rights
exercised after such time shall be entitled to receive, upon payment of the Purchase Price then in effect, the aggregate number and
kind of shares of capital stock which, if such Rights had been exercised immediately prior to such date and at a time when the
applicable transfer books were open, such holder would have owned upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification; provided, however, that in no event shall the consideration to be paid upon the
exercise of one Right be less than the aggregate par value of the shares of capital stock issuable upon exercise of one Right. If an event
occurs which would require an adjustment under both this Section 11(a)(i) and Section 11(a)(ii), the adjustment provided for in this
Section 11(a)(i) shall be in addition, and shall be made prior, to any adjustment required pursuant to Section 11(a)(ii).

         (i)   Subject to Section 24, if:

                  (A) any Person shall become an Acquiring Person, unless the event causing the Person to become an Acquiring
         Person is a transaction to which the provisions of Section 13(a) apply;


                                                               14
          (B) any Acquiring Person or any Associate or Affiliate of any Acquiring Person, at any time after the date of this
Agreement, directly or indirectly, shall (1) merge into the Company or otherwise combine with the Company and the
Company shall be the continuing or surviving corporation of such merger or combination and shares of Common Stock of the
Company shall remain outstanding and unchanged; (2) in one transaction or a series of transactions, transfer any assets to the
Company or any of its Subsidiaries in exchange (in whole or in part) for shares of Common Stock of the Company, for other
equity securities of the Company or any of its Subsidiaries, or for securities exercisable for or convertible into shares of
equity securities of the Company or any of its Subsidiaries (whether shares of Common Stock of the Company or otherwise)
or otherwise obtain from the Company or any of its Subsidiaries, with or without consideration, any additional shares of such
equity securities or securities exercisable for or convertible into such equity securities (other than pursuant to a pro rata
distribution to all holders of shares of Common Stock of the Company); (3) sell, purchase, lease, exchange, mortgage, pledge,
transfer or otherwise acquire or dispose of, in one transaction or a series of transactions, to, from or with the Company or any
of its Subsidiaries or any employee benefit plan maintained by the Company or any of its Subsidiaries or any trustee or
fiduciary with respect to such plan acting in such capacity, assets (including securities) on terms and conditions less favorable
to the Company or such Subsidiary, plan, trustee or fiduciary than those that could have been obtained in arm's-length
negotiations with an unaffiliated third party, other than pursuant to a transaction set forth in Section 13(a); (4) sell, purchase,
lease, exchange, mortgage, pledge, transfer or otherwise acquire or dispose of, in one transaction or a series of transactions,
to, from or with the Company or any of its Subsidiaries or any employee benefit plan maintained by the Company or any of
its Subsidiaries or any trustee or fiduciary with respect to such plan acting in such capacity (other than transactions, if any,
consistent with those engaged in, as of the date hereof, by the Company and such Acquiring Person or such Associate or
Affiliate thereof), assets (including securities or intangible assets) having an aggregate fair market value of more than
$5,000,000, other than pursuant to a transaction set forth in Section 13(a); (5) receive, or any designee, agent or
representative of such Acquiring Person or any Affiliate or Associate of such Acquiring Person shall receive, any
compensation from the Company or any of its Subsidiaries other than compensation for full-time employment as a regular
employee at rates in accordance with the Company's (or its Subsidiaries') past practices; or (6) receive the benefit, directly or
indirectly (except proportionately as a holder of shares of Common Stock of the Company or as required by law or
governmental regulation), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other
tax advantages provided by the Company or any of its Subsidiaries or any employee benefit plan maintained by the Company
or any of its Subsidiaries or any trustee or fiduciary with respect to such plan acting in such capacity; or

          (C) during such time as there is an Acquiring Person, there shall be any reclassification of securities (including any
reverse stock split), or recapitalization of the Company, or any merger or consolidation of the Company with any of its
Subsidiaries or any other transaction or series of transactions involving the Company or any of its Subsidiaries, other than a
transaction or transactions to which the provisions of Section 13(a) apply (whether or not with or into or otherwise involving
an Acquiring Person), which has the effect, directly or indirectly, of increasing by more than one percent the proportionate
share of the outstanding shares of any class of equity securities of the Company or any of its Subsidiaries that is directly or
indirectly beneficially owned by any Acquiring Person or any Person or any Associate or Affiliate of any Acquiring Person;


                                                      15
          then promptly following the occurrence of an event described in Section 11(a)(ii)(A), (B) or (C) (each being a "Section
11(a)(ii) Event"), proper provision shall be made so that each holder of a Right, except as otherwise provided in Section 7(e), shall
thereafter have the right to receive for each Right, upon exercise thereof in accordance with the terms of this Agreement and payment
of the then-current Purchase Price, in lieu of the number of Units for which a Right was exercisable immediately prior to the first
occurrence of a Section 11(a)(ii) Event, such number of Units as shall equal the result obtained by multiplying the then-current
Purchase Price by the then number of Units for which a Right was exercisable (or would have been exercisable if the Distribution Date
had occurred) immediately prior to the first occurrence of a Triggering Event, and dividing that product by 50% of the Current Per
Share Market Price for shares of Common Stock on the date of occurrence of the most recent Triggering Event (such number of Units
being hereinafter referred to as the "Adjustment Shares"). Upon the occurrence of a Section 13 Event, any Rights that shall not have
been previously exercised pursuant to this Section 11(a)(ii) shall thereafter be exercisable only pursuant to Section 13 and not pursuant
to this Section 11(a)(ii). The Company shall notify the Rights Agent when this Section 11(a)(ii) applies and shall use all commercially
reasonable efforts to ensure that the provisions of this Section 11(a)(ii) are complied with, but neither the Company nor the Rights
Agent shall have any liability to any holder of Rights Certificates or other Person as a result of the Company's failure to make any
determinations with respect to any Acquiring Person or its Affiliates, Associates or transferees hereunder.

          (ii) In the event that the number of shares of Preferred Stock which are authorized by the Company's certificate of
incorporation but not outstanding or reserved for issuance for purposes other than upon exercise of the Rights are not sufficient to
permit the exercise in full of the Rights, or if any necessary regulatory approval for such issuance has not been obtained by the
Company, the Company shall, in lieu of issuing Units in accordance with Section 11(a)(ii) hereof: (A) determine the excess of (1) the
value of the Units issuable upon the exercise of a Right (the "Current Value") over (2) the Purchase Price (such excess being referred
to as the "Spread") and (B) with respect to each Right, make adequate provision to substitute for such Units, upon exercise of the
Rights, (1) cash, (2) a reduction in the Purchase Price, (3) other equity securities of the Company (including, without limitation,
Common Stock of the Company or shares or units of shares of any series of preferred stock which the board of directors of the
Company shall have conclusively deemed to have the same value as the Units (such shares or units of preferred stock are herein called
"Preferred Stock Equivalents")), except to the extent that the Company has not obtained any necessary regulatory approval for such
issuance, (4) debt securities of the Company, except to the extent that the Company has not obtained any necessary regulatory
approval for such issuance, (5) other assets, or (6) any combination of the foregoing, having an aggregate value equal to the Current
Value, as determined by the board of directors of the Company based upon the advice of a nationally recognized investment banking
firm selected by the board of directors of the Company (which determination shall be described in a statement filed with the Rights
Agent and shall be conclusive and binding on the Rights Agent, the holders of the Rights and all other persons); provided, however, if
the Company shall not have made adequate provision to deliver value pursuant to clause (B) above within thirty days following the
later of (x) occurrence of a Section 11(a)(ii) Event, and (y) the date on which the Company's right of redemption pursuant to Section
23(a) expires (the later of (x) and (y) being referred to herein as the "Section 11(a)(iii) Trigger Date"), then the Company shall be
obligated to deliver, upon the surrender for exercise of a Right and without requiring payment of the Purchase Price, Units (to the
extent available), except to the extent that the Company has not obtained any necessary regulatory approval for such issuance, and
then, if necessary, cash, having an aggregate value equal to the Spread.


                                                              16
          (b) If the Company shall fix a record date for the issuance of rights, options or warrants to all holders of Preferred Stock
entitling them (for a period expiring within forty five calendar days after such record date) to subscribe for or purchase Preferred
Stock (or shares having the same rights, privileges and preferences as the Preferred Stock ("Equivalent Preferred Stock")) or securities
convertible into Preferred Stock or Equivalent Preferred Stock at a price per Unit or Equivalent Preferred Stock (or having a
conversion price per Unit, if a security convertible into Units or Equivalent Preferred Stock) less than the then Current Per Share
Market Price (as determined pursuant to Section 11(d)) of a Unit on such record date, the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the sum of the number of Units outstanding on such record date plus the number of Units which the
aggregate offering price of the total number of Units and/or Equivalent Preferred Stock so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase at such Current Per Share Market Price and the
denominator of which shall be the sum of the number of Units outstanding on such record date plus the number of additional Units
and/or Equivalent Preferred Stock to be offered for subscription or purchase (or into which the convertible securities so to be offered
are initially convertible). If such subscription price may be paid in a consideration part or all of which shall be in a form other than
cash, the value of such consideration shall be as determined in good faith by the board of directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and shall be conclusive and binding on the Rights Agent
and the holders of the Rights. Units owned by or held for the account of the Company shall not be deemed outstanding for the purpose
of any such computation. Such adjustment shall be made successively whenever such a record date is fixed; and if such rights, options
or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record
date had not been fixed.

          (c) If the Company shall fix a record date for a distribution to all holders of Units (including any such distribution made in
connection with a consolidation or merger in which the Company is the continuing or surviving corporation) of evidences of
indebtedness, cash (other than a regular quarterly cash dividend), assets (other than a dividend payable in Units or Equivalent
Preferred Stock but including any dividend payable in equity securities other than Preferred Stock or Equivalent Preferred Stock) or
subscription rights or warrants (excluding those referred to in Section 11(d)), the Purchase Price to be in effect after such record date
shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of
which shall be the then Current Per Share Market Price (as determined pursuant to Section 11(d)) of the Preferred Stock on such
record date, less the fair market value (as determined in good faith by the board of directors of the Company, whose determination
shall be described in a statement filed with the Rights Agent and shall be conclusive and binding on the Rights Agent and the holders
of the Rights) of the cash, assets or evidences of indebtedness to be distributed or of such subscription rights or warrants distributable
in respect of a share of Preferred Stock, and the denominator of which shall be such Current Per Share Market Price of a share of
Preferred Stock. Such adjustments shall be made successively whenever such a record date is fixed; and in the event that such
distribution is not so made, the Purchase Price shall again be adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.


                                                               17
          (d) (i) For the purpose of any computation hereunder, the "Current Per Share Market Price" of any security on any date shall
be deemed to be the average of the daily closing prices per share of such security for the thirty consecutive Trading Days (as such term
is hereinafter defined) ending on and including the Trading Day immediately prior to such date; provided, however, that in the event
that the Current Per Share Market Price of the security is determined during a period following the announcement by the issuer of such
security of (A) a dividend or distribution on such security payable in shares of such security or securities convertible into such
security, or (B) any subdivision, combination or reclassification of such security and prior to the expiration of thirty Trading Days
after and not including the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the Current Per Share Market Price shall be appropriately adjusted to reflect the current
market price per share equivalent of such security. The closing price for each day shall be the last sale price, regular way, or, in case
no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the Nasdaq Stock Market
("Nasdaq") or, if the security is not listed or admitted to trading on the Nasdaq, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national securities exchange on which the security is listed or
admitted to trading or, if the security is not listed or admitted to trading on any national securities exchange, the last quoted price or, if
not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the Nasdaq or such other
system then in use, or, if on any such date the security is not quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the security selected by the board of directors of the Company.
If on any such date no market maker is making a market in the security, the Current Per Share Market Price of such security on such
date shall mean the fair value per share or other trading unit as determined in good faith by the board of directors of the Company as
provided for above (which determination shall be described in a statement filed with the Rights Agent and shall be conclusive and
binding on the Rights Agent, the holders of the Rights and all other Persons). The term "Trading Day" shall mean a day on which the
principal national securities exchange on which the security is listed or admitted to trading is open for the transaction of business or, if
the security is not listed or admitted to trading on any national securities exchange, a Business Day.

          (ii) For the purpose of any computation hereunder, the Current Per Share Market Price of the Preferred Stock shall be
determined in accordance with the method set forth in Section 11(d)(i). If the Current Per Share Market Price of the Preferred Stock
cannot be determined in the manner provided above or if the Preferred Stock is not publicly held or listed or traded in a manner
described in Section 11(d)(i), the Current Per Share Market Price of the Preferred Stock shall be conclusively deemed to be an amount
equal to the product of $1,000 (as such amount may be appropriately adjusted for such events as stock splits, stock dividends and
recapitalizations with respect to shares of Common Stock of the Company occurring after the date of this Agreement) multiplied by
the Current Per Share Market Price of Common Stock of the Company. If no shares of the Common Stock of the Company or the
Preferred Stock are publicly held or so listed or traded, "Current Per Share Market Price" of the Preferred Stock shall mean the fair
value per share as determined in good faith by the board of directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent and shall be conclusive and binding on the Rights Agent and the holders of the Rights for all
purposes. For all purposes of this Agreement, the Current Per Share Market Price of a Unit shall be equal to the Current Per Share
Market Price of one share of Preferred Stock divided by 1,000.


                                                                18
          (e) No adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least
one percent in the Purchase Price; provided, however, that any adjustments which by reason of this Section 11(e) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the
nearest cent or to the nearest one-hundred-thousandth (1/100,000) of a share of Preferred Stock or one-hundredth (1/100) of any other share or
security as the case may be. Notwithstanding the first sentence of this Section 11(e), any adjustment required by this Section 11 shall be made
no later than the earlier of (i) three years from the date of the transaction which requires such adjustment or (ii) the Expiration Date.

          (f) If as a result of an adjustment made pursuant to Section 11(a)(ii), the holder of any Rights thereafter exercised shall become
entitled to receive any shares of capital stock of the Company other than Units, thereafter the number of such other shares so receivable upon
exercise of any Rights and the Purchase Price thereof shall be subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Preferred Stock contained in Sections 11(a), (b), (c), (d), (e), (g), (h), (i), (j), (k),
(l) and (m), and the provisions of Sections 7, 9, 10, 13 and 14 with respect to the Preferred Stock shall apply on like terms to any such other
shares.

        (g) All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price shall evidence the right to
purchase, at the adjusted Purchase Price, the number of Units purchasable from time to time upon exercise of the Rights, all subject to further
adjustment as provided in this Agreement.

          (h) Unless the Company shall have exercised its election under Section 11(i), upon each adjustment of the Purchase Price as a result
of the calculations made in Sections 11(b) and (c), each Right outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of Units (calculated to the nearest one-millionth of a share of
Preferred Stock) obtained by dividing


                                                                            19
         (i) the product obtained by multiplying (x) the number of Units covered by a Right immediately prior to this adjustment by (y) the
Purchase Price in effect immediately prior to such adjustment of the Purchase Price, by (ii) the Purchase Price in effect immediately after such
adjustment of the Purchase Price. (i) The Company may elect on or after the date of any adjustment of the Purchase Price to adjust the number
of Rights, in substitution for any adjustment in the number of Units purchasable upon the exercise of a Right. Each of the Rights outstanding
after such adjustment of the number of Rights shall be exercisable for the number of Units for which a Right was exercisable immediately prior
to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated
to the nearest one-thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase Price. The Company shall make a public announcement of its election to
adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made.
The Company shall give the Rights Agent a copy of such announcement. This record date may be the date on which the Purchase Price is
adjusted or any day thereafter, but, if the Rights Certificates have been issued, shall be at least ten days later than the date of the public
announcement. If Rights Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the
Company shall, as promptly as practicable, cause to be distributed to holders of record of Rights Certificates on such record date Rights
Certificates evidencing, subject to Section 14, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at
the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Rights Certificates
held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders shall be entitled after such adjustment. Rights Certificates to be so distributed shall be issued,
executed and countersigned in the manner provided for herein and shall be registered in the names of the holders of record of Rights
Certificates on the record date specified in the public announcement.

         (j) Irrespective of any adjustment or change in the Purchase Price or the number of Units issuable upon the exercise of the Rights,
the Rights Certificates theretofore and thereafter issued may continue to express the Purchase Price per Unit and the number of Units which
were expressed in the initial Rights Certificates issued hereunder.

          (k) Before taking any action that would cause an adjustment reducing the Purchase Price below the then par value of the number of
Units issuable upon exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary
in order that the Company may validly and legally issue fully paid and nonassessable number of Units at such adjusted Purchase Price.

          (l) In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date
for a specified event, the Company may elect to defer, until the occurrence of such event, the issuing to the holder of any Rights exercised after
such record date of that number of Units and other capital stock or securities of the Company, if any, issuable upon such exercise over and
above the Units and other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in
effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument
evidencing such holder's right to receive such additional shares (fractional or otherwise) upon the occurrence of the event requiring such
adjustment. The Company shall give the Rights Agent notice of its election under this Section 11(e).

          (m) Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that it in its sole discretion shall
determine to be advisable in order that any (i) consolidation or subdivision of the Preferred Stock, (ii) issuance wholly for cash of any Unit at
less than the Current Per Share Market Price, (iii) issuance wholly for cash of Preferred Stock or securities which by their terms are convertible
into or exchangeable for Preferred Stock, (iv) dividends on Preferred Stock payable in Preferred Stock, or (v) issuance of rights, options or
warrants referred to in this Section 11, hereafter made by the Company to holders of Units of its Preferred Stock shall not be taxable to such
stockholders.


                                                                        20
          (n) The Company shall not, at any time after the Distribution Date, (i) consolidate with any other Person (other than a Subsidiary of
the Company in a transaction which complies with Section 11(o)), (ii) merge with or into any other Person (other than a Subsidiary of the
Company in a transaction which complies with Section 11(o)), or (iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of transactions, assets or earning power aggregating more than 50% of the assets or earning power of the Company and
its Subsidiaries (taken as a whole) to any other Person or Persons (other than the Company and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o)), if (x) at the time of or immediately after such consolidation, merger or sale there are
any rights, warrants or other instruments or securities outstanding or agreements in effect which would substantially diminish or otherwise
eliminate the benefits intended to be afforded by the Rights or (y) prior to, simultaneously with or immediately after such consolidation, merger
or sale, the Person which constitutes, or would constitute, the Principal Party (as defined in Section 13(b)) shall have distributed or otherwise
transferred to its stockholders or other persons holding an equity interest in such Person, Rights previously owned by such Person or any of its
Affiliates and Associates; provided, however, this Section 11(n) shall not affect the ability of any Subsidiary of the Company to consolidate
with, merge with or into, or sell or transfer assets or earning power to, any other Subsidiary of the Company.

         (o) After the Distribution Date, the Company shall not, except as permitted by Section 23 or Section 27, take (or permit any of its
Subsidiaries to take) any action if at the time such action is taken it is reasonably foreseeable that such action will diminish substantially or
otherwise eliminate the benefits intended to be afforded by the Rights.

         (p) If, at any time after the date of this Agreement and prior to the Distribution Date, the Company shall (i) declare or pay any
dividend on outstanding shares of Common Stock of the Company payable in shares of Common Stock of the Company or (ii) effect a
subdivision, combination or consolidation of the Common Stock of the Company (by reclassification or otherwise than by payment of
dividends in shares of Common Stock of the Company) into a greater or lesser number of shares of Common Stock of the Company, then in
any such case the number of Units purchasable after such event upon proper exercise of each Right shall be determined by multiplying the
number of Units so purchasable immediately prior to such event by a fraction, the numerator of which shall be the number of shares of
Common Stock of the Company outstanding immediately before such event and the denominator of which shall be the number of shares of
Common Stock of the Company outstanding immediately after such event. The adjustments provided for in this Section 11(p) shall be made
successively whenever such a dividend is declared or paid or such a subdivision, combination or consolidation is effected.


                                                                         21
                   Section 12. Certificate of Adjusted Purchase Price or Number of Shares. Whenever an adjustment is made as provided in
Section 11 or 13, the Company shall promptly (a) prepare a certificate setting forth such adjustment, and a brief statement of the computations
and facts accounting for such adjustment, (b) file with the Rights Agent and with each transfer agent for the shares of Common Stock of the
Company or Units a copy of such certificate and (c) mail a brief summary thereof to each holder of a Rights Certificate in accordance with
Section 25 hereof. Notwithstanding the foregoing sentence, the failure by the Company to make such certification or give such notice shall not
affect the validity of or the force or effect of the requirement for such adjustment. The Rights Agent shall be fully protected in relying on any
such certificate and on any adjustment or statement contained therein and shall have no duty or liability with respect to, shall not be deemed to
have knowledge of, and adjustment or any such event unless and until it shall have received such certificate.

                  Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power.

           (a) In the event that, following a Share Acquisition Date, directly or indirectly, (x) the Company shall consolidate with, or merge
with and into, any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o)), and the Company
shall not be the continuing or surviving corporation of such consolidation or merger, (y) any Person (other than a Subsidiary of the Company in
a transaction which complies with Section 11(o)) shall consolidate with the Company, or merge with and into the Company and the Company
shall be the continuing or surviving corporation of such consolidation or merger and, in connection with such consolidation or merger, all or
part of the shares of Common Stock of the Company shall be changed into or exchanged for stock or other securities of any other Person or
cash or any other property, or (z) the Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise
transfer) to any Person or Persons (other than a Subsidiary of the Company in a transaction which complies with Section 11(o)), in one or more
transactions, directly or indirectly, assets or earning power aggregating 50% or more of the assets or earning power of the Company and its
Subsidiaries (taken as a whole), (any such event being a "Section 13 Event"), then, and in each such case, proper provision shall be made so
that: (i) each holder of a Right, except as provided in Section 7(e), shall thereafter have the right to receive, upon the exercise thereof at the
then current Purchase Price, such number of validly authorized and issued, fully paid and non-assessable shares of Common Stock of the
Principal Party, which shares shall not be subject to any liens, encumbrances, rights of first refusal, transfer restrictions or other adverse claims,
as shall be equal to the product obtained by (1) multiplying the then current Purchase Price by the number of Units for which a Right is
exercisable immediately prior to the first occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event has occurred prior to the first
occurrence of a Section 13 Event, multiplying the number of such Units for which a Right would be exercisable hereunder but for the
occurrence of such Section 11(a)(ii) Event by the Purchase Price which would be in effect hereunder but for such first occurrence), and (2)
dividing that product (which, following the first occurrence of a Section 13 Event, shall be the "Purchase Price" for all purposes of this
Agreement) by 50% of the Current Per Share Market Price of the shares of Common Stock of such Principal Party on the date of
consummation of such Section 13 Event; (ii) such Principal Party shall thereafter be liable for, and shall assume, by virtue of such Section 13
Event, all the obligations and duties of the Company pursuant to this Agreement; (iii) the term "Company" shall, for all purposes of this
Agreement, thereafter be deemed to refer to such Principal Party, it being specifically intended that the provisions of Section 11 shall apply
only to such Principal Party following the first occurrence of a Section 13 Event; (iv) such Principal Party shall take such steps (including, but
not limited to, the reservation of a sufficient number of shares of its Common Stock) in connection with the consummation of any such
transaction as may be necessary to ensure that the provisions of this Agreement shall thereafter be applicable to its shares of Common Stock
thereafter deliverable upon the exercise of the Rights; and (v) the provisions of Section 11(a)(ii) shall be of no further effect following the first
occurrence of any Section 13 Event.


