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CROSSROADS SYSTEMS INC S-1/A Filing

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CROSSROADS SYSTEMS INC S-1/A Filing Powered By Docstoc
					                                 As filed with the Securities and Exchange Commission on May 18, 2011
                                                                                                                      Registration No. 333-172792


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




                                                         Amendment No. 1
                                                               to
                                                            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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    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 May 18, 2011

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

                                   CROSSROADS SYSTEMS, INC.


    We are registering 12,500,000 shares of our common stock, 4,296,875 warrants to purchase shares of our common stock and
4,296,875 additional shares of common stock issuable upon exercise of the warrants for sale by our security holders from time to
time. The warrants are exercisable for shares of our common stock at an exercise price of $0.80 per share, subject to anti-dilution
adjustments. 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.
    The selling security holders will offer their:
   •    shares of our common stock at a price of $1.25 per share, and
   •    warrants to purchase shares of our common stock at a price of $1.25 per warrant,
until the shares of our common stock or warrants, as the case may be, 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 selling security holders will receive all of the proceeds from the sale of the offered securities. 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 ―Selling Security Holders‖ on page 72 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 76 .
   Our common stock is quoted on the Pink Sheets under the symbol ―CRDS.‖ The last reported sale price of our common stock
on May 16, 2011 was $1.30 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                                                                                                       39
        Management                                                                                                     48
        Certain Relationships and Related Transactions                                                                 61
        Principal Stockholders                                                                                         62
        Description of Capital Stock                                                                                   64
        Shares Eligible for Future Sale                                                                                70
        Selling Security Holders                                                                                       72
        Plan of Distribution                                                                                           76
        Validity of Common Stock                                                                                       79
        Experts                                                                                                        79
        Where You Can Find More Information                                                                            79
        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.
     In the private placement, we agreed with the purchasers, among other things, that we would list the common stock and warrants
on either the OTC Bulletin Board or NASDAQ exchange and to maintain such listing for a certain period of time. At our annual
meeting of stockholders on April 20, 2011, in connection with an anticipated application to list our common stock on the NASDAQ
Capital Market, our stockholders approved a resolution authorizing our board of directors within six months from the annual
meeting to decide whether to implement the reverse stock split of our common stock and the exact ratio of the split within a range
of 1-for-4 and 1-for-8. The purpose of the reverse stock split will be to raise the per share bid price of our common stock to better
enable us to meet the minimum bid price requirement for initial listing on the NASDAQ Capital Market. Our common stock is
currently quoted under the symbol ―CRDS‖ on the Pink Sheets. On May 16, 2011, the last reported sale price of our common stock
was $1.30. We cannot assure you that we will commence the process for listing on a NASDAQ exchange, that a reverse stock split
will cause the minimum bid price of our common stock to exceed $4.00 per share or that our common stock will not be declined for
listing due to a failure to meet other listing requirements even if after the reverse stock split the market price per share of the
common stock is in excess of $4.00.

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                                                      THE OFFERING
Securities offered by the selling security
  holders
                                                  12,500,000 shares of common stock

                                                  4,296,875 warrants to purchase common stock

                                                  4,296,875 additional shares of common stock issuable upon the exercise of
                                                  warrants
Common stock outstanding as of May 6, 2011
                                                  43,463,232 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 11,726,568 shares of common stock issuable upon exercise of options and warrants outstanding as of May 6, 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. We derived the following summary unaudited consolidated financial data for the three months ended January
31, 2010 and 2011 from our unaudited consolidated financial statements for such periods and dates. The unaudited consolidated
financial statements were prepared on a basis consistent with our audited consolidated financial statements and include, in the
opinion of management, all adjustments necessary for the fair presentation of the financial information contained in those
statements. The historical results presented below are not necessarily indicative of financial results to be achieved in future periods.
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 January 31, 2011              As of October 31, 2010
                                                                                                           (in thousands)
        Balance Sheet Data:
          Total current assets                                                       $            18,050              $             19,804
          Total assets                                                               $            19,142              $             21,178
          Total current liabilities                                                  $             5,503              $              6,751
          Long-term deferred revenue                                                 $               112              $                103
          Total stockholders‘ equity                                                 $            13,527              $             14,324
          Total liabilities and stockholders‘ equity                                 $            19,142              $             21,178


                                                            Three Months Ended                                      Years Ended
                                                                January 31,                                         October 31,
                                                          2010               2011                          2009                      2010
                                                                            (in thousands, except per share data)
        Statement of Operations Data:
          Total revenue                           $         2,722       $         3,601           $        16,848             $      16,368
          Total cost of revenue                   $           265       $           503           $         2,734             $       2,492
          Gross profit                            $         2,457       $         3,098           $        14,114             $      13,876
          Total operating expenses                $         4,577       $         4,291           $        18,607             $      18,048
          Losses from operations                  $        (2,120 )     $        (1,193 )         $        (4,493 )           $      (4,172 )
          Interest expense                        $           (24 )     $           (38 )         $          (113 )           $        (110 )
          Other income (expense)                               —                     —            $            12             $          (4 )
          Net loss                                $        (2,144 )     $        (1,231 )         $        (4,594 )           $      (4,286 )
          Basic net loss per share (1)            $         (0.07 )     $         (0.03 )         $         (0.16 )           $       (0.14 )
          Fully diluted net loss per share (1)    $         (0.07 )     $         (0.03 )         $         (0.16 )           $       (0.14 )


                                                          Three Months Ended January 31,                            Years Ended
                                                                                                                    October 31,
                                                             2010                  2011                     2009                      2010
                                                                                          (in thousands)
        Statements of Cash Flows Data:
          Net cash provided by (used in)              $        883          $       1,125             $     (1,968 )           $        (179 )
             operating activities
          Net cash used in investing activities       $        (85 )        $        (142 )           $           (26 )        $        (320 )
          Net cash provided by (used in)                        —           $           1             $           (50 )        $       9,178
             financing activities
          Net increase in (decrease) cash and         $        554          $            892          $     (1,789 )           $       8,514
             cash equivalents
          Cash and cash equivalents, end of           $      5,851          $      14,703             $      5,297             $     13,811
             period



(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 May 6, 2011, there were
43,463,232 shares of our common stock outstanding. In addition to the shares covered by this prospectus, approximately
30,140,872 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 May 6, 2011, an additional 11,726,568 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 40.3% of our
common stock as of May 6, 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 issued in
our October 2010 private placement to purchase 4,296,875 shares of our common stock have 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 offer their:
   •    shares of our common stock at a price of $1.25 per share, and
   •    warrants to purchase shares of our common stock at a price of $1.25 per warrant,
until the shares of our common stock or warrants, as the case may be, 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 May 16, 2011)                              $       1.40      $       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 May 16, 2011, the last reported sale price of our common stock on the Pink Sheets was $1.30 per share. As of May 6, 2011,
there were 43,463,232 shares of our common stock outstanding held by 251 holders of record.

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                                                         CAPITALIZATION
    The following table sets forth our capitalization as of January 31, 2011. 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
                                                                                                         January 31, 2011
                                                                                                           (in thousands)
        Cash and cash equivalents                                                                    $           14,703

        Total current liabilities                                                                                 5,503
        Long-term deferred revenue                                                                                  112
        Stockholders‘ equity:
          Common stock, $.001 par value, 75,000,000 shares authorized, 43,282,290 shares                             43
             issued and outstanding
          Additional paid-in capital                                                                           199,123
          Accumulated other comprehensive loss                                                                     (42 )
          Accumulated deficit                                                                                 (185,597 )
             Total stockholders‘ equity                                                                         13,527
             Total liabilities and stockholders‘ equity                                              $          19,142


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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 January 31, 2011, 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 was completed successfully
        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. This milestone was completed
        successfully in 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 2012, which should offset a portion of the expenses. However, shifts in market need or
particular customer

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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, 86
employees as of October 31, 2010 and 91 employees as of January 31, 2011. 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 and related disclosures. We base our estimates on historical experience and on
various other assumptions

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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 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 product returns. These allowances are based on programs in existence at
the time revenue is recognized. 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.
   In October 2009, the Financial Accounting Standards Board (―FASB‖) issued Accounting Standards Update (―ASU‖) No.
2009-13, ―Multiple-Deliverable Revenue Arrangements‖ and ASU 2009-14, ―Certain Revenue Arrangements that Include Software
Elements.‖ We adopted the new guidance on a prospective basis for new or materially modified revenue arrangements as of
November 1, 2011.
    When elements such as hardware, software and services are contained in a single arrangement, or in related arrangements with
the same customer, we allocate revenue to each element in an arrangement based on relative selling price using a selling price
hierarchy. The selling price for a deliverable is based on its VSOE if available, third party evidence (―TPE‖) if VSOE is not
available, or our best estimate of selling price (―ESP‖) if neither VSOE nor TPE is available. The maximum revenue recognized on
a delivered element is limited to the amount that is not contingent upon the delivery of additional items.

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    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 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.

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   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
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.
    Stock-Based Compensation
    On January 1, 2006, we adopted the provisions of the applicable guidance under ASC Topic 718 for share-based payment
transactions. Under the provision of this guidance, stock-based compensation costs for employees is measured on the grant date,
based on the estimated fair value of the award on that date, and is recognized as expense over the employee's requisite service
period, which is generally over the vesting period, on a straight-line basis. We adopted this guidance using the prospective
transition method. Under this transition method, non-vested option awards outstanding at January 1, 2006, continue to be accounted
for under the minimum value method, and all awards granted, modified or settled after the date of adoption are accounted for using
the measurement, recognition and attribution provisions of this guidance.

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    Under the provisions of this guidance, we make a number of estimates and assumptions. The estimation of stock awards that
will ultimately vest requires judgment, and to the extent actual results differ from our estimates, such amounts will be recorded as
an adjustment in the period estimates are revised. Actual results may differ substantially from these estimates. In valuing
share-based awards under this guidance, significant judgment is required in determining the expected volatility of our common
stock and the expected term individuals will hold their share-based awards prior to exercising. 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. Our 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
Results of Operations
     Three Months Ended January 31, 2011 Compared to Three Months Ended January 31, 2010
     Revenue. Revenues increased $0.9 million, or 32.3%, to $3.6 million for the three months ended January 31, 2011 from $2.7
million for the three months ended January 31, 2010. Product revenues for the three months ended January 31, 2011 increased $0.2
million, or 19.6%, to $1.3 million compared with $1.1 million for three months ended January 31, 2010 due to an increase in
shipments of VTS products of $0.1 million, and shipments of $0.1 million of SPHiNX products, which was not available in the first
quarter of 2010. IP license, royalty and other revenues for the three months ended January 31, 2011 increased $0.7 million, or
40.7%, to $2.2 million compared with $1.6 million for three months ended January 31, 2010 due to two IP settlements during the
first quarter of 2011, totaling $527,000.
    Cost of Revenue. Cost of revenue increased $0.2 million, or 89.8%, to $0.5 million, for the three months ended January 31,
2011 from $0.3 million for three months ended January 31, 2010. Product costs for three months ended January 31, 2011 increased
$21,000, or 25.7%, to $105,000 compared with $83,000 for the three months ended January 31, 2010. IP license, royalty and other
costs for the three months ended January 31, 2011 increased $216,000, or 119.1%, to $398,000 compared with $182,000 for the
three months ended January 31, 2010 due to the increase in professional fees in relation to our IP licensing activities, related to the
two settlements named above.
    Sales and Marketing. Sales and marketing expenses decreased $0.1 million, or 8.1%, to $1.2 million for the three months
ended January 31, 2011 from $1.3 million for the three months ended January 31, 2010. This decrease was due to reduced contract
labor, advertising, tradeshow-related travel, and stock-based compensation, offset by increases in relocation expenses for new hires,
and an increase in payroll and commissions. We anticipate that sales and marketing expenses will increase in absolute dollars, as
we intend to market our new tape archive product.
    Research and Development. Research and development expenses decreased $0.2 million, or 7.2%, to $2.1 million for the
three months ended January 31, 2011 from $2.3 million for the three months ended January 31, 2010. This decrease was due to
reduced contract labor by $154,000, stock-based compensation by $86,000, and depreciation by $45,000, offset by increases in
payroll related expenses of $56,000 and increased equipment rental of $15,000. 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.

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    General and Administrative. General and administrative expenses decreased $14,000, or 2.2%, to $647,000 for the three
months ended January 31, 2011 from $662,000 for the three months ended January 31, 2010. The decrease was due to a reduction
in stock-based compensation of $180,000, offset by an increase in professional fees, consulting and outside services of $101,000,
an increase in payroll and related expenses of $30,000, and an increase in communication and utilities of $24,000. 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.
    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
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.

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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:


                                                                                         Three Months Ended
                                                                               January 31, 2010            January 31, 2011
                                                                                               (in thousands)
             Net cash provided by operating activities                     $           883             $          1,125
             Net cash used in investing activities                                     (85 )                       (142 )
             Net cash (used in) provided by financing activities                      (—)                            (1 )
             Net increase in cash and cash equivalents                                 554                          892
             Cash and cash equivalents, end of period                                5,851                       14,703
    Net cash provided by operating activities increased from approximately $0.9 million in the three months ended January 31,
2010 to approximately $1.1 million in the three months ended January 31, 2011 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 $85,000 in the three months ended
January 31, 2010 compared to $142,000 in the three months ended January 31, 2011. Included in the year ended October 31, 2009
and 2010 are capital expenditures for research and development equipment.
    Cash flows provided by financing activities in the three months ended January 31, 2010 was $0. Cash provided by financing
activities in the three months ended January 31, 2011 was approximately $1,000 from the exercise of stock options by employees.
    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

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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 January 31, 2010 and 2011, 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 2011. 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 2011. 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.

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    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
   •    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.

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   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.
   We are party to a software license and distribution agreement with HP whereby we license to HP certain of our software
products and intellectual property rights for use in HP‘s products. HP pays us royalties and support fees pursuant to contractual
formulas in the agreement. 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
76 U.S. patents and have 46 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.

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   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.
    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;

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   •    product interoperability with customer networks and backup software;
   •    industry credibility and emerging market presence; and
   •    customer support and services.
    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 May 6, 2011, we had 98 employees in offices around the world. Of the total employees, 27 were engaged in sales and
marketing, 60 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, 2010, 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 case is ongoing. The court has conducted a hearing in order to construe the claims of the patents and the
parties are currently filing post-hearing briefings.
    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.

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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
        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. We believe Mr. Sims‘ qualifications to serve on our board of directors includes prior service to
Crossroads as its President, Chief Executive Officer and Director, his more than twenty years of experience in the international data
storage, management and protection industry with in-depth engineering expertise and his intimate knowledge of Crossroads are
critical to the oversight of our strategic initiatives and the evaluation of our operational performance.
    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.

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    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 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.
    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

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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 five members. Messrs. Brackett, Ledger, Pearce 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;
   •    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;

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   •    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 employment agreement with Robert C. Sims, our President and
Chief Executive Officer, in October 2003. 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 (3)                                                 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 received 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 pursuant to his consulting agreement with us.
(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.
(3) Mr. Howe‘s term as a director ended on April 20, 2011.
    We are party to a consulting agreement with Mr. Ledger pursuant to which he provides consulting services with respect to
certain of our products. Under the terms of the agreement, Mr. Ledger receives $5,000 per month and reimbursement of expenses.

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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 May 6, 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 43,463,232 shares of common stock
outstanding as of May 6, 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 May 6, 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)              7.4 %
          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)              3.6 %
          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                                                                     316,068 (10)               *
          Elliott Brackett                                                               226,146 (11)               *
          Joseph J. Hartnett                                                                  —                     *
          Steven Ledger                                                                1,804,803 (12)             4.2 %
          All current directors and executive officers as a group (9                   6,022,485 (13)            13.1 %
             persons)



*   Less than 1%.
(1) Includes 937,500 shares of common stock issuable upon exercise of warrants exercisable within 60 days of May 6, 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 May 6, 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 May 6, 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 May 6, 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 May 6, 2011.
(6) Includes 472,840 shares of common stock issuable upon exercise of options exercisable within 60 days of May 6, 2011.
(7) Includes 308,347 shares of common stock issuable upon exercise of options exercisable within 60 days of May 6, 2011.
(8) Includes 313,283 shares of common stock issuable upon exercise of options exercisable within 60 days of May 6, 2011.
(9) Includes of 4,687 shares of common stock issuable upon exercise of options exercisable within 60 days of May 6, 2011.
(10) Includes 108,414 shares of common stock issuable upon exercise of options exercisable within 60 days of May 6, 2011.
(11) Includes 167,555 shares of common stock issuable upon exercise of options exercisable within 60 days of May 6, 2011.
(12) Consists of 1,804,803 shares of common stock held by a partnership of which Mr. Ledger is a partner.
(13) Includes 2,401,592 shares of common stock issuable upon exercise of options exercisable within 60 days of May 6, 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 May 6, 2011, we had outstanding 43,463,232 shares of common stock, held of record by 251 stockholders. In addition, as of
May 6, 2011, we had outstanding options to acquire 7,429,693 shares of common stock and warrants exercisable for 4,296,875
shares of common stock.
    In connection with our October 2010 private placement, we agreed with the purchasers, among other things, that we would list
the common stock and warrants on either the OTC Bulletin Board or NASDAQ exchange and to maintain such listing for a certain
period of time. At our annual meeting of stockholders on April 20, 2011, in connection with an anticipated application to list our
common stock on the NASDAQ Capital Market, our stockholders approved a resolution authorizing our board of directors within
six months from the annual meeting to decide whether to implement the reverse stock split of our common stock and the exact ratio
of the split within a range of 1-for-4 and 1-for-8. The purpose of the reverse stock split will be to raise the per share bid price of our
common stock to better enable us to meet the minimum bid price requirement for initial listing on the NASDAQ Capital Market.
Our common stock is currently quoted under the symbol ―CRDS‖ on the Pink Sheets. On May 16, 2011, the last reported sale price
of our common stock was $1.30. We cannot assure you that we will commence the process for listing on a NASDAQ exchange,
that a reverse stock split will cause the minimum bid price of our common stock to exceed $4.00 per share or that our common
stock will not be declined for listing due to a failure to meet other listing requirements even if after the reverse stock split the
market price per share of the common stock is in excess of $4.00.
    The reverse stock split is intended to raise the bid price of the common stock to satisfy the $4.00 minimum bid price
requirement for initial listing on the NASDAQ Capital Market. However, there can be no assurance that the reverse stock split, if
implemented, will have the desired effect of sufficiently raising the common stock price. The effect of a reverse stock split upon the
market price of the common stock cannot be predicted with any certainty. The market price of the common stock may vary based
on other factors that are unrelated to the number of shares outstanding, including our future performance. We also cannot assure
you that the common stock will not be declined for listing due to a failure to meet other listing requirements even if after the
reverse stock split the market price per share of the common stock is in excess of $4.00. If a listing on the NASDAQ Capital
Market were not to occur, we may seek to have the common stock and the warrants quoted on the OTC Bulletin Board or continue
to be quoted in the Pink Sheets. These alternative markets are generally considered to be less efficient and liquid than the
NASDAQ Capital Market. In addition, the purchasers in our October 2010 private placement may consider our failure to have the
common stock and warrants listed on the NASDAQ Capital Market or quoted on the OTC Bulletin Board to be a breach of our
agreements in the private placement. Even if the closing bid price of the common stock satisfies the minimum bid price
requirement, we may still effect the reverse stock split if stockholders approve the proposal and our board of directors determines
that effecting the reverse stock split would be in our best interests and the best interests of our stockholders.
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

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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 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

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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.
    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

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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.
    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.

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    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.
    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.

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    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 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 May 6, 2011, 43,463,232 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, 30,140,872 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 May 6, 2011, options to purchase a total of 7,429,693 shares of common stock were outstanding, of which 4,868,541
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.
    The offering was conducted pursuant to Rule 506 under the Securities Act of 1933, and the purchasers of securities in the
private placement represented their intention to acquire the securities for investment. 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.
    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 May 6, 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 43,463,232 shares of our common stock issued and
outstanding on May 6, 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. The purchasers in the private placement that are broker-dealers
     purchased the securities in the ordinary course of business and 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.
(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


       Unaudited Financial Statements:
         Consolidated Balance Sheets as of October 31, 2010 and January 31, 2011                       F-2
         Consolidated Statements of Operations for the three months ended January 31, 2010 and 2011    F-3
         Consolidated Statements of Cash Flows for the three months ended January 31, 2010 and 2011    F-4
         Notes to Consolidated Financial Statements                                                    F-5
       Financial Statements:
         Report of Independent Registered Public Accounting Firm                                      F-13
         Consolidated Balance Sheets as of October 31, 2009 and 2010                                  F-14
         Consolidated Statements of Operations for the years ended October 31, 2009 and 2010          F-15
         Consolidated Statements of Changes in Stockholders‘ Equity and Comprehensive Loss for the    F-16
           years ended October 31, 2009 and 2010
         Consolidated Statements of Cash Flows for the years ended October 31, 2009 and 2010          F-17
         Notes to Consolidated Financial Statements                                                   F-18
       Financial Statement Schedule:
         Schedule II: Valuation and Qualifying Accounts for the Years Ended October 31, 2009          F-33
           and 2010

                                                          F-1
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                                  CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES

                                          CONSOLIDATED BALANCE SHEETS
                                                      (unaudited)
                                            (In thousands, except share data)


                                                                             OCTOBER 31, 2010     JANUARY 31, 2011
                                    ASSETS
       Current assets:
          Cash and cash equivalents .                                        $       13,811       $      14,703
          Accounts receivable, net of allowance for doubtful accounts of              5,607               2,953
            $19 and $28, respectively
          Inventories, net                                                               93                 167
          Prepaid expenses and other current assets                                     293                 227
            Total current assets                                                     19,804              18,050
       Property and equipment, net                                                      575                 610
       Intangible assets, net                                                           739                 427
       Other assets                                                                      60                  55
            Total assets .                                                   $       21,178       $      19,142

              LIABILITIES AND STOCKHOLDERS' EQUITY
       Current liabilities:
         Accounts payable                                                    $           990      $         663
         Accrued expenses                                                              2,271              1,617
         Deferred revenue                                                              1,517              1,250
         Line of credit                                                                1,973              1,973
           Total current liabilities .                                                 6,751              5,503
       Long term deferred revenue                                                        103                112
       Commitments and contingencies (See Note 8)                                         —                  —
       Stockholders' equity:
         Common stock, $.001 par value, 75,000,000 shares authorized,                     43                 43
           42,945,102 and 43,282,290 shares issued and outstanding,
           respectively
         Additional paid-in capital                                                 198,697             199,123
         Accumulated other comprehensive loss                                           (49 )               (42 )
         Accumulated deficit                                                       (184,367 )          (185,597 )
           Total stockholders' equity .                                              14,324              13,527
           Total liabilities and stockholders' equity                        $       21,178       $      19,142



                               See accompanying notes to the consolidated financial statements.

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                                   CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES

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




                                                                                     Three Months Ended
                                                                                         January 31,
                                                                            2010                          2011
       Revenue:
          Product                                                  $               1,093        $                1,309
          IP license, royalty and other                                            1,629                         2,292
            Total revenue                                                          2,722                         3,601
       Cost of revenue:
          Product                                                                     83                           105
          IP license, royalty and other                                              182                           398
            Total cost of revenue                                                    265                           503
       Gross profit                                                                2,457                         3,098
       Operating expenses:
          Sales and marketing                                                       1,323                         1,215
          Research and development                                                  2,280                         2,117
          General and administrative                                                  662                           647
          Amortization of intangible assets                                           312                           312
            Total operating expenses                                                4,577                         4,291
       Loss from operations                                                        (2,120 )                      (1,193 )
       Interest expense                                                               (24 )                         (38 )
       Net loss                                                    $               (2,144 )     $                (1,231 )

       Basic and diluted net loss per share                        $                (0.07 )     $                 (0.03 )

       Basic and diluted average common shares outstanding                  29,199,586                    42,674,694



                                See accompanying notes to the consolidated financial statements.

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                                  CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES

                                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                  (unaudited)
                                                (In thousands)




                                                                                      Three Months Ended
                                                                                          January 31,
                                                                                   2010                 2011
       Cash flows from operating activities:
         Net loss                                                              $   (2,144 )      $      (1,231 )
         Adjustments to reconcile net loss to net cash provided by (used in)
            operating activities:
            Depreciation                                                              163                  100
            Amortization of intangible assets                                         312                  312
            Loss on disposal of fixed assets                                           —                     6
            Stock-based compensation                                                  392                   82
            Provision for doubtful accounts receivable                                (12 )                 —
            Provision for excess and obsolete inventory                                (2 )                 (6 )
         Changes in assets and liabilities:
            Accounts receivable                                                     3,007                2,651
            Inventories                                                                22                  (68 )
            Prepaids and other current assets                                          (3 )                 66
            Accounts payable                                                         (241 )               (224 )
            Accrued expenses                                                         (608 )               (297 )
            Deferred revenue                                                           (3 )               (266 )
               Net cash provided by operating activities                              883                1,125
       Cash flows from investing activities:
         Purchase of property and equipment                                           (85 )               (142 )
               Net cash used in investing activities                                  (85 )               (142 )
       Cash flows from financing activities:
         Proceeds from issuance of common stock, net of expenses                       —                    1
               Net cash provided by financing activities                               —                    1
       Effect of exchange rate on cash                                               (244 )               (92 )
       Net increase in cash and cash equivalents                                      554                 892
       Cash and cash equivalents, beginning of period                               5,297              13,811
       Cash and cash equivalents, end of period                                $    5,851        $     14,703

       Supplemental disclosure of cash flow information:
       Cash paid for interest                                                  $       23        $             30
       Cash paid for taxes                                                     $        2        $             —
See accompanying notes to the consolidated financial statements.

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                                    CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
     The accompanying unaudited Consolidated Financial Statements include the accounts of Crossroads Systems, Inc. and
subsidiaries (the ―Company‖) in accordance with accounting principles generally accepted in the United States (―GAAP‖). All
intercompany transactions and balances have been eliminated. The statements have been prepared in accordance with the
accounting policies described in the Company‘s Form S-1 Registration Statement and should be read in conjunction with the
Consolidated Financial Statements for the year ended October 31, 2010 and notes included therein. These statements do not include
all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management all
material adjustments (primarily consisting of normal recurring accruals) considered necessary for a fair presentation of the financial
positions, results of operations and cash flows for the periods presented have been included and the disclosures herein are adequate.
The results for interim periods are unaudited and not necessarily indicative of the results that can be expected for a full year.
    The preparation of financial statements in accordance with U.S. generally accepted accounting principles (―GAAP‖) requires
management to make estimates and assumptions that affect the amounts reported in Crossroads‘ Consolidated Condensed Financial
Statements and accompanying notes. Actual results could differ materially from those estimates.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
    In October 2009, the Financial Accounting Standards Board (―FASB‖) issued Accounting Standards Update (―ASU‖) No.
2009-13,―Multiple-Deliverable Revenue Arrangements ‖ and ASU 2009-14,―Certain Revenue Arrangements that Include Software
Elements.‖ The Company adopted the new guidance on a prospective basis for new or materially modified revenue arrangements as
of November 1, 2011. The adoption of this guidance did not have a material impact on the Company‘s financial statements and is
not expected to have a material impact in the future.
    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. Shipping
charges billed to customers are included in product revenue and the related shipping costs are included in cost of product revenue.
    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 Product sales include a perpetual license to the Company‘s software that is essential to the functionality of the
hardware. Shipping charges billed to customers are included in product revenue and the related shipping costs are included in cost
of product revenue. Virtually all sales include post-contract support (PCS) services (included in support revenue) which consist of
software updates and customer support. Software

                                                                F-5
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                                    CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (continued)
updates provide customers access to maintenance releases and patches released during the term of the support period. Support
includes telephone and internet access to technical support personnel and hardware support.
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 each element in an arrangement based on relative selling price using a selling
price hierarchy. The selling price for a deliverable is based on its vendor specific objective evidence (―VSOE‖) if available, third
party evidence (―TPE‖) if VSOE is not available, or the Company‘s best estimate of selling price (―ESP‖) if neither VSOE nor TPE
is available. The maximum revenue recognized on a delivered element is limited to the amount that is not contingent upon the
delivery of additional items.
    The Company determines VSOE for PCS based on the rate charged to customers based upon renewal pricing for PCS. PCS
revenue is recognized under a proportional performance method, ratably over the life of the contract.
3. INVENTORY
    Inventory, net consists of the following (in thousands):




                                                                                   OCTOBER 31,          JANUARY 31,
                                                                                      2010                 2011
              Raw materials                                                    $        225         $        280
              Finished goods                                                             89                  101
                                                                                        314                  381
                Less: Allowance for excess and obsolete inventory                      (221 )               (214 )
                                                                               $         93         $        167
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                                    CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES

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




                                                                   Life          OCTOBER 31,           JANUARY 31,
                                                                 (years)            2010                  2011
             Equipment                                           1–3         $       18,269        $       18,422
             Furniture and fixtures                               5                     706                   687
             Leasehold improvements                                                     511                   511
                                                                                     19,486                19,619
                Less: Accumulated depreciation and                                  (18,911 )             (19,010 )
                  amortization
                                                                             $          575        $             610

    Depreciation expense was approximately $165,000 and $100,000 for the three months ended January 31, 2010 and 2011,
respectively.
5. INTANGIBLE ASSETS
    The following table presents details of intangible assets acquired (in thousands, except number of years):




                                                            Amortization         OCTOBER 31,           JANUARY 31,
                                                            Period (Years)          2010                  2011
             Intangible assets:
                Technology                                         5         $        6,407           $        6,407
                Accumulated amortization                                             (5,668 )                 (5,980 )
             Net carrying value                                              $          739           $          427

    Amortization expense was approximately $312,000 and $312,000 for three months ended January 31, 2010 and 2011,
respectively. Such assets will be fully amortized at October 31, 2012.
6. ACCRUED EXPENSES AND DEFERRED REVENUE
    Accrued expenses consist of the following (in thousands):




                                                                                 OCTOBER 31,              JANUARY 31,
                                                                                    2010                     2011
             Professional services                                           $          596           $          462
             Payroll related                                                          1,368                      908
             Warranty reserve                                                            30                       18
             Other                                                                      277                      229
                                                                             $        2,271           $        1,617

   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 year ended October 31, 2010 and three months ended January 31, 2011 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, 2010
Warranty reserve                 $   18         $   12   $   —       $   30

Three months ended January 31,
  2011
Warranty reserve                 $   30         $   2    $   (14 )   $   18


                                          F-7
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                                   CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES

                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. ACCRUED EXPENSES AND DEFERRED REVENUE – (continued)
    Deferred revenue consists of the following (in thousands):




                                                                                 OCTOBER 31,          JANUARY 31,
                                                                                    2010                 2011
             Product                                                         $        1,345       $         1,044
             Services                                                                   165                   199
             Other                                                                        7                     7
                                                                             $        1,517       $         1,250

7. 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
Company is in compliance for the interim period, three months ended January 31, 2011. The line of credit will mature on December
28, 2011. As of January 31, 2011, 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 $23,000 and $30,000 for the three months ended January 31, 2010 and 2011, respectively.
8. 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 $143,000 and $140,000 for the three months
ended January 31, 2010 and 2011, 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
7).
    The minimum annual future payments under the terms of these leases and other commitments at January 31, 2011 are as
follows (in thousands):
Fiscal Year             Operating
                         Leases
2011                $         294
2012                          386
2013                          384
2014                          393
2015                          130
Thereafter                     —
                    $       1,586


              F-8
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                                      CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. COMMITMENTS AND CONTINGENCIES – (continued)
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.
9. 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 415(a)(1) of the Securities Act of 1933.
    In connection therewith, on March 11, 2011, the Company filed on Form S-1, a 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.
10. STOCK OPTIONS AND STOCK BASED COMPENSATION
    Crossroads 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.

                                                                 F-9
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                                    CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. STOCK OPTIONS AND STOCK BASED COMPENSATION – (continued)
    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 three
months ended January 31, 2010, 196,820 stock options were granted, and as of January 31, 2011, a total of 7,673,995 stock options
were outstanding, of which 4,945,930 were vested, and 2,326,005 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 notbe 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:




                                                                                        Three months ended January 31,
                                                                                            2010               2011
              Cost of revenue                                                          $       10        $       0
              Sales and marketing                                                              66               31
              Research and development                                                        112               26
              General and administrative                                                      205               25
                Total stock-based compensation.                                        $      392        $      82

    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 it does 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:
                                     Three months ended January 31,
                                    2010                         2011
Expected dividend yield              0%                          0%
Expected volatility                 63%                         70%
Risk-free interest rate          2.6 – 2.8%                  1.4 – 2.0%
Expected term (years)                6.1                         6.1

                          F-10
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                                   CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES

                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. STOCK OPTIONS AND STOCK BASED COMPENSATION – (continued)
    The following table summarizes information about stock option activity for the three months ended January 31, 2011:




                                                       Number of             Weighted     Weighted          Average
                                                        Shares               Average       Average          Intrinsic
                                                                             Exercise     Remaining        Value ($M)
                                                                              Price      Contractual
                                                                                         Term (years)
             Outstanding at October 31, 2010            7,531,094        $      0.94           6.60      $      3.4
               Granted                                    196,820        $      0.95
               Forfeited                                  (50,169 )      $      0.53

                Exercised                                   (3,750 )     $      0.18

             Outstanding and expected to                7,673,995        $      0.94           6.37      $      2.4
               vest at January 31, 2011
             Exercisable at January 31, 2011            4,945,930        $      1.23           4.90      $      0.8
    The weighted average fair value per option granted during the three months ended January 31, 2010 and 2011 was $0.17 and
$0.65 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 three months ended January 31, 2010 and 2011 was $0 and $2,850,
respectively. During the three months ended January 31, 2010 and 2011, the amount of cash received from the exercise of stock
options was $0 and $675, respectively.
   The Company granted no options to non-employees during the three months ended January 31, 2011.
    At January 31, 2011, there was approximately $508,000 of total unrecognized compensation cost related to non-vested stock
option awards which is expected to be recognized over a weighted-average period of 1.54 years. There were 209,400 and 293,891
options that became vested during the three months ended January 31, 2010 and 2011, respectively, with the total fair value of these
awards of approximately $110,000 and $136,000 respectively.
   The following table shows information about outstanding stock options at January 31, 2011:
Range of Exercise Prices   Options OutstandingOptions
                                   Exercisable
                             Shares            Weighted       Weighted       Shares        Weighted
                           Outstanding          Average       Average                      Average
                                               Remaining    Exercise Price               Exercise Price
                                              Contractual
                                                 Term
$0.16000 – $0.37000            771,463            8.27      $   0.19039        296,872   $   0.19475
$0.39000 – $0.39000          1,943,573            9.53      $   0.39000        241,618   $   0.39000
$0.44000 – $0.77000            877,594            7.17      $   0.48251        525,464   $   0.48741
$0.82000 – $0.93000            888,176            5.55      $   0.87838        765,176   $   0.87008
$0.94000 – $1.14000          1,239,580            5.52      $   1.11784      1,192,219   $   1.12320
$1.15000 – $1.55000          1,176,087            3.73      $   1.39989      1,147,059   $   1.40315
$1.71000 – $5.62500            777,522            1.97      $   2.68030        777,522   $   2.68030
$0.16000 – $5.62500          7,673,995            6.37      $   0.94143      4,945,930   $   1.23465

                                                F-11
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                                    CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. SUBSEQUENT EVENTS
    On April 20, 2011, a reverse stock split was approved by the shareholders. The reverse stock split is intended to raise the bid
price of the common stock to satisfy the $4.00 minimum bid price requirement for initial listing on the NASDAQ Capital Market.
The initial listing requirements for the NASDAQ Capital Market include a bid price of $4.00 per share. The ―bid price‖ is the price
a prospective buyer is prepared to pay at a particular time for trading a unit of a given security. A range of 1-for-4 to 1-for-8 reverse
stock split is approved, and will be announced by the Board of Directors within 6 months of the annual meetings date April 20,
2011.

                                                                 F-12
TABLE OF CONTENTS

                       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

                                                                 F-13
TABLE OF CONTENTS

                                  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 deferred revenue                                                        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-14
TABLE OF CONTENTS

                                   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.

                                                             F-15
TABLE OF CONTENTS

                            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-16
TABLE OF CONTENTS

                                  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-17
TABLE OF CONTENTS

                                     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-18
TABLE OF CONTENTS

                                     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.

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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

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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.

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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

                                                                F-22
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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 2011. 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 2011. 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 May 18, 2011.

                                                                  F-23
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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-24
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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.

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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).

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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 7,531,094 stock options were
outstanding, of which 4,779,436 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


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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,                 6,316,860        $    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,                 6,283,451        $    1.19           5.68       $      —
               2009
               Granted                                  2,090,557        $    0.41
               Forfeited                                 (842,914 )      $    1.47

               Exercised                                       —         $      —
             Outstanding and expected to                7,531,094        $    0.94           6.60       $     3.4
               vest at October 31, 2010
             Exercisable at October 31,                 4,779,436        $    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-29
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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                      788,276            8.67      $   0.19             252,542      $      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
                                               7,531,094            6.60      $   0.94           4,779,436      $      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-30
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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-31
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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.
15. SUBSEQUENT EVENT (UNAUDITED)
    On April 20, 2011, a reverse stock split was approved by the shareholders. The reverse stock split is intended to raise the bid
price of the common stock to satisfy the $4.00 minimum bid price requirement for initial listing on the NASDAQ Capital Market.
The initial listing requirements for the NASDAQ Capital Market include a bid price of $4.00 per share. The ―bid price‖ is the price
a prospective buyer is prepared to pay at a particular time for trading a unit of a given security. A range of 1-for-4 to 1-for-8 reverse
stock split is approved, and will be announced by the Board of Directors within 6 months of the annual meetings date April 20,
2011.

                                                                 F-32
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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 Period
                                               of Period
       Year ended October 31, 2009
       Deducted from asset accounts:
         Allowance for doubtful accounts   $        73          $           34         $       (73 )    $     34
       Year ended October 31, 2010
       Deducted from asset accounts:
         Allowance for doubtful accounts   $        34          $            3         $       (18 )    $     19

                                                         F-33
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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 28 accredited investors for gross proceeds to us of $10.0 million in reliance
      on Section 4(2) of the Securities Act of 1933 and the rules and regulations promulgated thereunder (including Regulation D
      and Rule 506). 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.
   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 April 29, 2011, we granted to our employees, executive officers and directors options to
      purchase an aggregate of 2,303,250 shares of common stock at prices ranging from $0.39 to $1.38 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.
       On March 14, 2011, we issued 3,750 shares of common stock pursuant to an option exercise for an aggregate purchase price
       of $675.
       On April 12, 2011, we issued 166,422 shares of common stock pursuant to option exercises for an aggregate purchase price
       of $58,062.
    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

                                                               II-3
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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. Each recipient of
securities pursuant to Items 2 through 5 above either received adequate information about the registrant or had access, through their
relationships with the registrant, to such information.
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

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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 May 18, 2011.




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




                                                                    Robert C. Sims
                                                                    President and Chief Executive Officer
    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
*                             Director, Chairman of the Board of Directors   May 18, 2011




 Don Pearce
/s/ Robert C.                 Director, President and Chief Executive        May 18, 2011
Sims                          Officer
                              (Principal Executive Officer)




 Robert C. Sims
/s/ Jennifer Ray      Chief Financial Officer          May 18, 2011
Crane                 (Principal Accounting Officer)




 Jennifer Ray Crane
*                     Director                         May 18, 2011




 Elliott Brackett
*                     Director                         May 18, 2011
 Joseph J. Hartnett
*                        Director   May 18, 2011




 Steven Ledger
* By: /s/ Jennifer Ray
  Crane




  Attorney-in-Fact
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                                              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**†    Software License and Distribution Agreement, dated January 20, 2009, by and between
            Hewlett-Packard Company and Crossroads Systems, Inc.
10.12.1**   Commercial Industrial Lease Agreement, dated October 31, 2005, by Principal Life Insurance
            Company and Crossroads Systems, Inc.
10.12.2**   First Amendment to Lease, dated December 15, 2009, by and between Principal Life Insurance
            Company and Crossroads Systems, Inc.
 21.1       List of Subsidiaries
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             Exhibit                                                 Description
              No.
            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.
** Filed herewith.
†   Confidential materials deleted and filed separately with the Securities and Exchange Commission.
―** Confidential Treatment Requested‖ indicates portions of this document that have been deleted and have been separately filed with the
Securities and Exchange Commission.

                                                                                                                                 Exhibit 10.11
                                       SOFTWARE LICENSE AND DISTRIBUTION AGREEMENT

THIS SOFTWARE LICENSE AND DISTRIBUTION AGREEMENT (― Agreement ‖) is made by and between HEWLETT-PACKARD
COMPANY, a Delaware Corporation, and its Subsidiaries, divisions, and affiliates (― HP ‖), and CROSSROADS SYSTEMS, INC., a
Delaware Corporation (― Licensor ‖), effective as of the date of HP‘s signature below (the ― Effective Date ‖).

The parties hereby agree as follows:

1.   DEFINITIONS

     1.1.    ― Additional Program ‖ means a software program that is added as a Program to this Agreement after the Effective Date by
             appending an Exhibit A hereto.