                                                                         22
(b) "Principal Party" shall mean:

          (i) in the case of any transaction described in clause (x) or (y) of the first sentence of Section 13(a), (A) the Person
that is the issuer of any securities into which shares of Common Stock of the Company are converted in such merger or
consolidation, or, if there is more than one such issuer, the issuer whose outstanding shares of Common Stock have the
greatest aggregate Current Per Share Market Price and (B) if no securities are so issued, the Person that is the other party to
such merger or consolidation, or, if there is more than one such Person, the Person whose outstanding shares of Common
Stock have the greatest aggregate Current Per Share Market Price; and

          (ii) in the case of any transaction described in clause (z) of the first sentence of Section 13(a), the Person that is the
party receiving the largest portion of the assets or earning power transferred pursuant to such transaction or transactions, or, if
each Person that is a party to such transaction or transactions receives the same portion of the assets or earning power
transferred pursuant to such transaction or transactions or if the Person receiving the largest portion of the assets or earning
power cannot be determined, whichever Person whose outstanding shares of Common Stock have the greatest aggregate
Current Per Share Market Price; provided, however, that in any such case, (1) if the Common Stock of such Person is not at
such time and has not been continuously over the preceding twelve-month period registered under Section 12 of the
Exchange Act ("Registered Common Stock"), or such Person is not a corporation, and such Person is a direct or indirect
Subsidiary of another Person that has Registered Common Stock outstanding, "Principal Party" shall refer to such other
Person; (2) if the Common Stock of such Person is not Registered Common Stock or such Person is not a corporation, and
such Person is a direct or indirect Subsidiary of another Person but is not a direct or indirect Subsidiary of another Person
which has Registered Common Stock outstanding, "Principal Party" shall refer to the ultimate parent entity of such
first-mentioned Person; (3) if the Common Stock of such Person is not Registered Common Stock or such Person is not a
corporation, and such Person is directly or indirectly controlled by more than one Person, and one or more of such other
Persons has Registered Common Stock outstanding, "Principal Party" shall refer to whichever of such other Persons is the
issuer of the Registered Common Stock having the highest aggregate Current Per Share Market Price; and (4) if the Common
Stock of such Person is not Registered Common Stock or such Person is not a corporation, and such Person is directly or
indirectly controlled by more than one Person, and none of such other Persons has Registered Common Stock outstanding,
"Principal Party" shall refer to whichever ultimate parent entity is the corporation having the greatest stockholders' equity or,
if no such ultimate parent entity is a corporation, shall refer to whichever ultimate parent entity is the entity having the
greatest net assets.


                                                       23
         (c) The Company shall not consummate any such consolidation, merger, sale or transfer unless the Principal Party shall have a
sufficient number of authorized shares of its Common Stock which have not been issued or reserved for issuance to permit the exercise in full
of the Rights in accordance with this Section 13, and unless prior thereto the Company and such Principal Party shall have executed and
delivered to the Rights Agent a supplemental agreement providing for the terms set forth in paragraphs (a) and (b) of this Section 13 and further
providing that the Principal Party will:

                  (i) (A) file on an appropriate form, as soon as practicable following the execution of such agreement, a registration statement
         under the Securities Act with respect to the shares of Common Stock of such Principal Party that may be acquired upon exercise of the
         Rights, (B) cause such registration statement to remain effective (and to include a prospectus complying with the requirements of the
         Securities Act) until the Expiration Date, and (C) as soon as practicable following the execution of such agreement take such action as
         may be required to ensure that any acquisition of such shares of Common Stock of such Principal Party upon the exercise of the
         Rights complies with any applicable state securities or "blue sky" laws; and

                 (ii) deliver to holders of the Rights historical financial statements for the Principal Party and each of its Affiliates which
         comply in all respects with the requirements for registration on Form 10 (or any successor form) under the Exchange Act.

          (d) In case the Principal Party which is to be a party to a transaction referred to in this Section 13 has a provision in any of its
authorized securities or in its certificate of incorporation, bylaws or other instrument governing its corporate affairs, which provision would
have the effect of (i) causing such Principal Party to issue, in connection with, or as a consequence of, the consummation of a transaction
referred to in this Section 13, shares of Common Stock of such Principal Party at less than in the Current Per Share Market Price or securities
exercisable for, or convertible into, shares of Common Stock of such Principal Party at less than in the Current Per Share Market Price (other
than to holders of Rights pursuant to this Section 13) or (ii) providing for any special payment, tax or similar provisions in connection with the
issuance of the shares of Common Stock of such Principal Party pursuant to the provisions of this Section 13, then, in such event, the Company
shall not consummate any such transaction unless prior thereto the Company and such Principal Party shall have executed and delivered to the
Rights Agent a supplemental agreement providing that the provision in question of such Principal Party shall have been cancelled, waived or
amended, or that the authorized securities shall be redeemed, so that the applicable provision will have no effect in connection with, or as a
consequence of, the consummation of the proposed transaction.

         (e) The provisions of this Section 13 shall similarly apply to successive mergers or consolidations or sales or other transfers. In the
event that a Section 13 Event shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the Rights that have not theretofore been
exercised shall thereafter be exercisable in any manner provided in Section 13(a).


                                                                         24
                  Section 14. Fractional Rights and Fractional Shares.

         (a) The Company shall not be required to issue fractions of Rights or to distribute Rights Certificates which evidence fractional
Rights. In lieu of such fractional Rights, there shall be paid to the registered holders of the Rights Certificates with regard to which such
fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the Current Per Share Market Price of a whole
Right. For purposes of this Section 14(a), the Current Per Share Market Price of a whole Right shall be the closing price per share of a whole
Right on the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable.

         (b) The Company shall not be required to issue fractions of Preferred Stock (other than fractions which are integral multiples of one
one-thousandth of a share of Preferred Stock) upon exercise of the Rights or to distribute certificates which evidence fractional Preferred Stock
(other than fractions which are integral multiples of one one-thousandth of a share of Preferred Stock). Fractions of Preferred Stock in integral
multiples of one one-thousandth of a share of Preferred Stock may, at the election of the Company, be evidenced by depositary receipts,
pursuant to an appropriate agreement between the Company and a depositary selected by it; provided, however, that such agreement shall
provide that the holders of such depositary receipts shall have all the rights, privileges and preferences to which they are entitled as beneficial
owners of the Preferred Stock represented by such depositary receipts. In lieu of fractional shares of Preferred Stock that are not integral
multiples of one one-thousandth of a share of Preferred Stock, the Company shall pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same fraction of the Current Per Share Market Price of one share of
Preferred Stock.

         (c) The holder of a Right by the acceptance of the Right expressly waives such holder's right to receive any fractional Rights or any
fractional shares upon exercise of a Right (except as provided above).

         (d) Whenever a payment for fractional Rights or fractional shares is to be made by the Rights Agent, the Company shall (i) promptly
prepare and deliver to the Rights Agent a certificate setting forth in reasonable detail the facts related to such payment and the prices and/or
formulas utilized in calculating such payments, and (ii) provide sufficient monies to the Rights Agent in the form of fully collected funds to
make such payments. The Rights Agent shall be fully protected in relying upon such a certificate and shall have no duty to respect to, and shall
not be deemed to have knowledge of any payment for fractional Rights or fractional shares under any section of this Agreement relating to the
payment of fractional Rights or fractional shares unless and until the Rights Agent shall have received such a certificate and sufficient monies.

                    Section 15. Rights of Action. All rights of action in respect of this Agreement, excepting the rights of action given to the
Rights Agent under Section 18, are vested in the respective registered holders of the Rights Certificates (and, prior to the Distribution Date, the
registered holders of certificates representing shares of Common Stock of the Company); and any registered holder of any Rights Certificate
(or, prior to the Distribution Date, a certificate representing shares of Common Stock of the Company), without the consent of the Rights Agent
or of the holder of any other Rights Certificate (or, prior to the Distribution Date, of a certificate representing shares of Common Stock of the
Company), may, in such holder's own behalf and for such holder's own benefit, enforce, and may institute and maintain any suit, action or
proceeding against the Company to enforce, or otherwise act in respect of, such holder's right to exercise the Rights evidenced by such Rights
Certificate or, prior to the Distribution Date, in the manner provided in such Rights Certificate and in this Agreement. Without limiting the
foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an
adequate remedy at law for any breach of this Agreement and will be entitled to specific performance of the obligations hereunder, and
injunctive relief against actual or threatened violations of the obligations of any Person subject to this Agreement.


                                                                         25
                Section 16. Agreement of Rights Holders. Every holder of a Right, by accepting the same, consents and agrees with the
Company and the Rights Agent and with every other holder of a Right that:

       (a) prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of shares of Common Stock of
the Company;

          (b) after the Distribution Date, the Rights Certificates are transferable only on the registry books of the Rights Agent if surrendered
at the office of the Rights Agent designated for such purpose, duly endorsed or accompanied by a proper instrument of transfer with all
required certificates completed;

          (c) subject to Sections 6(a) and 7(f), the Company and the Rights Agent may deem and treat the Person in whose name the Rights
Certificate (or, prior to the Distribution Date, the associated Common Stock certificate) is registered as the absolute owner thereof and of the
Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Rights Certificates or the associated Common Stock
certificate made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights
Agent shall be affected by any notice to the contrary;

         (d) such holder expressly waives any right to receive any fractional Rights and any fractional securities upon exercise or exchange of
a Right, except as otherwise provided in Section 14; and

         (e) notwithstanding anything in this Agreement to the contrary, neither the Company nor the Rights Agent shall have any liability to
any holder of a Right or other Person as a result of its inability to perform any of its obligations under this Agreement by reason of any
preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or by a governmental,
regulatory or administrative agency or commission, or any statute, rule, regulation or executive order promulgated or enacted by any
governmental authority, prohibiting or otherwise restraining performance of such obligation; provided, however, the Company shall use
commercially reasonable efforts to have any such order, decree or ruling lifted or otherwise overturned as soon as practicable.


                                                                        26
                    Section 17. Rights Certificate Holder Not Deemed a Stockholder. No holder, as such, of any Rights Certificate shall be
entitled to vote, receive dividends or be deemed for any purpose the holder of the Units or any other securities of the Company which may at
any time be issuable upon the exercise of the Rights represented thereby, nor shall anything contained in this Agreement or in any Rights
Certificate be construed to confer upon the holder of any Rights Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to
any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in Section 25), or to receive
dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Rights Certificate shall have been exercised in
accordance with this Agreement.

                    Section 18. Concerning the Rights Agent. The Company agrees to pay to the Rights Agent reasonable compensation for all
services rendered by it under this Agreement and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees
and other disbursements incurred in the preparation, negotiation, execution, delivery, amendment and administration of this Agreement and the
exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against,
any loss, damage, judgment, fine, penalty, claim, demand, settlement, cost, liability or expense (including, without limitation, the reasonable
fees and disbursements of counsel), incurred without gross negligence or willful misconduct on the part of the Rights Agent, for any action
taken, suffered or omitted by the Rights Agent in connection with the execution, acceptance and administration of this Agreement and the
exercise and performance of its duties, including, without limitation, the costs and expenses of defending against and appealing any claim of
liability arising therefrom, directly or indirectly. This indemnity shall survive the termination of this Agreement and the expiration of the
Rights. The costs and expenses incurred in enforcing this right of indemnification shall be paid by the Company.

                    In the absence of gross negligence or willful misconduct, the Rights Agent is authorized and shall be protected and shall
incur no liability for, or in respect of any action taken, suffered or omitted by it in connection with, its administration of this Agreement and the
exercise and performance of its duties hereunder, in reliance upon any Rights Certificate or certificate for Units or for other securities of the
Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged,
by the proper person or persons, or otherwise upon the advice of counsel as set forth in Section 20.

                  Section 19. Merger or Consolidation or Change of Name of Rights Agent.

          (a) Any corporation into which the Rights Agent or any successor Rights Agent may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a
party, or any corporation succeeding to the shareholder services, stock transfer or corporate trust business of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on
the part of any of the parties hereto; provided, that such corporation must be eligible for appointment as a successor Rights Agent under the
provisions of Section 21. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement any of the
Rights Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of the
predecessor Rights Agent and deliver such Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not
have been countersigned, any successor Rights Agent may countersign such Rights Certificates either in the name of the predecessor Rights
Agent or in the name of the successor Rights Agent; and in all such cases such Rights Certificates shall have the full force provided in the
Rights Certificates and in this Agreement.


                                                                         27
         (b) In case at any time the name of the Rights Agent shall be changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Rights Certificates so
countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, the Rights Agent may countersign such
Rights Certificates either in its prior name or in its changed name; and in all such cases such Rights Certificates shall have the full force
provided in the Rights Certificates and in this Agreement.

                 Section 20. Duties of Rights Agent. The Rights Agent undertakes to perform only the duties and obligations expressly
imposed by this Agreement upon the following terms and conditions, all of which the Company and the holders of Rights Certificates, by their
acceptance thereof, shall be bound, and no implied duties or obligations shall be read into this Agreement against the Rights Agent:

         (a) Before the Rights Agent acts or refrains from acting, it may consult with legal counsel of its choice (who may be legal counsel
for the Company), and the advice or opinion of such counsel shall be full and complete authorization and protection to the Rights Agent, and
the Rights Agent shall incur no liability for or in respect of, as to any action taken, suffered or omitted by it in good faith and in accordance
with such advice or opinion.

          (b) Whenever in the administration, exercise and performance of its duties under this Agreement the Rights Agent shall deem it
necessary or desirable that any fact or matter be proved or established by the Company prior to taking, suffering or omitting to take any action
hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively
proved and established by a certificate signed by any officer of the Company and delivered to the Rights Agent; and such certificate shall be
full and complete authorization and protection to the Rights Agent for or in respect of any action taken, suffered or omitted in good faith by it
under the provisions of this Agreement in reliance upon such certificate.

       (c) The Rights Agent shall be liable hereunder to the Company and any other Person only for its own gross negligence or willful
misconduct.

         (d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in
the Rights Certificates (except its countersignature thereof) or be required to verify the same, but all such statements and recitals are and shall
be deemed to have been made by the Company only.


                                                                        28
          (e) The Rights Agent shall not be under any responsibility or have any liability in respect of the legality, validity or enforceability of
this Agreement or the execution and delivery hereof (except the due execution by the Rights Agent) or in respect of the legality, validity or
enforceability or the execution of any Rights Certificate (except its countersignature); nor shall it be liable or responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any Rights Certificate; nor shall it be responsible for any change in
the exercisability of the Rights (including the Rights becoming void pursuant to Section 11(a)(ii)) or any change or adjustment in the terms of
the Rights (including the manner, method or amount thereof) provided for in Section 3, 11, 13, 23 or 24, or the ascertaining of the existence of
facts that would require any such change or adjustment (except with respect to the exercise of Rights evidenced by Rights Certificates after
receipt of the certificate described in Section 12, upon which the Rights Agent may rely); nor shall it by any act hereunder be deemed to make
any representation or warranty as to the authorization or reservation of any Units or other securities to be issued upon the exercise of any Rights
or as to whether any such security will, when issued, be validly authorized and issued, fully paid and nonassessable.

         (f) The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged
and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out
or performing by the Rights Agent of the provisions of this Agreement.

          (g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the administration, exercise and
performance of its duties hereunder from any one officer of the Company, and to apply to such officers for advice or instructions in connection
with its duties under this Agreement, and such instructions shall be full authorization and protection to the Rights Agent and the Rights Agent
shall not be responsible or liable for, or in respect of, any action taken, suffered or omitted to be taken by it in good faith in accordance with
instructions of any such officer or for any delay in acting while waiting for those instructions. The Rights Agent shall be fully authorized and
protected in relying upon the most recent instructions received from such officers. Any application by the Rights Agent for written instructions
from the Company may, at the option of the Rights Agent, set forth in writing any action proposed to be taken, suffered or omitted by the
Rights Agent under this Agreement and the date on and/or after which such action shall be taken or such omission shall be effective. The
Rights Agent shall not be liable for any action taken or suffered by, or omission of, the Rights Agent in accordance with a proposal included in
any such application on or after the date specified in such application (which date shall not be less than five Business Days after the date any
officer of the Company actually received such application, unless any such officer shall have consented in writing to an earlier date) unless,
prior to taking any such action (or the effective date in the case of an omission), the Rights Agent shall have received written instructions in
response to such application specifying the action to be taken, suffered or omitted.

         (h) The Rights Agent and any stockholder, affiliate, director, officer or employee of the Rights Agent may buy, sell or deal in any of
the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or
contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement.
Nothing herein shall preclude the Rights Agent, or any such stockholder, affiliate, director, officer or employee from acting in any other
capacity for the Company or for any other Person.


                                                                        29
          (i) The Rights Agent may execute and exercise any of the rights or powers vested in it or perform any duty under this Agreement
either itself (through its directors, officers and employees) or by or through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, omission, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company
resulting from any such act, omission, default, neglect or misconduct, provided that reasonable care was exercised in the selection and
continued employment thereof.

           (j) No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder or in the exercise of its rights if the Rights Agent in good faith believes that
repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it.

          (k) If, with respect to any Rights Certificate surrendered to the Rights Agent for exercise, transfer, split up, combination or exchange,
the certification on the form of assignment or form of election to purchase, as the case may be, that has been completed to certify the holder is
an Acquiring Person (or an Affiliate or Associate thereof) has either not been completed or in any manner indicates any other response thereto,
the Rights Agent shall not take any further action with respect to such requested exercise, transfer, split up, combination or exchange, without
first consulting with the Company.

                    Section 21. Change of Rights Agent. The Rights Agent or any successor Rights Agent may resign and be discharged from its
duties under this Agreement upon thirty days' notice in writing mailed to the Company and to each transfer agent of the Common Stock of the
Company or Preferred Stock (as to which the Rights Agent has received prior written notice) by registered or certified mail, and the Company
shall mail notice thereof to the holders of the Rights Certificates by first-class mail. The Company may remove the Rights Agent or any
successor Rights Agent upon thirty days' notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to
each transfer agent of the Common Stock or Preferred Stock (as to which the Rights Agent has received prior written notice) by registered or
certified mail, and to the holders of the Rights Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise
become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment
within a period of thirty days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by the holder of a Rights Certificate (who shall, with such notice, submit such holder's Rights
Certificate for inspection by the Company), then the registered holder of any Rights Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court,
shall be a corporation organized and doing business under the laws of the United States or of any state of the United States, in good standing,
authorized under such laws to exercise corporate trust or stock transfer powers, and subject to supervision or examination by federal or state
authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $50 million. After
appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally
named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent
any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose.
Not later than the effective date of any such appointment the Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Common Stock or Preferred Stock, and mail a notice thereof in writing to the registered holders of the Rights
Certificates. Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of
the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be.


                                                                         30
                    Section 22. Issuance of New Rights Certificates. Notwithstanding any of the provisions of this Agreement or of the Rights to
the contrary, the Company may, at its option, issue new Rights Certificates evidencing Rights in such form as may be approved by its board of
directors to reflect any adjustment or change in the Purchase Price and the number or kind or class of shares or other securities or property
purchasable under the Rights Certificates made in accordance with the provisions of this Agreement. In addition, in connection with the
issuance or sale of shares of Common Stock of the Company following the Distribution Date and prior to the Expiration Date, the Company (a)
shall, with respect to shares of Common Stock of the Company so issued or sold pursuant to the exercise of stock options or under any
employee benefit plan or arrangement or upon the exercise, conversion or exchange of securities of the Company currently outstanding or
issued at any time in the future by the Company and (b) may, in any other case, if deemed necessary or appropriate by the board of directors of
the Company issue Rights Certificates representing the appropriate number of Rights in connection with such issuance or sale; provided,
however, that (i) no such Rights Certificate shall be issued and this sentence shall be null and void ab initio if, and to the extent that, such
issuance or this sentence would create a significant risk of or result in material adverse tax consequences to the Company or the Person to
whom such Rights Certificate would be issued or would create a significant risk of or result in such options' or employee plans' or
arrangements' failing to qualify for otherwise available special tax treatment and (ii) no such Rights Certificate shall be issued if, and to the
extent that, appropriate adjustment shall otherwise have been made in lieu of the issuance thereof.

                  Section 23. Redemption and Termination.

          (a) The Company may, at its option, upon approval by the board of directors, at any time on or prior to the Close of Business (or
such later date as may be determined by its board of directors) on the earlier of (i) the Distribution Date or (ii) the Final Expiration Date redeem
all but not less than all of the then outstanding Rights at a redemption price of $0.01 per Right, appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date of this Agreement (such redemption price being hereinafter referred to as the
"Redemption Price"), and the Company may, at its option, pay the Redemption Price either in cash, shares of Common Stock of the Company
(based on the Current Per Share Market Price thereof at the time of redemption), or any other form of consideration deemed appropriate by its
board of directors. The redemption of the Rights by the board of directors of the Company may be made effective at such time on such basis
and with such conditions as the board of directors of the Company in its sole discretion may establish. Any such redemption will be effective
immediately upon the action of the board of directors of the Company ordering the same, unless such action of the board of directors of the
Company expressly provides that such redemption will be effective at a subsequent time or upon the occurrence or nonoccurrence of one or
more specified events (in which case such redemption will be effective in accordance with the provisions of such action of the board of
directors of the Company).


                                                                         31
          (b) Immediately upon the effectiveness of the redemption of the Rights pursuant to Section 23(a), and without any further action and
without any notice, the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the
Redemption Price. The Company shall promptly give public notice of any such redemption (with a copy to the Rights Agent); provided,
however, that the failure to give, or any defect in, any such notice shall not affect the validity of such redemption. Within 10 days after the
effectiveness of the redemption of the Rights, the Company shall give notice of such redemption to the Rights Agent and shall mail a notice of
redemption to all the holders of the then outstanding Rights at their last addresses as they appear upon the registry books of the Rights Agent
or, prior to the Distribution Date, on the registry books of the transfer agent for the Common Stock. Any notice which is mailed in such manner
shall be deemed given, whether or not the holder receives the notice. Each notice of redemption will state the method by which the payment of
the Redemption Price will be made. Neither the Company nor any of its Affiliates or Associates may redeem, acquire or purchase for value any
Rights at any time in any manner other than that specifically set forth in this Section 23 or in Section 24 or other than in connection with the
purchase of shares of Common Stock prior to the Distribution Date.

          (c) Notwithstanding anything contained in this Agreement to the contrary, the Rights shall not be exercisable pursuant to Section
7(a) at any time when the Rights are redeemable hereunder.


                                                                       32
                  Section 24. Exchange.

          (a) The Company, at its option, upon approval by its board of directors, at any time after any Person becomes an Acquiring Person,
may exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that have become unexerciseable
pursuant to the provisions of Section 7(e)) for Units at an exchange ratio equal to, subject to adjustment to reflect stock splits, stock dividends
and similar transactions occurring after the date hereof, that number obtained by dividing the Purchase Price by the then Current Per Share
Market Price per Unit on the earlier of (i) the date on which any Person becomes an Acquiring Person and (ii) the date on which a tender or
exchange offer by any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan maintained by the
Company or any of its Subsidiaries or any trustee or fiduciary with respect to such plan acting in such capacity) is commenced within the
meaning of Rule 14d-2(a) of the Exchange Act Regulations or any successor rule, if upon consummation thereof such Person would be the
Beneficial Owner of 15% or more of the shares of Common Stock of the Company then outstanding (such exchange ratio being hereinafter
referred to as the "Section 24(a) Exchange Ratio"). Notwithstanding the foregoing, the Company may not effect such exchange at any time
after any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan maintained by the Company or any of its
Subsidiaries, or any trustee or fiduciary with respect to such plan acting in such capacity), together with all Affiliates and Associates of such
Person, becomes the Beneficial Owner of 50% or more of the shares of Common Stock of the Company then outstanding.

          (b) Immediately upon the action of the board of directors of the Company ordering the exchange of any Rights pursuant to
subsection (a) of this Section 24 and without any further action and without any notice, the right to exercise such Rights shall terminate and the
only right thereafter of a holder of such Rights shall be to receive that number of Units equal to the number of such Rights held by such holder
multiplied by the Section 24(a) Exchange Ratio. The Company shall promptly give public notice of any such exchange (with a copy provided
to the Rights Agent); provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. The
Company promptly shall mail a notice of any such exchange to all of the holders of such Rights at their last addresses as they appear upon the
registry books of the Rights Agent. Any notice which is mailed in the manner provided in this Agreement shall be deemed given, whether or
not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of Units for Rights will be
effected and, in the event of any partial exchange, the number of Rights which will be exchanged. Any partial exchange shall be effected pro
rata based on the number of Rights (other than Rights which have become unexerciseable pursuant to the provisions of Section 7(e)) held by
each holder of Rights.


                                                                        33
         (c) In the event that the number of shares of Preferred Stock authorized by the Company's certificate of incorporation but not
outstanding or reserved for issuance for purposes other than upon exercise of the Rights is not sufficient to permit any exchange of Rights as
contemplated in accordance with this Section 24, the Company shall take all such action as may be necessary to authorize additional shares of
Preferred Stock for issuance upon exchange of the Rights or make adequate provision to substitute (1) cash, (2) Common Stock of the
Company or other equity securities of the Company, (3) debt securities of the Company, (4) other assets, or (5) any combination of the
foregoing, having an aggregate value equal to the aggregate Current Per Share Market Price of the Units that would otherwise be issuable in
such exchange, all as determined by the board of directors of the Company (which determination shall be described in a statement filed with the
Rights Agent and shall be conclusive and binding on the Rights Agent, the holders of the Rights and all other Persons). To the extent that the
Company determines that some action need be taken pursuant to Section 24(a), the board of directors of the Company may temporarily suspend
the exercisability of the Rights for a period of up to sixty days following the date on which the event described in Section 24(a) shall have
occurred, in order to seek any authorization of additional shares of Preferred Stock and/or to decide the appropriate form of distribution to be
made pursuant to the above provision and to determine the value thereof. Upon any such suspension, the Company shall notify the Rights
Agent thereof and issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the supervision is no longer in effect (a copy of which shall be provided to the Rights Agent).