     1.2.    ― Complete Copy ‖ means a Program which includes (i) a master copy of the Program, (ii) all Documentation for the Program,
             and (iii) all associated Sales Tools and Support Tools, each in the form(s) and on the media described in Exhibit A.

     1.3.    ― Documentation ‖ means the end user manuals and other documentation (including copies of any such materials in electronic
             form to the extent Licensor makes available to its customers) that Licensor has created for a Program including all localized
             versions thereof, if any, and any other documentation and information regarding a Program, including but not limited to a
             functional description of the Program, directions for installation, verification of installation and use, and any other explanatory
             material reasonably necessary for a user to perform all of the functions of the Program, which Licensor generally provides to its
             customers, including those items listed and described in Exhibit A hereto.

     1.4.    ― Enhancements ‖ mean all present and future bug fixes, error corrections, updates, modifications, new features, new
             functionalities, upgrades or new versions of a Program, Source Code Program or Documentation which Licensor makes available
             at no additional charge to its customers which are subscribing to maintenance and support.

     1.5.    ― Final Copy ‖ means a Complete Copy of a Program that has been reviewed and accepted by HP pursuant to Section 2.8 hereof.

     1.6.    ― HP License ‖ means HP‘s standard form of reseller agreement or end-user license agreement, as applicable, in effect from
             time-to-time used by HP.

     1.7.    " HP Partner " means an entity that engages in software development and participates in the HP Developer and Solution Partner
             Program (DSPP) specifically with respect to HP Product.

     1.8.    ― HP Product(s) ‖ means the product(s) set forth in Exhibit B.

     1.9.    ― Marks ‖ shall have the meaning ascribed to such term in Section 4.3.

     1.10.   ― Program ‖ means Licensee‘s software program(s), in object code format, listed and described on an Exhibit A appended hereto,
             including all Enhancements and localized versions thereto, if any, Third Party Code (as defined in Section 4.7), if any, and
             Documentation. Program shall also include Additional Programs. The first Programs subject to this Agreement are set forth and
             incorporated herein by the attached Exhibit A1 and Exhibit A2; each subsequent Exhibit A appended hereto by amendment shall
             be consecutively numbered.

     1.11.   ― Source Code Program ‖ means the code of a Program, including comments and procedural code such as job control language,
             which is machine-readable and which may be printed or displayed in a form readable and understandable by a computer
             programmer of ordinary skill who is well versed in the languages used in the Program.
     1.12.   ― Subsidiaries ‖ means an entity controlled by or under common control with a party to this Agreement, through ownership or
             control of more than fifty percent (50%) of the voting power of the shares or other means of ownership or control, provided that
             such control continues to exist.

     1.13.   ― Sales Tools ‖ means all applications, utilities or other materials (in object code form) programs that are used by Licensor in the
             normal course of marketing its Programs but only those which Licensor has the right to provide to HP on a royalty-free basis.

     1.14.   ― Support Tools ‖ means all applications, utilities, listings, or other materials (in object code form) related to a Program that are
             reasonably necessary to enable HP to exercise its rights under Section 3.2 hereof.

2.   DEVELOPMENT, DELIVERY AND ACCEPTANCE

     2.1.    Program Development . Any development work that is required with respect to a Program will be described in a separate
             document (― Project Statement ‖) mutually acceptable to the parties. Licensor agrees to use reasonable commercial efforts to
             undertake and complete the work set forth in each Project Statement so that each Program meets the specifications set forth
             therein. The first such Project Statement is attached hereto and incorporated herein as Exhibit F.

     2.2.    Development Program Management . The individuals set forth on Exhibit D as Program Managers are the technical contacts for
             each party for this Agreement and, unless otherwise named in the applicable Project Statement, for any Project Statement and
             any ongoing coordination during the term of each Project Statement. The Program Managers will be responsible for day-to-day
             communications between the parties regarding the technical aspects of each Project Statement. Either party may change its
             Program Manager at any time and from time to time by giving the other party written notice. Each Program Manager will be
             responsible for (i) monitoring the schedules and progress of work for each Project Statement; (ii) receiving and submitting
             requests for information and/or assistance; (iii) determining whether a request he or she receives for information and/or
             assistance from the other Program Manager is necessary for Licensor to complete the work specified in any Project Statement;
             (iv) receiving and submitting deliverables; (v) cooperating with the other Program Manager to coordinate acceptance testing in
             accordance with Section 2.8; and (vi) supervising and recording the exchange of confidential information pursuant to this
             Agreement. The Program Managers will meet remotely every 60 days, or for any alternative interval as set forth in a Project
             Statement, during the term of the Project Statement to discuss the progress of the development effort and, if applicable, to
             exchange information and deliverables.

     2.3.    Development Expenses . Except as expressly set forth herein, each party shall bear its own costs and expenses incurred in
             connection with its Project activities.

     2.4.    Delivery . Licensor agrees to deliver to HP, for evaluation pursuant to Section 2.8, a Complete Copy of (i) each Program listed in
             Exhibit A as of the Effective Date or, if development is required in accordance with a Project Statement, upon the date set forth
             in the applicable Project Statement; (ii) any Additional Programs no later than ten (10) days after execution by Licensor and HP
             of an Amendment to Exhibit A to include a software product as an Additional Program hereunder, and (iii) all Enhancements to a
             Program no later than ten (10) days after the date on which the corresponding bug fixes, error corrections, updates, modifications,
             new features, new functionalities, upgrades or new versions of Programs are first delivered to any other of Licensor‘s distributors
             or partners , if applicable. HP will have the right to test and evaluate each Program (including, as defined, Additional
             Program(s) and/or Enhancement(s)) under the acceptance procedure described in Section 2.8, and the requirements as delineated
             in Exhibit B. In the event Licensor fails to deliver a Complete Copy under clauses (i) or (ii) above in accordance with the terms
             of this Section 2.4, HP‘s sole remedy and Licensor‘s sole liability shall be HP‘s right to terminate this Agreement with respect to
             the applicable Program(s), in which event HP will incur no liability for payment of any Minimum Royalty applicable to such
             Program(s), as defined in Exhibit C, except as expressly stated herein.


                                                                                                                                     Page 2 of 51
2.5.   New HP Products and Operating Systems . Licensor shall use commercially reasonable efforts to modify or otherwise adapt the
       Programs and Enhancements for use in conjunction with revisions, releases, and successors to the HP Product within a
       reasonable timeframe, with the target for such modification or adaptation being the same timeframe as Licensor modifies or
       otherwise adapts its products for use in conjunction with any other third-party products. HP will use commercially reasonable
       efforts to notify Licensor of revisions planned for HP Products six (6) months prior to HP‘s intended release and to provide
       Licensor with preliminary copies of such releases within a reasonable timeframe.

2.6.   HP Product Loans . If access to HP Products is required by Licensor during the term of any Project Statement, such requirements
       will be set forth in the applicable Project Statement. HP will have the sole option to determine the best mechanism to provide
       Licensor with access to such HP Products, such as but not limited to use of the HP‘s Advanced Technology Center (― ATC ‖) on
       a remote basis or loaned equipment. The terms of HP‘s Remote Access Agreement and/or HP‘s Loan Agreement, as applicable,
       will apply to such transactions.

2.7.   Program Performance . Licensor shall ensure the Programs and Enhancements for use in conjunction with HP Products execute
       with the same features, functionality, speed, and quality as Programs and Enhancements for use in conjunction with Non-HP
       Products, to the extent commercially feasible based on the relative underlying capabilities of the HP Products vs. the related
       non-HP products.

2.8.   Acceptance .

       2.8.1.   Acceptance of Program . HP will have thirty (30) days from the date of receipt of a Complete Copy of the Program to
                determine if the Program: (i) materially conforms to the functional specifications set forth in the relevant
                Documentation; or (ii) if the Program was subject to a Project Statement with specifications that are different from the
                relevant Documentation, conforms to the specifications set forth in such Project Statement (collectively, ―Acceptance
                Criteria‖), and either accept, return for rework or reject the Program. Failure of HP to provide Licensor with notice of
                acceptance, rework, or rejection of the Program within such thirty (30) day time period shall be deemed to be
                acceptance. HP will be entitled to test and evaluate any Program by whatever means it deems appropriate, subject to
                restrictions in the use of the Program set forth elsewhere herein. Licensor hereby grants to HP any licenses to the
                Program solely to the extent necessary for HP to perform its evaluation, provided that such licenses shall be in object
                code only and non-exclusive, non-transferable, limited term, without rights of modification (for the period of the
                evaluation). Notwithstanding the foregoing, such licenses will include the right of HP to use third parties who have
                executed separate agreements containing substantially similar confidentiality provisions, and shall only be permitted to
                access the Program in order to perform such evaluation on behalf of HP and for no other purpose. If HP returns a
                Program for rework due to a failure to conform to the applicable Acceptance Criteria, Licensor agrees to correct the
                listed defects and resubmit the Program for re-evaluation, under the same acceptance procedure, within such period as
                agreed to by the parties in writing. If, after such rework, HP again rejects a Program for failure to conform to the
                applicable Acceptance Criteria, in lieu of returning it for more rework, as HP‘s sole remedy, and Licensor‘s sole liability
                for such failure, HP will give Licensor written notice (including, without limitation, by electronic mail) of rejection
                stating the reasons for its unacceptability, and this Agreement will terminate with respect to that version of the Program
                and associated Documentation. Notwithstanding the foregoing, if such Program was subject to a Project Statement per
                (ii) above, in lieu of a single opportunity to rework, Licensor shall have three (3) opportunities to rework such Program,
                each opportunity to be no more than thirty (30) days in duration (for a total of ninety (90) days); provided, however, that
                defects discovered in the Program in the second and third rework opportunity which were not identified at the time of the
                first rework and which were not caused by such rework will not be cause for rejection of such Program and will, instead,
                be corrected in accordance with the warranty terms as set forth in Section 7.2. Until such time as HP shall have either
                accepted or rejected the Program in accordance with this Section 2.8.1, and associated Documentation in accordance
                with Section 2.8.2, Licensor shall not make generally available any version of a Program (other than the versions
                released as of the Effective Date or released prior to the corresponding Additional Program being added to this
                Agreement), and shall not permit any of its distributors or other partners to so release. For avoidance of doubt, HP will
                not be liable for payment of royalties or Minimum Royalty, as defined in Exhibit C, for any Program which has been
                rejected in accordance with the foregoing terms and conditions.


                                                                                                                              Page 3 of 51
            2.8.2.   Acceptance of Documentation . HP will have thirty (30) days from the date of receipt of a Complete Copy of the
                     Program to evaluate the associated Documentation, and either accept, return for rework or revise the Documentation
                     pursuant to HP‘s license under Section 3.3 below. If HP returns Documentation for rework due to defects in the
                     Documentation, Licensor agrees to correct the listed defects and resubmit the Documentation for re-evaluation, under
                     the same acceptance procedure, within fourteen (14) days or such longer period as agreed to by the parties.

     2.9.   Additional Programs . Licensor shall offer to HP an opportunity to add to this Agreement any and all of Licensor‘s future
            software products that would not otherwise constitute a Program or Enhancement hereunder as of the Effective Date, as and
            when such future software products become generally available. Such offer may include pricing and other license restrictions
            associated therewith. Such offer shall be made at least six (6) months prior to Licensor‘s scheduled general availability date for
            such software product, and not later than any similar offer being made to any other distributor or partner of Licensor. HP will
            inform Licensor within three (3) months of such offer whether it intends to accept such offer and add Licensor‘s software as an
            Additional Program. If HP accepts such offer, Licensor and HP shall execute an amendment to Exhibit A to include such
            software product as an Additional Program hereunder.

3.   RIGHTS GRANTED

     3.1.   License to the Program . Subject to Section 6.4.3, Licensor hereby grants and agrees to grant to Hewlett-Packard Company,
            under all intellectual property rights embodied in each Program, a non-exclusive, worldwide license to use, reproduce, display
            and distribute, without right of modification (except as set forth in Section 3.9), import, and disclose, the Program for use solely
            with the HP Product. Such license will include the right of HP to sublicense HP Subsidiaries, divisions, and affiliates,
            distributors, resellers, OEM‘s, and other third parties (collectively, ―Distributors‖) to achieve the foregoing. Such copies of the
            Program will be distributed to customers and Distributors in accordance with an HP License and, if applicable, the software
            license terms applicable to any open source and/or freeware. HP acknowledges that installation of the Programs on the HP
            Product may involve a license key that restricts use of the Programs to a particular HP system identified by a unique system
            number. These system numbers will also be provided by HP on royalty reports. HP further acknowledges that the Programs
            may require activation on initial installation of the Programs and from time to time based on events and changes to the HP
            Product on which the Program is installed. Licensor will ensure that HP is enabled to generate any keys or other materials
            necessary for HP, its Customers, and partners to use the Programs to the extent of HP‘s licenses hereunder. In the event HP
            establishes its own license key program, Licensor agrees to replace its current license key fulfillment system, subject to execution
            by the parties of a mutually acceptable Project Statement pursuant to Section 2.1. For avoidance of doubt, any termination or
            interruption of use of the Programs will be controlled solely by HP. Distribution of a Program by HP under this Agreement
            may be on media selected by HP, including magnetic or optical media or a web-based distribution method provided such
            Program is subject to the HP License.


                                                                                                                                   Page 4 of 51
3.2.   Licenses for Demonstration, Evaluation, and Internal Use . Licensor hereby grants and agrees to grant to HP, under all
       intellectual property rights embodied in the Program, a non-exclusive, worldwide, non-transferable, royalty-free license to use,
       reproduce, display, translate, import, disclose, and distribute the Program in whole or in part, for purposes of (i) replacement due
       to any maintenance, warranty or support obligation, (ii) evaluation, for not more than 90 days, by a customer or HP Partner (as
       defined in Section 3.4) (― Evaluation Copies ‖), (iii) demonstration, marketing, and promotional activities by or on behalf of HP
       or its Distributors at HP Advanced Technology Centers (or successor facilities), HP attended tradeshows and other HP and/or
       Distributor locations, (iv) demonstration at a prospective customer or Distributor; (v) the sale or distribution of education,
       training or Documentation, and (vi) re-licensing of Program to the same customer for platform upgrade or system transfer, unless
       HP receives net license revenue from such transaction, in which event HP will pay Licensor only the difference between the
       original license royalty fee and the new, upgraded license royalty fee; and (vii) HP‘s non-production internal use at HP locations
       (e.g., support, training, testing). Such license will include the right of HP to sublicense Distributors to achieve the foregoing.

3.3.   License to the Documentation . Licensor hereby grants and agrees to grant to HP, under all intellectual property rights embodied
       in the Documentation, a non-exclusive, worldwide, royalty-free, non-transferable license to use, reproduce, display, translate,
       import, disclose, distribute, modify, and prepare derivative works or compilations of: (a) the Documentation, and (b)
       modifications, derivative works, and compilations based upon the Documentation for use with a Program. These rights are
       exercisable in any medium. Such license will include the right of HP to sublicense Distributors to achieve the foregoing. The
       right to modify and prepare derivative works and compilations is granted solely for the purposes of (i) combining documentation
       of more than one program or product, (ii) condensing Documentation, (iii) localizing Documentation, (iv) formatting and
       preparing Documentation for user accessibility, (v) updating Documentation as appropriate to account for changes to the
       associated Program, and (vi) re-branding in accordance with the terms of Section 4.3. HP will make no substantive
       representations concerning a Program except as set forth in the Documentation furnished to HP by Licensor and/or as set forth in
       this Agreement. If HP introduces errors or misrepresentations into the Documentation, then Licensor has no liability for such
       errors or misrepresentations.

3.4.   Licenses to HP Partners . Licensor hereby grants and agrees to grant to HP, under all intellectual property rights embodied in the
       Program, a non-exclusive, non-transferable, worldwide, royalty-free license to distribute and sublicense a reasonable number of
       copies of the Program, in binary executable form only, to HP Partners for the purpose of supporting the promotion and marketing
       thereof and for the purpose of enabling such HP Partners to develop software applications compatible with the Program. Such
       copies of the Program will be provided in accordance with the HP License.

3.5.   License to Photograph (Marketing Materials) . Licensor hereby grants and agrees to grant to HP, under all intellectual property
       rights embodied in each Program and associated Documentation, a non-exclusive, worldwide, royalty free license to capture
       visual images of the Program screen displays and packaging, the Documentation and the CD-ROM, if any, and to use, reproduce,
       display, perform, distribute, import and modify, on any media, such photographs and modifications and images solely in
       connection with HP‘s marketing and support of the Program and training with respect to the Program. Such license will include
       the right of HP to sublicense Distributors to achieve the foregoing.


                                                                                                                              Page 5 of 51
     3.6.   License to Support Tools . Licensor hereby grants and agrees to grant to HP, under all intellectual property rights embodied in all
            non-royalty bearing Support Tools which have been internally developed by Supplier for each Program (― Internal Support
            Tools ‖), a non-exclusive, non-transferable, worldwide, royalty-free license to internally use such Internal Support Tools for
            evaluation, customer support and related testing. Supplier will provide HP, at any time upon request, with a list of any other
            Support Tools.

     3.7.   License to Sales Tools . Licensor hereby grants and agrees to grant to HP, under all intellectual property rights embodied in the
            Sales Tools for each Program, a non-exclusive, worldwide, non-transferable, royalty free license to use such Sales Tools solely in
            conjunction with a Program.

     3.8.   No Internal Use . Any internal use of Programs for HP‘s business operations, except as expressly set forth in Section 3.2, or in
            operating a production environment is not included as part of the foregoing licenses and is strictly prohibited on a royalty-free
            basis.

     3.9.   Escrow Agreement and Source Code License . At HP‘s request, Licensor agrees to execute the Escrow Agreement required to be
            added as a new depositor as a part of HP's Software Escrow Agreement with NCC Group Inc. within sixty (60) days after
            Acceptance of each Program. HP agrees to pay applicable escrow fees.

            HP shall ensure that the Release Conditions set forth below in this Section are applicable to each Program independent of one
            another.

            Source Code will not include commercial Third Party Code (as defined in Section 4.7 below) that Licensor has incorporated into
            the Programs. In the event Source Code is released to HP pursuant to this Agreement and the Software Escrow Agreement for a
            Program containing commercial Third Party Code, then Licensor shall cooperate with HP in obtaining support for such Third
            Party Code directly from the licensor of such Third Party Code.

            In the event Licensor or any successor of Licensor declines, substantially fails to, or ceases to provide support for any Program(s)
            under this Agreement (― Release Conditions ‖), Source Code for such Program will be released to HP. In the event of such
            release of Source Code for any particular Program(s) to HP, Licensor hereby grants to HP the right and license to use such Source
            Code for supporting and maintaining the applicable Program, making error corrections and minor modifications to the Program
            which do not add substantial new functionality or feature sets and for the purpose of exercising its rights under the licenses
            granted herein for as long as HP has contractual obligations to its customers but, in no event for a period less than twenty-four
            (24) months from the date of such event. Notwithstanding the above, the grant of such right to HP will in no way obligate HP to
            undertake such support and maintenance, except as provided in this Agreement, and will in no way diminish Licensor‘s
            obligations under this Agreement.

4.   COVENANTS AND RESTRICTIONS

     4.1.   Internationalization . [Intentionally Omitted]

     4.2.   Customization . [Intentionally Omitted]

     4.3.   Trademarks . Neither party is granted any ownership in or license to the trademarks, marks or trade names (collectively ―Marks‖)
            of the other party. Notwithstanding the foregoing, Licensor acknowledges that HP may fairly and accurately reference Licensor‘s
            name and the name of each Program in the course of marketing and distributing such Program. HP reserves the right to market
            and promote the Program under trademarks, logotypes, and trade dress of HP instead of Licensor Marks. In doing so, Licensor
            understands and agrees that HP reserves the right to change the Documentation (subject to Section 3.8 above) and, to be
            described in a Project Statement, to reasonably request Licensor to change the logon, on-line help, initialization and splash
            screens and the help text and "About" dialog boxes for the Program to primarily display such trademarks and logotypes in place
            of Licensor Marks, subject to Section 4.5.


                                                                                                                                   Page 6 of 51
     4.4.     Ownership . Subject to the rights and licenses granted to HP hereunder, Licensor retains and reserves all right, title, and interest
              in and to the Programs, Sales Tools, Support Tools and Documentation, including all copyrights.

     4.5.     Copyright Notices . HP agrees that it will not remove any reasonable copyright notices or Licensor Marks from a Program or
              Documentation. Licensor and HP agree that a second HP copyright notice in HP‘s standard copyright notice form may be added
              to any authorized HP modification; provided, however, that HP may move acknowledgments of Licensor as the source of the
              technology to less conspicuous places in such Documentation, boxes or screens, subject to the prior approval of Licensor, which
              approval shall not be unreasonably withheld or delayed.