                  Section 25. Notice of Certain Events.

          (a) In case the Company shall propose (i) to pay any dividend payable in stock of any class to the holders of its Preferred Stock or to
make any other distribution to the holders of its Preferred Stock (other than a regular quarterly cash dividend), (ii) to offer to the holders of its
Preferred Stock rights or warrants to subscribe for or to purchase any additional Units or shares of stock of any class or any other securities,
rights or options, (iii) to effect any reclassification of its Preferred Stock (other than a reclassification involving only the subdivision of
outstanding Preferred Stock), (iv) to effect any consolidation or merger into or with any other Person (other than a Subsidiary of the Company
in a transaction which complies with Section 11(o)), or to effect any sale or other transfer (or to permit one or more of its Subsidiaries to effect
any sale or other transfer), in one or more transactions, of 50% or more of the assets or earning power of the Company and its Subsidiaries
(taken as a whole) to, any other Person, (v) to effect the liquidation, dissolution or winding up of the Company or (vi) to declare or pay any
dividend on the Common Stock of the Company payable in shares of Common Stock of the Company or to effect a subdivision, combination
or consolidation of the shares of Common Stock of the Company (by reclassification or otherwise than by payment of dividends in shares of
Common Stock), then, in each such case, the Company shall give to the Rights Agent and each holder of a Rights Certificate, in accordance
with Section 26, a notice of such proposed action, which shall specify the record date for the purposes of such stock dividend, or distribution of
rights or warrants, or the date on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution, or winding up is to
take place and the date of participation therein by the holders of the shares of Common Stock of the Company and/or shares of Preferred Stock,
if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (i) or (ii) above at least ten days
prior to the record date for determining holders of the shares of Preferred Stock for purposes of such action, and in the case of any such other
action, at least ten days prior to the date of the taking of such proposed action or the date of participation therein by the holders of the shares of
Common Stock of the Company and/or shares of Preferred Stock, whichever shall be the earlier.

                                                                         34
         (b) In case any of the events set forth in Section 11(a)(ii) shall occur, then the Company shall as soon as practicable thereafter give to
each holder of a Rights Certificate, in accordance with Section 26, a notice of the occurrence of such event, which notice shall describe such
event and the consequences of such event to holders of Rights under Section 11(a)(ii). In the event any Person becomes an Acquiring Person,
the Company will promptly notify the Rights Agent thereof.

                  Section 26. Notices. Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the
holder of any Rights Certificate to or on the Company shall be sufficiently given or made if sent by first-class mail, postage prepaid or by
telecopier, addressed (until another address is filed in writing by the Company with the Rights Agent) as follows:

                  Crossroads Systems, Inc.
                  8300 North MoPac Expressway
                  Austin, Texas 78759
                  Telecopy: (512) 349-0304
                  Attention: Chief Executive Officer

                  with a copy to:

                  Brobeck, Phleger & Harrison LLP
                  4801 Plaza on the Lake
                  Austin, Texas 78746
                  Telecopy: (512) 330-4001
                  Attention: J. Matthew Lyons, P.C.

Subject to the provisions of Section 21, any notice or demand authorized by this Agreement to be given or made by the Company or by the
holder of any Rights Certificate to or on the Rights Agent shall be sent by registered or certified mail and shall be deemed given upon receipt
and addressed (until another address is filed in writing by the Rights Agent with the Company) as follows:

                  American Stock Transfer & Trust Company
                  59 Maiden Lane
                  New York, New York 10038
                  Telecopy: (718) 236-4588
                  Attention: Executive Vice President

Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Rights
Certificate shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder
as shown on the registry books of the Company.


                                                                         35
                   Section 27. Supplements and Amendments. Prior to the Distribution Date, the Company may supplement or amend this
Agreement in any respect, without the approval of any holders of Rights, by action of its board of directors. From and after the Distribution
Date, the Company may from time to time supplement or amend this Agreement without the approval of any holders of Rights, by action of its
board of directors in order (i) to cure any ambiguity, (ii) to correct or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, (iii) to shorten or lengthen any time period hereunder, or (iv) to change or supplement the
provisions hereunder in any manner which the Company may deem necessary or desirable and which shall not adversely affect the interests of
the holders of Rights Certificates (other than an Acquiring Person or an Affiliate or Associate of an Acquiring Person), including, without
limitation, to change the Purchase Price, the Redemption Price, any time periods herein specified, and any other term hereof, any such
supplement or amendment to be evidenced by a writing signed by the Company and the Rights Agent; provided, however, that from and after
such time as any Person becomes an Acquiring Person, this Agreement shall not be amended in any manner which would adversely affect the
interests of the holders of Rights. Upon receipt of a certificate from an appropriate officer of the Company that the proposed supplement or
amendment is consistent with this Section 27 and, after such time as any Person has become an Acquiring Person, that the proposed supplement
or amendment does not adversely affect the interests of the holders of Rights, the Rights Agent shall execute such supplement or amendment.

                 Section 28. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the
Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder.

                   Section 29. Determinations and Actions by the Board of Directors. For all purposes of this Agreement, any calculation of the
number of shares of Common Stock of the Company outstanding at any particular time, including for purposes of determining the particular
percentage of such outstanding shares of Common Stock of the Company of which any Person is the Beneficial Owner, shall be made in
accordance with the last sentence of Rule 13d-3(d)(1)(i) of the Exchange Act Regulations. The board of directors of the Company shall have
the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the board of
directors, or the Company, or as may be necessary or advisable in the administration of this Agreement, including, without limitation, the right
and power to (i) interpret the provisions of this Agreement and (ii) make all determinations or calculations deemed necessary or advisable for
the administration of this Agreement (including a determination to redeem or not redeem the Rights or to amend the Agreement). All such
actions, calculations, interpretations and determinations (including, for purposes of clause (y) below, all omissions with respect to the
foregoing), which are done or made by the board of directors of the Company in good faith, shall (x) be final, conclusive and binding on the
Company, the Rights Agent, the holders of the Rights Certificates and all other Persons and (y) not subject the board of directors of the
Company to any liability to the holders of the Rights. The Rights Agent shall be entitled to assume that the Board of Directors acted in good
faith and shall be fully protected and incur no liability in reliance thereon.


                                                                       36
                  Section 30. Benefits of This Agreement. Nothing in this Agreement shall be construed to give to any Person other than the
Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, shares of Common Stock
of the Company) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive
benefit of the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, shares of
Common Stock of the Company).

                   Section 31. Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent
jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated; provided, however, that
notwithstanding anything in this Agreement to the contrary, if any such term, provision, covenant or restriction is held by such court or
authority to be invalid, void or unenforceable and the board of directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or effect of this Agreement and the right of redemption set forth in
Section 23 shall have expired, such right shall be reinstated and shall not expire until the tenth Business Day following the date of such
determination by the board of directors of the Company.

                  Section 32. Governing Law. This Agreement and each Rights Certificate issued hereunder shall be deemed to be a contract
made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the internal laws of
the State of Delaware applicable to contracts to be made and performed entirely within such state, without regard to the choice-of-law or
conflict-of-laws principles of any jurisdiction.

                   Section 33. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts
shall for all purposes be deemed to be an original, and all such counterparts shall together constitute one and the same instrument.

                  Section 34. Descriptive Headings. Descriptive headings of the several sections of this Agreement are inserted or convenience
only and shall not control or affect the meaning or construction of any of the provisions of this Agreement.

                                                           [Signature page follows]


                                                                      37
                   IN WITNESS WHEREOF, the parties hereto have caused this Rights Agreement to be duly executed as of the day and year
first above written.

                                                                    CROSSROADS SYSTEMS, INC.

                                                                    By:       /s/
                                                                              Name:
                                                                              Title:

                                                                    AMERICAN STOCK TRANSFER
                                                                    & TRUST COMPANY

                                                                    By:       /s/
                                                                              Name:
                                                                              Title:

                          [SIGNATURE PAGE TO CROSSROADS SYSTEMS, INC. RIGHTS AGREEMENT]
                                                                                                                                      EXHIBIT A

                                                                     FORM

                                                                       OF

                                                      CERTIFICATE OF DESIGNATION

                                                                       OF

                                         SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

                                                                       OF

                                                       CROSSROADS SYSTEMS, INC.,

                                                        (Pursuant to Section 151 of the
                                                      Delaware General Corporation Law)




                   Crossroads Systems, Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware
(hereinafter called the "Corporation"), hereby certifies that the following resolution was adopted by the board of directors of the Corporation as
required by Section 151 of the General Corporation Law at a meeting duly called and held on August 21, 2002;

                   RESOLVED, that pursuant to the authority granted to and vested in the board of directors of the Corporation (hereinafter the
"Board") in accordance with the provisions of the certificate of incorporation of the Corporation, as currently in effect, the Board hereby creates
a series of Preferred Stock, par value $0.001 per share (the "Preferred Stock"), of the Corporation and hereby states the designation and number
of shares, and fixes the relative rights, preferences, and limitations thereof as follows:

                  Series A Junior Participating Preferred Stock:

         Section 1. Designation and Amount. The shares of such series shall be designated as "Series A Junior Participating Preferred Stock"
(the "Series A Preferred Stock") and the number of shares constituting the Series A Preferred Stock shall be one hundred seventy-five thousand
(175,000). Such number of shares may be increased or decreased by resolution of the Board of Directors; provided that no decrease shall
reduce the number of shares of Series A Preferred Stock to a number less than the number of shares then outstanding plus the number of shares
reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by
the Corporation convertible into Series A Preferred Stock.


                                                                       A-1
         Section 2. Dividends and Distributions.

          (a) Subject to the rights of the holders of any shares of any series of Preferred Stock (or any similar stock) ranking prior and superior
to the Series A Preferred Stock with respect to dividends, each holder of a share of Series A Preferred Stock, in preference to the holders of
shares of common stock, par value $0.001 per share (the "Common Stock"), of the Corporation, and of any other junior stock, shall be entitled
to receive, when declared by the Board out of funds legally available for the purpose, dividends in an amount per share (rounded to the nearest
cent) equal to, subject to the provision for adjustment hereinafter set forth, 1,000 times the aggregate per share amount of all cash dividends,
and 1,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable
in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the
Common Stock. In the event the Corporation shall, at any time after August 21, 2002 (the "Rights Declaration Date"), declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock (and an equivalent dividend is not declared on the Series A Preferred Stock or the Series A Preferred Stock
is not similarly subdivided or combined), then in each such case the amount to which holders of shares of Series A Preferred Stock were
entitled immediately prior to such event under the preceding sentence shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such event.

         (b) The Corporation shall declare a dividend or distribution on the shares of Series A Preferred Stock as provided in Section 2(a)
immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock);
provided, however, that, in no event shall a dividend or distribution be declared by the Board on the Common Stock for which it does not
declare and pay the dividend required to be declared on the Preferred Stock pursuant to Section 2(a).

          (c) Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Preferred Stock in an amount less
than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board may fix a record date for the determination of holders of shares of Series A Preferred
Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than sixty days prior to the
date fixed for the payment thereof.


                                                                       A-2
         Section 3. Voting Rights. The holders of shares of Series A Preferred Stock shall have the following voting rights:

         (a) Subject to the provision for adjustment hereinafter set forth, each share of Series A Preferred Stock shall entitle the holder thereof
to 1,000 votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall, at any time after the
Rights Declaration Date, declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in
shares of Common Stock) into a greater or lesser number of shares of Common Stock (and an equivalent dividend is not declared on the Series
A Preferred Stock or the Series A Preferred Stock is not similarly subdivided or combined), then in each such case the number of votes per
share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying
such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

         (b) Except as otherwise provided herein, in the Certificate of Incorporation, in any other Certificate of Designation creating a series
of Preferred Stock or any similar stock, or by law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock
and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of
stockholders of the Corporation.

         (c) Except as set forth herein, or as otherwise provided by law, holders of Series A Preferred Stock shall have no special voting
rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein)
for taking any corporate action.

         Section 4. Certain Restrictions.

          (a) Whenever quarterly dividends or other dividends or distributions payable on the Series A Preferred Stock as provided in Section 2
are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Preferred
Stock outstanding shall have been paid in full, the Corporation shall not:

                  (i) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A Preferred Stock;

                   (ii) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except dividends paid ratably on the shares of
Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;

                  (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A Preferred Stock; provided, that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to
dividends or upon dissolution, liquidation or winding up) to the Series A Preferred Stock; or

                   (iv) redeem or purchase or otherwise acquire for consideration any shares of Series A Preferred Stock, or any shares of stock
ranking on a parity with the Series A Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as
determined by the Board) to all holders of such shares upon such terms as the Board, after consideration of the respective annual dividend rates
and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable
treatment among the respective series or classes.


                                                                       A-3
         (b) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares
of stock of the Corporation unless the Corporation could, under Section 4(a), purchase or otherwise acquire such shares at such time and in
such manner.

          Section 5. Reacquired Shares. Any shares of Series A Preferred Stock purchased or otherwise acquired by the Corporation in any
manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and
restrictions on issuance set forth herein, in the certificate of incorporation, or in any other certificate of designation creating a series of
Preferred Stock or any similar stock or as otherwise required by law.

         Section 6. Liquidation, Dissolution or Winding Up.

          (a) Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (i) to the holders of shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock unless, prior thereto,
the holders of shares of Series A Preferred Stock shall have received the greater of (x) $1,000 per share, plus an amount equal to accrued and
unpaid dividends and distributions thereon to the date of such payment (the "Series A Liquidation Preference") and (y) an aggregate amount
per share, subject to the provision for adjustment hereinafter set forth, equal to the product of 1,000 times the aggregate amount to be
distributed per share to holders of shares of Common Stock, or (ii) to the holders of shares of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except distributions made ratably on the Series A Preferred
Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up. In the event the Corporation shall, at any time after the Rights Declaration Date declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of
shares of Common Stock (and an equivalent dividend is not declared on the Series A Preferred Stock or the Series A Preferred Stock is not
similarly subdivided or combined), then in each such case the aggregate amount to which holders of shares of Series A Preferred Stock were
entitled immediately prior to such event under the proviso in clause (i) of the preceding sentence shall be adjusted by multiplying such amount
by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were outstanding immediately prior to such event.


                                                                       A-4
          (b) In the event, however, that there are not sufficient assets available to permit payment in full of the Series A Liquidation
Preference and the liquidation preferences of all other series of Preferred Stock, if any, which rank on a parity with the Series A Preferred
Stock, then such remaining assets shall be distributed ratably to the holders of Series A Preferred Stock and such parity shares in proportion to
their respective liquidation preferences.

         Section 7. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other
transaction in which the shares of Common Stock are exchanged for or converted or changed into other stock or securities, cash and/or any
other property (or into the right to receive any of the foregoing), then in any such case each share of Series A Preferred Stock shall at the same
time be similarly exchanged, converted or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal
to 1,000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for
which each share of Common Stock is converted, changed or exchanged. In the event the Corporation shall, at any time after the Rights
Declaration Date declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in
shares of Common Stock) into a greater or lesser number of shares of Common Stock (and an equivalent dividend is not declared on the Series
A Preferred Stock or the Series A Preferred Stock is not similarly subdivided or combined), then in each such case the amount set forth in the
preceding sentence with respect to the conversion, exchange or change of shares of Series A Preferred Stock shall be adjusted by multiplying
such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

         Section 8. No Redemption. The shares of Series A Preferred Stock shall not be redeemable.

          Section 9. Rank. The Series A Preferred Stock shall rank, with respect to the payment of dividends and the distribution of assets,
junior to all series of any other class of the Corporation's Preferred Stock.

          Section 10. Amendment. The certificate of incorporation of the Corporation shall not be amended, including any amendment through
consolidation, merger, combination or other transaction, in any manner which would materially alter or change the powers, preferences or
special rights of the Series A Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least a majority of
the outstanding shares of Series A Preferred Stock, voting together as a single class.

                                                             [Signature page follows]


                                                                        A-5
         IN WITNESS WHEREOF, this Certificate of Designation is executed on behalf of the Corporation as of the date first written
above.

                                                             CROSSROADS SYSTEMS, INC.

                                                             By:
                                                                   Name:
                                                                   Title:


                                                           A-6
                                                                                                                                     EXHIBIT B

                                                           Form of Rights Certificate

Certificate No. R-                                                                                                              ________ Rights

         NOT EXERCISABLE AFTER TEN YEAR ANNIVERSARY OF RECORD DATE OR EARLIER IF REDEMPTION OR
         EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT THE OPTION OF THE COMPANY AT $0.01 PER
         RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
         CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE
         OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT
         HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS
         CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING
         PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE
         RIGHTS AGREEMENT). aCCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY
         BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SUCH AGREEMENT]*

                                                       Rights Certificate

                                              CROSSROADS SYSTEMS, INC.

                   This certifies that _____________, or registered assigns, is the registered owner of the number of Rights set forth above, each
of which entitles the owner thereof, subject to the terms, provisions and conditions of the Rights Agreement, dated as of August 21, 2002 (the
"Rights Agreement"), between Crossroads Systems, Inc., a Delaware corporation (the "Company"), and American Stock Transfer & Trust
Company, as Rights Agent (the "Rights Agent"), to purchase from the Company at any time after the Distribution Date (as such term is defined
in the Rights Agreement) and prior to 5:00 p.m., New York City time, on September 3, 2012 at the office of the Rights Agent designated for
such purpose, or at the office of its successor as Rights Agent, one one-thousandth (a "Unit") of a fully paid non-assessable share of Series A
Junior Participating Preferred Stock, par value $0.001 per share (the "Series A Preferred Stock") of the Company, at a purchase price of $12.00
per Unit of Series A Preferred Stock (the "Purchase Price"), upon presentation and surrender of this Rights Certificate with the Form of
Election to Purchase and certification duly executed. The number of Rights evidenced by this Rights Certificate (and the number of Units of
Series A Preferred Stock which may be purchased upon exercise hereof) set forth above, and the Purchase Price set forth above, are the number
and Purchase Price as of September 3, 2002 based on the Series A Preferred Stock as constituted at such date. As provided in the Rights
Agreement, the Purchase Price and the number of Units of Series A Preferred Stock which may be purchased upon the exercise of the Rights
evidenced by this Rights Certificate are subject to modification and adjustment upon the happening of certain events.



    *    The bracketed language is to be inserted in place of the preceding sentence where applicable.


                                                                       B-1
                 This Rights Certificate is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms,
provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is
hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the
Company and the holders of the Rights Certificates. Copies of the Rights Agreement are on file at the principal executive offices of the
Company.

                   This Rights Certificate, with or without other Rights Certificates, upon surrender at the office of the Rights Agent designated
for such purpose, may be exchanged for another Rights Certificate or Rights Certificates of like tenor and date evidencing Rights entitling the
holder to purchase a like aggregate number of Units of Series A Preferred Stock as the Rights evidenced by the Rights Certificate or Rights
Certificates surrendered shall have entitled such holder to purchase. If this Rights Certificate shall be exercised in part, the holder shall be
entitled to receive upon surrender hereof another Rights Certificate or Rights Certificates for the number of whole Rights not exercised.

                Subject to the provisions of the Rights Agreement, the Rights evidenced by this Certificate may be redeemed by the
Company at a redemption price of $0.01 per Right.

                   No fractional shares of Series A Preferred Stock will be issued upon the exercise of any Rights or Rights evidenced hereby
(other than fractions which are integral multiples of one one-thousandth of a share of Series A Preferred Stock, which may, at the election of
the Company, be evidenced by depositary receipts), but in lieu thereof a cash payment will be made, as provided in the Rights Agreement.

                   No holder of this Rights Certificate, as such, shall be entitled to vote or receive dividends or be deemed for any purpose the
holder of Units of Series A Preferred Stock or of any other securities of the Company which may at any time be issuable on the exercise hereof,
nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except
as provided in the Rights Agreement), or to receive dividends or subscription rights, or otherwise, until the Rights or Rights evidenced by this
Rights Certificate shall have been exercised as provided in the Rights Agreement.


                                                                       B-2
                  This Rights Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights
Agent.

                  WITNESS the signature of the proper officers of the Company and its corporate seal.

Dated as of                                                                        CROSSROADS SYSTEMS, INC.

                                                                                   By:

                                                                                              Name:

                                                                                              Title:

Countersigned:

AMERICAN STOCK TRANSFER & TRUST
COMPANY, as Rights Agent

By:
         Authorized Signatory

         Name:

         Title:


                                                                       B-3
                                                    Form of Reverse Side of Rights Certificate

                                                           FORM OF ASSIGNMENT

                        (To be executed by the registered holder if such holder desires to transfer the Rights Certificate.)

                  FOR VALUE RECEIVED ________________________________ hereby sells, assigns and transfers unto



                                                  (Please print name and address of transferee)

this Rights Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint ________ Attorney,
to transfer the within Rights Certificate on the books of the within-named Company, with full power of substitution.

DATED: _______________ ‘ ____


                                                                                                                 Signature

Signature Guaranteed:

                  Signatures must be guaranteed by a participant in an "eligible guarantor institution" as defined in Rule 17Ad-5 promulgated
under the Securities Exchange Act of 1934, as amended.


                                                                        B-4
                                                                CERTIFICATE

                 The undersigned hereby certifies that the Rights evidenced by this Rights Certificate are not beneficially owned by an
Acquiring Person or an Affiliate or Associate thereof (each as defined in the Rights Agreement).


                                                                                                              Signature




                                                                   NOTICE

                   The signature in the foregoing Form of Assignment must conform to the name as written upon the face of this Rights
Certificate in every particular, without alteration or enlargement or any change whatsoever.

                  In the event the certification set forth above in the Form of Assignment is not completed, the Company and the Rights Agent
will deem the beneficial owner of the Rights evidenced by this Rights Certificate to be an Acquiring Person or an Affiliate or Associate thereof
(each as defined in the Rights Agreement) and such Assignment will not be honored.


                                                                      B-5
                                                     FORM OF ELECTION TO PURCHASE

(To be executed if holder desires to exercise the Rights Certificate.)

To Crossroads Systems, Inc.:

                 The undersigned hereby irrevocably elects to exercise ________________ Rights represented by this Rights Certificate to
purchase the Units of Series A Preferred Stock issuable upon the exercise of such Rights and requests that certificates for such Series A
Preferred Stock be issued in the name of:

Please insert social security
or other identifying number
                                                                                    (Please print name and address)

If such number of Rights shall not be all the Rights evidenced by this Rights Certificate, a new Rights Certificate for the balance remaining of
such Rights shall be registered in the name of and delivered to:

Please insert social security
or other identifying number


                                                                                           (Please print name and address)

DATED: _____________________‘ _____


                                                                                                              Signature

Signature Guaranteed:

                  Signatures must be guaranteed by a participant in an "eligible guarantor institution" as defined in Rule 17Ad-5 promulgated
under the Securities Exchange Act of 1934, as amended.


                                                                         B-6
                                                                CERTIFICATE

                 The undersigned hereby certifies that the Rights evidenced by this Rights Certificate are not beneficially owned by an
Acquiring Person or an Affiliate or Associate thereof (each as defined in the Rights Agreement).


                                                                                                              Signature




                                                                   NOTICE

                   The signature in the foregoing Form of Election to Purchase must conform to the name as written upon the face of this Rights
Certificate in every particular, without alteration or enlargement or any change whatsoever.

                  In the event the certification set forth above in the Form of Election to Purchase, as the case may be, is not completed, the
Company and the Rights Agent will deem the beneficial owner of the Rights evidenced by this Rights Certificate to be an Acquiring Person or
an Affiliate or Associate thereof (each as defined in the Rights Agreement) and such Election to Purchase will not be honored.


                                                                      B-7
                                                                                                                                        EXHIBIT C

                                                   SUMMARY OF RIGHTS TO PURCHASE
                                                         PREFERRED STOCK

                  On August 21, 2002, the board of directors of Crossroads Systems, Inc. (the "Company") declared a dividend distribution of
one right (a "Right") for each outstanding share of our common stock to stockholders of record at the close of business on September 3, 2002.
Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of our Series A Junior Participating
preferred stock, par value $0.001 per share (the "Preferred Stock"), at a purchase price of $12.00, subject to adjustment. The description and
terms of the Rights are set forth in a Rights Agreement (the "Rights Agreement") between the Company and American Stock Transfer & Trust
Company, as Rights Agent.

                   Initially, the Rights will be attached to all common stock certificates representing shares then outstanding, and no separate
Rights certificates will be distributed (the "Distribution Date"). The Distribution Date will occur on the earlier of (i) ten days following a public
announcement that a person or group of affiliated or associated persons (an "Acquiring Person") has (subject to certain exceptions) acquired, or
obtained the right to acquire, beneficial ownership of 15% or more of the outstanding shares of our common stock (the "Share Acquisition
Date"), other than as a result of repurchases of stock by the Company, or (ii) ten days (or a later date that the board shall determine) following
the commencement of, or public announcement of an intention to make, a tender offer or exchange offer that would result in a person or group
beneficially owning 15% or more of the outstanding shares of our common stock. The Rights Agreement specifically provides that our
Chairman, President and Chief Executive Officer, Brian R. Smith, who currently owns 11.9% of our common stock, may acquire up to an
aggregate of 20% of our common stock without triggering the exercisability of the rights. Additionally, Austin Ventures and its affiliates
currently beneficially own 16.1% of our common stock. The rights agreement provides that so long as Austin Ventures and its affiliates do not
acquire any additional shares of our common stock, their ownership of our common stock will not trigger the exercisability of the rights in the
event that their ownership percentage rises above 15%.

                   Until the Distribution Date, (i) the Rights will be evidenced by the common stock certificates and will be transferred with and
only with our common stock certificates, (ii) new common stock certificates issued after the record date will contain a notation incorporating
the Rights Agreement by reference and (iii) the surrender for transfer of any certificates for common stock outstanding will also constitute the
transfer of the Rights associated with the common stock represented by such certificate. Pursuant to the Rights Agreement, the company
reserves the right to require prior to the occurrence of a Triggering Event (as defined below) that, upon any exercise of Rights, a number of
Rights be exercised so that only whole shares of preferred stock will be issued.


                                                                        C-1
                   The Rights can not be exercised until the Distribution Date and will expire at the close of business on September 3, 2012,
unless earlier redeemed by the Company as described below.

                  Shortly after the Distribution Date, Rights certificates would be mailed to record holders of our common stock as of the close
of business on the Distribution Date and, thereafter, the separate Rights certificates alone will represent the Rights. Unless our board of
directors decides differently, only shares of our common stock issued before the Distribution Date will be issued with Rights.

                   If an Acquiring Person becomes (subject to certain exceptions) the beneficial owner of 15% or more of the then outstanding
shares of common stock (other than pursuant to an offer for all the outstanding shares of common stock that our board of directors determines
to be fair to and otherwise in the best interests of the Company and its stockholders), each holder of a Right will thereafter have the right to
receive, upon exercise, preferred stock (or, in certain circumstances, cash, property or other securities of the company) having a value equal to
two times the exercise price of the Right. If, at any time after the Stock Acquisition Date, (i) we are acquired in a merger or other business
combination transaction in which we are not the surviving corporation, other than a merger that results from an offer for all the outstanding
shares of common stock that our board decides is fair and in the best interests of the Company and its stockholders, or (ii) 50% or more of our
assets, cash flow or earning power is sold or transferred, each holder of a Right, except Rights which previously have been voided, will have
the right to receive, after exercise of the Right, common stock of the company that acquires us having a value equal to two times the exercise
price of the Right. The events described in this paragraph are "Triggering Events."

                  For example, at an exercise price of $12 per Right, each Right not owned by an Acquiring Person (or by certain related
parties) following a Triggering Event would entitle its holder to purchase $24 worth of preferred stock (or other consideration, as noted above)
for $12. Assuming that our common stock had a per share value of $10 at such time, the holder of each valid Right would be entitled to
purchase preferred stock that would be economically equivalent to 2.4 shares of our common stock for $12.

                  All Rights that are, or (under certain circumstances specified in the Rights Agreement) were, beneficially owned by any
Acquiring Person will not be exercisable. At any time after a person becomes an Acquiring Person and prior to the acquisition by such person
or group of 50% or more of the outstanding common stock, the board may exchange the Rights (other than Rights owned by the person or
group which will not be exercisable), in whole or in part, at an exchange ratio of one share of common stock, or one one-thousandth of a share
of preferred stock (or of a share of a class or series of our preferred stock having equivalent rights, preferences and privileges), per Right.

                  At any time until ten days following the Share Acquisition Date, the board may redeem the Rights in whole, but not in part, at
a price of $0.01 per Right (payable in cash, common stock or other consideration deemed appropriate by the board). Immediately upon the
action of the board ordering redemption of the Rights, the Rights will terminate and the only right of the holders of Rights will be to receive the
$0.01 redemption price.


                                                                       C-2
                   Until a Right is exercised, the holder of a Right will have no rights by virtue of ownership as a stockholder of the company,
such as the right to vote or to receive dividends. While the distribution of the Rights will not be taxable to stockholders or to the company,
stockholders may, depending upon the circumstances, recognize taxable income in the event that the Rights become exercisable for preferred
stock (or other consideration) of the company or for common stock of the acquiring company.

                  Any of the provisions of the Rights Agreement may be amended by the board prior to the Distribution Date. After the
Distribution Date, the provisions of the Rights Agreement may be amended by the board in order to cure any ambiguity, to make changes
which do not adversely affect the interests of holders of Rights, or to shorten or lengthen any time period under the Rights Agreement, but no
amendment may be made at such time as the Rights are not redeemable.

                   A copy of the Rights Agreement has been filed with the Securities and Exchange Commission as an exhibit to a Current
Report on Form 8-K. A copy of the Rights Agreement is available free of charge from the company upon a written request. This summary
description of the Rights does not purport to be complete and is qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.


                                                                       C-3
                                                                                                                                  Exhibit 10.1
                                                     CROSSROADS SYSTEMS, INC.

                                                     2010 STOCK INCENTIVE PLAN

        Section 1.          PURPOSE

                   1.1        Purpose . The purpose of the Crossroads Systems, Inc. 2010 Stock Incentive Plan (the ―Plan‖ ) is to provide a
means through which Crossroads Systems, Inc. (the ―Company‖ ) may attract able persons to serve as employees, directors, or consultants of
the Company or its subsidiaries and to provide a means whereby those individuals upon whom the responsibilities of the successful
administration and management of the Company rest, and whose present and potential contributions to the welfare of the Company are of
importance, may acquire and maintain stock ownership, thereby strengthening their concern for the welfare of the Company. A further purpose
of the Plan is to provide such individuals with additional incentive and reward opportunities designed to enhance the profitable growth of the
Company. Accordingly, the Plan provides for granting Incentive Stock Options, options that do not constitute Incentive Stock Options,
Restricted Stock Awards, or any combination of the foregoing, as is best suited to the circumstances of the particular employee, consultant, or
director as provided in the Plan.

        Section 2.          DEFINITIONS

                 2.1         Definitions . Whenever the following capitalized words or phrases are used, the following definitions will be
applicable throughout the Plan, unless specifically modified by any Section:

                           (a)      “Affiliate” means, with respect to any person, any other person directly or indirectly controlling,
controlled by, or under common control with such other person.

                          (b)         “Award” means, individually or collectively, any Option or Restricted Stock Award.

                          (c)         “Board” means the board of directors of the Company.

                          (d)         “Change of Control Value” means the amount determined in accordance with Section 9.4.

                          (e)        “Code” means the Internal Revenue Code of 1986, as amended. Reference in the Plan to any section of
the Code will be deemed to include any amendments or successor provisions to such section and any regulations under such section.

                          (f)         “Committee” means a committee of the Board that is selected by the Board as provided in Section 4.1.

                        (g)       “Common Stock” means the common stock, [$0.001] par value, of the Company or any security into
which such common stock may be changed by reason of any transaction or event of the type described in Section 9.

                          (h)        “Company” means Crossroads Systems, Inc., a Delaware corporation.


                                                                      1
                        (i)         “Consultant” means any person who is not an Employee or Director and who is providing services to the
Company or any parent or subsidiary corporation (as defined in section 424 of the Code) as an advisor, consultant, or other non-common law
employee.

                           (j)         “Corporate Change” means either (i) the Company will not be the surviving entity in any merger, share
exchange, or consolidation (or survives only as a subsidiary of an entity), (ii) the Company sells, leases, or exchanges, or agrees to sell, lease,
or exchange, all or substantially all of its assets to any other person or entity, (iii) the Company is to be dissolved and liquidated, (iv) any
person or entity, including a ―group‖ as contemplated by Section 13(d)(3) of the 1934 Act, acquires or gains ownership or control (including,
without limitation, power to vote) of more than 50% of the outstanding shares of the Company‘s voting stock (based upon voting power), or (v)
at such time as the Company becomes a reporting company under the 1934 Act, as a result of or in connection with a contested election of
Directors, the persons who were Directors of the Company before such election will cease to constitute a majority of the Board; provided ,
however , that a Corporate Change will not include (A) any reorganization, merger, consolidation, sale, lease, exchange, or similar transaction,
which involves solely the Company and one or more entities wholly-owned, directly or indirectly, by the Company immediately prior to such
event or (B) the consummation of any transaction or series of integrated transactions immediately following which the record holders of the
voting stock of the Company immediately prior to such transaction or series of transactions continue to hold 50% or more of the voting stock
(based upon voting power) of (1) any entity that owns, directly or indirectly, the stock of the Company, (2) any entity with which the Company
has merged, or (3) any entity that owns an entity with which the Company has merged.

                             (k)         “Director” means (i) an individual elected to the Board by the stockholders of the Company or by the
Board under applicable corporate law who either is serving on the Board on the date the Plan is adopted by the Board or is elected to the Board
after such date and (ii) for purposes of and relating to eligibility for the grant of an Award, an individual elected to the board of directors of any
parent or subsidiary corporation (as defined in section 424 of the Code) of the Company.

                           (l)         “Employee” means any person in an employment relationship with the Company or any parent or
subsidiary corporation (as defined in section 424 of the Code).

                             (m)        “Fair Market Value” means, as of any specified date, (i) the mean of the high and low sales prices of the
Common Stock either (A) if the Common Stock is traded on the National Market System of the NASDAQ, as reported on the National Market
System of NASDAQ on that date (or if no sales occur on that date, on the last preceding date on which such sales of the Common Stock are so
reported), or (B) if the Common Stock is listed on a national securities exchange, as reported on the stock exchange composite tape on that date
(or if no sales occur on that date, on the last preceding date on which such sales of the Common Stock are so reported); (ii) if the Common
Stock is not traded on the National Market System of the NASDAQ or a national securities exchange but is traded over the counter at the time a
determination of its fair market value is required to be made under the Plan, the average between the reported high and low or closing bid and
asked prices of Common Stock on the most recent date on which Common Stock was publicly traded; (iii) in the event Common Stock is not
publicly traded at the time a determination of its value is required to be made under the Plan, the amount determined by the Committee in its
discretion through the reasonable application of a reasonable valuation method that considers applicable factors affecting market value and all
information available as of the valuation date; or (iv) on the date of an initial public offering of common stock, the offering price under such
initial public offering. In its determination of Fair Market Value, the Board may use an independent appraisal that meets the requirements of
Code Section 401(a)(28)(c) and the regulations thereunder, as long as such appraisal is as of a date that is no more than 12 months before the
date of the Board‘s determination .


                                                                          2
                           (n)        “Forfeiture Restrictions” will have the meaning assigned to such term in Section 8.2 .

                           (o)        “Holder” means an Employee, Consultant, or Director who has been granted an Award.

                           (p)         “Incentive Stock Option” means an incentive stock option within the meaning of section 422 of the
Code.

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

                           (r)         “Nonstatutory Stock Option” means Options that do not constitute Incentive Stock Options.

                            (s)         “Option” means an Award granted under Section 7 and includes both Incentive Stock Options and
options that do not constitute Incentive Stock Options.

                          (t)       “Option Agreement” means a written agreement between the Company and a Holder with respect to an
Option, including the accompanying ―Notice of Grant of Stock Option.‖

                           (u)        “Plan” means the Crossroads Systems, Inc. 2010 Stock Incentive Plan, as amended from time to time.

                            (v)      “Restricted Stock Agreement” means a written agreement between the Company and a Holder with
respect to a Restricted Stock Award.

                           (w)         “Restricted Stock Award” means an Award granted under Section 8 .

                           (x)          “Rule 16b-3” means SEC Rule 16b-3 promulgated under the 1934 Act, as such may be amended from
time to time, and any successor rule, regulation, or statute fulfilling the same or a similar function.

                   2.2       Number and Gender . Wherever appropriate in the Plan, words used in the singular will be considered to
include the plural, and words used in the plural will be considered to include the singular. The masculine gender, where appearing in the Plan,
will be deemed to include the feminine gender.

                   2.3        Headings . The headings of Sections and Subsections in the Plan are included solely for convenience, and, if
there is any conflict between such headings and the text of the Plan, the text will control. All references to Sections and Subsections are to this
document unless otherwise indicated.


                                                                        3
         Section 3.         EFFECTIVE DATE AND DURATION OF THE PLAN

                 3.1         Effective Date . The Plan will become effective upon the date of its adoption by the Board, provided that the
Plan is approved by the stockholders of the Company within 12 months after such adoption. Notwithstanding any provision in the Plan, in any
Option Agreement, or in any Restricted Stock Agreement, no Option will be exercisable and no Restricted Stock Award will vest prior to such
stockholder approval.

                    3.2        Duration of Plan . No further Awards may be granted under the Plan after ten years from the date the Plan is
adopted by the Board. The Plan will remain in effect until all Options granted under the Plan have been exercised, forfeited, assumed,
substituted, satisfied or expired and all Restricted Stock Awards granted under the Plan have vested or been forfeited.

         Section 4.          ADMINISTRATION

                  4.1         Composition of Committee . The Plan will be administered by a committee of, and appointed by, the Board. In
the absence of the Board‘s appointment of such Committee to administer the Plan, the Board will serve as the Committee. Notwithstanding the
foregoing, from and after the date upon which the Company becomes a ―publicly held corporation‖ (as defined in section 162(m) of the Code
and applicable interpretive authority under the Code), the Plan will be administered by a committee of, and appointed by, the Board that will be
comprised solely of two or more outside Directors (within the meaning of the term ―outside directors‖ as used in section 162(m) of the Code
and applicable interpretive authority under the Code and within the meaning of ―Non-Employee Director‖ as defined in Rule 16b-3).

                   4.2        Powers . Subject to the express provisions of the Plan, the Committee will have authority, in its discretion, to
determine which Employees, Consultants, or Directors will receive an Award, the time or times when such Award will be made, whether an
Incentive Stock Option or Nonstatutory Stock Option will be granted, and the number of shares to be subject to each Option or Restricted Stock
Award. In making such determinations, the Committee will take into account the nature of the services rendered by the respective Employees,
Consultants, or Directors, their present and potential contribution to the Company‘s success, and such other factors as the Committee in its
discretion will deem relevant.

                   4.3       Additional Powers . The Committee will have such additional powers as are delegated to it by the other
provisions of the Plan. Subject to the express provisions of the Plan, this will include the power (1) to construe the Plan and the respective
agreements executed under the Plan, (2) to prescribe rules and regulations relating to the Plan, (3) to determine the terms, restrictions, and
provisions of the agreement relating to each Award, including such terms, restrictions, and provisions as will be requisite in the judgment of the
Committee to cause designated Options to qualify as Incentive Stock Options, and (4) to make all other determinations necessary or advisable
for administering the Plan. The Committee may correct any defect, supply any omission, or reconcile any inconsistency in the Plan or in any
agreement relating to an Award in the manner and to the extent it will deem expedient to carry it into effect. The determinations of the
Committee on the matters referred to in this Section will be conclusive and binding on all persons.


                                                                        4
                  4.4        Limitation of Liability . The Committee and each member thereof shall be entitled to, in good faith, rely or act
upon any report or other information furnished to him or her by any officer or employee of the Company or an Affiliate, the Company‘s legal
counsel, independent auditors, consultants or any other agents assisting in the administration of this Plan. Members of the Committee and any
officer or employee of the Company or an Affiliate acting at the direction or on behalf of the Committee shall not be personally liable for any
action or determination taken or made in good faith with respect to this Plan, and shall, to the fullest extent permitted by law, be indemnified
and held harmless by the Company with respect to any such action or determination.

         Section 5.          STOCK SUBJECT TO THE PLAN

                  5.1          Stock Offered . Subject to the limitations set forth in Section 5.2 , the stock to be offered pursuant to the grant of
an Award may be (1) authorized but unissued Common Stock or (2) previously issued and outstanding Common Stock reacquired by the
Company. Any of such shares that remain unissued and are not subject to outstanding Awards at the termination of the Plan will cease to be
subject to the Plan, but until termination of the Plan the Committee will at all times make available a sufficient number of shares to meet the
requirements of the Plan.

                   5.2        Plan and Individual Limitations on Shares . Subject to increases in Section 5.3 below and adjustment in the
same manner as provided in Section 9 with respect to shares of Common Stock subject to Options then outstanding, the aggregate number of
shares of Common Stock that may be issued under the Plan will not exceed 10,000,000 shares. Shares will be deemed to have been issued
under the Plan only (1) to the extent actually issued and delivered pursuant to an Award or (2) to the extent an Award is settled in cash. To the
extent that an Award lapses or the rights of its Holder terminate, any shares of Common Stock subject to such Award will again be available for
the grant of an Award. From and after the date upon which the Company becomes a ―publicly held corporation‖ (as defined in section 162(m)
of the Code and applicable interpretive authority under the Code), the limitation set forth in the preceding sentences will be applied in a manner
that will permit compensation generated under the Plan to constitute ―performance-based‖ compensation for purposes of section 162(m) of the
Code, including, without limitation, counting against such maximum number of shares, to the extent required under section 162(m) of the Code
and applicable interpretative authority under the Code, any shares subject to Options that are canceled or repriced.

                  5.3          Evergreen . The total number of shares that will be reserved, and that may be issued, under the Plan shall
automatically increase on the first trading day of each calendar year, beginning with calendar year 2011, by a number of shares equal to four
percent (4%) of the total outstanding shares on the last day of the prior calendar year (subject to a maximum annual increase of 1,000,000).

         Section 6.          GRANT OF AWARDS

                  6.1         Eligibility for Award . Awards may be granted only to persons who, at the time of grant, are Employees,
Consultants, or Directors.

                 6.2         Grant of Awards . The Committee may from time to time in its discretion grant Awards to one or more
Employees, Consultants, or Directors determined by it to be eligible for participation in the Plan in accordance with the provisions of Section
6.1 . An Award may be granted on more than one occasion to the same person, and, subject to the limitations set forth in the Plan, such Award
may include an Incentive Stock Option, a Nonstatutory Stock Option, a Restricted Stock Award, or any combination thereof.


                                                                         5
         Section 7.         STOCK OPTIONS

                     7.1     Option Period . The term of each Option will be as specified by the Committee at the date of grant.

                   7.2        Limitations on Vesting and/or Exercise of Option . An Option will be vested and/or exercisable in whole or in
part and at such times as determined by the Committee and set forth in the Notice of Grant and Option Agreement. The Committee in its
discretion may provide that an Option will be vested or exercisable upon (1) the attainment of one or more performance goals or targets
established by the Committee, which are based on (i) the price of a share of Common Stock, (ii) the Company‘s earnings per share, (iii) the
Company‘s market share, (iv) the market share of a business unit of the Company designated by the Committee, (v) the Company‘s sales, (vi)
the sales of a business unit of the Company designated by the Committee, (vii) the net income (before or after taxes) of the Company or a
business unit of the Company designated by the Committee, (viii) the cash flow return on investment of the Company or any business unit of
the Company designated by the Committee, (ix) the earnings before or after interest, taxes, depreciation, and/or amortization of the Company
or any business unit of the Company designated by the Committee, (x) the economic value added, or (xi) the return on stockholders‘ equity
achieved by the Company; (2) the Holder‘s continued employment as an Employee with the Company or continued service as a Consultant or
Director for a specified period of time; (3) the occurrence of any event or the satisfaction of any other condition specified by the Committee in
its sole discretion; or (4) a combination of any of the foregoing. Each Option may, in the discretion of the Committee, have different
provisions with respect to vesting and/or exercise of the Option.

                     7.3     Special Limitations on Incentive Stock Options .

                           (a)       An Incentive Stock Option may be granted only to an individual who is an Employee at the time the
Option is granted.

                            (b)        No Incentive Stock Option will be granted to an individual if, at the time the Option is granted, such
individual owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or of its parent or
subsidiary corporation, within the meaning of section 422(b)(6) of the Code, unless (1) at the time such Option is granted the option price is at
least 110% of the Fair Market Value of the Common Stock subject to the Option and (2) such Option by its terms is not exercisable after the
expiration of five years from the date of grant.

                            (c)       If an Option is designated as an Incentive Stock Option in the Notice of Grant of Stock Option, to the
extent that such Option (together with all Incentive Stock Options granted to the Optionee under the Plan and all other stock option plans of the
Company and its parent and subsidiaries) becomes exercisable for the first time during any calendar year for shares having a Fair Market Value
greater than $100,000, the portion of each such Incentive Stock Option that exceeds such amount will be treated as a Nonstatutory Stock
Option. For purposes of this Subsection, Options designated as Incentive Stock Options are taken into account in the order in which they were
granted, and the Fair Market Value of Common Stock is determined as of the time the Option with respect to such Common Stock is
granted. If the Code is amended to provide for a different limitation from that set forth in this Subsection, such different limitation will be
deemed incorporated in the Plan effective as of the date required or permitted by such amendment to the Code. If the Option is treated as an
Incentive Stock Option in part and as a Nonstatutory Stock Option in part by reason of the limitation set forth in this Subsection, the Optionee
may designate which portion of such Option the Optionee is exercising. In the absence of such designation, the Optionee will be deemed to
have exercised the Incentive Stock Option portion of the Option first. Separate certificates representing each such portion will be issued upon
the exercise of the Option.


                                                                       6
                            (d)        An Incentive Stock Option (1) will not be transferable otherwise than by will or the laws of descent and
distribution and (2) will be exercisable during the Holder‘s lifetime only by such Holder or his guardian or legal representative.

                            (e)      The price at which a share of Common Stock may be purchased upon exercise of an Incentive Stock
Option will not be less than 100% of the Fair Market Value of a share of Common Stock on the date such Option is granted.

                 7.4         Option Agreement .

                            (a)       Each Option will be evidenced by an Option Agreement in such form and containing such provisions not
inconsistent with the provisions of the Plan as the Committee from time to time will approve, including, without limitation, provisions to
qualify an Incentive Stock Option under section 422 of the Code and provisions relating to vesting and exercisability. The terms and
conditions of the Options and respective Option Agreements need not be identical. Subject to the consent of the Holder, the Committee may, in
its sole discretion, amend an outstanding Option Agreement from time to time in any manner that is not inconsistent with the provisions of the
Plan (including, without limitation, an amendment that accelerates the time at which the Option, or a portion of the Option, may be
exercisable).

                          (b)      Each Option Agreement will specify the effect of termination of (1) employment, (2) the consulting,
advisory, or other non-common law employee relationship, or (3) membership on the Board, as applicable, on the vesting and/or exercisability
of the Option.

                           (c)       An Option Agreement may provide for the payment of the option price, in whole or in part, by the
delivery of a number of shares of Common Stock (plus cash if necessary) having a Fair Market Value equal to such option price. Moreover, an
Option Agreement may provide for a ―cashless exercise‖ of the Option through procedures satisfactory to, and approved by and in the sole
discretion of, the Committee. Generally, and without limiting the Committee‘s absolute discretion, a ―cashless exercise‖ will only be permitted
at such times in which the shares underlying this Option are publicly traded.

                  7.5        Option Price, Payment, and Exercise . Subject to Subsection 7.3(b) with respect to Incentive Stock Options, the
price at which a share of Common Stock may be purchased upon exercise of an Option will be determined by the Committee, but in no event
will the price be less than 100% of the Fair Market Value of a share of Common Stock on the date such Option is granted. The Option or
portion of the Option may be exercised by delivery of an irrevocable notice of exercise to the Secretary of the Company, except as may
otherwise be provided in the Option Agreement. The purchase price of the Option or portion of the Option will be paid in full in the manner
prescribed by the Committee. Separate stock certificates will be issued by the Company for those shares acquired pursuant to the exercise of an
Incentive Stock Option and for those shares acquired pursuant to the exercise of a Nonstatutory Stock Option.

                   7.6       Stockholder Rights and Privileges . The Holder will be entitled to all the privileges and rights of a stockholder
only with respect to such shares of Common Stock as have been purchased under the Option and for which certificates of stock have been
registered in the Holder‘s name.