     4.6.     Restrictions . Except as otherwise expressly provided herein, HP will not disassemble or reverse engineer any Program without
              written authorization from Licensor, except as necessary to ascertain interfaces or as permitted by law (and will not authorize any
              third party to): (i) reverse engineer or otherwise attempt to discover any source code or underlying ideas or algorithms of any
              Program (ii) copy, modify, translate, localize, port or otherwise create derivative works of Program or allow any agent, reseller,
              distributor or end user of HP to engage in similar conduct; (iii) allow the removal, alteration, covering or obscuring or of any
              notice or mark that appears on the Program or media; or (iv) encumber, or timeshare the rights granted or Program licensed
              hereunder. Certain Programs may only be operable in conjunction with an authorization key (― Authorization Key ‖). In such
              case, the Authorization Key will allow each copy of such Program licensed to be installed only on one HP server or to operate
              within certain parameters as may be set forth in the applicable Exhibit B. If Licensor requires certain restrictions with respect to
              other software which may be permitted to be installed on an HP server on which a Program is installed, such restriction will be
              valid only if expressly set forth in an Exhibit A accepted by HP. If the Program does contain Authorization Keys, Licensor will
              ensure that HP receives any keys or other materials necessary to enable the ultimate licensee to use the Program to the limits of
              such licensee‘s license, as instructed by HP.

     4.7.     Third Party Code . Licensor has identified in Exhibit A any code from another party, including open source or freeware (― Third
              Party Code ‖) contained in the Program and will promptly inform HP of its intention to incorporate Third Party Code in any
              subsequent version of the Program within a reasonable time after completion of any such agreement with such third party or with
              respect to any open source or freeware prior to release of any upgrade in which such code is included. At such time Licensor will
              identify the specific technical details of the Third Party Code to be included and, if applicable, will identify the specific software
              license terms applicable to any open source and/or freeware.

     4.8.     Enforcement . HP agrees to protect Programs from unauthorized use, copying and/or distribution to the same extent it protects its
              own similarly situated products from such activities.

5.   PROGRAM MAINTENANCE AND SUPPORT

     Notwithstanding any termination of this Agreement, subject to payment of all maintenance and support fees, Licensor agrees to maintain
     and support each Program distributed by HP, in accordance with the provisions of Exhibit E, for at least thirty-six (36) months after the
     earlier of the date such Program is (i) last made available to HP for distribution hereunder or (ii) the Program is discontinued (provided HP
     has been given at least two (2) years‘ notification of such discontinuance). For purposes of clarification, Licensor has the right to
     discontinue a Program on two (2) years‘ advanced written notice to HP.


                                                                                                                                       Page 7 of 51
6.   PAYMENT

     6.1.    Payment . HP agrees to pay Licensor royalties and support fees as set forth in Exhibit C. Upon either party‘s request, the parties
             agree, no more often than on an annual basis, to discuss royalties and/or support fees for the Programs; however, no change in the
             royalties or support fees will occur except as a result of an amendment to this Agreement in accordance with Section 11.14.

     6.2.    Payment Schedule and Procedure . Payments set forth in Section 6.1 will be made by Hewlett-Packard Company within 45 days
             after the conclusion of each of HP‘s fiscal quarters for the amount of payment obligations accruing during such quarter. Payment
             will be accompanied by a summary of the basis for determining the amount of such payment and will be paid in US dollars in
             detail sufficient to verify payments are correct. Licensor acknowledges that the reports being received with respect to Neoview
             VTS support fees as of the Effective Date are sufficient to verify payments are correct.

     6.3.    Exclusions . No royalty, support fee, or other charge will be payable by HP for any Program used for the purposes set forth in
             Section 3.2 hereof, except as expressly stated therein.

     6.4.    Royalties– General.

            6.4.1.   ―HP Net Revenue,‖ for purposes of royalty calculations, shall mean **.

            6.4.2.   Commencing with the Effective Date of this Agreement and subject to any royalty minimums set forth in Exhibit C, if
                     applicable, HP will calculate royalties due to Licensor hereunder based **

            6.4.3.   For Programs distributed by HP hereunder, HP will pay a royalty to Licensor under this Agreement as set forth in
                     Exhibit C.

            6.4.4.   In the event HP distributes copies of Program as part of a bundled product consisting of the Program together with other
                     software products, the HP Net Revenue for such copies of the Program shall be determined using the percentage of the
                     bundled product price that represents the Program content, based on list prices for all software product in the
                     bundle. Set forth below is an example of calculating the royalty due on bundled Program products assuming the royalty
                     is to be based on HP Net Revenue.

                              BUNDLED PRODUCT EXAMPLE: FOR ILLUSTRATED PURPOSES ONLY

                HP‘s list price of bundled product = **
                HP list price of Program = **
                HP‘s list price of other software product (s) in bundle= **
                Add list price of all software components in bundle **
                Divide list price of Program by list price of all software components in bundle (** Program content of bundle)

                For purposes of calculating the royalty payable with respect to such bundled product, the HP Net Revenue amount would
                equal to ** of HP‘s net revenue from the bundled product (calculated in the same manner that HP Net Revenue is calculated
                for products consisting entirely of Program).

            6.4.5.   Because a portion of HP‘s recurring HP Net Revenue is not recorded in CABS, HP will adjust quarterly royalties
                     payable hereunder to compensate Licensor for such non-recorded HP Net Revenue with respect to the Program. The
                     adjustment percentage will be based on the ratio of ** (the ―Ratio‖). Total recurring royalties due hereunder will be
                     determined as follows:

**Confidential Treatment Requested.


                                                                                                                                  Page 8 of 51
                        (i)      The adjustment percentage will be determined by dividing ** by the Ratio.

                        (ii)     On the Effective Date of this Agreement, the Ratio is ** resulting in an adjustment percentage of **.

                        (iii)    The total royalty calculated from CABS-recorded revenue for the Program will be multiplied by the
                                 adjustment percentage.

                       The Ratio will be reviewed by the parties on an annual basis. If the Ratio has increased or decreased, the adjustment
                       percentage will be revised using the formula defined in this Section to reflect such change and will be documented in
                       an amendment to this Agreement.

            6.4.6.      If HP makes an upgrade product available to permit existing licensees of the Program to re-license a new version of
                        the Program, HP and Licensor agree that the royalty due to Licensor hereunder with respect to such upgrade product
                        will be determined using a ratio of royalty to upgrade product license fee proportional to the royalty rates stated
                        herein.

    6.5.     Support Fees – General

            6.5.1.      With respect to Programs distributed by HP subject to this Agreement and in all cases subject to the existence of a
                        support contract between HP and the customer, Licensor will deliver support services to HP as defined in Exhibit E at
                        a fee calculated as set forth in Exhibit C.

            6.5.2.      If applicable, the term ―HP Net Support Services Revenue,‖ for purposes of support fee calculations, shall mean the
                        amounts invoiced to customers, recorded monthly, directly related to support of each copy of the Program under a
                        support contract with HP less any related credits, refunds, rebates and discounts actually allowed or paid by HP (to the
                        extent not already reflected in the price so invoiced) and excluding all taxes and other incidental costs.

    6.6.     Fee Warranty . Licensor warrants that the amounts payable hereunder by HP with respect to any Program are no greater than
             those for any other similar licensee for similar quantities of those software programs on similar hardware that correspond to such
             Program and on similar terms and conditions, and Licensor agrees to retroactively pass on to HP the lowest rate or price it has
             given to any other such licensee which meets the foregoing conditions, commencing effectively on the date it so grants the lower
             rate or price to any such other licensee.

    6.7.     Taxes . Licensor will be responsible for and indemnify HP from all taxes, levies, social securities, and other charges and duties of
             a similar nature imposed on amounts paid to Licensor by HP under this Agreement, including Value Added Tax or any
             equivalent local non-US sales tax (the above mentioned Value Added Tax and equivalent local non-US sales tax are collectively
             referred to as "Indirect Tax"). HP specifically does not accept responsibility for any Indirect Tax, payable in addition to any
             support fee, that relates to purchases of goods or services by Licensor or Licensor's suppliers. With respect to US sales and use
             taxes, Licensor will exempt HP, in accordance with law, effective on the date HP provides Licensor with a duly authorized
             exemption certificate. If HP is required by law to make any deduction or to withhold from any sum payable hereunder, then the
             sum payable by HP upon which the deduction is based shall be paid to Licensor net of such deduction or withholding. HP shall
             pay the applicable tax authorities any such required deduction or withholding. HP shall provide Licensor with applicable
             documentation as requested by Licensor in writing to HP. Upon request, HP will provide Licensor with a reseller exemption
             certificate.

**Confidential Treatment Requested.


                                                                                                                                    Page 9 of 51
     6.8.    Audits . HP will keep books of account, in accordance with GAAP and its other normal accounting practices, with respect to
             payments due or paid under this Section. Licensor may cause a public accountancy firm hired by it on a non-contingency fee
             basis, after reasonable prior written notice and during normal business hours, to enter HP's premises where such books and
             records are normally kept, at reasonable intervals but no more frequently than on an annual basis, for purposes of auditing or
             inspecting all such books of account for the period(s) requested in such notice; provided, however, Licensor may not request to
             audit or inspect any period which has been the subject of a previous audit or inspection pursuant to this Section 6.4 or which
             began 2 years or more prior to the date of the notice requesting such audit or inspection. The accounting firm will disclose to
             Licensor only whether the records are correct or not and the specific details concerning any discrepancies. No other information
             will be shared. The cost of any such audit or inspection will be paid and borne by Licensor. If any such audit or inspection
             reveals that an overpayment or underpayment of royalties or support fees may have occurred, then the necessary correcting
             payment will be made within 30 days after the amount of the discrepancy is finally determined, with interest at the then "prime
             rate" as published in The Wall Street Journal, provided, however, in the event of an overpayment, instead of a correcting
             payment, HP may elect to credit any overpayment to the payment of future royalties incurred under this Agreement.

     6.9.    Escalation . Questions or issues with respect to royalty or support fee payments will first be escalated to the Royalty Admin
             Group as set forth in the applicable Exhibit D. The Royalty Admin Group will use best commercial efforts to respond prior to
             the next scheduled royalty report due date. The matter may be further escalated to the Product Account Manager, as set forth in
             the applicable Exhibit D, at Licensor‘s discretion.

7.   WARRANTY AND INTELLECTUAL PROPERTY PROTECTION

     7.1.    General Warranty . Licensor warrants that it has full power and authority to grant HP the rights granted herein, has obtained the
             required rights for HP to any Third Party Code included in each Program, and that each Program and accompanying
             Documentation is free of any and all restrictions (except as expressly set forth herein), settlements, judgments or adverse claims.

     7.2.    Program Warranty . Licensor warrants that for a period of ninety (90) days from the date of shipment from HP to its customer (―
             Warranty Period ‖) that each Program referred to herein will operate in accordance with and substantially conform to the
             Documentation and any specifications provided or agreed to in writing. HP‘s exclusive remedy and the entire liability of
             Licensor and its suppliers under this limited warranty will be, for any failure giving rise to a breach of the foregoing warranty of
             which Licensor is notified on or before the end of the Warranty Period, repair or replacement, at Licensor‘s option, in
             accordance with the Support Plan set forth in Exhibit E or, if Licensor, after the use of commercially reasonable efforts and a
             period of sixty (60) days (― Correction Period ‖), is unable to repair or replace the Program, at HP‘s option, refund all royalties
             paid for such Program with respect to the applicable customer against return of such Program by HP to Licensor; provided,
             however, that HP exercises its right to such refund within sixty (60) days of the end of the Correction Period. In no event does
             Licensor warrant that the Program is error-free or that HP or any customer will be able to operate the Program without problems
             or interruptions. The foregoing limited warranty applies only to failures in operation of the Program and does not apply to: (i) a
             Program that is modified by HP, an end user, or any other third party (other than by, or on behalf of, or as authorized by
             Licensor); (ii) a Program that is operated in violation of this Agreement or other than in accordance with the published user
             Documentation; (iii) failures which are caused by other software or hardware products; or (iv) any media or copy of the Program
             that was not originally purchased or licensed from Licensor.

**Confidential Treatment Requested.


                                                                                                                                   Page 10 of 51
7.3.   No Infringement Warranty . Licensor warrants that each Program, accompanying Documentation, trademarks, copyrights and
       trade names referred to in this Agreement do not violate or infringe any patent, copyright, trademark, trade secret or other
       proprietary right of any third party, and that Licensor is not aware of any facts upon which such a claim for infringement could
       be based. Licensor will promptly notify HP if it becomes aware of any claim or any facts upon which a claim could be based.

7.4.   Prerequisite Licenses . The Program provided hereunder may include Third Party Code. Licensor represents and warrants that it
       has or will have procured current, valid license agreements to such Third Party Code, which agreements provide sufficient rights
       to HP such that HP may receive from Licensor and use such Third Party Code as provided under this Agreement (" Prerequisite
       Licenses "). Upon termination of any Prerequisite License, Licensor will either (a) procure for HP the right to continue using
       Third Party Code or (b) as soon as reasonably practical replace Third Party Code with non-infringing software and
       documentation of equivalent function and efficiency.

7.5.   Intellectual Property Protection .

       7.5.1.   Licensor will indemnify, defend and hold harmless HP, its affiliates, subsidiaries, assigns, agents, contractors,
                distributors, and customers from any third party claim, suit or proceeding alleging that a Program or any combination
                of a Program with an HP Product (to the extent based on or arising out of the functionality of the Program regardless of
                the combination) or any Documentation or any part thereof or any product provided to HP as part of the support
                services furnished by Licensor under this Agreement constitutes an infringement of any third party‘s patent, copyright,
                trademark, trade name, other proprietary right or unauthorized trade secret use. Without limiting the generality of the
                foregoing, Licensor will pay all claims, liabilities, losses, damages, judgments, awards, costs and expenses including
                reasonable attorneys‘ fees, expert witness fees and bonds incurred with respect to any such claim, suit or proceeding
                and will pay any award in connection with, arising from or with respect to any such claim, suit or proceeding or agreed
                to in any settlement of that claim, suit or proceeding.

       7.5.2.   In case any Program or Documentation or any part thereof in such suit is held to constitute an infringement and its use
                is enjoined, Licensor will, or Licensor in good faith believes a Program or Documentation may constitute an
                infringement, Licensor may, at its own expense and at its option either (i) procure for HP and its customers the right to
                continue use or (ii) if applicable, replace the same with a non-infringing program and documentation of equivalent
                function and performance or (iii) modify them so they become non-infringing without detracting from function or
                performance; or (iv) if options (i), (ii) or (iii) above cannot be accomplished despite Licensor's reasonable efforts, then
                Licensor may terminate HP's rights and Licensor's obligations hereunder with respect to such Program and, upon return
                of the allegedly infringing item, refund to HP the royalties paid hereunder for such Program.

       7.5.3.   HP will give Licensor prompt notice of any such claim or action, and will give Licensor the authority, information, and
                reasonable assistance (at Licensor‘s expense) necessary to defend and, subject to the restrictions set forth in this
                Section, settle or compromise. If Licensor does not diligently pursue resolution of the claim nor provide HP with
                reasonable assurances that it will diligently pursue resolution, then HP may, without in any way limiting its other rights
                and remedies, defend such claim or action and collect all costs of doing so from Licensor. Any settlement or
                compromise Licensor desires to enter into will be subject to HP‘s prior written approval. However, Licensor can settle
                any IP Claim without HP‘s consent so long as a full and unconditional release is provided to HP and no agreed order,
                consent judgment or the like is entered into which would prejudice HP (other than an obligation to cease use and
                distribution of the applicable Program).


                                                                                                                             Page 11 of 51
            7.5.4.   Notwithstanding the foregoing, Licensor will have no responsibility for claims arising solely and directly from (i)
                     improper installation, repair (other than by Licensor or Licensor‘s agents), or unauthorized modifications of a Program
                     made by HP if such claim would not have arisen but for such modifications; (ii) unauthorized combination or use of a
                     Program with products not specified in the Documentation or reasonably inferable therefrom, if such claim would not
                     have arisen but for such combination or use; (iii) have been used in a manner contrary to specifications or
                     Documentation or outside the licensed use; or (iv) is distributed, licensed, leased, sold or otherwise transferred by HP
                     after the date that HP is provided with a non-infringing replacement or modified Program as provide in Section 7.5.2
                     above. In addition, Licensor will have no responsibility for certain claims as follows arising solely and directly from
                     functional requirements provided by HP: (a) if a functional requirement constitutes a misappropriation of third party
                     trade secrets by HP and implementation into a Program results in a trade secret misappropriation claim from such third
                     party, or (b if a functional requirement implemented into a Program results in a claim of patent infringement by a third
                     party (unless Licensor had actual knowledge of the infringing nature of the functional requirement prior to
                     implementing such functional requirement into a Program).

            7.5.5.   THIS SECTION 7.5 STATES THE ENTIRE LIABILITY OF LICENSOR WITH RESPECT TO ANY CLAIM OF
                     INFRINGEMENT OF INTELLECTUAL PROPERTY RIGHTS BY THE PROGRAMS OR DOCUMENTATION.

     7.6.   Ownership; Right to Grant Licenses . Licensor and its suppliers are the exclusive owner of all right, title and interest in and to
            the Programs and all patents, copyrights, trademarks and other intellectual property rights that protect any of the Programs
            (including Enhancements and Additional Programs), Documentation, Sales Tools or Support Tools that either (i) exist as of the
            Effective Date of this Agreement or (ii) are added to Exhibit A to this Agreement after the date hereof, in each case free and
            clear of any and all liens or other adverse claims or any restriction or limitation that affects Licensor‘s ability to grant licenses of
            the scope and nature granted by Licensor to HP under this Agreement.

     7.7.   Warranty Disclaimer . EXCEPT AS EXPRESSLY PROVIDED HEREIN, LICENSOR MAKES NO OTHER WARRANTIES,
            EITHER EXPRESS OR IMPLIED, REGARDING ANY PROGRAM, INCLUDING BUT NOT LIMITED TO ITS
            MERCHANTABILITY OR ITS FITNESS FOR ANY PARTICULAR PURPOSE.

8.   TERM AND TERMINATION

     8.1.   Termination . This Agreement may only be terminated as follows:

            8.1.1.   Term . The initial term of this Agreement will commence on the Effective Date and remain in effect for 3 years;
                     provided, however, that the term of this Agreement will be extended automatically from year to year thereafter, unless
                     terminated as of any anniversary date of said Effective Date by either party upon written notice provided at least 180
                     days prior to such termination date.

            8.1.2.   Joint Agreement . HP and Licensor may jointly agree in writing to terminate this Agreement.


                                                                                                                                     Page 12 of 51
        8.1.3.   Breach . Either party may terminate this Agreement, either in its entirety or, at HP‘s discretion, with respect to any
                 applicable Program, effective upon written notice to the other if the other party violates any material covenant,
                 agreement, representation or warranty contained herein or defaults or fails to perform any of its material obligations or
                 agreements hereunder, which violation, default or failure is not cured within thirty (30) days after notice thereof from
                 the non-defaulting party stating its intention to terminate this Agreement. HP will be liable for payment of any
                 remaining applicable Minimum Royalty, as set forth in Exhibit C, unless this Agreement is terminated by HP as a
                 result of: (i) default by Licensor directly related to the Program for which such Minimum Royalty is due, including but
                 not limited to substantially failing to, or ceasing to provide support for such Program under this Agreement; (ii) a
                 Change of Control pursuant to Section 8.1.6; or (iii) a material breach of Licensor‘s obligations of confidentiality
                 pursuant to Section 10.

       8.1.4.    Insolvency; Bankruptcy . Either party may terminate this Agreement in the event the other party ceases conducting
                 business in the normal course, admits in writing its inability to pay its debts, makes a general assignment for the benefit
                 of its creditors, becomes insolvent, agrees or permits the appointment of a trustee or receiver for itself or any of its
                 companies or units or commences any voluntary proceeding under any bankruptcy, reorganization, insolvency or
                 dissolution statute or similar law in any jurisdiction or any such foregoing proceeding is filed, whether voluntary or
                 involuntary, and remains in effect and is not dismissed for sixty (60) days or more or judgment is entered against such
                 party and such party is adjudicated insolvent.

       8.1.5.    Convenience . HP may terminate this Agreement at any time upon at least ninety (90) days prior written notice to
                 Licensor for convenience, subject only to the payment, on or before the termination date, of any remaining applicable
                 Minimum Royalty as set forth in Exhibit C.

       8.1.6.    Change of Control . HP may terminate this Agreement effective upon written notice to Licensor upon the occurrence of
                 a Change of Control of Licensor. For purposes of this Agreement, the term ―Change of Control‖ shall mean (i) the
                 acquisition by an individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
                 Exchange Act of 1934, as amended (the ―Exchange Act‖) of beneficial ownership (within the meaning of rule 13d-3
                 promulgated under the Exchange Act) of fifty percent (50%) or more of either (a) the then outstanding shares of
                 common stock of Licensor or (b) the combined voting power of the then outstanding voting securities of Licensor
                 entitled to vote generally in the election of directors or (ii) the direct or indirect (by merger, reorganization,
                 consolidation or otherwise) sale of all or substantially all of the assets of Licensor or of the business unit of Licensor
                 primarily responsible for the development and maintenance of the Programs.