                                                                      7
                7.7       Options and Rights in Substitution for Stock Options Granted by Other Corporations . Options may be
granted under the Plan from time to time in substitution for stock options held by individuals employed by corporations who become
Employees, Consultants, or Directors as a result of a merger, consolidation, or other business combination of the employing corporation with
the Company or any subsidiary.

         Section 8.          RESTRICTED STOCK AWARDS

                  8.1        Restricted Stock Agreement . At the time any Award is made under this Section, the Company and the Holder
will enter into a Restricted Stock Agreement setting forth each of the matters contemplated by the Plan and such other matters as the
Committee may determine to be appropriate. The terms and provisions of the respective Restricted Stock Agreements need not be identical.

                    8.2         Forfeiture Restrictions . Shares of Common Stock that are the subject of a Restricted Stock Award will be
subject to restrictions on disposition by the Holder and an obligation of the Holder to forfeit and surrender the shares to the Company under
certain circumstances (the ―Forfeiture Restrictions‖ ). The Forfeiture Restrictions will be determined by the Committee in its sole discretion,
and the Committee may provide that the Forfeiture Restrictions will lapse upon (1) the attainment of one or more performance goals or targets
established by the Committee, which are based on (i) the price of a share of Common Stock, (ii) the Company‘s earnings per share, (iii) the
Company‘s market share, (iv) the market share of a business unit of the Company designated by the Committee, (v) the Company‘s sales, (vi)
the sales of a business unit of the Company designated by the Committee, (vii) the net income (before or after taxes) of the Company or a
business unit of the Company designated by the Committee, (viii) the cash flow return on investment of the Company or any business unit of
the Company designated by the Committee, (ix) the earnings before or after interest, taxes, depreciation, and/or amortization of the Company
or any business unit of the Company designated by the Committee, (x) the economic value added, or (xi) the return on stockholders‘ equity
achieved by the Company; (2) the Holder‘s continued employment as an Employee with the Company or continued service as a Consultant or
Director for a specified period of time; (3) the occurrence of any event or the satisfaction of any other condition specified by the Committee in
its sole discretion; or (4) a combination of any of the foregoing. Each Restricted Stock Award may, in the discretion of the Committee, have
different Forfeiture Restrictions.

                   8.3         Other Terms and Conditions . Common Stock awarded pursuant to a Restricted Stock Award will be
represented by a stock certificate registered in the name of the Holder of such Restricted Stock Award. Unless otherwise provided in the
Restricted Stock Agreement, the Holder will have the right to receive dividends with respect to Common Stock subject to a Restricted Stock
Award, to vote Common Stock subject to such Restricted Stock Agreement, and to enjoy all other stockholder rights, except that (1) the Holder
will not be entitled to delivery of the stock certificate until the Forfeiture Restrictions have lapsed, (2) the Company will retain custody of the
stock until the Forfeiture Restrictions have lapsed, (3) the Holder may not sell, transfer, pledge, exchange, hypothecate, or otherwise dispose of
the stock until the Forfeiture Restrictions have lapsed, and (4) a breach of the terms and conditions established by the Committee pursuant to
the Restricted Stock Agreement will cause a forfeiture of the Restricted Stock Award. At the time of such Award, the Committee may, in its
sole discretion, prescribe additional terms, conditions, or restrictions relating to Restricted Stock Awards, including, but not limited to, rules
pertaining to the termination of employment or service as a Consultant or Director (by retirement, disability, death, or otherwise) of a Holder
prior to lapse of the Forfeitures Restrictions. Such additional terms, conditions, or restrictions will be set forth in the Restricted Stock
Agreement made in conjunction with the Award. Subject to the consent of the Holder and the restriction set forth in the last sentence of
Section 8.4 below, the Committee may, in its sole discretion, amend an outstanding Restricted Stock Agreement from time to time in any
manner that is not inconsistent with the provisions of the Plan.


                                                                        8
                  8.4        Committee’s Discretion to Accelerate Vesting of Restricted Stock Awards . The Committee may, in its
discretion and as of a date determined by the Committee, fully vest any or all Common Stock awarded to a Holder pursuant to a Restricted
Stock Award, and, upon such vesting, all restrictions applicable to such Restricted Stock Award will lapse as of such date. Any action by the
Committee pursuant to this Section may vary among individual Holders and may vary among the Restricted Stock Awards held by any
individual Holder. Notwithstanding the preceding provisions of this Section, from and after the date upon which the Company becomes a
―publicly held corporation‖ (as defined in section 162(m) of the Code and applicable interpretive authority under the Code), the Committee
may not take any action described in this Section with respect to a Restricted Stock Award that has been granted after such date to a ―covered
employee‖ (within the meaning of Treasury Regulation section 1.162-27(c)(2)) if such Award has been designed to meet the exception for
performance-based compensation under section 162(m) of the Code.

                 8.5       Payment for Restricted Stock . The Committee will determine the amount and form of any payment for
Common Stock received pursuant to a Restricted Stock Award, provided that , in the absence of such a determination, a Holder will not be
required to make any payment for Common Stock received pursuant to a Restricted Stock Award, except to the extent otherwise required by
law.

         Section 9.         RECAPITALIZATION OR REORGANIZATION

                    9.1       No Effect on Board’s or Stockholders’ Power . The existence of the Plan and the Awards granted under the
Plan will not affect in any way the right or power of the Board or the stockholders of the Company to make or authorize (1) any adjustment,
recapitalization, reorganization, or other change in the Company‘s capital structure or its business, (2) any merger, share exchange, or
consolidation of the Company or any subsidiary, (3) any issue of debt or equity securities ranking senior to or affecting Common Stock or the
rights of Common Stock, (4) the dissolution or liquidation of the Company or any subsidiary, (5) any sale, lease, exchange, or other disposition
of all or any part of the Company‘s assets or business, or (6) any other corporate act or proceeding.

                  9.2        Adjustment in the Event of Stock Subdivision, Consolidation, or Dividend . The shares with respect to which
Options may be granted are shares of Common Stock as presently constituted, but if, and whenever, prior to the expiration of an Option
theretofore granted, the Company shall effect a subdivision or consolidation of shares of Common Stock or the payment of a stock dividend on
Common Stock without receipt of consideration by the Company, the number of shares of Common Stock with respect to which such Option
may thereafter be exercised (1) in the event of an increase in the number of outstanding shares, will be proportionately increased, and the
purchase price per share will be proportionately reduced, and (2) in the event of a reduction in the number of outstanding shares, will be
proportionately reduced, and the purchase price per share will be proportionately increased, without changing the aggregate purchase price or
value as to which outstanding Awards remain exercisable or subject to restrictions. No fractional share resulting from such adjustment shall be
issued under the Plan.


                                                                       9
                  9.3        Adjustment in the Event of Recapitalization or Corporate Change .

                            (a)       If the Company recapitalizes, reclassifies its capital stock, or otherwise changes its capital structure (a
―recapitalization‖ ), the number and class of shares of Common Stock covered by an Option theretofore granted will be adjusted so that such
Option will thereafter cover the number and class of shares of stock and securities to which the Holder would have been entitled pursuant to the
terms of the recapitalization if, immediately prior to the recapitalization, the Holder had been the holder of record of the number of shares of
Common Stock then covered by such Option.

                            (b)       If a Corporate Change occurs, then no later than (1) 10 days after the approval by the stockholders of the
Company of a Corporate Change, other than a Corporate Change resulting from a person or entity acquiring or gaining ownership or control of
more than 50% of the outstanding shares of the Company‘s voting stock, or (2) 30 days after a Corporate Change resulting from a person or
entity acquiring or gaining ownership or control of more than 50% of the outstanding shares of the Company‘s voting stock, the Committee,
acting in its sole discretion and without the consent or approval of any Holder, will effect one or more of the following alternatives, which
alternatives may vary among individual Holders and which may vary among Options held by any individual Holder:

                                    (i)       Accelerate the vesting of any Options (or any portion of any Option) then outstanding;

                                     (ii)      Accelerate the time at which some or all of the Options (or any portion of the Options) then
outstanding may be exercised so that such Options (or any portion of such Options) may be exercised for a limited period of time on or before a
specified date (before or after such Corporate Change) fixed by the Committee, after which specified date all unexercised Options and all rights
of Holders under such Options will terminate;

                                    (iii)      Require the mandatory surrender to the Company by selected Holders of some or all of the
outstanding Options (or any portion of such Options) held by such Holders (irrespective of whether such Options (or any portion of such
Options) are then vested or exercisable under the provisions of the Plan) as of a date, before or after such Corporate Change, specified by the
Committee, in which event the Committee will then cancel such Options (or any portion of such Options) and cause the Company to pay each
Holder an amount of cash per share equal to the excess, if any, of the Change of Control Value of the shares subject to such Option over the
exercise price(s) under such Options for such shares;

                                    (iv)      Make such adjustments to Options (or any portion of such Options) then outstanding as the
Committee deems appropriate to reflect such Corporate Change ( provided , however , that the Committee may determine in its sole discretion
that no adjustment is necessary to one or more Options (or any portion of such Options) then outstanding); or

                                    (v)       Provide that the number and class of shares of Common Stock covered by an Option (or any
portion of such Option) theretofore granted will be adjusted so that such Option will thereafter cover the number and class of shares of stock or
other securities or property (including, without limitation, cash) to which the Holder would have been entitled pursuant to the terms of the
agreement of merger, consolidation, or sale of assets or dissolution if, immediately prior to such merger, consolidation, or sale of assets or
dissolution, the Holder had been the holder of record of the number of shares of Common Stock then covered by such Option.


                                                                       10
                 9.4        Change of Control Value . For purposes of Subsection 9.3(b)(iii) above, the ―Change of Control Value‖ will
equal the amount determined in one of the following clauses, whichever is applicable:

                             (a)      The per share price offered to stockholders of the Company in any such merger, consolidation, sale of
assets, or dissolution transaction;

                        (b)        The price per share offered to stockholders of the Company in any tender offer or exchange offer
whereby a Corporate Change takes place; or

                            (c)      If such Corporate Change occurs other than pursuant to a tender or exchange offer, the fair market value
per share of the shares into which such Options being surrendered are exercisable, as determined by the Committee as of the date determined
by the Committee to be the date of cancellation and surrender of such Options.

In the event that the consideration offered to stockholders of the Company in any transaction described in this Section or in Section 9.3 above
consists of anything other than cash, the Committee will determine in its discretion the fair cash equivalent of the portion of the consideration
offered that is other than cash .

                   9.5        Other Adjustments . In the event of changes in the outstanding Common Stock by reason of recapitalizations,
mergers, consolidations, reorganizations, liquidations, combinations, split-ups, split-offs, spin-offs, exchanges, issuances of rights or warrants,
or other relevant changes in capitalization or distributions to the holders of Common Stock occurring after the date of grant of any Award and
not otherwise provided for by this Section, (1) such Award and any agreement evidencing such Award shall be adjusted by the Committee as it
deems appropriate as to the number and price of shares of Common Stock or other consideration subject to such Award, without changing the
aggregate purchase price or value as to which outstanding Awards remain, and (2) the aggregate number of shares available under the Plan and
the maximum number of shares that may be subject to Awards to any one individual shall be adjusted by the Committee as it deems
appropriate, whose determination with respect to the adjustment shall be conclusive and binding on all parties.

                  9.6         Stockholder Action . If any event giving rise to an adjustment provided for in this Section requires stockholder
action, such adjustment will not be effective until such stockholder action has been taken.

                    9.7         No Adjustment Except as Provided in the Plan . Except as expressly provided in the Plan, the issuance by the
Company of shares of stock of any class or securities convertible into shares of stock of any class for cash, property, labor, or services, upon
direct sale, upon the exercise of rights or warrants to subscribe for such shares or other securities, or upon conversion of shares or obligations of
the Company convertible into such shares or other securities, and in any case whether or not for fair value, will not affect, and no adjustment by
reason thereof will be made with respect to, the number of shares of Common Stock subject to Awards theretofore granted or the purchase
price per share, if applicable.


                                                                         11
        Section 10.        AMENDMENT AND TERMINATION OF THE PLAN

               10.1       Termination of Plan . The Board in its discretion may terminate the Plan at any time with respect to any shares
of Common Stock for which Awards have not theretofore been granted.

                   10.2      Amendment of Plan . The Board will have the right to alter or amend the Plan or any part of the Plan from time
to time; provided that no change in any Award theretofore granted may be made that would impair the rights of the Holder without the consent
of the Holder; and provided , further , that the Board may not, without approval of the stockholders, amend the Plan to (1) increase the
maximum aggregate number of shares that may be issued under the Plan, (2) change the class of individuals eligible to receive Awards under
the Plan, or (3) otherwise modify the Plan in a manner that would require shareholder approval under applicable exchange rules.

        Section 11.        MISCELLANEOUS

                  11.1       No Right To An Award . Neither the adoption of the Plan nor any action of the Board or of the Committee will
be deemed to give an Employee, Consultant, or Director any right to be granted an Option, any right to a Restricted Stock Award, or any other
rights under the Plan except as may be evidenced by an Option Agreement or a Restricted Stock Agreement duly executed on behalf of the
Company, and then only to the extent and on the terms and conditions expressly set forth in such Agreement.

                  11.2       Unfunded Plan . The Plan will be unfunded. The Company will not be required to establish any special or
separate fund or to make any other segregation of funds or assets to insure the payment of any Award.

                  11.3       No Employment/Consulting/Membership Rights Conferred . Nothing contained in the Plan will (1) confer
upon any Employee or Consultant any right with respect to continuation of employment or of a consulting, advisory, or other non-common law
relationship with the Company or any subsidiary or (2) interfere in any way with the right of the Company or any subsidiary to terminate any
Employee‘s employment or any Consultant‘s consulting, advisory, or other non-common law relationship at any time. Nothing contained in
the Plan will confer upon any Director any right with respect to continuation of membership on the Board.

                  11.4      Compliance with Other Laws . The Company will not be obligated to issue any Common Stock pursuant to any
Award granted under the Plan at any time when the shares covered by such Award have not been registered under the Securities Act of 1933, as
amended, and such other state and federal laws, rules, or regulations as the Company or the Committee deems applicable and, in the opinion of
legal counsel to the Company, there is no exemption from the registration requirements of such laws, rules, or regulations available for the
issuance and sale of such shares. No fractional shares of Common Stock will be delivered, nor will any cash in lieu of fractional shares be
paid.

                  11.5       Withholding . The Company will have the right to deduct or cause to be deducted in connection with all Awards
any taxes required by law to be withheld and to require any payments required to satisfy applicable withholding obligations.


                                                                     12
                   11.6       No Restriction on Corporate Action . Nothing contained in the Plan will be construed to prevent the Company
or any subsidiary from taking any corporate action that is deemed by the Company or such subsidiary to be appropriate or in its best interest,
whether or not such action would have an adverse effect on the Plan or any Award made under the Plan. No Employee, Consultant, Director,
beneficiary, or other person will have any claim against the Company or any subsidiary as a result of any such action.

                    11.7       Restrictions on Transfer . An Award (other than an Incentive Stock Option, which will be subject to the transfer
restrictions set forth in Section 7.3 ) will not be transferable otherwise than (1) by will or the laws of descent and distribution or (2) with the
consent of the Committee.

                  11.8        Governing Law . The Plan will be construed in accordance with the laws of the state of Delaware.


                                                                        13
                                                                                                                                    Exhibit 10.2

                                                       EMPLOYMENT AGREEMENT

 This Employment Agreement (this "AGREEMENT") is made and entered into effective as of October 13, 2003, by and between Crossroads
Systems, Inc., a Delaware corporation (the "COMPANY"), and Robert Sims, an individual (the "EXECUTIVE").

                                                                  RECITALS

 WHEREAS, the Company desires to promote Executive and Executive desires to remain with the Company; and;

 WHEREAS, the Company and Executive have determined that it is in their respective best interest to enter into this Agreement on the terms
and conditions as set forth herein.

                                                                AGREEMENT

 NOW, THEREFORE, in consideration of the premises and the mutual covenants and promises contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 1.         EMPLOYMENT TERMS AND DUTIES

 1.1      EMPLOYMENT. The Company hereby agrees to promote Executive, and Executive hereby desires to remain employed by the
Company, upon the terms and conditions set forth in this Agreement.

 1.2        DUTIES AND OUTSIDE ACTIVITIES.

 1.2.1          DUTIES. Executive shall serve as President and Chief Executive Officer and shall report directly to the Company's Board of
Directors (the "BOARD OF DIRECTORS"). Executive shall have the authority and perform the duties customarily associated with his title and
office, together with such additional duties of a senior executive nature and commensurate with his title as may from time to time be assigned
by the Board of Directors. During the term of Executive's employment hereunder, Executive shall devote his full working time and efforts to
the performance of his duties and the furtherance of the interests of the Company and shall not be otherwise be employed except for permitted
outside activities as set forth in Section 1.2.3.

 1.2.2         BOARD OF DIRECTORS. It is the Company's understanding that Executive will be appointed to the Board of Directors as a
Class III board member. If, at any time during Executive's service on the Board of Directors, Executive is no longer the Chief Executive
Officer or President of the Company, regardless of the reason, Executive agrees to resign from the Board of Directors immediately following
such change of employment status.

 1.2.3          PERMITTED OUTSIDE ACTIVITIES. Executive may serve as a director or trustee of other organizations or engage in
charitable, civic and/or governmental activities, provided that such service and activities do not prevent Executive from performing the duties
required of Executive under this Agreement, as determined in the judgment of the Company, and further provided that Executive obtains
written consent for all such activities from the Company, which consent will not be unreasonably withheld. Executive also may engage in
personal activities, including, without limitation, personal investments, provided that such activities do not, in the judgment of the Company,
impair or interfere with Executive's ability to perform the duties required of Executive under this Agreement.
 1.3          TERM. The Company's promotion of Executive under this Agreement shall commence on September 18, 2003 (the
"PROMOTION DATE") and shall continue on an "at-will" basis. Executive and the Company understand and agree that the employment
relationship between Executive and the Company is "at-will" and may be terminated at any time, upon written notice to the other party, with or
without cause, at the option of either the Company or Executive and subject to the provisions of the special severance benefit program set forth
in that certain letter agreement between the Company and Executive dated February 11, 2002 attached hereto as Exhibit A (the "SEVERANCE
BENEFIT PLAN"). The time period for which Executive is actually employed under this Agreement shall be referred to herein as the
"EMPLOYMENT TERM."

 1.4        COMPENSATION AND BENEFITS.

 1.4.1        BASE SALARY. In consideration of the services rendered to the Company hereunder by Executive and Executive's covenants
hereunder and in the Company's Proprietary Information and Inventions Agreement, the Company shall, during the Employment Term, pay
Executive a base salary in the amount of $20,833.33 per month ($250,000 annualized) (the "BASE SALARY"), less statutory deductions and
withholdings, payable in accordance with the Company's regular payroll practices.

 1.4.2       BENEFITS PACKAGE. In addition to the Base Salary, during the Employment Term, Executive shall be eligible to receive
such employee benefits and holidays as may be in effect from time to time as are afforded to other executives of the Company.

 1.4.3        VACATION. Executive shall be eligible for the Company's executive vacation plan.

 1.4.4        EXPENSES. The Company shall, upon receipt from Executive of supporting receipts to the extent required by applicable
income tax regulations and the Company's reimbursement policies, reimburse Executive for all out-of-pocket business expenses reasonably
incurred by Executive in connection with his employment hereunder.

 1.5        STOCK OPTION. Subject to approval by the Company's Board of Directors, the Company shall grant to Executive, in accordance
with the terms of the Crossroads Systems, Inc. 1999 Stock Incentive Plan (the "PLAN"), an option to purchase a total of 125,000 shares of the
Company's common stock ("COMMON STOCK") at an exercise price equal to the fair market of the Common Stock on September 30, 2003
(the "OPTION"). The Option shall vest over four (4) years in accordance with the following vesting schedule: twenty-five percent (25%) of the
Option shall become exercisable upon Executive's completion of one year as an Employee (defined below) of the Company measured from the
Promotion Date and the balance of the Option shall vest in twelve (12) successive equal quarterly installments upon the completion of each
additional quarter of employment as an Employee of the Company during the three (3)-year period following the first anniversary of the
Promotion Date. For purposes of this Agreement, "EMPLOYEE" shall mean an individual who is in the employ of the Company (or any Parent
or Subsidiary), subject to the control and direction of the employer entity as to both the work to be performed and the manner and method of
performance.

 1.6        BONUS PLAN. Executive will be eligible to participate in the Company's bonus plans as may be in effect from time to time and as
afforded to other executives of the Company.


                                                                       2
 1.7        TERMINATION AND SEVERANCE.

 1.7.1         TERMINATION. Executive's employment and this Agreement may be terminated at any time, upon written notice to the other
party, with or without cause, at the option of either the Company or Executive subject to the provisions set forth in the Severance Benefit Plan.

 1.7.2          SEVERANCE BENEFITS. Executive shall be entitled to the severance benefits set forth in the Severance Benefit Plan.

 1.7.3         WARN ACT OFFSET. In the event that Executive's Involuntary Termination (as defined in the Severance Benefit Plan) is
covered by the Worker Adjustment Retraining Notification Act ("WARN") at the time of Executive's termination, or is deemed to be covered
by WARN retrospectively within 90 days after Executive's termination, the amount of any severance benefit Executive is entitled to receive
pursuant to the Severance Benefit Plan shall be reduced by an amount equal to any payments the Company is required to provide Executive
under WARN or by the amount of pay Executive receives during any portion of WARN's 60-day notice period where Executive does not
perform any work for the Company.

           2.          PROTECTION OF COMPANY'S PROPRIETARY INFORMATION AND INVENTIONS.

 Executive acknowledges that he has complied with the provisions of the Company's Confidentiality, Proprietary Information and Inventions
Agreement signed by him (the "PROPRIETARY INFORMATION AGREEMENT"). Executive understands and agrees that he will continue to
be bound by the Proprietary Information Agreement and that the Proprietary Information Agreement survives the termination of this
Agreement, the Employment Term and/or the Executive's employment with the Company. A copy of the Proprietary Information Agreement is
attached hereto as Exhibit B.

           3.            REPRESENTATIONS AND WARRANTIES BY EXECUTIVE

 Executive represents and warrants to the Company that (i) this Agreement is valid and binding upon and enforceable against him in
accordance with its terms, (ii) Executive is not bound by or subject to any contractual or other obligation that would be violated by his
execution or performance of this Agreement, including, but not limited to, any non-competition agreement presently in effect, and (iii)
Executive is not subject to any pending or, to Executive's knowledge, threatened claim, action, judgment, order, or investigation that could
adversely affect his ability to perform his obligations under this Agreement or the business reputation of the Company. Executive has not
entered into, and agrees that he will not enter into, any agreement either written or oral in conflict herewith.

           4.          MISCELLANEOUS

 4.1        NOTICES. All notices, requests, and other communications hereunder must be in writing and will be deemed to have been duly
given only if (i) delivered personally against written receipt, (ii) delivered by facsimile transmission with answer back confirmation, (iii)
mailed (postage prepaid by certified or registered mail, return receipt requested), (iv) delivered by overnight courier to the parties, or (v)
delivered by electronic communication (as set forth below) at the following addresses, facsimile numbers, or electronic mail addresses:


                                                                        3
 If to the Company, to:

 Crossroads Systems, Inc.
 8300 North MoPac Expressway
 Austin, Texas 78759
 Facsimile: 512-349-0304
 Attn: Compensation Committee of the Board of Directors

All such notices, requests and other communications will (i) if delivered personally to the address as provided in this Section 4.1, be deemed
given upon delivery, (ii) if delivered by facsimile transmission to the facsimile number as provided in this Section 4.1, be deemed given upon
receipt, and (iii) if delivered by mail in the manner described above to the address as provided in this Section 4.1, be deemed given upon receipt
(in each case regardless of whether such notice, request, or other communication is received by any other person to whom a copy of such
notice, request or other communication is to be delivered pursuant to this Section). An electronic communication ("ELECTRONIC NOTICE")
shall be deemed written notice for purposes of this Section 4.1 if sent with return receipt requested to the electronic mail address specified by
the receiving party, in a signed writing in a nonelectronic form. Electronic Notice shall be deemed received at the time the party sending
Electronic Notice receives verification of receipt by the receiving party. Any party receiving Electronic Notice may request and shall be
entitled to receive the notice on paper, in a nonelectronic form ("NONELECTRONIC NOTICE") which shall be sent to the requesting party
within ten (10) days of receipt of the written request for Nonelectronic Notice. Any party from time to time may change its address, facsimile
number, electronic mail address, or other information for the purpose of notices to that party by giving written notice specifying such change to
the other parties hereto.

 4.2        AUTHORIZATION TO BE EMPLOYED. This Agreement, and Executive's employment hereunder, is subject to Executive
providing the Company with legally required proof of Executive's authorization to be employed in the United States of America.