8.2.   Effect of Termination and Survival . Notwithstanding any termination of this Agreement, all licenses granted to customers for
       use of any Program will survive. In addition, the provisions of this Agreement regarding Escrow Agreement and Source Code
       License (Section 3.9); Support (Section 5); Warranty and Intellectual Property Protection (Section 7); Limitation of Liability
       (Section 9); Confidentiality (Section 10); and Miscellaneous Clauses (Section 11) shall survive any termination or expiration of
       this Agreement. Upon the termination or expiration of this Agreement for any reason: (i) except for the license granted to HP to
       use in the fulfillment of its support obligations to customers, for so long as HP has such obligations, all rights given to HP
       hereunder will terminate, no residual rights will remain with HP, and HP will not sublicense, sell or otherwise distribute the
       Programs to any third party; (ii) HP will pay Licensor all amounts accrued and/or due and outstanding as of the date of
       termination or expiration and remit such payment within forty-five (45) days of the termination date; and (iii) except as HP
       deems necessary to fulfill its obligations to customers, HP will return to Licensor all Confidential Information of Licensor in
       HP‘s possession or control and all copies and portions thereof, in all forms and types of media, or at Licensor‘ request, destroy
       such materials and provide Licensor with an officer‘s written certification of compliance with the foregoing, and HP will not
       thereafter make any use of such material or Confidential Information. Upon any termination of this Agreement, Licensor will
       promptly return to HP or, at HP's request, destroy, any HP Confidential Information in its possession or control and all copies
       and portions thereof, in all forms and types of media, and provide HP with an officer's written certification, certifying to
       Licensor compliance with the foregoing.


                                                                                                                              Page 13 of 51
9.   LIMITATION OF LIABILITY

     9.1.    WITH THE EXCEPTION OF SECTION 10 (CONFIDENTIAL INFORMATION), TO THE FULLEST EXTENT PERMITTED
             BY LAW, UNLESS EXPRESSLY PROVIDED OTHERWISE UNDER THIS AGREEMENT, NEITHER PARTY WILL BE
             LIABLE FOR ANY INCIDENTAL, INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES TO THE OTHER PARTY
             (INCLUDING, BUT NOT LIMITED TO LOSS OF PROFITS) ARISING OUT OF ANY PERFORMANCE OF THIS
             AGREEMENT OR IN FURTHERANCE OF THE PROVISIONS OR OBJECTIVES OF THIS AGREEMENT, REGARDLESS
             OF WHETHER SUCH DAMAGES ARE BASED ON TORT, CONTRACT OR ANY OTHER LEGAL THEORY, EVEN IF
             ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

     9.2.    WITH THE EXCEPTION OF SECTION 7.5 (INTELLECTUAL PROPERTY PROTECTION) AND SECTION 10
             (CONFIDENTIAL INFORMATION), DURING THE TERM OF THIS AGREEMENT, HP‘S AGGREGATE LIABILITY TO
             LICENSOR FOR DIRECT DAMAGES ARISING OUT OF HP‘S PERFORMANCE OF THIS AGREEMENT, UNDER ANY
             LEGAL THEORY, SHALL NOT EXCEED THE GREATER OF ** OR THAT AMOUNT PAID BY HP TO LICENSOR
             DURING THE PRIOR TWELVE (12) MONTH PERIOD. DURING THE TERM OF THIS AGREEMENT, LICENSOR‘S
             AGGREGATE LIABILITY TO HP FOR DIRECT DAMAGES ARISING OUT OF LICENSOR‘S PERFORMANCE OF THIS
             AGREEMENT, UNDER ANY LEGAL THEORY, SHALL NOT EXCEED THE GREATER OF ** OR THAT AMOUNT
             PAID BY HP TO LICENSOR DURING THE PRIOR TWELVE MONTH PERIOD.

     9.3.    NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, ANY PURPORTED LIMITATION ON
             LICENSOR‘S LIABILITY, EITHER AS TO TYPE OR AMOUNT OF DAMAGES SHALL NOT APPLY TO ANY CLAIM
             ARISING FROM THE LICENSOR‘S BREACH OF ITS OBLIGATION WITH RESPECT TO (i) SECTION 10
             (CONFIDENTIAL INFORMATION) OR (ii) ANY FINAL JUDGMENT AWARDED OR SETTLEMENT AGREED TO BY
             LICENSOR IN ACCORDANCE WITH SECTION 7.5 LICENSOR‘S INTELLECTUAL PROPERTY PROTECTION
             OBLIGATIONS.

10. CONFIDENTIAL INFORMATION

     10.1.   Programs . Each Program in object code form and related Documentation provided to HP hereunder are deemed Confidential
             Information.

     10.2.   Confidential Information . During the term of this Agreement, either party may receive or have access to technical information,
             including without limitation source code, and Program architecture, as well as information about product plans and strategies,
             promotions, pricing, customers and related non-technical business information which the disclosing party considers to be
             confidential and which is marked as confidential at the time of disclosure or which, if disclosed orally, is identified as
             confidential at the time of disclosure and is followed within thirty (30) days of disclosure with a written memorandum so stating
             to the receiving party‘s Designated Recipient for Notice (― Confidential Information ‖). Confidential Information will be used
             by only those employees, agents, or contractors of the receiving party who have a need to know such information for purposes
             related to this Agreement and who have executed separate agreements containing confidentiality provisions no less protective of
             the disclosing party than set forth herein.

** Confidential Treatment Requested.


                                                                                                                                Page 14 of 51
   10.3.   Protection of Confidential Information . The receiving party will protect any such Confidential Information of the disclosing
           party by using the same degree of care, but no less than a reasonable degree of care, to prevent the unauthorized use,
           dissemination or publication of the Confidential Information as the receiving party uses to protect its own confidential
           information of like nature. The receiving party will, if permitted by law, provide reasonable prior notice to the disclosing party
           and so that disclosing party may request a protective order if the receiving party is required to reveal the Confidential
           Information under a subpoena, court order or other operation of law. The foregoing restriction will survive termination of this
           Agreement, but will not apply to any information which (i) was in the receiving party‘s possession prior to receipt from the
           disclosing party, (ii) is independently developed or learned by the receiving party, (iii) is publicly known or readily ascertainable
           by proper means, (iv) is rightfully received from a third party without a duty of confidentiality, (v) is disclosed by the disclosing
           party to a third party without an express or implied duty of confidentiality on the third party, (vi) is disclosed under operation of
           law or (vii) is disclosed by the receiving party with the disclosing party‘s prior written approval.

   10.4.   Licensor Source Code . HP agrees to treat any Source Code Programs provided by Licensor hereunder as Confidential
           Information of Licensor under this Section 10 until an exclusion set forth under Section 10.3 applies.

   10.5.   Residuals . Notwithstanding the foregoing, either party may use and disclose any Residuals for any purpose, subject to
           confidentiality restrictions hereunder, except that no license to any patent or copyright is granted under this Section 10.5. The
           term ―Residuals‖ means Confidential Information in non-tangible form which may be retained in the unaided memories of any of
           the employees, agents, or contractors of the receiving party, but shall not include any third party Confidential Information. The
           receiving party shall have no obligation to limit or restrict the assignment of its employees, agents, or contractors or to pay
           royalties for any work resulting from the use of Residuals.

   10.6.   Independent Development . Licensor understands that HP designs, develops and acquires hardware and software for use with its
           own computer system products, and that existing or planned hardware and software which HP can demonstrate was
           independently developed without use of Licensor‘s proprietary information or Confidential Information or acquired by HP may
           contain ideas and concepts similar or identical to those contained in Licensor‘s Programs, Documentation, Sales Tools or Support
           Tools. Licensor agrees that entering into this Agreement shall not preclude HP, in any way, from using such ideas and concepts
           to develop or acquire similar hardware or software for any purpose, provided that HP does not use Licensor‘s proprietary
           information or Confidential Information.

11. MISCELLANEOUS CLAUSES

   11.1.   Notices . All notices to be given under this Agreement must be in writing and addressed to the receiving party‘s designated
           recipient specified in Exhibit D. Notices are validly given upon the earlier of confirmed receipt by the receiving party or three (3)
           days after dispatch by courier or certified mail, postage prepaid, properly addressed to the receiving party. Notices may also be
           delivered by telefax and will be validly given upon oral or written confirmation of receipt. Either party may change its address
           for purposes of notice by giving notice to the other party in accordance with these provisions.

   11.2.   Exhibits . Each Exhibit attached to this Agreement is deemed a part of this Agreement and incorporated herein wherever
           reference to it is made.


                                                                                                                                  Page 15 of 51
11.3.    Independent Contractors . The relationship of the parties established under this Agreement is that of independent contractors and
         neither party is a partner, employee, agent or joint venture of or with the other.

11.4.    Assignment . Neither this Agreement nor any part hereof may be assigned by either party without the other party‘s prior written
         consent; any attempted assignment is void. Notwithstanding the foregoing, HP may assign or transfer this Agreement without
         such consent as a consequence of a merger, acquisition, consolidation, reorganization or sale of substantially all of its assets or
         of the business to which this Agreement pertains. Further, notwithstanding the foregoing, subject to and not in derogation of
         HP‘s rights to terminate this Agreement pursuant to Section 8.1.6 above, Licensor may assign or transfer this Agreement with
         notice, but without the prior consent of HP, only in the event of a Change of Control.

11.5.    No Waiver . The waiver of any term, condition or provision of this Agreement must be in writing and signed by an authorized
         representative of the waiving party. Any such waiver will not be construed as a waiver of any other term, condition or provision
         except as provided in writing, nor as a waiver of any subsequent breach of the same term, condition or provision.

11.6.    Export Control . When a party is responsible for shipment of the Program to an agreed-upon destination, such party agrees to
         comply with all applicable United States laws and regulations which may govern the export of Program abroad, including the
         Export Administration Act of 1979, as amended, any successor legislation, and the Export Administration Regulations issued by
         the Department of Commerce.

11.7.    Definition of Days . All references in this Agreement to ―days‖ will, unless otherwise specified herein, mean calendar days.

11.8.    Headings . The Section Headings used in this Agreement are for convenience of reference only. They will not limit or extend
         the meaning of any provision of this Agreement, and will not be relevant in interpreting any provision of this Agreement.

11.9.    No Publication . Except as set forth in Section 3.5 hereof, neither party may publicize or disclose to any third party, without
         the written consent of the other party, the existence or terms of this Agreement. Without limiting the generality of the foregoing
         sentence, no press releases may be made without the mutual written consent of each party.

11.10.   Severability . If any provision in this Agreement is held invalid or unenforceable by a body of competent jurisdiction, such
         provision will be construed, limited or, if necessary, severed to the extent necessary to eliminate such invalidity or
         unenforceability. The parties agree to negotiate in good faith a valid, enforceable substitute provision that most nearly effects the
         parties‘ original intent in entering into this Agreement or to provide an equitable adjustment in the event no such provision can
         be added. The other provisions of this Agreement will remain in full force and effect.

11.11.   No Use Obligation . Except as expressly provided herein and subject to the terms and conditions herein, HP may in its sole
         discretion decide whether or not to use or distribute or sell any Program as it deems appropriate. Nothing in this Agreement shall
         be construed or interpreted as placing a ―best efforts‖ standard upon HP with respect to the use and distribution of any Program.

11.12.   Force Majeure . Nonperformance of either party will be excused to the extent that performance is rendered impossible by strike,
         fire, flood, governmental acts or orders or restrictions or other similar reason where failure to perform is beyond the control and
         not caused by the negligence of the nonperforming party, provided that the nonperforming party gives prompt notice of such
         conditions to the other party and makes all reasonable efforts to perform. If the force majeure event continues for a period of
         ninety (90) days, HP may terminate this Agreement. If such termination impacts development work as set forth in Section 2, HP
         will incur no liability for payment of any applicable Minimum Royalty, as defined in Exhibit C, except as expressly stated
         herein.


                                                                                                                               Page 16 of 51
         11.13.   No Third Party Beneficiaries . Unless otherwise expressly provided, no provisions of this Agreement are intended or shall be
                  construed to confer upon or give to any person or entity other than Licensor and HP any rights, remedies or other benefits under
                  or by reason of this Agreement.

         11.14.   Entire Agreement . This Agreement comprises the entire understanding between the parties with respect to its subject matters
                  and supersedes any previous communications, representations or agreements, whether oral or written with respect to the
                  Program(s), including without limitation the OEM Purchase Agreement No. 1783-090203. For purposes of construction, this
                  Agreement will be deemed to have been drafted by both parties. No modification of this Agreement will be binding on either
                  party unless in writing and signed by an authorized representative of each party.

         11.15.   Governing Law . This Agreement will be governed in all respects by the laws of the State of New York without reference to any
                  choice of laws provisions. The Licensor consents to the jurisdiction of the federal and state courts within the State of New York,
                  and the United States of America. Both parties hereby waive any applications of the United Nations Convention on Contracts
                  for the International Sale of Goods (as promulgated in 1980 and any successor or subsequent conventions) with respect to the
                  performance or interpretations of this Agreement.

         11.16.   Counterparts . This Agreement may be executed by facsimile and in counterparts, each of which will be deemed an original and
                  together which shall constitute one and the same instrument.

         11.17.   Order of Precedence . In the event of any conflict between the terms and conditions of this Agreement and any Attachments
                  and/or Exhibits, the following shall be the order of precedence: Exhibits, Attachments, this Agreement.

Agreed:
HEWLETT-PACKARD COMPANY                                                            CROSSROADS SYSTEMS, INC.
                                                                                   Licensor

By:                                                                                By:

Print Name:                                                                        Print Name:

Title:                                                                             Title:

Date:                                                                              Date:


                                                                                                                                      Page 17 of 51
                                                               EXHIBIT A1
                                                           LICENSED PROGRAMS

DESCRIPTION OF PROGRAM AND DOCUMENTATION FOR HP NEOVIEW PRODUCT

    Programs :

         Crossroads DBProtector Database Logging when licensed in conjunction with HP‘s Neoview Products to support HP Neoview
         database (― Database Logging ‖).

         Crossroads DBProtector Database Security licensed in conjunction with HP‘s Neoview Products to support HP Neoview database (―
         Database Security ‖).

    3 rd Party Code or Open Source :

         List to be provided 30 days prior to delivering a Complete Copy of the Programs.

    Documentation :

         Online Help, Quick Setup Guide and Configuration Guide

    Sales Tools :

         Datasheet, Product Presentation and Sales Guide

    Support Tools :

         Release notes.

    Internal Use Copies : Notwithstanding anything to the contrary in Section 3.2(vii), the number of copies of Database Logging and
    Database Security available for internal use will be forty (40) each.

FORM AND MEDIA FOR PROGRAM AND DOCUMENTATION

 Program Form/Media: Documentation CD and a DVD with an ISO image.

 Documentation Form/Media: Documentation CD in FrameMaker format.

 Sales Tools Form/Media: In MS Word and PDF format

         Support Tools Form/Media: In Word and PowerPoint format. The Transfers of Information (TOIs) will be delivered via web
         conference.

EXCLUSIVE SOLUTION . HP agrees that during the Term of the Agreement, HP shall not itself develop, nor license from any third party,
nor promote, market or distribute, any software with similar features and functionalities (or fulfilling similar purposes) as the Database Logging
and/or Database Security Programs for use with Neoview SQL database solutions, except in cases where an HP customer requests the use of
other software.

DBPROTECTOR SUPPORT . As HP and the Licensor jointly agree to new hardware models for running the DBProtector software, HP will
provide Licensor, at no charge to Licensor, three (3) servers in the appropriate hardware configuration (― New Model Configuration ‖).
Licensor may purchase HP hardware support for such New Model Configuration. Upon the completion of Licensor‘s development and support
work, HP will have the right to request the return of such New Model Configuration. Additional hardware configurations may be purchased
through HP‘s Developer and Solutions Partner Program (― DSPP ‖).


                                                                                                                                    Page 18 of 51
                                                             EXHIBIT A2
                                                         LICENSED PROGRAMS

DESCRIPTION OF PROGRAM AND DOCUMENTATION FOR HP NEOVIEW PRODUCT

   Programs :

       Any one of the following software products when licensed in conjunction with HP‘s Neoview Products (― Neoview VTS ‖):

                                  HP Program ID                         Description
                                  VT5900-D00                            Application Software
                                  VT5900-F00                            Application Software
                                  VT5900-M00                            Application Software

   3 rd Party Code or Open Source :

       List to be provided on or before 30 days after Effective Date.

   Documentation :

       Online Help, Product Overview and Installation Guide

   Sales Tools :

       Datasheet, Product Presentation and Sales Guide

   Support Tools :

       Release notes.

FORM AND MEDIA FOR PROGRAM AND DOCUMENTATION

Program Form/Media: Documentation CD and a DVD with an ISO image.

Documentation Form/Media: Documentation CD in FrameMaker format.

Sales Tools Form/Media: In MS Word and PDF format

       Support Tools Form/Media: In Word and PowerPoint format. The Transfers of Information (TOIs),. if any will be delivered via web
       conference.

ACCEPTANCE

       The Complete Copy of Neoview VTS and its associated Documentation is hereby accepted pursuant to Section 2.8 of the Agreement.

NEOVIEW VTS SUPPORT

       As HP and the Licensor jointly agree to new hardware models for running the Neoview VTS software, HP will provide Licensor, at
       no charge to Licensor, two (2) servers in the appropriate hardware configuration (― New Model Configuration ‖). Licensor may
       purchase HP hardware support for such New Model Configuration. Upon the completion of Licensor‘s development and support
       work, HP will have the right to request the return of such New Model Configuration. Additional hardware configurations may be
       purchased through HP‘s Developer and Solutions Partner Program (― DSPP ‖).


                                                                                                                           Page 19 of 51
                                                             EXHIBIT A3
                                                         LICENSED PROGRAMS

DESCRIPTION OF PROGRAM AND DOCUMENTATION FOR HP NONSTOP PRODUCT

   Programs :

       Any one of the following software products when licensed in conjunction with HP‘s NonStop Products (collectively referred to herein
       as ― NonStop VTS ‖):

                                  HP Program ID                         Description
                                  VT5900-B00                            Application SW with (2) VTDs
                                                                        for VT5900-B
                                  VT5900-GFS                            Global File System Software
                                  VT5900-K00                            Application Software with two
                                                                        VTDs for VT5900-K
                                  VT5900-SV                             Secure VTS
                                  VT5903                                Site License
                                  VT5907                                4-pack of Instant/DR and
                                                                        AutoCopy
                                  VT5907-A                              Instant DR and Autocopy
                                  VT5908                                4-pack of Daisy Chain VTDs
                                  VT5908-A                              Single Daisy Chain VTD
                                  VT5910                                4-pack of VTDs
                                  VT5910-A                              Single VTD
                                  VT5911                                Redundant VTD
                                  VT5912                                Single Data Compression
                                  VT5913                                ACSLS Manager
                                  VT5920                                VTD with compression

   3 rd Party Code or Open Source :

       List to be provided on or before 30 days after Effective Date.

   Documentation :

       Online Help, Product Overview and Installation Guide

   Sales Tools :

       Datasheet, Product Presentation and Sales Guide

   Support Tools :

       Release notes.

FORM AND MEDIA FOR PROGRAM AND DOCUMENTATION

Program Form/Media: Documentation CD and a DVD with an ISO image.


                                                                                                                             Page 20 of 51
Documentation Form/Media: Documentation CD in FrameMaker format.

Sales Tools Form/Media: In MS Word and PDF format

       Support Tools Form/Media: In Word and PowerPoint format. The Transfers of Information (TOIs), if any, will be delivered via web
       conference.

ACCEPTANCE

       The Complete Copy of NonStop VTS and its associated Documentation is hereby accepted pursuant to Section 2.8 of the Agreement.

NONSTOP VTS SUPPORT

       As HP and the Licensor jointly agree to new hardware models for running the NonStop VTS software, HP will provide Licensor, at
       no charge to Licensor, two (2) servers in the appropriate hardware configuration (― New Model Configuration ‖). Upon the
       completion of Licensor‘s development and support work, HP will have the right to request the return of such New Model
       Configuration. Additional hardware configurations may be purchased through HP‘s Developer and Solutions Partner Program (―
       DSPP ‖).


                                                                                                                           Page 21 of 51
                                                 EXHIBIT B
                             HP PRODUCT TYPES AND COMPATIBILITY REQUIREMENTS

1.   HP NEOVIEW PRODUCT : HP Neoview database at minimum version level R2.3 and any successor HP Product.

     COMPATIBILITY REQUIREMENTS:

            The Programs in Exhibits A1 and A2 will support the HP Product set forth above.

            The Programs in Exhibits A1 and A2 may be installed on an HP Proliant hardware/platform, the specific model of which is
             to be mutually agreed upon prior to commencement of any development work on the Programs by Licensor.

            If HP licenses a Program for internal use in a hosted service bureau or application service provider environment, HP will so
             inform Licensor.

2.   HP NONSTOP PRODUCT : HP NonStop software at minimum version levels G06.22; H06.03; and J06.03, and any successor HP
     Product.

     COMPATIBILITY REQUIREMENTS:

            The Programs in Exhibit A3 will support the HP Product set forth above.

            The Programs in Exhibit A3 may be installed on an HP Proliant hardware/platform, the specific model of which is to be
             mutually agreed upon prior to commencement of any development work on the Programs by Licensor.

            If HP licenses a Program for internal use in a hosted service bureau or application service provider environment, HP will so
             inform Licensor.


                                                                                                                           Page 22 of 51
                                                               EXHIBIT C

                                                                PRICING

1.      HP Neoview Product Royalty and Support Fee Terms

1.1.    DBProtector . The terms of this Section 1.1 apply only to the Programs known as Database Logging and Database Security,
        collectively referred to as Crossroads Strongbox DBProtector distributed by HP on HP Neoview platforms only (― DBProtector ‖):

        (a)      Royalty . HP will pay Licensor ** of HP Net Revenue for each DBProtector Program, subject to the royalty minimums as
                 set forth in Table 1.1(a). Unless otherwise mutually agreed in writing, HP will offer the DBProtector Programs on a
                 one-time-license-charge basis only.

        (b)      Minimum Royalty . During a ** for Phase I of Project Statement 1 and an ** for Phase III of Project Statement 1, beginning
                 on the date indicated below (collectively " Minimum Royalty Term "), HP agrees to pay Licensor a minimum guaranteed
                 royalty (― Minimum Royalty ‖) as follows:

                 (1) ** upon HP‘s acceptance of Phase I of Project Statement 1for Database Logging.

                 (2) ** upon HP‘s acceptance of Phase III of Project Statement 1for Database Security.

                All payments made in accordance with Section 6.4 of the Agreement during each respective Minimum Royalty Term will be
                credited toward the Minimum Royalty for the applicable Program. If, upon expiration of a Minimum Royalty Term, the total
                royalties paid by HP with respect to the applicable Program do not equal the Minimum Royalty due for such Program, HP
                will pay Licensor the balance of the Minimum Royalty due for such Program within ** days of the end of the Minimum
                Royalty Term.

                For avoidance of doubt, HP will pay Licensor actual royalties due for each DBProtector Program during its respective
                Minimum Royalty Term which may exceed the applicable Minimum Royalty. Following either or both Minimum Royalty
                Terms, royalties will continue to be payable to Licensor in accordance with Section 6.4 of the Agreement.

        (c)      Support Fees . For support of the DB Protector Program to be provided by Licensor in accordance with Exhibit E, HP will
                 pay Licensor (i) ** of Net Support Services Revenue (as defined in Section 6.5.2 of the Agreement) on DBProtector
                 Programs in those locations where such revenue information is available on a timely basis, or (ii) in accordance with the
                 support minimums set forth in Table 1.1(c) in all other locations. Notwithstanding anything to the contrary in the Agreement
                 or this Section 1.1, all support fees are subject to the support minimums as set forth in Table 1.1(c), independent of HP‘s
                 support plan type.

**Confidential Treatment Requested.


                                                                                                                                Page 23 of 51
                                                              Table 1.1(a)
                                                     DBProtector Royalty Minimums

               Number of Neoview                Royalty minimum for                   Royalty minimum for
                  Segments *                    ― Database Logging ‖                  ― Database Security ‖
          1                                                 **                                     **
          2                                                 **                                     **
          3                                                 **                                     **
          4                                                 **                                     **
          5                                                 **                                     **
          6                                                 **                                     **
          7                                                 **                                     **
          8                                                 **                                     **
          10                                                **                                     **
          12                                                **                                     **
          14                                                **                                     **
          16                                                **                                     **

              * A ―Neoview Segment‖ is defined as sixteen (16) processors

                                                            Table 1.1(c)
                                              DBProtector Monthly Support Fee Minimums

                                                Monthly Support Fee                   Monthly Support Fee
               Number of Neoview               minimum for ― Database                minimum for ― Database
                  Segments *                         Logging ‖                             Security ‖
          1                                                  **                                    **
          2                                                  **                                    **
          3                                                  **                                    **
          4                                                  **                                    **
          5                                                  **                                    **
          6                                                  **                                    **
          7                                                  **                                    **
          8                                                  **                                    **
          10                                                 **                                    **
          12                                                 **                                    **
          14                                                 **                                    **
          16                                                 **                                    **

                  * A ―Neoview Segment‖ is defined as sixteen (16) processors

1.2     Neoview VTS . The terms of this Section 1.2 apply only to the Programs known as Neoview VTS:

        (a)       Royalty . For each copy of Neoview VTS distributed by HP hereunder, HP will pay a royalty to Licensor under this
                  Agreement equal to ** of HP Net Revenue. Unless mutually agreed in writing, HP will offer the Neoview VTS Programs on
                  a one-time-license-charge basis only.
        (b)       Royalty Minimum . Notwithstanding anything to the contrary in Section 1.2(a), in no event will the royalty paid to Licensor
                  hereunder for each copy of the Neoview VTS be less than ** for Neoview VTS offered on a one-time license charge basis.

**Confidential Treatment Requested.


                                                                                                                                Page 24 of 51
        (c)      Support Fees . For support of the Neoview VTS Program to be provided by Licensor in accordance with Exhibit E, HP will
                 pay Licensor (i) ** of Net Support Services Revenue (as defined in Section 6.5.2 of the Agreement) on Neoview VTS
                 Programs in those locations where such revenue information is available on a timely basis, or (ii) ** of HP‘s then-current
                 U.S. list support price at HP‘s Basic support service ** level in all other locations.
        (d)      Monthly Support Minimum . Notwithstanding anything to the contrary in Section 1.2(c), in no event will the support fee
                 paid to Licensor hereunder for support of the Neoview VTS be less than ** per month, independent of HP‘s support plan
                 type.

2.      HP NonStop Product Royalty and Support Fee Terms

        The terms of this Section 2 apply only to the Programs known as NonStop VTS:

        (a)      Royalty . For each copy of each NonStop VTS Program distributed by HP hereunder, HP will pay a royalty to Licensor
                 under this Agreement equal to the amount set forth in Table 2(a). Unless mutually agreed in writing, HP will offer the
                 NonStop VTS Programs on a one-time-license-charge basis only.

                                                              Table 2(a)
                                                     NonStop VTS Product Royalty

                                     HP Program ID                    Per Copy Product Royalty
                                  VT5900-SV                                         **
                                  VT5900-K00                                        **
                                  VT5900-GFS                                        **
                                  VT5903                                            **
                                  VT5907-A                                          **
                                  VT5910-A                                          **
                                  VT5912                                            **
                                  VT5920                                            **

        (b)      Support Fees . For support of the NonStop VTS Program to be provided by Licensor in accordance with Exhibit E, HP will
                 pay Licensor ** of HP‘s U.S. list support price at HP‘s Basic support service ** level.

**Confidential Treatment Requested.


                                                                                                                               Page 25 of 51
                                                 EXHIBIT D1
                                        ACCOUNT MANAGERS - DBProtector

Licensor                                               HP
Name: Craig Harries                                    Name: **
Title: Product Account Manager                         Title: Product Account Manager
Address: 11000 North MoPac Expressway                  Address: 11000 Wolfe Road
          Austin, TX 78759                                        Cupertino, CA 95014

Phone: 310-428-7068                                    Phone: **
Fax: 512-928-7924                                      Fax: **
Email: charries@Crossroads.com                         Email: **

Licensor                                               HP
Name: N/A                                              Name: **
Title: Program Manager                                 Title: Program Manager
Address:                                               Address: 11000 Wolfe Road
                                                                  Cupertino, CA 95014
Phone:                                                 Phone: **
Fax:                                                   Fax: : **
Email:                                                 Email: **

Licensor                                               HP
Name: Debasmita (Mita) Roychowdhury                    Name: **
Title: Product Manager                                 Title: Product Manager
Address: 11000 North MoPac Expy.                       Address: 11000 Wolfe Road
          Austin, TX 78759                                       Cupertino, CA 95014
Phone: 512-928-7193                                    Phone: **
Fax: 512-928-7924                                      Fax: **
Email: droychowdhury@Crossroads.com                    Email: **

Licensor                                               HP
Name: Sharon Alexander                                 Name: **
Title: Support Account Manager                         Title: Support Account Manager
Address: 11000 North MoPac Expy.                       Address: 309 Gailes Court
         Austin, TX 78759                                        Roseville, CA 95747
Phone: 512-928-7549                                    Phone: **
Fax: 512-928-7402
Email: salexander@crossroads.com                       Email: **

Licensor                                               HP
Name: Con Hendren                                      Name: **
Title: Contract Account Manager                        Title: Contract Account Manager
Address: 11000 North MoPac Expy.                       Address: 8000 Foothills Blvd.
         Austin, TX 78759                                         Roseville, CA 95747
Phone: 512-928-7127                                    Phone: **
Fax: 512-928-7924                                      Fax:
Email:                                                 Email: **

                                                       HP
                                                      Name: **
                                                      Title: Royalty Admin. Group
                                                      Email: **

**Confidential Treatment Requested.


                                                                                         Page 26 of 51
                                      DESIGNATED RECIPIENT FOR LEGAL NOTICE

Licensor                                                HP
Name: Jennifer Crane                                    Name: **
Title: VP Finance                                       Title: General Counsel
Address: 11000 North MoPac Expy.                        Address: 16399 W Bernardo Drive
         Austin, TX 78759                                         San Diego, CA 92127
Phone: 512-928-7129                                     Phone: **
Fax: 512-928-7386                                       Fax: **
Email:                                                  Email: **

**Confidential Treatment Requested.


                                                                                          Page 27 of 51
                                                 EXHIBIT D2
                                        ACCOUNT MANAGERS –Neoview VTS

Licensor                                              HP
Name: Craig Harries                                   Name: **
Title: Product Account Manager                        Title: Product Account Manager
Address: 11000 North MoPac Expressway                 Address: 11000 Wolfe Road
          Austin, TX 78759                                       Cupertino, CA 95014
Phone: 310-428-7068                                   Phone: **
Fax: 512-928-7924                                     Fax: **
Email: charries@Crossroads.com                        Email: **

Licensor                                              HP
Name: N/A                                             Name: **
Title: Program Manager                                Title: Program Manager
Address:                                              Address: 14231 Tandem Boulevard
                                                                 Austin, TX 78728
Phone:                                                Phone: **
Fax:                                                  Fax: :
Email:                                                Email: **

Licensor                                              HP
Name: Craig Harries                                   Name: **
Title: Product Manager                                Title: Product Manager
Address: 11000 North MoPac Expressway                 Address: 11000 Wolfe Road
          Austin, TX 78759                                       Cupertino, CA 95014
Phone: 310-428-7068                                   Phone: **
Fax: 512-928-7924                                     Fax:
Email: charries@Crossroads.com                        Email: **

Licensor                                              HP
Name: Sharon Alexander                                Name: **
Title: Support Account Manager                        Title: Support Account Manager
Address: 11000 North MoPac Expy.                      Address: 309 Gailes Court
           Austin, TX 78759                                     Roseville, CA 95747
Phone: 512-928-7549                                   Phone: **
Fax: 512-928-7402
Email: salexander@crossroads.com                      Email: **

Licensor                                              HP
Name: Con Hendren                                     Name: **
Title: Contract Account Manager                       Title: Contract Account Manager
Address: : 11000 North MoPac Expy.                    Address:     8000 Foothills Blvd.
           Austin, TX 78759                                       Roseville, CA 95747
Phone: 512-928-7127                                   Phone: **
Fax: 512-928-7924                                     Fax:
Email:                                                Email: **

                                                       HP
                                                      Name: **
                                                      Title: Royalty Admin. Group
                                                      Email: **

**Confidential Treatment Requested.


                                                                                          Page 28 of 51
                                      DESIGNATED RECIPIENT FOR LEGAL NOTICE

Licensor                                                HP
Name: Jennifer Crane                                    Name: **
Title: VP Finance                                       Title: General Counsel
Address: : 11000 North MoPac Expy.                      Address: 16399 W Bernardo Drive
           Austin, TX 78759                                       San Diego, CA 92127
Phone: 512-928-7127                                     Phone : **
Fax: 512-928-7924                                       Fax: **
Email:                                                  Email: **

**Confidential Treatment Requested.


                                                                                          Page 29 of 51
                                                 EXHIBIT D3
                                        ACCOUNT MANAGERS – NonStop VTS

Licensor                                               HP
Name: Craig Harries                                    Name: **
Title: Product Account Manager                         Title: Product Account Manager
Address: 11000 North MoPac Expressway                  Address: 11000 Wolfe Road , Mail Stop 4220324
          Austin, TX 78759                                         Cupertino, CA 95014
Phone: 310-428-7068                                    Phone: **
Fax: 512-928-7924
Email: charries@Crossroads.com                         Email: **

Licensor                                               HP
Name: N/A                                              Name: **
Title: Program Manager                                 Title: Program Manager
Address:                                               Address: 11000 Wolfe Road, Mail Stop 4220324
                                                                   Cupertino, CA 95014
Phone:                                                 Phone: **
Email:                                                 Email: **

Licensor                                               HP
Name: Debasmita (Mita) Roychowdhury                    Name: **
Title: Product Manager                                 Title: Product Manager
Address: 11000 North MoPac Expy.                       Address: 11000 Wolfe Road, Mail Stop 4220324
          Austin, TX 78759                                       Cupertino, CA 95014
Phone: 512-928-7193                                    Phone: **
Fax: 512-928-7924
Email: droychowdhury@Crossroads.com                    Email: **

Licensor                                               HP
Name: Sharon Alexander                                 Name: **
Title: Support Account Manager                         Title: Support Account Manager
Address: 11000 North MoPac Expy.                       Address: 309 Gailes Court
           Austin, TX 78759                                       Roseville, CA 95747
Phone: 512-928-7549                                    Phone: **
Fax: 512-928-7402
Email: salexander@crossroads.com                       Email: **

Licensor                                               HP
Name: Con Hendren                                      Name: **
Title: Contract Account Manager                        Title: Business Relations Manager
Address: 11000 North MoPac Expy.                       Address: 11000 Wolfe Road
         Austin, TX 78759                                         Cupertino, CA 95014
Phone: 512-928-7127                                    Phone: **
Fax: 512-928-7924
Email:                                                 Email: **

                                                      HP
                                                      Name: **
                                                      Title: Royalty Admin. Group
                                                      Email: **
**Confidential Treatment Requested.


                                                                                                       Page 30 of 51
                                      DESIGNATED RECIPIENT FOR LEGAL NOTICE

Licensor                                               HP
Name: Jennifer Crane                                   Name: **
Title: VP Finance                                      Title: General Counsel
Address: 11000 North MoPac Expy.                       Address: 3000 Hanover Street
         Austin, TX 78759                                        Palo Alto, CA 94304-1112
Phone: 512-928-7129                                    Phone: **
Fax: 512-928-7386
Email:                                                 Email: **

**Confidential Treatment Requested.


                                                                                            Page 31 of 51
                                                       EXHIBIT E
                                         SOFTWARE SUPPORT TERMS AND CONDITIONS

1.   DEFINITIONS

     In addition to the definitions set forth in the Agreement to which this Exhibit E is appended, the words below shall have the following
     meaning ascribed to them for the purposes of this Exhibit E. In the event there is a conflict of terms or definitions between the
     Agreement and this Exhibit E, the terms contained herein shall have precedence only as they pertain to this Exhibit E.

     1.1.     ―Action Plan‖ means a plan mutually developed by HP and Licensor or as otherwise specified in Attachment A-2 that identifies
              the Customer, contains a Problem statement, a clear description of the Problem, describes the impact of the Problem to the
              Customer, and clearly defines the goals, actions, target/estimated time frames and responsible individuals to deliver a Problem
              Resolution.

     1.2.     ―Beta or Pre-release Product‖ means new or revised versions of the Product that are available for evaluation and/or testing prior
              to commercial release.

     1.3.     ―Business Day‖ means Licensor‘s local Business Day at the location where Licensor‘s support to HP is being provided.

     1.4.     ―Business Hour‖ means Licensor‘s local Business Hours at the location where Licensor‘s support to HP is being provided.

     1.5.     ―Customer‖ means the entity to which HP is obligated to provide services for Product(s) under Service Agreement(s).

     1.6.     ―Kit‖ means any Product, including Major Versions and Minor Versions, that may include Documentation and/or Media in
              physical or electronic form.

     1.7.     ―Level 0 Support‖ means the initial response provided to a Customer-initiated request for support. Level 0 Support includes,
              but may not be limited to the verification and validation that the Customer is entitled to receive services, the logging of
              suspected Problems with the Product reported by the Customer, recording the details of the Problem in a problem-management
              database, dispatching the request for support as specified herein, and managing the Customer call to an acceptable closure.

     1.8.     ―Level 1 Support‖ means the services provided in response to a Customer‘s notification of a suspected Problem in the
              Product. These services include, but may not be limited to, answering Product installation, configuration and usage questions,
              Problem isolation and identification, determination of whether a solution is contained in Product Information and a review of a
              symptoms-solutions database for known Problem Resolutions.

     1.9.     ―Level 2 Support‖ means the services provided to a Customer to perform an in-depth analysis of the suspected Problem,
              attempt to recreate the Problem and to provide an acceptable Problem Resolution.

     1.10.    ―Level 3 Support‖ means the services provided by Licensor to resolve Problems in the Product that are determined to be, or are
              highly probable to be, the result of a design or manufacturing defect or the result of a complex interaction between the Product
              and another product that cannot be resolved by HP, and which requires product design engineering knowledge or expertise to
              isolate and effect a Problem Resolution.

     1.11.    ―Major Version‖ means an Enhancement which contains new features, functionality, and/or enhancements, and may or may not
              include Minor Versions.

     1.12.    ―Media‖ means material that is electronically encoded with the Product(s) binary data, Documentation and/or technical product
              information.


                                                                                                                                 Page 32 of 51
1.13.   ―Minor Version‖ means an Enhancement that corrects errors including, but not limited to, maintenance-only releases, bug
        fixes, and patch-kits. For the purpose of clarity, a Minor Version does not include new features, functionality or enhancements.

1.14.   ―Problem‖ means a demonstrable instance of adverse and incorrect operation of a Product resulting from a failure to materially
        conform to Documentation that causes an impact to the Customer‘s ability to conduct business.

1.15.   ―Problem Resolution‖ means, when used in the context of resolving a reported Problem, the following:

        1.15.1.    the reported Problem is corrected by replacing the malfunctioning Product; or

        1.15.2.    the Customer accepts a workaround or known fix as a final solution or as an acceptable solution pending a final fix
                   in the next release; or

        1.15.3.    a code change in the form of a ―patch‖, a formal Engineering Change Order or equivalent, a new image, or new
                   revision that has been tested and that corrects the Problem without causing additional problems has been provided
                   and a reasonable attempt has been made to install the patch and verify that it is working; or

        1.15.4.    a Problem and its cause has been identified, however, a correction was not generated because HP and Licensor have
                   agreed that a preliminary analysis of the correction indicates that a correction may cause unknown and/or serious
                   regressions or subsequent Problems due to constraints in the design and/or implementation of the affected Product;
                   or

        1.15.5.    the Product conforms to design specifications and need not be changed; or

        1.15.6.    the Product conforms to design specifications and Licensor and HP jointly agree that the Problem report will be
                   treated as a request for new features, functionality or enhancements and will be considered for future
                   implementation; or

        1.15.7.    the Product conforms to design specifications and will not be changed, but the Problem exists in the Documentation
                   and the appropriate Documentation will be clarified; or

        1.15.8.    the Problem has only occurred once and HP agrees that adequate time and effort has been expended and that the
                   Problem could not be reproduced; or

        1.15.9.    the Customer has not provided sufficient information to analyze and identify the Problem and HP and Licensor will
                   jointly decide, depending on the circumstances, when this closure situation is appropriate, or

        1.15.10.   Licensor issues a technical advisory/engineering position statement to HP that explains why Licensor should not
                   take any further action to resolve the Problem. HP and Licensor will discuss and mutually agree upon an
                   appropriate course of action and communication to the Customer; or

        1.15.11.   a workaround is delivered to and accepted by the Customer as a final solution and the call closed; or

        1.15.12.   HP and Licensor agree that Licensor will correct the Problem in a future release of the Product when HP and
                   Licensor have determined that the Problem cannot be economically or feasibly resolved and requires a redesign of
                   the product or rewrite of the segment of code or image and the Customer has been notified of this action; or

        1.15.13.   HP and Licensor jointly concur that further effort is not warranted; or


                                                                                                                           Page 33 of 51
             1.15.14.    HP and Licensor agree that the Product does not cause the Problem, or the exclusions set forth in Section 4.8 apply.