 4.3         ENTIRE AGREEMENT. This Agreement, and the attached exhibits, supersede all prior discussions and agreements among the
parties with respect to the subject matter hereof and contain the sole and entire agreement between the parties hereto with respect thereto.

 4.4         SURVIVAL. The respective rights and obligations of the parties, including but not limited to Sections 1.7.2, 1.7.3, 2, 4.1, and 4.5,
4.7, 4.9, 4.10, 4.12, 4.13, and 4.14 shall survive the termination of this Agreement, the Employment Term and/or the Employee's employment
with the Company.

 4.5        WAIVER. Any term or condition of this Agreement may be waived at any time by the party that is entitled to the benefit thereof,
but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the party waiving such term or
condition. No waiver by any party hereto of any term or condition of this Agreement, in any one or more instances, shall be deemed to be or
construed as a waiver of the same or any other term or condition of this Agreement on any future occasion. All remedies, either under this
Agreement or by law or otherwise afforded, will be cumulative and not alternative.


                                                                        4
 4.6        AMENDMENT. This Agreement may be amended, supplemented, or modified only by a written instrument duly executed by or
on behalf of each party hereto.

 4.7         RECOVERY OF ATTORNEY'S FEES. In the event of any litigation arising from or relating to this Agreement, the prevailing
party in such litigation proceedings shall be entitled to recover, from the non-prevailing party, the prevailing party's reasonable costs and
attorney's fees, in addition to all other legal or equitable remedies to which it may otherwise be entitled.

 4.8        TAX AND LEGAL ADVICE. Executive has had an opportunity to consult with his legal counsel and tax and other advisors
regarding the preparation of this Agreement. Executive understands that Ogletree, Deakins, Nash, Smoak & Stewart, P.C. and Andrews Kurth
LLP have acted solely as legal counsel for the Company with respect to the preparation of this Agreement and have not acted as legal counsel
for Executive.

 4.9        NO THIRD PARTY BENEFICIARY. The terms and provisions of this Agreement are intended solely for the benefit of each party
hereto and the Company's successors or assigns, and it is not the intention of the parties to confer third-party beneficiary rights upon any other
person.

 4.10       NO ASSIGNMENT; BINDING EFFECT. This Agreement shall inure to the benefit of any successors or assigns of the Company.
Executive shall not be entitled to assign his obligations under this Agreement.

 4.11       HEADINGS. The headings used in this Agreement have been inserted for convenience of reference only and do not define or limit
the provisions hereof.

 4.12       SEVERABILITY. The Company and Executive intend all provisions of this Agreement to be enforced to the fullest extent
permitted by law. Accordingly, if a court of competent jurisdiction determines that the scope and/or operation of any provision of this
Agreement is too broad to be enforced as written, the Company and Executive intend that the court should reform such provision to such
narrower scope and/or operation as it determines to be enforceable. If, however, any provision of this Agreement is held to be illegal, invalid,
or unenforceable under present or future law, and not subject to reformation, then (i) such provision shall be fully severable, (ii) this Agreement
shall be construed and enforced as if such provision was never a part of this Agreement, and (iii) the remaining provisions of this Agreement
shall remain in full force and effect and shall not be affected by illegal, invalid, or unenforceable provisions or by their severance.

 4.13    GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS APPLICABLE TO CONTRACTS EXECUTED AND PERFORMED IN SUCH STATE WITHOUT
GIVING EFFECT TO CONFLICTS OF LAWS PRINCIPLES.

 4.14        JURISDICTION. With respect to any suit, action, or other proceeding arising from (or relating to) this Agreement, the Company
and Executive hereby irrevocably agree to the exclusive personal jurisdiction and venue of the United States District Court for the Western
District of Texas (and any Texas State Court within Travis County, Texas).

 4.15      COUNTERPARTS. This Agreement may be executed in any number of counterparts and by facsimile, each of which will be
deemed an original, but all of which together will constitute one and the same instrument.

                                    [SIGNATURE PAGE TO EMPLOYMENT AGREEMENT FOLLOWS]


                                                                        5
IN WITNESS WHEREOF, the parties hereto have caused this Employment Agreement to be executed on the date first written above.

                                                                  "COMPANY"

                                                                  CROSSROADS SYSTEMS, INC.

                                                                  By:        /s/ Richard Eyestone
                                                                  Name: Richard Eyestone
                                                                  Title: Director & Chairman,
                                                                  Director & Chairman, Comp. Comm.

                                                                  "EXECUTIVE"

                                                                  ROBERT SIMS

                                                                  /s/ Robert Sims
                                                                  Executive's Signature


                                                                  Address


                                                                  Address

EXHIBIT A: Severance Benefit Plan
EXHIBIT B: Confidentiality, Proprietary Information and Inventions Agreement

                                       [SIGNATURE PAGE TO EMPLOYMENT AGREEMENT]
                                                                                                                                      Exhibit 10.3

February 11, 2002

Robert Sims

RE: Severance Benefit Plan

Dear Mr. Sims

         We are pleased to inform you that the Company‘s Board of Directors has approved a special severance benefit program for you. The
purpose of this letter agreement is to set forth the terms and conditions of your severance benefits and to explain the limitations that will govern
their overall value.

                   Your severance package will become payable should your employment terminate under certain circumstances including
certain terminations following a substantial change in ownership or control of the Company. To understand the full scope of your benefits, you
should familiarize yourself with the definitional provisions of Part One of this letter agreement. The benefits comprising your severance
package are detailed in Part Two, and the dollar limitations on the overall value of your benefit package and other applicable restrictions are
specified in Parts Three and Four, respectively. Part Five deals with ancillary matters affecting your severance arrangement.

                                                      PART ONE – DEFINITIONS

                  For purposes of this letter agreement, the following definitions will be in effect:

                  Base Salary means the monthly rate of base salary in effect for you at the time of your Involuntary Termination. In the event
of your Involuntary Termination following a Change in Control, Base Salary means the greater of your monthly base salary immediately prior
to the Change in Control or the monthly rate of base salary in effect at the time of your Involuntary Termination.

                  Board means the Company‘s Board of Directors.

                  Change in Control means a change in the ownership or control of the Company effected through any of the following
transactions:

                  (i)       a merger, consolidation or reorganization approved by the Company‘s stockholders, unless securities representing
                            more than fifty percent (50%) of the total combined voting power of the voting securities of the successor
                            corporation are immediately thereafter beneficially owned, directly or indirectly and in substantially the same
                            proportion, by the persons who beneficially owned the Company‘s outstanding voting securities immediately prior
                            to such transaction,
                 (ii)     any stockholder-approved sale, transfer or other disposition of all or substantially all of the Company‘s assets,

                 (iii)    the acquisition, directly or indirectly, by any person or related group of persons (other than the Company or 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 Securities Exchange Act of 1934, as amended) 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 stockholders; or

                 (iv)     a change in the composition of the Board over a period of thirty-six (36) consecutive months or less such that a
                          majority of the Board members ceases, by reason of one or more contested elections for Board membership, to be
                          comprised of individuals who either (A) have been Board members continuously since the beginning of such period
                          or (B) have been elected or nominated for election as Board members during such period by at least a majority of
                          the Board members described in clause (A) who were still in office at the time the Board approved such election or
                          nomination.

                 Code means the Internal Revenue Code of 1986, as amended.

                 Common Stock means the Company‘s common stock.

                 Company means Crossroads Systems, Inc., a Delaware corporation, or any successor corporation, whether or not resulting
from a Change in Control.

                 Disability means your inability to perform the normal and usual duties of your position with the Company by reason of any
physical or medical impairment which is expected to result in death or continue for a period of twelve (12) consecutive months or more.

                   Fair Market Value means, with respect to the shares of Common Stock subject to any of your Options, the closing selling
price per share of Common Stock on the date in question, as such price is reported by the National Association of Securities Dealers on the
Nasdaq National Market and published in The Wall Street Journal. If there is no closing selling price reported for the Common Stock on the
date in question, then the Fair Market Value will be the closing selling price for the last preceding date for which such report exists.
                Health Care Coverage means the continued coverage to which you and your eligible dependents may become entitled under
the Company‘s health care plans pursuant to the severance benefit provisions of Part Two of this letter agreement.

                 Incentive Stock Option means an option which satisfies the requirements of Code Section 422.

                  Involuntary Termination means (i) the involuntary termination of your employment with the Company other than a
Termination for Cause or (ii) your voluntary resignation within six (6) months following (A) a change in your position with the Company
which materially reduces your duties and responsibilities or the level of management to which you report, (B) a reduction in your level of
compensation (including Base Salary, fringe benefits and target bonus under any corporate-performance based bonus or incentive programs) by
more than fifteen percent (15%) with the exception of compensation reductions that are applied to all executive officers of the Company or (C)
a relocation of your principal place of employment by more than fifty (50) miles.

                   An Involuntary Termination will not be deemed to occur in the event your employment terminates by reason of your death or
Disability or a Termination for Cause.

                 Option means any outstanding option you hold under the Plan at the time of your Involuntary Termination. For purposes of
this Agreement, your Options will be divided into two (2) separate categories as follows:

                     Acquisition-Accelerated Options : any outstanding Option (or installment thereof) which automatically accelerates,
                      pursuant to the acceleration provisions of the agreement evidencing that Option, upon a Change in Control.

                     Severance-Accelerated Options : any outstanding Option (or installment thereof) which, pursuant to Part Two of this
                      letter agreement, accelerates upon an Involuntary Termination.

                  Option Parachute Payment means, with respect to any Acquisition-Accelerated Option or any Severance-Accelerated
Option, the portion of that Option deemed to be a parachute payment under Code Section 280G and the Treasury Regulations issued
thereunder. The portion of such Option which is categorized as an Option Parachute Payment will be calculated in accordance with the
valuation provisions established under Code Section 280G and the applicable Treasury Regulations and will include an appropriate dollar
adjustment to reflect the lapse of your obligation to remain in the Company‘s employ as a condition to the vesting of the accelerated
installment. In no event, however, will the Option Parachute Payment attributable to any Acquisition-Accelerated Option or
Severance-Accelerated Option (or accelerated installment) exceed the spread (the excess of the Fair Market Value of the accelerated option
shares over the option exercise price payable for those shares) existing at the time of acceleration.
                 Other Parachute Payment means any payment in the nature of compensation (other than the benefits to which you become
entitled under Part Two of this letter agreement) which are made to you in connection with the Change in Control and which accordingly
qualify as parachute payments within the meaning of Code Section 280G(b)(2) and the Treasury Regulations issued thereunder. Your Other
Parachute Payment will include (without limitation) the Present Value, measured as of the Change in Control, of the aggregate Option
Parachute Payment attributable to your Acquisition-Accelerated Options (if any).

                 Parachute Payment means any payment or benefit provided you under Part Two of this letter agreement (other than the
Option Parachute Payment attributable to your Severance-Accelerated Options) which is deemed to constitute a parachute payment within the
meaning of Code Section 280G(b)(2) and the Treasury Regulations issued thereunder.

                 Plan means (i) the Company‘s 1996 Stock Option/Stock Issuance Plan, (ii) the Company‘s 1999 Stock Incentive Plan, as
amended or restated from time to time, and (ii) any successor stock incentive plan subsequently implemented by the Company.

                  Present Value means the value, determined as of the date of the Change in Control, of any payment in the nature of
compensation to which you become entitled in connection with the Change in Control or your subsequent Involuntary Termination, including
(without limitation) the Option Parachute Payment attributable to your Severance-Accelerated Options, the additional benefits to which you
become entitled under Part Two of this letter agreement, and the Option Parachute Payment attributable to your Acquisition-Accelerated
Options. The Present Value of each such payment will be determined in accordance with the provisions of Code Section 280G(d)(4), utilizing
a discount rate equal to one hundred twenty percent (120%) of the applicable Federal rate in effect at the time of such determination,
compounded semi-annually to the effective date of the Change in Control.

                   Severance Period means the number of months for which you will receive severance payments pursuant to Paragraph A.2 of
Part Two of this letter agreement.

                   Termination for Cause means the Company‘s termination of your employment for any of the following reasons: (i) your
commission of any act of fraud, embezzlement or dishonesty, (ii) your unauthorized use or disclosure of any confidential information or trade
secrets of the Company, (iii) any intentional misconduct by you, whether by omission or commission, which has an adverse effect upon the
Company‘s business or affairs as determined in the sole discretion of the Company‘s Board of Directors, (iv) your breach of the Company‘s
Confidentiality, Proprietary Information and Inventions Agreement, or (v) your continued failure to perform the major duties, functions and
responsibilities of your position after written notice from the Company identifying the deficiencies in your performance and a reasonable cure
period of not less than thirty (30) days.
                                                 PART TWO – TERMINATION BENEFITS

 Your benefits under this Part Two will in all events be subject to the benefit limitations of Part Three and the restrictive covenants of Part Four
of this letter agreement and will be in lieu of all other severance benefits to which you might otherwise be entitled upon termination of your
employment.

         A.       Severance Benefits Upon An Involuntary Termination Prior to A Change in Control.

                 Should your employment with the Company terminate by reason of an Involuntary Termination at any time prior to and not
in connection with a Change in Control, you will become entitled to receive the following severance benefits, provided you execute and deliver
to the Company, at the time of such Involuntary Termination, a General Release in substantially the form of attached Exhibit A :

                  1.       Accelerated Vesting of Outstanding Options Upon an Involuntary Termination.

                   Each outstanding Option which you hold at the time of your Involuntary Termination, to the extent not otherwise exercisable
for all the shares of Common Stock subject to that Option as fully vested shares, will immediately vest in full and become exercisable. Each
such accelerated Option will remain exercisable until the earlier of (x) the expiration of the option term or (y) the end of the twelve (12)-month
period following the date of your Involuntary Termination. Any Options not exercised prior to the expiration of the applicable post-service
exercise period will lapse and cease to remain exercisable. As a result of the extension of the post-termination exercise periods for Options
outstanding on the date of this agreement, those Options, to the extent designated as Incentive Options, will no longer be treated as Incentive
Options for Federal tax purposes; instead, such Options will be treated as Non-Statutory Options for Federal tax purposes and accordingly you
will recognize ordinary income upon exercise of such Options. All such income will be subject to applicable income and employment
withholding taxes.

                  2.         Severance Payment .

                 Following your Involuntary Termination, you will receive severance payments from the Company equal to your monthly rate
of Base Salary for a period of twelve (12) months. The salary continuation payments shall be paid to you following your Involuntary
Termination in accordance with the Company‘s normal payroll practices over such period and subject to all applicable withholding taxes. The
payments will immediately terminate in the event you fail to abide by the restrictive covenants set forth in Part Four of this letter agreement.
                 3.       Health Care Coverage.

                    The Company will, at its expense, continue to provide you and your eligible dependents with the Company‘s paid portion of
health care coverage under the Company‘s medical/dental plan until the earlier of (i) the expiration of that number of months equal to one-half
of the Severance Period measured from the first day of the first month following the effective date of your Involuntary Termination or (ii) the
first date that you are covered under another employer‘s health benefit program which provides substantially the same level of benefits without
exclusion for pre-existing medical conditions. Such Health Care Coverage will be in lieu of any other continued health care coverage to which
you or your dependents would otherwise be entitled at your own cost under Code Section 4980B by reason of your termination of employment.

                                             PART THREE — LIMITATION ON BENEFITS

        1.       Benefit Limit.

 The aggregate Present Value (measured as of the Change in Control) of the benefits to which you become entitled under Part Two at the time
of your Involuntary Termination, namely, the salary continuation payments, the Option Parachute Payment attributable to your
Severance-Accelerated Options and your Health-Care Coverage, will in no event exceed in amount the dollar amount (the ― Benefit Limit ‖)
which yields you the greatest after-tax amount of benefits under Part Two of this letter agreement after taking into account any excise tax
imposed under Code Section 4999 on the payments and benefits which are provided you under Part Two or which constitute Other Parachute
Payments.

                 The Option Parachute Payment attributable to the accelerated vesting of your Acquisition-Accelerated Options (if any) at the
time of any Change in Control shall also be subject to the Benefit Limit.

                  For purposes of applying the Benefit Limit to your benefits under Part Two, the value of your non-competition covenant
under Part Four of this letter agreement shall be determined through independent appraisal by a nationally-recognized independent accounting
firm acceptable to both you and the Company and obtained solely at the Company‘s cost, and a portion of your Part Two benefits shall, to the
extent of such appraised value, be specifically allocated as reasonable compensation for your non-competition covenant.

        2.       Resolution Procedure.

          In the event there is any disagreement between you and the Company as to whether one or more payments to which you become
entitled in connection with either the Change in Control or your Involuntary Termination constitute Parachute Payments, Option Parachute
Payments or Other Parachute Payments or as to the determination of the Present Value of any of those payments, such dispute will be resolved
as follows:
         (i)      In the event temporary, proposed or final Treasury Regulations in effect at the time under Code Section 280G (or
applicable judicial decisions) specifically address the status of any such payment or the method of valuation therefor, the
characterization afforded to such payment by the Regulations (or such decisions) will, together with the applicable valuation
methodology, be controlling.

          (ii)    In the event Treasury Regulations (or applicable judicial decisions) do not address the status of any payment in
dispute, the matter will be submitted for resolution to independent tax counsel mutually acceptable to you and the Company (―
Independent Counsel ‖). The resolution reached by Independent Counsel will be final and controlling; provided , however, that if in
the judgment of Independent Counsel the status of the payment in dispute can be resolved through the obtainment of a private letter
ruling from the Internal Revenue Service, a formal and proper request for such ruling will be prepared and submitted by Independent
Counsel, and the determination made by the Internal Revenue Service in the issued ruling will be controlling. All expenses incurred
in connection with the retention of Independent Counsel and (if applicable) the preparation and submission of the ruling request will
be shared equally by you and the Company.

        (iii)    In the event Treasury Regulations (or applicable judicial decisions) do not address the appropriate valuation
methodology for any payment in dispute, the Present Value thereof will, at the Independent Counsel‘s election, be determined through
an independent third-party appraisal, and the expenses incurred in obtaining such appraisal will be shared equally by you and the
Company.

3.      Status of Benefits.

         (i)      No benefits shall be provided you under Part Two of this letter agreement (including the accelerated vesting of your
outstanding Options, the salary continuation payments and the Company-paid Health Care Coverage) until the Present Value of the
Option Parachute Payment attributable to both your Severance-Accelerated Options and your Acquisition-Accelerated Options has
been determined and the status of any payments in dispute under Paragraph 2 above has been resolved in accordance therewith. The
post-service exercise period in effect for your Options shall be stayed and shall not run until the resolution process hereunder is
completed.
                  (ii)     Once the requisite determinations under Paragraph 2 have been made, then to the extent the aggregate Present
        Value, measured as of the Change in Control, of (i) the Option Parachute Payment attributable to your Severance-Accelerated Options
        (or installments thereof) plus (ii) the Parachute Payment attributable to your other benefit entitlements under Part Two of this letter
        agreement would, when added to the Present Value of all your Other Parachute Payments (including the Option Parachute Payment
        attributable to your Acquisition-Accelerated Options), exceed the Benefit Limit, first your salary continuation payments will be
        reduced and then the period of your Company-paid Health Care Coverage will be shortened, to the extent necessary to assure that
        such Benefit Limit is not exceeded. To the extent such Benefit Limit is still exceeded following such reductions, then the number of
        shares for which your Options are to vest on an accelerated basis pursuant to Part Two (based on the amount of the Option Parachute
        Payment attributable to each Option) shall be reduced to the extent necessary to eliminate such excess.

                                       PART FOUR — SPECIAL RESTRICTIVE COVENANTS

                 1.       Cessation of Benefits.

                 Your entitlement to your salary continuation payments and Company-paid Health Care Coverage under this letter agreement
will immediately cease, should you, at any time during the one-year period following the termination of your employment (or such lesser
period during which you are entitled to receive such payments and Company-paid Health Care Coverage hereunder):

                 (i)      render, anywhere in the United States, any services or provide any advice or assistance to any Competing Business,
        whether as an employee, consultant, partner, principal, agent, representative, equity holder or in any other capacity, without the
        express prior written consent of the Company. However, nothing in this Part Four, subpart 1(i) will limit your making any passive
        investment representing an interest of less than two percent (2%) of an outstanding class of publicly-traded securities of any
        corporation or other enterprise;

                  (ii)      solicit customers, clients, suppliers, agents or other persons or entities under contract or otherwise associated or
        doing business with the Company and/or its controlled affiliates to reduce or alter any such association or business with the Company
        and/or its controlled affiliates on behalf of any Competing Business; and/or

                 (iii)     solicit any employee or contractor of the Company and/or its controlled affiliates to (a) alter or reduce such
        relationship with the Company, and/or (b) accept employment, or enter into any consulting arrangement, with any person other than
        Company and/or its controlled affiliates.

                  A Competing Business shall mean any entity that offers products or services which are or may be competitive with those
offered or proposed to be offered by the Company.

                                                       [ SIGNATURE PAGE FOLLOWS ]
                   Please indicate your agreement with the foregoing terms and conditions of your severance package (including, without
limitation, the conversion of any Incentive Options into Non-Statutory Options) by signing the Acceptance section of the enclosed copy of this
letter below and returning it to the Company.

                                                                                  Very truly yours,

                                                                                  CROSSROADS SYSTEMS, INC.

                                                                    By:

                                                                    Title:        Chief Executive Officer

                                                               ACCEPTANCE

                  I hereby agree to all the terms and provisions of the foregoing letter agreement governing the special benefits to which I may
become entitled in the event my employment should terminate under certain prescribed circumstances including certain terminations following
a substantial change in control or ownership of the Company.

                                                                 Signature:

                                                                 Dated:

                                                                 Address
                                                               EXHIBIT A
                                                            GENERAL RELEASE

          By signing this General Release (this ― Release ‖) and accepting the severance being offered to [NAME OF EXECUTIVE] (― you ‖ or
― You ‖) in the Severance Offer and General Release Letter Agreement to which this Release is an exhibit, you agree to waive, release, and
forever discharge Crossroads Systems, Inc. (the ― Company ‖) and its parents, successors, assigns, divisions, subsidiaries, affiliates, partners,
officers, directors, executives, investors, shareholders, managers, supervisors, employees, agents, attorneys and representatives (collectively the
― Released Parties ‖ or ― Releasees ‖), from any and all claims, demands, and causes of action which you have or claim to have, whether
known or unknown, of whatever nature, which exist or may exist as of the date of your execution of this Release. ―Claims,‖ ―demands,‖ and
―causes of action‖ include, but are not limited to, those based on contract, fraud, equity, tort, discrimination, sexual harassment, retaliation,
personal injury, constructive discharge, emotional distress, public policy, wage and hour law, defamation, claims for debts, accounts, attorneys‘
fees, compensatory damages, punitive damages, and/or liquidated damages, claims for vesting or accelerated vesting of options to purchase the
Company‘s Common Stock, claims for any additional shares of the Company‘s Common Stock, and any and all claims arising under the
Americans with Disabilities Act, the Family and Medical Leave Act, or any other federal or state statute governing employment, including but
not limited to Title VII of the Civil Rights Act of 1964, the Employee Retirement Income Security Act of 1974, the Worker Adjustment
Retraining and Notification Act, the Texas Labor Code, and the Texas Commission on Human Rights Act, as such statutes may have been or
may be amended from time to time.

          You understand and agree, in compliance with any statute or ordinance which requires a specific release of unknown claims or
benefits, that this Release includes a release of unknown claims, and you hereby expressly waive and relinquish any and all claims, rights or
benefits that you may have which are unknown to you at the time of the execution of this Release. You understand and agree that if, hereafter,
you discover facts different from or in addition to those which you now know or believe to be true, that the waivers and releases of this Release
shall be and remain effective in all respects notwithstanding such different or additional facts or the discovery of such fact(s).

         You represent and warrant that you do not presently have on file, and further represent and warrant to the maximum extent allowed by
law that you will not hereafter file, any lawsuits, claims, charges, grievances or complaints against the Company and/or the Released Parties in
or with any administrative, state, federal or governmental entity, agency, board or court, or before any other tribunal or panel or arbitrators,
public or private, based upon any actions or omissions by the Company and/or the Released Parties occurring prior to the Effective Date of this
Release. You understand that nothing in this Release prevents you from filing a charge or complaint with or from participating in an
investigation or proceeding conducted by the EEOC or any other federal, state or local agency charged with the enforcement of any
employment laws. To the extent that you are still entitled to file an administrative charge with any governmental agency, you hereby release
any personal entitlement to reinstatement, back pay, or any other types of damages or injunctive relief in connection with any civil action
brought on your behalf after your filing of any administrative charge.
         The only claims that this Release does not include are claims related to your rights under the employment benefits plans of the
Company (as applicable to you on the date of your termination) and any claims that controlling law clearly states may not be released by
settlement. Nothing in this Release shall constitute or be treated as an admission of any wrongdoing or liability on your part or on the part of
the Company and/or the Released Parties. You acknowledge that you have been advised to consult with an attorney of your choosing prior to
entering into this Release.

          Nothing in this Release is intended to alter, modify or waive the Company‘s and your continuing rights and obligations under the
Company‘s Confidentiality, Proprietary Information and Inventions Agreement or its Indemnity Agreement, each signed by you and each
incorporated herein by this reference. You understand and agree that a breach of any continuing obligation contained in the above agreements
shall also constitute a breach of this Release. Finally, you represent and agree that you are the sole and lawful owner of all rights, title and
interest in and to all released matters, claims and demands arising out of or in any way related to your employment with the Company and/or
the termination thereof.

 You acknowledge that you have until [date] to consider this Release and that you received this Release on [date]. You must execute and
deliver this Release to [company representative] at the Company on [date] (the ― Delivery Deadline ‖). This Release will be deemed
―delivered‖ to the Company when you have dated, signed and faxed or hand-delivered it to [company representative] at the Company‘s office
located at 11000 N. Mo-Pac Expy
Austin, TX 78759, on or before 5:00 p.m. on the Delivery Deadline. Should you desire to fax the executed Release to the Company instead,
you should use the following fax number: [fax #]. This Release will become effective on the date the executed document is delivered to the
Company (herein, the ― Release Effective Date ‖).

                                                           [Signature Page Follows]
[NAME OF EXECUTIVE]



Dated:

ACCEPTED AND ACKNOWLEDGED:

CROSSROADS SYSTEMS, INC.

By:
Name:
Title:

Dated:
                                                                                                                                      Exhibit 10.4

October 21, 2004

Mr. Brian Bianchi
11217 Brista Way
Austin, Texas 78726

RE: Severance Benefit Plan

Dear Mr. Bianchi:

         We are pleased to inform you that the Company‘s Board of Directors has approved a special severance benefit program for you. The
purpose of this letter agreement is to set forth the terms and conditions of your severance benefits and to explain the limitations that will govern
their overall value.

                   Your severance package will become payable should your employment terminate under certain circumstances including
certain terminations following a substantial change in ownership or control of the Company. To understand the full scope of your benefits, you
should familiarize yourself with the definitional provisions of Part One of this letter agreement. The benefits comprising your severance
package are detailed in Part Two, and the dollar limitations on the overall value of your benefit package and other applicable restrictions are
specified in Parts Three and Four, respectively. Part Five deals with ancillary matters affecting your severance arrangement.

                                                       PART ONE – DEFINITIONS

                   For purposes of this letter agreement, the following definitions will be in effect:

                  Base Salary means the monthly rate of base salary in effect for you at the time of your Involuntary Termination. In the event
of your Involuntary Termination following a Change in Control, Base Salary means the greater of your monthly base salary immediately prior
to the Change in Control or the monthly rate of base salary in effect at the time of your Involuntary Termination.

                   Board means the Company‘s Board of Directors.

                   Change in Control means a change in the ownership or control of the Company effected through any of the following
transactions:

                    (i)     a merger, consolidation or reorganization approved by the Company‘s stockholders, unless securities representing
                            more than fifty percent (50%) of the total combined voting power of the voting securities of the successor
                            corporation are immediately thereafter beneficially owned, directly or indirectly and in substantially the same
                            proportion, by the persons who beneficially owned the Company‘s outstanding voting securities immediately prior
                            to such transaction,
                 (ii)     any stockholder-approved sale, transfer or other disposition of all or substantially all of the Company‘s assets,

                 (iii)    the acquisition, directly or indirectly, by any person or related group of persons (other than the Company or 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 Securities Exchange Act of 1934, as amended) 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 stockholders; or

                 (iv)     a change in the composition of the Board over a period of thirty-six (36) consecutive months or less such that a
                          majority of the Board members ceases, by reason of one or more contested elections for Board membership, to be
                          comprised of individuals who either (A) have been Board members continuously since the beginning of such period
                          or (B) have been elected or nominated for election as Board members during such period by at least a majority of
                          the Board members described in clause (A) who were still in office at the time the Board approved such election or
                          nomination.

                 Code means the Internal Revenue Code of 1986, as amended.

                 Common Stock means the Company‘s common stock.

                 Company means Crossroads Systems, Inc., a Delaware corporation, or any successor corporation, whether or not resulting
from a Change in Control.

                 Disability means your inability to perform the normal and usual duties of your position with the Company by reason of any
physical or medical impairment which is expected to result in death or continue for a period of twelve (12) consecutive months or more.

                   Fair Market Value means, with respect to the shares of Common Stock subject to any of your Options, the closing selling
price per share of Common Stock on the date in question, as such price is reported by the National Association of Securities Dealers on the
Nasdaq National Market and published in The Wall Street Journal. If there is no closing selling price reported for the Common Stock on the
date in question, then the Fair Market Value will be the closing selling price for the last preceding date for which such report exists.
                Health Care Coverage means the continued coverage to which you and your eligible dependents may become entitled under
the Company‘s health care plans pursuant to the severance benefit provisions of Part Two of this letter agreement.

                 Incentive Stock Option means an option which satisfies the requirements of Code Section 422.

                  Involuntary Termination means (i) the involuntary termination of your employment with the Company other than a
Termination for Cause or (ii) your voluntary resignation within six (6) months following (A) a change in your position with the Company
which materially reduces your duties and responsibilities or the level of management to which you report, (B) a reduction in your level of
compensation (including Base Salary, fringe benefits and target bonus under any corporate-performance based bonus or incentive programs) by
more than fifteen percent (15%) with the exception of compensation reductions that are applied to all executive officers of the Company or (C)
a relocation of your principal place of employment by more than fifty (50) miles.

                   An Involuntary Termination will not be deemed to occur in the event your employment terminates by reason of your death or
Disability or a Termination for Cause.

                 Option means any outstanding option you hold under the Plan at the time of your Involuntary Termination. For purposes of
this Agreement, your Options will be divided into two (2) separate categories as follows:

                     Acquisition-Accelerated Options : any outstanding Option (or installment thereof) which automatically accelerates,
                      pursuant to the acceleration provisions of the agreement evidencing that Option, upon a Change in Control.

                     Severance-Accelerated Options : any outstanding Option (or installment thereof) which, pursuant to Part Two of this
                      letter agreement, accelerates upon an Involuntary Termination.

                  Option Parachute Payment means, with respect to any Acquisition-Accelerated Option or any Severance-Accelerated
Option, the portion of that Option deemed to be a parachute payment under Code Section 280G and the Treasury Regulations issued
thereunder. The portion of such Option which is categorized as an Option Parachute Payment will be calculated in accordance with the
valuation provisions established under Code Section 280G and the applicable Treasury Regulations and will include an appropriate dollar
adjustment to reflect the lapse of your obligation to remain in the Company‘s employ as a condition to the vesting of the accelerated
installment. In no event, however, will the Option Parachute Payment attributable to any Acquisition-Accelerated Option or
Severance-Accelerated Option (or accelerated installment) exceed the spread (the excess of the Fair Market Value of the accelerated option
shares over the option exercise price payable for those shares) existing at the time of acceleration.
                 Other Parachute Payment means any payment in the nature of compensation (other than the benefits to which you become
entitled under Part Two of this letter agreement) which are made to you in connection with the Change in Control and which accordingly
qualify as parachute payments within the meaning of Code Section 280G(b)(2) and the Treasury Regulations issued thereunder. Your Other
Parachute Payment will include (without limitation) the Present Value, measured as of the Change in Control, of the aggregate Option
Parachute Payment attributable to your Acquisition-Accelerated Options (if any).

                 Parachute Payment means any payment or benefit provided you under Part Two of this letter agreement (other than the
Option Parachute Payment attributable to your Severance-Accelerated Options) which is deemed to constitute a parachute payment within the
meaning of Code Section 280G(b)(2) and the Treasury Regulations issued thereunder.

                 Plan means (i) the Company‘s 1996 Stock Option/Stock Issuance Plan, (ii) the Company‘s 1999 Stock Incentive Plan, as
amended or restated from time to time, and (ii) any successor stock incentive plan subsequently implemented by the Company.

                  Present Value means the value, determined as of the date of the Change in Control, of any payment in the nature of
compensation to which you become entitled in connection with the Change in Control or your subsequent Involuntary Termination, including
(without limitation) the Option Parachute Payment attributable to your Severance-Accelerated Options, the additional benefits to which you
become entitled under Part Two of this letter agreement, and the Option Parachute Payment attributable to your Acquisition-Accelerated
Options. The Present Value of each such payment will be determined in accordance with the provisions of Code Section 280G(d)(4), utilizing
a discount rate equal to one hundred twenty percent (120%) of the applicable Federal rate in effect at the time of such determination,
compounded semi-annually to the effective date of the Change in Control.

                   Severance Period means the number of months for which you will receive severance payments pursuant to Paragraph A.2 of
Part Two of this letter agreement.

                  Stock Bonus means the stock bonus payment you become entitled to upon a Change in Control as described in Paragraph B
of Part Two of this letter agreement.

                   Stock Bonus Parachute Payment means, with respect to the Stock Bonus payment, the portion of those shares deemed to be
a parachute payment under Code Section 280G and the Treasury Regulations issued thereunder. The amount of such parachute payment will
be calculated in accordance with the valuation provisions established under Code Section 280G and the applicable Treasury Regulations and
will include an appropriate dollar adjustment to reflect the lapse of your obligation to remain in the Company‘s employ as a condition to the
vesting of the stock.
                   Termination for Cause means the Company‘s termination of your employment for any of the following reasons: (i) your
commission of any act of fraud, embezzlement or dishonesty, (ii) your unauthorized use or disclosure of any confidential information or trade
secrets of the Company, (iii) any intentional misconduct by you, whether by omission or commission, which has an adverse effect upon the
Company‘s business or affairs as determined in the sole discretion of the Company‘s Board of Directors, (iv) your breach of the Company‘s
Confidentiality, Proprietary Information and Inventions Agreement, or (v) your continued failure to perform the major duties, functions and
responsibilities of your position after written notice from the Company identifying the deficiencies in your performance and a reasonable cure
period of not less than thirty (30) days.

                                                PART TWO – TERMINATION BENEFITS

                  Your benefits under this Part Two will in all events be subject to the benefit limitations of Part Three and the restrictive
covenants of Part Four of this letter agreement and will be in lieu of all other severance benefits to which you might otherwise be entitled upon
termination of your employment.

         A.       Severance Benefits Upon An Involuntary Termination Prior to A Change in Control.

                 Should your employment with the Company terminate by reason of an Involuntary Termination at any time prior to and not
in connection with a Change in Control, you will become entitled to receive the following severance benefits, provided you execute and deliver
to the Company, at the time of such Involuntary Termination, a General Release in substantially the form of attached Exhibit A :

                  1.       Accelerated Vesting of Outstanding Options Upon an Involuntary Termination.

                   Each outstanding Option which you hold at the time of your Involuntary Termination, to the extent not otherwise exercisable
for all the shares of Common Stock subject to that Option as fully vested shares, will immediately vest in full and become exercisable. Each
such accelerated Option will remain exercisable until the earlier of (x) the expiration of the option term or (y) the end of the twelve (12)-month
period following the date of your Involuntary Termination. Any Options not exercised prior to the expiration of the applicable post-service
exercise period will lapse and cease to remain exercisable. As a result of the extension of the post-termination exercise periods for Options
outstanding on the date of this agreement, those Options, to the extent designated as Incentive Options, will no longer be treated as Incentive
Options for Federal tax purposes; instead, such Options will be treated as Non-Statutory Options for Federal tax purposes and accordingly you
will recognize ordinary income upon exercise of such Options. All such income will be subject to applicable income and employment
withholding taxes.
                 2.         Severance Payment .

                   Following your Involuntary Termination, you will receive severance payments from the Company equal to your monthly rate
of Base Salary for a period of one (1) month plus and additional month for each completed quarter of service to the Company measured from
June 22, 1998 (the date of your hire) up to a maximum of twelve (12) months. The salary continuation payments shall be paid to you in equal
installments following your Involuntary Termination in accordance with the Company‘s normal payroll practices over such period and subject
to all applicable withholding taxes. The payments will immediately terminate in the event you fail to abide by the restrictive covenants set
forth in Part Four of this letter agreement.

                 3.       Health Care Coverage.

                    The Company will, at its expense, continue to provide you and your eligible dependents with the Company‘s paid portion of
health care coverage under the Company‘s medical/dental plan until the earlier of (i) the expiration of that number of months equal to one-half
of the Severance Period measured from the first day of the first month following the effective date of your Involuntary Termination or (ii) the
first date that you are covered under another employer‘s health benefit program which provides substantially the same level of benefits without
exclusion for pre-existing medical conditions. Such Health Care Coverage will be in lieu of any other continued health care coverage to which
you or your dependents would otherwise be entitled at your own cost under Code Section 4980B by reason of your termination of employment.

                                             PART THREE — LIMITATION ON BENEFITS

        1.       Benefit Limit.

 The aggregate Present Value (measured as of the Change in Control) of the benefits to which you become entitled under Part Two at the time
of your Involuntary Termination, namely, the salary continuation payments, the Option Parachute Payment attributable to your
Severance-Accelerated Options and your Health-Care Coverage, will in no event exceed in amount the dollar amount (the ― Benefit Limit ‖)
which yields you the greatest after-tax amount of benefits under Part Two of this letter agreement after taking into account any excise tax
imposed under Code Section 4999 on the payments and benefits which are provided you under Part Two or which constitute Other Parachute
Payments.

                 The Option Parachute Payment attributable to the accelerated vesting of your Acquisition-Accelerated Options (if any) at the
time of any Change in Control shall also be subject to the Benefit Limit.
                  For purposes of applying the Benefit Limit to your benefits under Part Two, the value of your non-competition covenant
under Part Four of this letter agreement shall be determined through independent appraisal by a nationally-recognized independent accounting
firm acceptable to both you and the Company and obtained solely at the Company‘s cost, and a portion of your Part Two benefits shall, to the
extent of such appraised value, be specifically allocated as reasonable compensation for your non-competition covenant.

        2.       Resolution Procedure.

          In the event there is any disagreement between you and the Company as to whether one or more payments to which you become
entitled in connection with either the Change in Control or your Involuntary Termination constitute Parachute Payments, Option Parachute
Payments or Other Parachute Payments or as to the determination of the Present Value of any of those payments, such dispute will be resolved
as follows:

                 (i)      In the event temporary, proposed or final Treasury Regulations in effect at the time under Code Section 280G (or
        applicable judicial decisions) specifically address the status of any such payment or the method of valuation therefor, the
        characterization afforded to such payment by the Regulations (or such decisions) will, together with the applicable valuation
        methodology, be controlling.

                  (ii)     In the event Treasury Regulations (or applicable judicial decisions) do not address the status of any payment in
        dispute, the matter will be submitted for resolution to independent tax counsel mutually acceptable to you and the Company (―
        Independent Counsel ‖). The resolution reached by Independent Counsel will be final and controlling; provided , however, that if in
        the judgment of Independent Counsel the status of the payment in dispute can be resolved through the obtainment of a private letter
        ruling from the Internal Revenue Service, a formal and proper request for such ruling will be prepared and submitted by Independent
        Counsel, and the determination made by the Internal Revenue Service in the issued ruling will be controlling. All expenses incurred
        in connection with the retention of Independent Counsel and (if applicable) the preparation and submission of the ruling request will
        be shared equally by you and the Company.

                (iii)      In the event Treasury Regulations (or applicable judicial decisions) do not address the appropriate valuation
        methodology for any payment in dispute, the Present Value thereof will, at the Independent Counsel‘s election, be determined through
        an independent third-party appraisal, and the expenses incurred in obtaining such appraisal will be shared equally by you and the
        Company.
        3.      Status of Benefits.

                 (i)      No benefits shall be provided you under Part Two of this letter agreement (including the accelerated vesting of your
        outstanding Options, the salary continuation payments and the Company-paid Health Care Coverage) until the Present Value of the
        Option Parachute Payment attributable to both your Severance-Accelerated Options and your Acquisition-Accelerated Options has
        been determined and the status of any payments in dispute under Paragraph 2 above has been resolved in accordance therewith. The
        post-service exercise period in effect for your Options shall be stayed and shall not run until the resolution process hereunder is
        completed.

                  (ii)     Once the requisite determinations under Paragraph 2 have been made, then to the extent the aggregate Present
        Value, measured as of the Change in Control, of (i) the Option Parachute Payment attributable to your Severance-Accelerated Options
        (or installments thereof) plus (ii) the Parachute Payment attributable to your other benefit entitlements under Part Two of this letter
        agreement would, when added to the Present Value of all your Other Parachute Payments (including the Option Parachute Payment
        attributable to your Acquisition-Accelerated Options), exceed the Benefit Limit, first your salary continuation payments will be
        reduced and then the period of your Company-paid Health Care Coverage will be shortened, to the extent necessary to assure that
        such Benefit Limit is not exceeded. To the extent such Benefit Limit is still exceeded following such reductions, then the number of
        shares for which your Options are to vest on an accelerated basis pursuant to Part Two (based on the amount of the Option Parachute
        Payment attributable to each Option) shall be reduced to the extent necessary to eliminate such excess.

                                       PART FOUR — SPECIAL RESTRICTIVE COVENANTS

                 1.       Cessation of Benefits.

                 Your entitlement to your salary continuation payments and Company-paid Health Care Coverage under this letter agreement
will immediately cease, should you, at any time during the one-year period following the termination of your employment (or such lesser
period during which you are entitled to receive such payments and Company-paid Health Care Coverage hereunder):

                 (i)      render, anywhere in the United States, any services or provide any advice or assistance to any Competing Business,
        whether as an employee, consultant, partner, principal, agent, representative, equity holder or in any other capacity, without the
        express prior written consent of the Company. However, nothing in this Part Four, subpart 1(i) will limit your making any passive
        investment representing an interest of less than two percent (2%) of an outstanding class of publicly-traded securities of any
        corporation or other enterprise;

                  (ii)      solicit customers, clients, suppliers, agents or other persons or entities under contract or otherwise associated or
        doing business with the Company and/or its controlled affiliates to reduce or alter any such association or business with the Company
        and/or its controlled affiliates on behalf of any Competing Business; and/or
                 (iii)      solicit any employee or contractor of the Company and/or its controlled affiliates to (a) alter or reduce such
        relationship with the Company, and/or (b) accept employment, or enter into any consulting arrangement, with any person other than
        Company and/or its controlled affiliates.

                  A Competing Business shall mean any entity that offers products or services which are or may be competitive with those
offered or proposed to be offered by the Company.

                                                   PART FIVE — MISCELLANEOUS

                 1.       Amendment and Termination.

                  This letter agreement may only be amended by written instrument signed by you and an authorized officer of the
Company. This letter agreement shall remain in effect through December 31, 2005, or any earlier termination of your employment with the
Company. Provided you continue in the Company‘s employ, this letter agreement shall automatically be renewed for successive one (1)-year
terms, beginning January 1, 2006, unless the Company provides you with written notice of termination of this letter agreement at least thirty
(30) days prior to the start of any such one (1)-year renewal period. Once a Change in Control occurs, this letter agreement may not be
terminated at any time prior to the expiration of the twelve (12)-month period following the effective date of that Change of Control, and no
subsequent termination of this letter agreement shall adversely affect your right to receive any benefits to which you may have previously
become entitled hereunder in connection with your Involuntary Termination.

                 2.       Termination for Cause.

                   Should your employment cease by reason of a Termination for Cause, then the Company will only be required to pay you (i)
any unpaid compensation earned for services previously rendered through the date of such termination and (ii) any accrued but unpaid vacation
benefits or sick days, and no benefits will be payable to you under Part Two of this letter agreement.

                 3.       Death.

                  Should you die before receipt of one or more salary continuation payments to which you become entitled under this letter
agreement, then those payments will be made to the executors or administrators of your estate. Should you die before you exercise all your
outstanding Options as accelerated hereunder, then such Options may be exercised, within twelve (12) months after your death, by the
executors or administrators of your estate or by persons to whom the Options are transferred pursuant to your will or in accordance with the
laws of inheritance. In no event, however, may any such Option be exercised after the specified expiration date of the option term.
                  4.       Miscellaneous.

                   This letter agreement will be binding upon the Company, its successors and assigns (including without limitation, the
surviving entity in any Change in Control) and is to be construed and interpreted under the laws of the State of Texas. This letter agreement
supersedes all prior agreements between you and the Company relating to the subject of severance benefits payable upon an Involuntary
Termination and you will not be entitled to any other severance benefits upon such a termination other than those that are provided in this letter
agreement. If any provision of this letter agreement as applied to you or the Company or to any circumstance should be adjudged by a court of
competent jurisdiction to be void or unenforceable for any reason, the invalidity of that provision will in no way affect (to the maximum extent
permissible by law) the application of such provision under circumstances different from those adjudicated by the court, the application of any
other provision of this letter agreement, or the enforceability or invalidity of this letter agreement as a whole. Should any provision of this
letter agreement become or be deemed invalid, illegal or unenforceable in any jurisdiction by reason of the scope, extent or duration of its
coverage, then such provision will be deemed amended to the extent necessary to conform to applicable law so as to be valid and enforceable
or, if such provision cannot be so amended without materially altering the intention of the parties, then such provision will be stricken and the
remainder of this letter agreement will continue in full force and effect.

                  5.        General Creditor Status.

                   All cash payments to which you become entitled hereunder will be paid, when due, from the general assets of the Company,
and no trust fund, escrow arrangement or other segregated account will be established as a funding vehicle for such payment. Accordingly,
your right (or the right of the personal representatives or beneficiaries of your estate) to receive such cash payments hereunder will at all times
be that of a general creditor of the Company and will have no priority over the claims of other general creditors.

                  6.       At Will Employment.

                  Nothing in this letter agreement is intended to provide you with any right to continue in the employ of the Company (or any
subsidiary) for any period of specific duration or interfere with or otherwise restrict in any way your rights or the rights of the Company (or any
subsidiary), which rights are hereby expressly reserved by each, to terminate your employment at any time and for any reason, with or without
cause.

                                                         [ SIGNATURE PAGE FOLLOWS ]
                   Please indicate your agreement with the foregoing terms and conditions of your severance package (including, without
limitation, the conversion of any Incentive Options into Non-Statutory Options) by signing the Acceptance section of the enclosed copy of this
letter below and returning it to the Company.

                                                                                   Very truly yours,

                                                                                   CROSSROADS SYSTEMS, INC.

                                                                         By:       /s/ Robert C. Sims
                                                                                   Robert C. Sims
                                                                         Title:    Chief Executive Officer

                                                               ACCEPTANCE

                  I hereby agree to all the terms and provisions of the foregoing letter agreement governing the special benefits to which I may
become entitled in the event my employment should terminate under certain prescribed circumstances including certain terminations following
a substantial change in control or ownership of the Company.

                                                                Signature:         /s/ Brian Bianchi
                                                                                   Brian Bianchi
                                                                Dated:

                                                                Address
                                                               EXHIBIT A
                                                            GENERAL RELEASE

          By signing this General Release (this ― Release ‖) and accepting the severance being offered to [NAME OF EXECUTIVE] (― you ‖ or
― You ‖) in the Severance Offer and General Release Letter Agreement to which this Release is an exhibit, you agree to waive, release, and
forever discharge Crossroads Systems, Inc. (the ― Company ‖) and its parents, successors, assigns, divisions, subsidiaries, affiliates, partners,
officers, directors, executives, investors, shareholders, managers, supervisors, employees, agents, attorneys and representatives (collectively the
― Released Parties ‖ or ― Releasees ‖), from any and all claims, demands, and causes of action which you have or claim to have, whether
known or unknown, of whatever nature, which exist or may exist as of the date of your execution of this Release. ―Claims,‖ ―demands,‖ and
―causes of action‖ include, but are not limited to, those based on contract, fraud, equity, tort, discrimination, sexual harassment, retaliation,
personal injury, constructive discharge, emotional distress, public policy, wage and hour law, defamation, claims for debts, accounts, attorneys‘
fees, compensatory damages, punitive damages, and/or liquidated damages, claims for vesting or accelerated vesting of options to purchase the
Company‘s Common Stock, claims for any additional shares of the Company‘s Common Stock, and any and all claims arising under the
Americans with Disabilities Act, the Family and Medical Leave Act, or any other federal or state statute governing employment, including but
not limited to Title VII of the Civil Rights Act of 1964, the Employee Retirement Income Security Act of 1974, the Worker Adjustment
Retraining and Notification Act, the Texas Labor Code, and the Texas Commission on Human Rights Act, as such statutes may have been or
may be amended from time to time.