     1.16.   ―Product(s)‖ means Programs (English and all foreign language versions) in object code form listed and described in Exhibit A,
             including Beta or Pre-Release Products, all current and future Major Versions and Minor Versions to such Products, and all
             Documentation and Media associated with such Products. Notwithstanding the foregoing, this Exhibit E shall not apply to Beta
             and Pre-Release Product, which shall be governed by a separate Beta evaluation agreement to be mutually agreed to by the
             parties.

     1.17.   ―Product Information‖ means, but may not be limited to, descriptions of Problems, symptoms/solutions, bugs/fixes, software
             patches, Documentation, technical tips, FAQ lists, software support tools, time critical Product information, top/hot issues list,
             how-to articles, installation manuals/procedures, release notes, Product specifications, system maintenance manuals, service
             guides, publications, and technical newsletters, all of which is specifically related to the Product and to the extent such
             information is generated by Licensor in its sole discretion providing that such Product Information is sufficient for HP to
             perform its obligations herein.

     1.18.   ―Regions‖ means HP‘s organizational groupings of countries at a regional level (Americas – Canada/Latin America/United
             States, EMEA – Europe/Mid East/Africa, and AP/J – Asia Pacific/Japan.

     1.19.   ―Service Agreement(s)‖ means agreements between HP and end-user Customers for services including telephone support,
             rights to new versions, and Updates.

     1.20.   ―Service Implementation Plan (SIP)‖ means a document developed by HP with input and mutual agreement from Licensor that
             documents the operational details of this Exhibit E. The SIP shall include, but not be limited to: processes, procedures and
             tools used for engagement between the parties in support of the Product, roles and responsibilities of all personnel involved
             with such support, training requirements and plans, and the metrics used to measure performance of the plan.

     1.21.   ―Survival Period‖ means the time period set forth in Section 5 of the Agreement. Such Survival Period will allow HP to honor
             its existing support obligations to its Customers under Service Agreements, and to carry out its retirement process for services.

     1.22.   ―Training Materials‖ means any training materials or training aids that Licensor may have or develop, including course
             hand-outs or course presentation slides, which will assist HP software support personnel in isolating/resolving Problems with
             the Product for HP‘s Customers.

     1.23.   ―Update‖ means any new Major Version or Minor Version of the Product.

2.     PRODUCT INFORMATION

     2.1.    Licensor will provide reasonable Product Information as available, in US English only, in order to aid in the effective and
             timely servicing of the supported Products. Section 3.3 (License to Documentation) of the Agreement shall be applicable to all
             such Product Information, and the term Documentation shall be deemed to include Product Information for the purposes of
             Section 3.3. Delivery of content should be in English and all other languages currently available.

     2.2.    To ensure effective conversion, reading, and updating of the Product Information, Licensor will provide to HP such Product
             Information in a useable, non-encrypted and non-compressed format. With respect to Documentation and other written
             materials, the preferred format is XML, with other acceptable formats to include HTML, text, Microsoft® suite data formats
             (e.g. Word, Excel), or Adobe® PDF. Information distributed on CD-ROM should not be tightly coupled with the onboard
             search engine but should be accessible as a standalone entity.


                                                                                                                                  Page 34 of 51
     2.3.   For delivery of information or information updates, Licensor will provide the information to the individual specified in the
            applicable SIP in one or more of the following forms as jointly agreed :

            2.3.1.     Hard copy/media.

            2.3.2.     Electronic.

            2.3.3.     Gold Master – Licensor to provide information on a Gold Master CD-ROM for use by HP in reproducing and
                       distributing the information to HP‘s service delivery personnel.

     2.4.   Licensor and HP will jointly develop a process for notification from Licensor to HP regarding information changes, additions
            and updates. The process developed will be documented in the Service Implementation Plan.

     2.5.   Licensor and HP will jointly develop procedures for information access, for updating of information, for distribution of
            information, and will define the frequency of updates. These procedures will be documented in the Service Implementation
            Plan.

     2.6.   Licensor and HP will each identify a contact who will be responsible to work the initial processes for supplying Product
            Information from Licensor to HP, and for working issues relating to Product Information during the life of this Exhibit E. The
            contact information will be identified in the Service Implementation Plan.

     2.7.   Licensor agrees to provide such information and assistance as may reasonably be required in connection with HP obtaining any
            required export documentation, licenses, permits, or export approvals. Such information may include export restrictions on the
            information provided and the specific export classification for the Product Information.

3.   SUPPORT FEES

     3.1.   HP shall pay to Licensor a support fee in accordance with the payment schedule and payment terms set forth in Exhibit C. HP
            may discontinue its support fee payments under in the event of Licensor‘s failure to perform its obligations herein, after notice
            and opportunity to cure in accordance with Section 8.1.3 of the Agreement.

     3.2.   Licensor and Licensor personnel render the services under this Exhibit E as independent party(ies) and is(are) not authorized to
            act as the agent or representative of HP or to represent that it or they are entitled so to act. Licensor and HP agree that no
            employment relationship shall exist between HP or any Affiliates and Licensor personnel by virtue of Licensor personnel
            providing the services under this Exhibit E. Accordingly Licensor and HP agree as follows:

            3.2.1.     Licensor shall be responsible for ensuring that all wages, fees, contributions and all social security and other
                       contributions including for the avoidance of doubt National insurance contributions, charges and taxes required to
                       be paid by Licensor in respect of Licensor personnel are paid, together with any payments due or in respect of any
                       Licensor personnel required by law or contract; and

            3.2.2.     Licensor shall ensure that all appropriate deductions are made from the wages of Licensor personnel in respect of
                       taxes, employees social security and other contributions including for the avoidance of doubt National insurance
                       contributions.


                                                                                                                                Page 35 of 51
             3.2.3.    As between Licensor and HP, Licensor is fully responsible for its Licensor personnel and Licensor assumes full and
                       exclusive liability for payments of claims for salaries, benefits, indemnities and other demands related to the
                       employment, that are made by Licensor personnel, or their dependants or successors. Neither Licensor nor Licensor
                       personnel shall be deemed to be either expressly or implicitly employees of HP.

4.   LICENSOR'S SUPPORT RESPONSIBILITIES

     4.1.   Licensor shall provide technical training and train-the trainer instruction, in US English only, (to allow HP personnel to become
            proficient at delivering Licensor's training courses), at no charge to HP, for HP personnel to familiarize them with the Product
            and Major Versions (or other Updates as mutually agreed) at a US-located HP designated facility and as mutually agreed within
            each of the Regions or as mutually otherwise agreed in writing. In the event HP requires Licensor to travel to an HP facility to
            deliver such training, the parties may mutually agree to HP paying for Licensor‘s reasonable travel expenses in accordance with
            HP‘s then current travel policies for its employees. Within sixty (60) days of the execution of the Agreement, a reasonable
            training plan will be jointly developed by Licensor and HP for the Products and Updates which identifies, at a minimum, the
            specific curriculum, amount of training, and course delivery schedule.

     4.2.   Licensor shall provide to HP, at no additional cost, access to its technical support personnel to respond to Customer reported
            Problems with the Product pursuant to each party‘s responsibilities as specified in Attachments A and B. Licensor will provide
            support, in US English only, in accordance with the provisions and response times specified in Attachment A to
            Exhibit E. Licensor shall assign a Support Account Manager to HP, who shall be identified in the applicable Exhibit D.

     4.3.   In the event that HP is unable to resolve a Problem with the Product pursuant to Attachments A-1 and A-2, Problem Severity
            Definitions and Response Requirements, HP shall contact Licensor for back-up support in accordance with Attachments B-1
            and B-2 to Exhibit E. Licensor shall correct any Problem with the Product in accordance with the following procedure:

            4.3.1.     If HP notifies Licensor of a Problem with the Product, or if Licensor learns of such a Problem independently,
                       Licensor shall initiate corrective action and provide response based on Attachment A to Exhibit E.

            4.3.2.     HP shall have exclusive right to reasonably determine the severity level of a Problem in good faith as defined in
                       Attachment A to Exhibit E, and in good faith whether Licensor's response is satisfactory in helping to solve the
                       Customer's Problem.

            4.3.3.     If Licensor revises the Product in order to remedy the Problem, Licensor shall provide HP with such Update.

     4.4.   In the event HP accepts and distributes an Update to the Product, Licensor, in accordance with the provisions of this section
            hereof, agrees to support the previous Update of the Product distributed by HP.

     4.5.   During the term of this Agreement and Survival Period, Licensor will provide Problem Resolution for Severity 1 Problems to
            the last Major or Minor Version of the Product known to successfully operate on non-current HP hardware for a period of five
            (5) years from the last date of shipment of such hardware by HP, unless otherwise mutually agreed between the parties. The
            foregoing is conditioned upon HP continuing to make payments for support as specified hereunder, and the parties mutually
            agree that the applicable Problem is a Severity 1 Problem, which agreement will not be unreasonably withheld. However,
            notwithstanding the foregoing, Licensor has the right to discontinue a Product in accordance with the terms of Section 5 of the
            Agreement.


                                                                                                                               Page 36 of 51
     4.6.   If HP has responded to all reasonable requests for information pertinent to the Problem, Licensor has had a reasonable
            opportunity to resolve the Problem in accordance with the response requirements specified in Attachments A-1 and A-2, and an
            on-site visit is necessary in order to resolve the Problem. If requested by HP, Licensor shall provide on-site visits to Customer
            locations to assist HP in resolving Severity 1 Problems as defined in Attachments A-1 and A-2 to Exhibit E). Licensor shall
            bear all of its costs and expenses related to such on-site visits. Notwithstanding the foregoing, HP shall reimburse Licensor for
            Licensor's out-of-pocket expenses incurred in connection therewith in the event that HP and Licensor jointly agree that a
            product other than the Product is the cause of the Problem or Customer and/or HP are found to have used or configured the
            Product other than in accordance with Documentation or explicit instructions provided by Licensor. Such reimbursement shall
            be subject to and paid in accordance with HP's then current internal business expense policy for reimbursing its employees for
            actual and reasonable travel and related expenses.

     4.7.   In the event that HP elects to continue to support a Product which Licensor had decided to retire, or HP elects to support a
            Major Version or Minor Version of the Product that Licensor is no longer required to support, Licensor agrees to provide such
            continued support, at HP‘s request, subject to the following: the parties shall enter into negotiations in good faith, to agree to
            terms for Licensor to continue to provide engineering support and Problem Resolution for a defined period of time for such
            Major Version or Minor Version. Such terms shall include, but not be limited to, length of time for extended support,
            reasonable fees, and terms relating to releases. In the event the parties cannot in good faith reach agreement on such continued
            support, Licensor shall have no obligation to provide such support.

     4.8.   Exclusions - Licensor is not obligated to provide services or support for any claims resulting from:

            4.8.1.     improper site preparation, or site or environmental conditions that do not conform to HP‘s site specifications;

            4.8.2.     Customer‘s non-compliance with Product specifications or Documentation;

            4.8.3.     improper or inadequate maintenance or calibration;

            4.8.4.     Customer or third-party media, software, interfacing, supplies, or other products;

            4.8.5.     modifications not performed or authorized by Licensor;

            4.8.6.     virus, infection, worm or similar malicious code not introduced by Licensor; or

            4.8.7.     abuse, negligence, accident, loss or damage in transit, fire or water damage, electrical disturbances, transportation
                       by Customer, or other causes beyond Licensor‘s control.

5.   SERVICE DELIVERY IMPLEMENTATION

     5.1.   Within sixty (60) days (1) after the execution of the Agreement and (2) whenever Products are added to the Agreement that
            require changes to the then-current procedures and processes, the following will occur:

            5.1.1.     Licensor and HP will develop a detailed Service Implementation Plan which will define the specific procedures and
                       processes that include, but may not be limited to, call handling, Problem escalation, the exchange of Product
                       Information, and ongoing management and updating of such Product Information.

            5.1.2.     Licensor shall provide HP with any Product Information in accordance with Section 2.


                                                                                                                                 Page 37 of 51
     5.2.     HP and Licensor will make reasonable efforts to provide each other with any and all non-confidential information obtained
              regarding Product Problems, Problem Resolutions and Customer feedback.

     5.3.     Upon execution of the Agreement and throughout the term of this Exhibit E, Licensor will provide HP with any Support Tools,
              including any future Support Tools developed or obtained by Licensor, which will assist HP support personnel in
              isolating/resolving Problems with the Product in accordance with Section 3.6 of the Agreement.

     5.4.     Licensor shall provide HP with sufficient information and instructions necessary to enable HP to assist Customers with
              questions regarding authorization keys for the Product or any other security measures if required by the Product for installation
              and/or execution.

     5.5.     HP shall determine, in its sole discretion, countries and or Regions in which HP shall offer Service Agreements and the terms
              and conditions under which they will be provided, subject to protection of intellectual property rights in the Products which
              conform to the licenses granted under the Agreement, license restrictions and confidentiality and ownership provisions set forth
              therein.

     5.6.     HP, in its sole discretion, may subcontract the performance of support services to HP customers to qualified, appropriately
              trained service suppliers.

6.   INSURANCE COVERAGE

     During the term of this Exhibit E, Licensor, when providing support services specified in this Exhibit E, will maintain in full force and
     effect, at Licensor‘s own expense, insurance coverage as specified herein.

     6.1.       Basic Compulsory Insurance Requirements

                6.1.1.    Workers' Compensation or Social Scheme and Employers Liability Insurance. Workers' Compensation Insurance
                          shall be provided as required by any applicable law or regulation having jurisdiction over Licensor's employees. If
                          the jurisdiction has a compulsory insurance program that is administered and enforced through the government, not
                          always through private insurers (also known as ―Social Scheme‖), Licensor agrees to be in full compliance with the
                          laws thereof. Employers Liability Insurance shall be provided in amounts not less than $1,000,000 USD* each
                          accident for Bodily Injury by accident and $1,000,000* USD each employee for Bodily Injury by disease. If the
                          Work performed involves a risk of injury to Licensor's employees which should be addressed under the U.S.
                          Longshoreman's Harbor Workers' regulations or statutes applicable to maritime employees, coverage shall be
                          included for such injuries of claims.

                * Employer's liability for Licensors in countries outside the US can be reduced to $500,000 USD.

                6.1.2.    Where permitted by law, such policies shall contain waivers of the insurer's right of subrogation against HP, its
                          subsidiaries, officers, directors and employees.

     6.2.       General Liability Insurance. Licensor shall carry either Comprehensive General Liability Insurance or Commercial General
                Liability Insurance with limits of liability and coverage as indicated below:

                6.2.1.    Premises and Operations;
                6.2.2.    Products and Completed Operations;
                6.2.3.    Contractual Liability;
                6.2.4.    Broad Form Property Damage (including Completed Operations);


                                                                                                                                  Page 38 of 51
                6.2.5.   Explosion, Collapse and Underground Hazards when Licensor will create risk normally covered by such insurance;
                6.2.6.   Personal Injury Liability.

     6.3.       Comprehensive General Liability . Comprehensive General Liability policy limits shall not be less than a Combined Single
                Limit for Bodily Injury, Property Damage, and Personal Injury Liability and $1,000,000 per occurrence and $1,000,000
                aggregate. Commercial General Liability (Occurrence) policy limits shall be not less than $1,000,000 per occurrence
                (combined single limit for bodily injury and property damage, $1,000,000 for Personal Injury Liability, $1,000,000
                Aggregate for Products and Completed Operations, and $2,000,000 General Aggregate. HP, its subsidiaries, officers,
                directors and employees shall be named as Additional Insureds under the policy. It is agreed the insurance afforded such
                Additional Insureds shall apply as primary insurance and that any other insurance carried by HP shall be excess only and
                shall not contribute with this insurance.

                If "claims made" policies are provided, Licensor shall maintain such policies, including unimpaired aggregate limits at the
                above stated minimums, for at least five years after the expiration of the Term.

     6.4.       Automobile Liability Insurance . Such insurance shall include coverage for Bodily Injury and Property Damage Liability,
                including Automobile Contractual Liability and shall apply to all owned (if applicable), hired, and non-owned autos. The
                limit of liability shall not be less than $1,000,000 combined single limit for each accident.

     6.5.       Certificate of Insurance . Licensor shall furnish Certificates of Insurance acceptable to HP before any Work is commenced
                hereunder by Licensor. The Certificate of Insurance shall provide that there will be no cancellation or reduction of coverage
                without fifteen (15) days prior written notice to HP.

     6.6.       Additional Requirements . All insurance policies will be written by a company authorized to do business in the territory and
                jurisdiction where the project is located. In no event will the coverage or limits of any insurance maintained by Licensor
                under this Exhibit E, or the lack or unavailability of any other insurance, limit or diminish in any way Licensor‘s obligations
                or liability to HP. Any acceptance of insurance certificates by HP shall not limit or relieve Licensor of the duties and
                responsibilities assumed by it under this Exhibit E.

     6.7.       Professional Liability Insurance (Errors and Omissions) . (For contracts involving a provider of professional services.)
                Licensor shall maintain Professional Liability Insurance covering negligent acts, errors or omissions arising out of the
                rendering of or failure to render professional services as contracted under this agreement, whether committed or alleged to
                have been committed by Licensor or by its employees, consultants or others for whom Licensor is legally responsible. The
                limit of liability shall not be less than $1,000,000 each claim and in the aggregate and such policy will remain in effect for
                not less than one (1) year following the date of termination of this Exhibit E. Any deductible or retention under the policy
                shall be the responsibility of Licensor.

7.   REVISIONS

     Compatibility of the Product with HP products shall be as specified in Section 2.5 of the Agreement.

8.   PERSONAL DATA

     In order to protect information defined as Personal Data, below, HP and Licensor agree to the following, which provisions will survive
     termination of the Agreement:


                                                                                                                                   Page 39 of 51
 8.1.   ―Personal Data‖ Defined . ―Personal Data‖ means information related to any identified, or identifiable, person or legal entity,
        including without limitation HP, Customers, subcontractors and including the employees or customers of HP, Customers and
        subcontractors. ―Personal Data‖ shall also mean any additional data deemed personal data by any applicable personal data
        protection law, regulation, or directive, which data is available to Licensor or to which Licensor has access: (i) in connection
        with the Agreement; or, (ii) in the course of performing any services pursuant to the Agreement. This definition of ―Personal
        Data‖ does not include Personal Data provided directly by Customer to Licensor.

8.2.    Licensor Obligations . With regard to any Personal Data that Licensor receives from HP and/or HP Customers to perform
        Licensor‘s obligations under the Agreement, Licensor shall comply with all of the following obligations:

        (a) Licensor shall comply with all applicable data protection laws and/or directives.

        (b) Licensor‘s use of the Personal Data is limited to performance of Licensor‘s obligations under the Agreement. Licensor
            may only disclose Personal Data to those Licensor employees that have a need to know in order to perform Licensor‘s
            obligations under the Agreement and who have received privacy training from the Licensor. Said Licensor employees
            must be bound by confidentiality obligations no less restrictive that those contained in Section 10 (Confidential
            Information) of the Agreement.

        (c) Licensor may not sell, rent, or lease Personal Data to anyone. Licensor may not disclose Personal Data to any third
            party, even for preservation of Personal Data, nor, transfer the Personal Data to any third country without the advance
            written permission of HP. Licensor shall immediately notify HP if Licensor becomes aware of any unauthorized use of
            disclosure of Personal Data.

        (d) Licensor shall use the same degree of care as it uses to protect its own information of similar nature (but never less than
            a reasonable degree of care) to prevent unauthorized use, dissemination or publication of Personal Data and will
            implement any technical and organizational measures to protect and prevent the disclosure of Personal Data which are
            required by Applicable Law. At a minimum, Licensor agrees to (i) implement appropriate technical and organizational
            measures to protect Personal Data against accidental or unlawful destruction or loss; unauthorized disclosure or access,
            in particular where processing involves the transmission of Personal Data over a network; alteration; and all other
            unlawful forms of processing and (ii) to implement appropriate procedures to ensure unauthorized persons will not have
            access to the data processing equipment used to process the Personal Data; any personal it authorizes to have access to
            the Personal Data will respect and maintain the confidentiality and security of the Personal Data; and the measures and
            procedures that it uses will be sufficient to comply with all legal requirements.. Personal Data shall also be considered
            Confidential Information and treated in accordance with the requirements for Confidential Information under the
            Agreement.