          You understand and agree, in compliance with any statute or ordinance which requires a specific release of unknown claims or
benefits, that this Release includes a release of unknown claims, and you hereby expressly waive and relinquish any and all claims, rights or
benefits that you may have which are unknown to you at the time of the execution of this Release. You understand and agree that if, hereafter,
you discover facts different from or in addition to those which you now know or believe to be true, that the waivers and releases of this Release
shall be and remain effective in all respects notwithstanding such different or additional facts or the discovery of such fact(s).

         You represent and warrant that you do not presently have on file, and further represent and warrant to the maximum extent allowed by
law that you will not hereafter file, any lawsuits, claims, charges, grievances or complaints against the Company and/or the Released Parties in
or with any administrative, state, federal or governmental entity, agency, board or court, or before any other tribunal or panel or arbitrators,
public or private, based upon any actions or omissions by the Company and/or the Released Parties occurring prior to the Effective Date of this
Release. You understand that nothing in this Release prevents you from filing a charge or complaint with or from participating in an
investigation or proceeding conducted by the EEOC or any other federal, state or local agency charged with the enforcement of any
employment laws. To the extent that you are still entitled to file an administrative charge with any governmental agency, you hereby release
any personal entitlement to reinstatement, back pay, or any other types of damages or injunctive relief in connection with any civil action
brought on your behalf after your filing of any administrative charge.
         The only claims that this Release does not include are claims related to your rights under the employment benefits plans of the
Company (as applicable to you on the date of your termination) and any claims that controlling law clearly states may not be released by
settlement. Nothing in this Release shall constitute or be treated as an admission of any wrongdoing or liability on your part or on the part of
the Company and/or the Released Parties. You acknowledge that you have been advised to consult with an attorney of your choosing prior to
entering into this Release.

          Nothing in this Release is intended to alter, modify or waive the Company‘s and your continuing rights and obligations under the
Company‘s Confidentiality, Proprietary Information and Inventions Agreement or its Indemnity Agreement, each signed by you and each
incorporated herein by this reference. You understand and agree that a breach of any continuing obligation contained in the above agreements
shall also constitute a breach of this Release. Finally, you represent and agree that you are the sole and lawful owner of all rights, title and
interest in and to all released matters, claims and demands arising out of or in any way related to your employment with the Company and/or
the termination thereof.

         You acknowledge that you have until [date] to consider this Release and that you received this Release on [date]. You must execute
and deliver this Release to [company representative] at the Company on [date] (the ― Delivery Deadline ‖). This Release will be deemed
―delivered‖ to the Company when you have dated, signed and faxed or hand-delivered it to [company representative] at the Company‘s office
located at 11000 N. Mo-Pac Expy Austin, TX 78759, on or before 5:00 p.m. on the Delivery Deadline. Should you desire to fax the executed
Release to the Company instead, you should use the following fax number: [fax #]. This Release will become effective on the date the executed
document is delivered to the Company (herein, the ― Release Effective Date ‖).

                                                           [Signature Page Follows]
[NAME OF EXECUTIVE]



Dated:

ACCEPTED AND ACKNOWLEDGED:

CROSSROADS SYSTEMS, INC.

By:
Name:
Title:

Dated:
                                                                                                                                      Exhibit 10.5




April 15, 2009

David Cerf

RE: Severance Benefit Plan

Dear Mr. Cerf,

         We are pleased to inform you that the Company‘s Board of Directors has approved a special severance benefit program for you. The
purpose of this letter agreement is to set forth the terms and conditions of your severance benefits and to explain the limitations that will govern
their overall value.

                   Your severance package will become payable should your employment terminate under certain circumstances including
certain terminations following a substantial change in ownership or control of the Company. To understand the full scope of your benefits, you
should familiarize yourself with the definitional provisions of Part One of this letter agreement. The benefits comprising your severance
package are detailed in Part Two, and the dollar limitations on the overall value of your benefit package and other applicable restrictions are
specified in Parts Three and Four, respectively. Part Five deals with ancillary matters affecting your severance arrangement.

                                                      PART ONE – DEFINITIONS

                  For purposes of this letter agreement, the following definitions will be in effect:

                  Base Salary means the monthly rate of base salary in effect for you at the time of your Involuntary Termination. In the event
of your Involuntary Termination following a Change in Control, Base Salary means the greater of your monthly base salary immediately prior
to the Change in Control or the monthly rate of base salary in effect at the time of your Involuntary Termination.

                  Board means the Company‘s Board of Directors.

                  Change in Control means a change in the ownership or control of the Company effected through any of the following
transactions:


                                                                                                                                                  1
                 (i)      a merger, consolidation or reorganization approved by the Company‘s stockholders, unless securities representing
                          more than fifty percent (50%) of the total combined voting power of the voting securities of the successor
                          corporation are immediately thereafter beneficially owned, directly or indirectly and in substantially the same
                          proportion, by the persons who beneficially owned the Company‘s outstanding voting securities immediately prior
                          to such transaction,

                 (ii)     any stockholder-approved sale, transfer or other disposition of all or substantially all of the Company‘s assets,

                 (iii)    the acquisition, directly or indirectly, by any person or related group of persons (other than the Company or 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 Securities Exchange Act of 1934, as amended) 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 stockholders; or

                 (iv)     a change in the composition of the Board over a period of thirty-six (36) consecutive months or less such that a
                          majority of the Board members ceases, by reason of one or more contested elections for Board membership, to be
                          comprised of individuals who either (A) have been Board members continuously since the beginning of such period
                          or (B) have been elected or nominated for election as Board members during such period by at least a majority of
                          the Board members described in clause (A) who were still in office at the time the Board approved such election or
                          nomination.

                 Code means the Internal Revenue Code of 1986, as amended.

                 Common Stock means the Company‘s common stock.

                 Company means Crossroads Systems, Inc., a Delaware corporation, or any successor corporation, whether or not resulting
from a Change in Control.

                 Disability means your inability to perform the normal and usual duties of your position with the Company by reason of any
physical or medical impairment which is expected to result in death or continue for a period of twelve (12) consecutive months or more.

                 Fair Market Value means, with respect to the shares of Common Stock subject to any of your Options, the price per share as
determined by the Board of Directors of the Company.


                                                                       2
                Health Care Coverage means the continued coverage to which you and your eligible dependents may become entitled under
the Company‘s health care plans pursuant to the severance benefit provisions of Part Two of this letter agreement.

                 Incentive Stock Option means an option which satisfies the requirements of Code Section 422.

                  Involuntary Termination means (i) the involuntary termination of your employment with the Company other than a
Termination for Cause or (ii) your voluntary resignation within six (6) months following (A) a change in your position with the Company
which materially reduces your duties and responsibilities or the level of management to which you report, (B) a reduction in your level of
compensation (including Base Salary, fringe benefits and target bonus under any corporate-performance based bonus or incentive programs) by
more than fifteen percent (15%) with the exception of compensation reductions that are applied to all executive officers of the Company or (C)
a relocation of your principal place of employment by more than fifty (50) miles.

                   An Involuntary Termination will not be deemed to occur in the event your employment terminates by reason of your death or
Disability or a Termination for Cause.

                 Option means any outstanding option you hold under the Plan at the time of your Involuntary Termination. For purposes of
this Agreement, your Options will be divided into two (2) separate categories as follows:

                     Acquisition-Accelerated Options : any outstanding Option (or installment thereof) which automatically accelerates,
                      pursuant to the acceleration provisions of the agreement evidencing that Option, upon a Change in Control.

                     Severance-Accelerated Options : any outstanding Option (or installment thereof) which, pursuant to Part Two of this
                      letter agreement, accelerates upon an Involuntary Termination.

                  Option Parachute Payment means, with respect to any Acquisition-Accelerated Option or any Severance-Accelerated
Option, the portion of that Option deemed to be a parachute payment under Code Section 280G and the Treasury Regulations issued
thereunder. The portion of such Option which is categorized as an Option Parachute Payment will be calculated in accordance with the
valuation provisions established under Code Section 280G and the applicable Treasury Regulations and will include an appropriate dollar
adjustment to reflect the lapse of your obligation to remain in the Company‘s employ as a condition to the vesting of the accelerated
installment. In no event, however, will the Option Parachute Payment attributable to any Acquisition-Accelerated Option or
Severance-Accelerated Option (or accelerated installment) exceed the spread (the excess of the Fair Market Value of the accelerated option
shares over the option exercise price payable for those shares) existing at the time of acceleration.


                                                                      3
                 Other Parachute Payment means any payment in the nature of compensation (other than the benefits to which you become
entitled under Part Two of this letter agreement) which are made to you in connection with the Change in Control and which accordingly
qualify as parachute payments within the meaning of Code Section 280G(b)(2) and the Treasury Regulations issued thereunder. Your Other
Parachute Payment will include (without limitation) the Present Value, measured as of the Change in Control, of the aggregate Option
Parachute Payment attributable to your Acquisition-Accelerated Options (if any).

                 Parachute Payment means any payment or benefit provided you under Part Two of this letter agreement (other than the
Option Parachute Payment attributable to your Severance-Accelerated Options) which is deemed to constitute a parachute payment within the
meaning of Code Section 280G(b)(2) and the Treasury Regulations issued thereunder.

                 Plan means (i) the Company‘s 1996 Stock Option/Stock Issuance Plan, (ii) the Company‘s 1999 Stock Incentive Plan, as
amended or restated from time to time, and (ii) any successor stock incentive plan subsequently implemented by the Company.

                  Present Value means the value, determined as of the date of the Change in Control, of any payment in the nature of
compensation to which you become entitled in connection with the Change in Control or your subsequent Involuntary Termination, including
(without limitation) the Option Parachute Payment attributable to your Severance-Accelerated Options, the additional benefits to which you
become entitled under Part Two of this letter agreement, and the Option Parachute Payment attributable to your Acquisition-Accelerated
Options. The Present Value of each such payment will be determined in accordance with the provisions of Code Section 280G(d)(4), utilizing
a discount rate equal to one hundred twenty percent (120%) of the applicable Federal rate in effect at the time of such determination,
compounded semi-annually to the effective date of the Change in Control.

                   Severance Period means the number of months for which you will receive severance payments pursuant to Paragraph A.2 of
Part Two of this letter agreement.

                   Termination for Cause means the Company‘s termination of your employment for any of the following reasons: (i) your
commission of any act of fraud, embezzlement or dishonesty, (ii) your unauthorized use or disclosure of any confidential information or trade
secrets of the Company, (iii) any intentional misconduct by you, whether by omission or commission, which has an adverse effect upon the
Company‘s business or affairs as determined in the sole discretion of the Company‘s Board of Directors, (iv) your breach of the Company‘s
Confidentiality, Proprietary Information and Inventions Agreement, or (v) your continued failure to perform the major duties, functions and
responsibilities of your position after written notice from the Company identifying the deficiencies in your performance and a reasonable cure
period of not less than thirty (30) days.

                                                PART TWO – TERMINATION BENEFITS

                  Your benefits under this Part Two will in all events be subject to the benefit limitations of Part Three and the restrictive
covenants of Part Four of this letter agreement and will be in lieu of all other severance benefits to which you might otherwise be entitled upon
termination of your employment.


                                                                       4
         A.       Severance Benefits Upon An Involuntary Termination.

                  Should your employment with the Company terminate by reason of an Involuntary Termination at any time, you will become
entitled to receive the following severance benefits, provided you execute and deliver to the Company, at the time of such Involuntary
Termination, a General Release in substantially the form of attached Exhibit A :

                  1.       Accelerated Vesting of Outstanding Options Upon an Involuntary Termination.

                   Each outstanding Option which you hold at the time of your Involuntary Termination, to the extent not otherwise exercisable
for all the shares of Common Stock subject to that Option as fully vested shares, will immediately vest in full and become exercisable. Each
such accelerated Option will remain exercisable until the earlier of (x) the expiration of the option term or (y) the end of the twelve (12)-month
period following the date of your Involuntary Termination. Any Options not exercised prior to the expiration of the applicable post-service
exercise period will lapse and cease to remain exercisable. As a result of the extension of the post-termination exercise periods for Options
outstanding on the date of this agreement, those Options, to the extent designated as Incentive Options, will no longer be treated as Incentive
Options for Federal tax purposes; instead, such Options will be treated as Non-Statutory Options for Federal tax purposes and accordingly you
will recognize ordinary income upon exercise of such Options. All such income will be subject to applicable income and employment
withholding taxes.

                  2.         Severance Payment .

                 Following your Involuntary Termination, you will receive severance payments from the Company equal to your monthly rate
of Base Salary for a period of twelve (12) months. The salary continuation payments shall be paid to you following your Involuntary
Termination in accordance with the Company‘s normal payroll practices over such period and subject to all applicable withholding taxes. The
payments will immediately terminate in the event you fail to abide by the restrictive covenants set forth in Part Four of this letter agreement.

                  3.       Health Care Coverage.

                    The Company will, at its expense, continue to provide you and your eligible dependents with the Company‘s paid portion of
health care coverage under the Company‘s medical/dental plan until the earlier of (i) the expiration of that number of months equal to one-half
of the Severance Period measured from the first day of the first month following the effective date of your Involuntary Termination or (ii) the
first date that you are covered under another employer‘s health benefit program which provides substantially the same level of benefits without
exclusion for pre-existing medical conditions. Such Health Care Coverage will be in lieu of any other continued health care coverage to which
you or your dependents would otherwise be entitled at your own cost under Code Section 4980B by reason of your termination of employment.


                                                                        5
                                            PART THREE — LIMITATION ON BENEFITS

        1.       Benefit Limit.

 The aggregate Present Value (measured as of the Change in Control) of the benefits to which you become entitled under Part Two at the time
of your Involuntary Termination, namely, the salary continuation payments, the Option Parachute Payment attributable to your
Severance-Accelerated Options and your Health-Care Coverage, will in no event exceed in amount the dollar amount (the ― Benefit Limit ‖)
which yields you the greatest after-tax amount of benefits under Part Two of this letter agreement after taking into account any excise tax
imposed under Code Section 4999 on the payments and benefits which are provided you under Part Two or which constitute Other Parachute
Payments.

                 The Option Parachute Payment attributable to the accelerated vesting of your Acquisition-Accelerated Options (if any) at the
time of any Change in Control shall also be subject to the Benefit Limit.

                  For purposes of applying the Benefit Limit to your benefits under Part Two, the value of your non-competition covenant
under Part Four of this letter agreement shall be determined through independent appraisal by a nationally-recognized independent accounting
firm acceptable to both you and the Company and obtained solely at the Company‘s cost, and a portion of your Part Two benefits shall, to the
extent of such appraised value, be specifically allocated as reasonable compensation for your non-competition covenant.

        2.       Resolution Procedure.

          In the event there is any disagreement between you and the Company as to whether one or more payments to which you become
entitled in connection with either the Change in Control or your Involuntary Termination constitute Parachute Payments, Option Parachute
Payments or Other Parachute Payments or as to the determination of the Present Value of any of those payments, such dispute will be resolved
as follows:

                 (i)      In the event temporary, proposed or final Treasury Regulations in effect at the time under Code Section 280G (or
        applicable judicial decisions) specifically address the status of any such payment or the method of valuation therefor, the
        characterization afforded to such payment by the Regulations (or such decisions) will, together with the applicable valuation
        methodology, be controlling.


                                                                     6
          (ii)     In the event Treasury Regulations (or applicable judicial decisions) do not address the status of any payment in
dispute, the matter will be submitted for resolution to independent tax counsel mutually acceptable to you and the Company (―
Independent Counsel ‖). The resolution reached by Independent Counsel will be final and controlling; provided , however, that if in
the judgment of Independent Counsel the status of the payment in dispute can be resolved through the obtainment of a private letter
ruling from the Internal Revenue Service, a formal and proper request for such ruling will be prepared and submitted by Independent
Counsel, and the determination made by the Internal Revenue Service in the issued ruling will be controlling. All expenses incurred
in connection with the retention of Independent Counsel and (if applicable) the preparation and submission of the ruling request will
be shared equally by you and the Company.

        (iii)      In the event Treasury Regulations (or applicable judicial decisions) do not address the appropriate valuation
methodology for any payment in dispute, the Present Value thereof will, at the Independent Counsel‘s election, be determined through
an independent third-party appraisal, and the expenses incurred in obtaining such appraisal will be shared equally by you and the
Company.

3.      Status of Benefits.

         (i)      No benefits shall be provided you under Part Two of this letter agreement (including the accelerated vesting of your
outstanding Options, the salary continuation payments and the Company-paid Health Care Coverage) until the Present Value of the
Option Parachute Payment attributable to both your Severance-Accelerated Options and your Acquisition-Accelerated Options has
been determined and the status of any payments in dispute under Paragraph 2 above has been resolved in accordance therewith. The
post-service exercise period in effect for your Options shall be stayed and shall not run until the resolution process hereunder is
completed.

          (ii)     Once the requisite determinations under Paragraph 2 have been made, then to the extent the aggregate Present
Value, measured as of the Change in Control, of (i) the Option Parachute Payment attributable to your Severance-Accelerated Options
(or installments thereof) plus (ii) the Parachute Payment attributable to your other benefit entitlements under Part Two of this letter
agreement would, when added to the Present Value of all your Other Parachute Payments (including the Option Parachute Payment
attributable to your Acquisition-Accelerated Options), exceed the Benefit Limit, first your salary continuation payments will be
reduced and then the period of your Company-paid Health Care Coverage will be shortened, to the extent necessary to assure that
such Benefit Limit is not exceeded. To the extent such Benefit Limit is still exceeded following such reductions, then the number of
shares for which your Options are to vest on an accelerated basis pursuant to Part Two (based on the amount of the Option Parachute
Payment attributable to each Option) shall be reduced to the extent necessary to eliminate such excess.


                                                              7
                                        PART FOUR — SPECIAL RESTRICTIVE COVENANTS

                  1.       Cessation of Benefits.

                 Your entitlement to your salary continuation payments and Company-paid Health Care Coverage under this letter agreement
will immediately cease, should you, at any time during the one-year period following the termination of your employment (or such lesser
period during which you are entitled to receive such payments and Company-paid Health Care Coverage hereunder):

                  (i)      render, anywhere in the United States, any services or provide any advice or assistance to any Competing Business,
         whether as an employee, consultant, partner, principal, agent, representative, equity holder or in any other capacity, without the
         express prior written consent of the Company. However, nothing in this Part Four, subpart 1(i) will limit your making any passive
         investment representing an interest of less than two percent (2%) of an outstanding class of publicly-traded securities of any
         corporation or other enterprise;

                   (ii)      solicit customers, clients, suppliers, agents or other persons or entities under contract or otherwise associated or
         doing business with the Company and/or its controlled affiliates to reduce or alter any such association or business with the Company
         and/or its controlled affiliates on behalf of any Competing Business; and/or

                  (iii)      solicit any employee or contractor of the Company and/or its controlled affiliates to (a) alter or reduce such
         relationship with the Company, and/or (b) accept employment, or enter into any consulting arrangement, with any person other than
         Company and/or its controlled affiliates.

                  A Competing Business shall mean any entity that offers products or services which are or may be competitive with those
offered or proposed to be offered by the Company.

                                                    PART FIVE — MISCELLANEOUS

                  1.       Amendment and Termination.

                    This letter agreement may only be amended by written instrument signed by you and an authorized officer of the
Company. This letter agreement shall remain in effect through ____________ ____, 2010, or any earlier termination of your employment with
the Company. Provided you continue in the Company‘s employ, this letter agreement shall automatically be renewed for successive one
(1)-year terms, beginning ___________ ___, 2010, unless the Company provides you with written notice of termination of this letter agreement
at least thirty (30) days prior to the start of any such one (1)-year renewal period. Once a Change in Control occurs, this letter agreement may
not be terminated at any time prior to the expiration of the twelve (12)-month period following the effective date of that Change of Control, and
no subsequent termination of this letter agreement shall adversely affect your right to receive any benefits to which you may have previously
become entitled hereunder in connection with your Involuntary Termination.


                                                                       8
                  2.      Termination for Cause.

                   Should your employment cease by reason of a Termination for Cause, then the Company will only be required to pay you (i)
any unpaid compensation earned for services previously rendered through the date of such termination and (ii) any accrued but unpaid vacation
benefits or sick days, and no benefits will be payable to you under Part Two of this letter agreement.

                  3.      Death.

                  Should you die before receipt of one or more salary continuation payments to which you become entitled under this letter
agreement, then those payments will be made to the executors or administrators of your estate. Should you die before you exercise all your
outstanding Options as accelerated hereunder, then such Options may be exercised, within twelve (12) months after your death, by the
executors or administrators of your estate or by persons to whom the Options are transferred pursuant to your will or in accordance with the
laws of inheritance. In no event, however, may any such Option be exercised after the specified expiration date of the option term.

                  4.      Miscellaneous.

                   This letter agreement will be binding upon the Company, its successors and assigns (including without limitation, the
surviving entity in any Change in Control) and is to be construed and interpreted under the laws of the State of Texas. This letter agreement
supersedes all prior agreements between you and the Company relating to the subject of severance benefits payable upon an Involuntary
Termination [(including, without limitation, that certain letter agreement regarding Severance Benefit Plan entered into between you and the
Company, and you will not be entitled to any other severance benefits upon such a termination other than those that are provided in this letter
agreement. If any provision of this letter agreement as applied to you or the Company or to any circumstance should be adjudged by a court of
competent jurisdiction to be void or unenforceable for any reason, the invalidity of that provision will in no way affect (to the maximum extent
permissible by law) the application of such provision under circumstances different from those adjudicated by the court, the application of any
other provision of this letter agreement, or the enforceability or invalidity of this letter agreement as a whole. Should any provision of this
letter agreement become or be deemed invalid, illegal or unenforceable in any jurisdiction by reason of the scope, extent or duration of its
coverage, then such provision will be deemed amended to the extent necessary to conform to applicable law so as to be valid and enforceable
or, if such provision cannot be so amended without materially altering the intention of the parties, then such provision will be stricken and the
remainder of this letter agreement will continue in full force and effect.


                                                                       9
                  5.        General Creditor Status.

                   All cash payments to which you become entitled hereunder will be paid, when due, from the general assets of the Company,
and no trust fund, escrow arrangement or other segregated account will be established as a funding vehicle for such payment. Accordingly,
your right (or the right of the personal representatives or beneficiaries of your estate) to receive such cash payments hereunder will at all times
be that of a general creditor of the Company and will have no priority over the claims of other general creditors.

                  6.       At Will Employment.

                  Nothing in this letter agreement is intended to provide you with any right to continue in the employ of the Company (or any
subsidiary) for any period of specific duration or interfere with or otherwise restrict in any way your rights or the rights of the Company (or any
subsidiary), which rights are hereby expressly reserved by each, to terminate your employment at any time and for any reason, with or without
cause.

                                                         [ SIGNATURE PAGE FOLLOWS ]


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                   Please indicate your agreement with the foregoing terms and conditions of your severance package (including, without
limitation, the conversion of any Incentive Options into Non-Statutory Options) by signing the Acceptance section of the enclosed copy of this
letter below and returning it to the Company.

                                                                                   Very truly yours,

                                                                                   CROSSROADS SYSTEMS, INC.

                                                                         By:       /s/ Robert C. Sims
                                                                                   Robert C. Sims
                                                                         Title:    Chief Executive Officer

                                                               ACCEPTANCE

                  I hereby agree to all the terms and provisions of the foregoing letter agreement governing the special benefits to which I may
become entitled in the event my employment should terminate under certain prescribed circumstances including certain terminations following
a substantial change in control or ownership of the Company.

                                                                Signature:         /s/ David Cerf

                                                                Dated:

                                                                Address


                                                                      11
                                                               EXHIBIT A
                                                            GENERAL RELEASE

          By signing this General Release (this ― Release ‖) and accepting the severance being offered to [NAME OF EXECUTIVE] (― you ‖ or
― You ‖) in the Severance Offer and General Release Letter Agreement to which this Release is an exhibit, you agree to waive, release, and
forever discharge Crossroads Systems, Inc. (the ― Company ‖) and its parents, successors, assigns, divisions, subsidiaries, affiliates, partners,
officers, directors, executives, investors, shareholders, managers, supervisors, employees, agents, attorneys and representatives (collectively the
― Released Parties ‖ or ― Releasees ‖), from any and all claims, demands, and causes of action which you have or claim to have, wh