        (e) In connection with protecting, collecting, storing, transferring and otherwise processing of Personal Data, Licensor
            agrees to act only in accordance with the requirements of the Agreement or instructions provided by HP either upon
            Licensor‘s request or HP‘s election.

        (f) Not to copy or reproduce any Personal Data without the express written permission of HP, except as technically
            necessary to comply with the Agreement (e.g., duplication of data stocks as backup protection against loss of data).


                                                                                                                          Page 40 of 51
                  (g) To immediately notify HP by telephone and follow up in writing if it becomes aware of any actual, suspected or alleged
                      unauthorized use of, disclosure of, or access to Personal Data by itself or others, including notification of loss or
                      suspected loss of data whether or not such data has been encrypted. Licensor will cooperate with HP in the manner
                      reasonably requested by HP and in accordance with law, including but not limited to: conducting the investigation;
                      cooperating with authorities; notifying, at Licensor‘s sole expense, affected persons, credit bureaus, other persons or
                      entities deemed appropriate by HP; and issuing press releases. Such cooperation will include without limitation: (i) HP
                      access to Licensor records and facilities; (ii) Licensor provision of all relevant data and reports to HP; and (iii) prior
                      advance approval by HP of any notifications to impacted individuals or press releases.

                 (h) To inform HP promptly in writing if Licensor is of the opinion that any instruction from HP violates the applicable
                     personal data protection regulations.

                 (i) When collecting, using, storing, transferring and otherwise processing Personal Data Licensor shall adhere to all
                     applicable export and personal data laws, regulations and rules.

                 (j) Licensor will handle any Personal Data in a manner consistent with the then-current HP Privacy Policy, available at:
                     www.hp.com/hpinfo/globalcitizenship/privacy/masterpolicy.html.

9.    TERM AND TERMINATION

      9.1.       For the duration of the Survival Period, all terms and conditions of this Exhibit E survive the expiration or termination of the
                 Agreement.

      9.2.       Upon the termination or expiration date of this Exhibit E or the Agreement, HP shall initiate its service retirement process for
                 the Products. During the first ninety (90) days of the Survival Period, HP shall use commercially reasonable efforts to take
                 appropriate actions to cease the sales and renewals of Service Agreements.

10.   GENERAL PROVISIONS

      Wherever there is a provision that the parties must mutually agree within this Exhibit E, each party shall use good faith efforts to achieve
      such mutual agreement. Wherever HP or a Customer is given the right to accept or reject any item hereunder, such acceptance shall not
      be unreasonably withheld or delayed. Wherever a determination is to be made by either party hereunder or a Customer, such
      determination shall be reasonable.

        ATTACHMENTS TO EXHIBIT E

        Attachment A-1 – Problem Severity Definitions and Response Requirements, NonStop VTS and Neoview VTS Software Support

        Attachment A-2 – Problem Severity Definitions and Response Requirements, Neoview DBProtector

        Attachment B-1 –     Service Delivery Model, NonStop VTS and Neoview VTS Software Support

        Attachment B-2 –     Service Delivery Model, Neoview DBProtector


                                                                                                                                    Page 41 of 51
                                                       Attachment A-1 to Exhibit E
                                          Problem Severity Definitions and Response Requirements

Support Model      for NonStop VTS and Neoview VTS Software Support

I. Service requests to Licensor made by HP will be handled in accordance with the following procedures and as specifically provided for in
Section 4 of Exhibit E. Table 1 to this Attachment A-1 to Exhibit E summarizes the response requirements for the severity levels as defined
below. Licensor shall use all reasonable technically feasible means to diagnose and provide Problem Resolution for all Problems reported by
HP.

II. When HP requires backup support from Licensor, HP will contact Licensor‘s service delivery organization that will accept responsibility for
handling the call according to the severity levels described below. The HP service delivery organization will have responsibility for assigning a
Severity Level to the call, determining the Severity Level is acceptable to the Customer, providing all available technical information
pertaining to the Problem to Licensor and work with Licensor to obtain from Customer other information which may be reasonably necessary
for Licensor to proceed to the next step in the Action Plan. For the purposes of this exhibit, 'receipt' of a call by Licensor will be considered to
have occurred when the HP service delivery organization has made contact with Licensor's support organization or representative thereof.

III. Under this Attachment A-1, HP‘s service delivery organization will provide Level 0 and Level 1 Support and Licensor will provide Level 2
and Level 3 Support to deliver a Problem Resolution.

1.        Severity 1 Definition. A Severity 1 Problem is a catastrophic Problem that may severely impact the Customer‘s ability to conduct
business. This means that the Product is down or not functioning and no procedural workaround exists.

         1.1.        Response Requirements . Licensor‘s support organization will respond directly to the HP service delivery organization
within one (1) hour following receipt of the call from the HP service delivery organization. HP and Licensor will jointly develop an Action
Plan within 4 hours following Licensor‘s receipt of the call subject to Section II above.

         1.2.       Implementation . When working a ―Severity 1‖ Problem, the objective is to get the Customer back on line by whatever
means within 24 hours and to downgrade the Problem severity accordingly. Efforts to isolate, diagnose, and deliver a work-around or repair to
a ―Severity 1‖ Problem shall be continuous (i.e., round-the-clock) effort subject to Section II above. Periodic phone contact and progress
updates are also expected as specified in the Action Plan. When the severity level has been changed to ―Severity 2‖ or ―Severity 3,‖ the
appropriate guidelines should be followed. Resources must be available on a 24-hour by 7-day basis (24x7) to respond to Severity 1 cases.

2.0        Severity 2 Definition . A Severity 2 Problem is a high-impact Problem in which the Customer‘s operation is disrupted but there is
capacity to remain productive and maintain necessary business-level operations. The Problem may require a fix be installed on the Customer‘s
system prior to the next planned commercial release of the Product.

         2.1        Response Requirements . Licensor‘s support organization will respond to the HP service delivery organization within two
(2) hours following receipt of the call from the HP service delivery organization during normal Business Hours otherwise on the next Business
Day. HP and Licensor will jointly develop an Action Plan within one (1) Business Day following Licensor‘s receipt of the call subject to
Section II above.


                                                                                                                                     Page 42 of 51
          2.2         Implementation . Efforts to isolate, diagnose, and deliver a work-around or repair to a Severity 2 Problem shall be
continuous during Business Hours (Monday through Friday, 8:00 AM – 5:00 PM subject to Section II above. The frequency that Licensor
shall provide status updates shall be twice per week or as mutually agreed in an Action Plan. Resources may need to be available after hours
and/or weekends depending on the Action Plan. The objective is to have a solution and/or fix to the Customer within an average of 20 Business
days.

3.0         Severity 3 Definition . A Severity 3 Problem is a medium-to-low impact Problem that involves partial loss of non-critical
functionality. The Problem impairs some operations but allows the Customer to continue to function. This may be a minor issue with limited
loss or no loss of functionality or impact to the Customer‘s operation. This includes documentation errors.

         3.1       Response Requirements . Licensor‘s support organization will respond to the HP service delivery organization within three
(3) Business Days. HP and Licensor will jointly develop an Action Plan as mutually agreed subject to Section II above.

          3.2        Implementation . When working a ―Severity 3‖ Problem, the objective is to get the Customer a fix to the Problem within
thirty (30) days or a statement describing the disposition of the Problem. Action should be appropriate to the nature of the escalation. Efforts to
isolate and resolve the Problem shall be as agreed to in the Action Plan, or if no Action Plan is developed, Monday through Friday during
normal Business Hours as necessary.

4.0       Severity Level 4 Definition . ―Severity 4‖ will be assigned to general usage questions, recommendations for future product
enhancements or modifications and to calls that are passed to Licensor for information purposes. There is no impact on the quality,
performance or functionality of the Product.

         4.1        Response Requirements . Licensor‘s support organization will respond in a manner appropriate to the nature of the
escalated call.

        4.2         Implementation . If HP's sole reason for escalating a ―Severity 4‖ call is to submit a draft symptom/solution article for
consideration by Licensor, Licensor will respond to the submission and, if appropriate, will provide a reviewed and edited copy of the
submission and a recommendation for its disposition.


                                                                                                                                     Page 43 of 51
                                                         Table 1 of Attachment A-1 to Exhibit E

Conflict of Terms: For the avoidance of doubt, if there is any conflict of terms or deliverables in this Table 1 to the written terms specified
within Attachment A-1, then the written terms of Attachment A-1 shall apply.

      HP/LICENSOR Response Requirements
           Licensor
Severity   Response                Joint Action               Status              Interim Fix             Resolution            Level of
Level      Requirements            Plan                       Updates             Target *                Target *              Effort
    1      Within 1 hr following   Within 4 hrs               As specified in the See Section 1.2         See Section 1.2       7 by 24 continuous
           receipt of call from HP                            Action Plan                                                       effort until a
                                                                                                                                work-around or
                                                                                                                                repair is developed
                                                                                                                                subject to Section
                                                                                                                                1.2

     2       Within 2 hr M-F 8-5      Within 1 Business       Once per week or N/A                        Provide a             As agreed to in
             local time following     Day                     as mutually agreed                          solution/fix within   Action Plan or a
             receipt of call from HP;                                                                     an average of 20      minimum effort
             otherwise next Business                                                                      days                  during M-F 8-5
             Day.                                                                                                               local time subject
                                                                                                                                to Section 2.2

     3       Within 3 Business Days -Per Action Plan as per Action Plan or N/A                            Within an average     As agreed in
                                    mutually agreed     as mutually agreed                                of 30 days, provide   Action Plan or
                                                        based on nature of                                a solution or a       Monday – Friday
                                                        the escalation                                    statement             during normal
                                                                                                          regarding the         Business Hours
                                                                                                          disposition of the
                                                                                                          Problem.

     4       Engineering reviews and provides response within 30 days of the        N/A                 Within an average       8X5 as available
             escalation.                                                                                of 30 days, provide     and as appropriate
                                                                                                        a statement             to the nature of the
                                                                                                        regarding               escalation
                                                                                                        disposition of the
                                                                                                        Problem.
* - Timeframes defined are desired goals on average and are initiated upon receipt of the escalation from HP.


                                                                                                                                      Page 44 of 51
                        Attachment A-2 to Exhibit E – Problem Severity Definitions and Response Requirements

                                                  Support Model for Neoview DBProtector

I. Service requests to Licensor made by HP will be handled in accordance with the following procedures and as specifically provided for in
Section 4 of Exhibit E.     Table 1 of this Attachment A-2 summarizes the response requirements for the severity levels as defined below; in
the event of a conflict between Table 1 and the descriptions in this Attachment, this Attachment shall prevail. Licensor shall use all reasonable
technically feasible means to diagnose and provide Problem Resolution for all Problems reported by HP.

II. When HP requires backup support from Licensor, HP will contact Licensor‘s service delivery organization that will accept responsibility for
handling the call according to the severity levels described below. The HP service delivery organization will have responsibility for assigning a
Severity Level to the call, determining the Severity Level is acceptable to the Customer, providing all available technical information
pertaining to the Problem to Licensor and if requested by Licensor, work with Licensor to obtain from Customer other information which may
be reasonably necessary for Licensor to proceed to the next step in the Action Plan. For the purposes of this exhibit, 'receipt' of a call by
Licensor will be considered to have occurred when the HP service delivery organization has made contact with Licensor's support organization
or representative thereof.

III. Under this Attachment A-2, HP‘s service delivery organization will provide Level 0 Support and Licensor will provide Level 1, Level 2
and Level 3 Support to deliver a Problem Resolution providing however, that HP will use all reasonable technically feasible means to eliminate
the potential that such Problem is the result of HP distributed hardware and/or software other than the Product.

1.0       Severity 1 Definition . A Severity 1 Problem is a catastrophic Problem that may severely impact the Customer‘s ability to conduct
business. This may mean that the Product is down or not functioning and no procedural workaround exists.

         1.1        Response Requirements . Licensor‘s support organization will respond directly to the Customer within thirty (30) minutes
following receipt of the call from the HP service delivery organization subject to Section II. Customer and Licensor will develop an Action
Plan within 4 hours following receipt of the call subject to Section II above. Licensor will use reasonable effort to cause Customer to work with
Licensor to develop an Action Plan.

         1.2        Implementation . When working a ―Severity 1‖ Problem, the objective is to get the Customer back on line by whatever
means within 24 hours and to downgrade the Problem severity accordingly. Efforts to isolate, diagnose, and deliver a work-around or repair to
a ―Severity 1‖ Problem shall be continuous (i.e., round-the-clock) effort subject to Section II above. Periodic phone contact and progress
updates are also expected as specified in the Action Plan. When the severity level has been changed to ―Severity 2‖ or ―Severity 3,‖ the
appropriate guidelines should be followed. Resources must be available on a 24-hour by 7-day basis (24x7) to respond to Severity 1 cases.

2.0       Severity 2 Definition . A Severity 2 Problem is a high-impact Problem in which the Customer‘s operation is disrupted but there is
capacity to remain productive and maintain necessary business-level operations. The Problem may require a fix be installed on the Customer‘s
system prior to the next planned commercial release of the Product.

         2.1         Response Requirements . Licensor‘s support organization will respond directly to the Customer within one (1) hour
following receipt of the call from the HP service delivery organization during normal Business Hours otherwise on the next Business Day
subject to Section II.

         2.2          Implementation . Efforts to isolate, diagnose, and deliver a work-around or repair to a Severity 2 Problem shall be
continuous during Business Hours (Monday through Friday, 8:00 AM – 5:00 PM subject to Section II above. Specific implementation should
be mutually agreed between Customer and Licensor on a case-by-case basis and may be documented in an Action Plan within 1 Business Day
of receipt of the call by Licensor. The frequency that Licensor shall provide status updates shall be once per week or as mutually agreed.
Resources may need to be available after hours and/or weekends depending on the Action Plan. The objective is to have a solution and/or fix to
the Customer within an average of 20 days.


                                                                                                                                   Page 45 of 51
3.0       Severity 3 Definition . A Severity 3 Problem is a medium-to-low impact Problem that involves partial loss of non-critical
functionality. The Problem impairs some operations but allows the Customer to continue to function. This may be a minor issue with limited
loss or no loss of functionality or impact to the Customer‘s operation. This includes documentation errors.

         3.1        Response Requirements . Licensor‘s support organization will respond to the Customer within three (3) Business Days
following receipt of the call from the HP service delivery organization. Customer and Licensor will jointly develop an Action Plan as mutually
agreed subject to Section II above.

          3.2        Implementation . When working a ―Severity 3‖ Problem, the objective is to get the Customer a fix to the Problem within
thirty (30) days or a statement describing the disposition of the Problem. Action should be appropriate to the nature of the escalation. Efforts
to isolate and resolve the Problem shall be as agreed to in the Action Plan or if no Action Plan is developed, a minimum of Monday through
Friday during normal Business Hours.

4.0      Severity Level 4 Definition . ―Severity 4‖ will be assigned to general usage questions, recommendations for future product
enhancements or modifications and to calls that are passed to Licensor for information purposes. There is no impact on the quality,
performance or functionality of the Product.

         4.1        Response Requirements . Licensor‘s support organization will respond in a manner appropriate to the nature of the
escalated call.

        4.2         Implementation . If HP's sole reason for escalating a ―Severity 4‖ call is to submit a draft symptom/solution article for
consideration by Licensor, Licensor will respond to the submission and, if appropriate, will provide a reviewed and edited copy of the
submission and a recommendation for its disposition.


                                                                                                                                    Page 46 of 51
                                                    Table 1 of Attachment A-2 to Exhibit E

Conflict of Terms: For the avoidance of doubt, if there is any conflict of terms or deliverables in this Table 1 to the written terms specified
within Attachment A-2, then the written terms of Attachment A-2 shall apply.

      HP/Licensor Response Requirements
           Licensor
Severity   Response              Joint Action                 Status                Interim Fix           Resolution            Level of
Level      Requirements          Plan with                    Updates               Target *              Target *              Effort
                                 Customer
    1      Within 30 minutes     Within 4 hrs                 As specified in the   As per Section 1.2    As per Section 1.2    7 by 24 continuous
           following receipt of  following receipt            Action Plan and                                                   effort until a
           call from HP          of call from HP to           weekly with HP                                                    work-around or
                                 develop Action                                                                                 repair is developed
                                 Plan                                                                                           subject to Section
                                                                                                                                1.2

     2       Within 1 hr. following    Within 1 Business      at least once per     N/A                   Provide solution or As agreed to in
             receipt of call from HP   Day with               week or as                                  fix within average Action Plan or a
             during Business hours;    implementation as      mutually agreed                             of 20 days          minimum effort
             otherwise next            mutually agreed                                                                        during M-F 8-5
             Business Day                                                                                                     local time subject
                                                                                                                              to Section 2.2

     3       Within 3 Business          as mutually agreed Per Action Plan          N/A                   Within an average     As agreed in
             Days following receipt                        - or as mutually                               of 30 days, provide   Action Plan or
             of call from HP                               agreed                                         a solution or a       Monday – Friday
                                                                                                          statement             during normal
                                                                                                          regarding the         Business Hours
                                                                                                          disposition of the
                                                                                                          Problem.

     4       Engineering reviews and provides response within 30 days of the        N/A                   Within an average     8X5 as available
             escalation.                                                                                  of 30 days, provide   and as appropriate
                                                                                                          a statement           to the nature of the
                                                                                                          regarding             escalation
                                                                                                          disposition of the
                                                                                                          Problem.

* - Timeframes defined are desired goals on average and are initiated upon receipt of the escalation from HP.


                                                                                                                                      Page 47 of 51
                                          Attachment B-1 to Exhibit E – Service Delivery Model

                                 Support Model     for NonStop VTS and Neoview VTS Software Support

 HP‘s service delivery organization will provide Level 0 and Level 1 Support and Licensor will provide Level 2 and Level 3 Support to deliver
a Problem Resolution.

                                                                                                        HP                  LICENSOR
POINT OF CONTACT                                                                                                   
OPEN CALL                                                                                                          
DEVELOP PROBLEM STATEMENT                                                                                          
IF SOLUTION KNOWN, PROVIDE SOLUTION, TO CUSTOMER AND CLOSE CALL                                                    
WORK PROBLEM UNTIL NO VALUE ADDED                                                                                  
WHEN NO VALUE ADDED, CONTACT LICENSOR FOR BACK-UP SUPPORT                                                          
MANAGE CALL TO CLOSURE                                                                                                        
RESOLVES PROBLEM                                                                                                                 
PROVIDES SOLUTION TO HP                                                                                                          
SOLUTION PROVIDED TO CUSTOMER                                                                                      
CLOSE CALL                                                                                                                    

        HP takes call and opens call tracking log.
        HP specialist will give Customer solution if known immediately or will work the Problem until there is no value added.
        If the reported issue is a Problem with the Product, HP immediately passes call to Licensor with Customer information, a Problem
         statement and all available technical information pertaining to the Problem.
        HP and Licensor will manage call to closure.
        Licensor will work to resolve the Problem and notify and deliver the Problem Resolution to HP.
        HP will contact and deliver the Problem Resolution to Customer.
        HP and Licensor close the call upon acceptance of the Problem Resolution by HP.


                                                                                                                                Page 48 of 51
                                           Attachment B-2 to Exhibit E – Service Delivery Model

Support Model for Neoview DBProtector

HP‘s service delivery organization will provide Level 0 Support and then pass the call to Licensor to provide Levels 1, 2 and 3 Support to
deliver a Problem Resolution .

                                                                                                         HP                   LICENSOR
POINT OF CONTACT                                                                                                    
OPEN CALL                                                                                                           
HP DETERMINES PROBLEM IS NOT THE RESULT OF HP DISTRIBUTED                                                           
HARDWARE AND/OR SOFTWARE
WHEN NO VALUE ADDED, CONTACT LICENSOR FOR BACK-UP SUPPORT                                                           
PASS CALL                                                                                                           
MANAGE CALL TO CLOSURE                                                                                                          
RESOLVES PROBLEM                                                                                                                   
PROVIDES SOLUTION TO CUSTOMER                                                                                                      
NOTIFY HP WHEN PROBLEM RESOLVED                                                                                                    
CLOSE CALL                                                                                                                      

        HP takes the call and opens call tracking log.
        HP determines the Problem is not the result of HP distributed hardware and/or software.
        If the reported issue is a Problem with the Product, HP immediately passes call to Licensor with Customer information, a Problem
         statement and all available technical information pertaining to the Problem .
        HP and Licensor manage call to closure.
        Licensor works directly with Customer and notifies HP when the Problem is resolved and Customer has accepted the Problem
         Resolution.
        HP and Licensor close the call upon HP‘s receipt of notice (ex. e-mail, telephone, etc.) of acceptance of the Problem Resolution from
         Customer.


                                                                                                                                  Page 49 of 51
                                                                 EXHIBIT F
                                                          PROJECT STATEMENT 1
                                                         for Crossroads DB Protector

DESCRIPTION OF PROGRAM PHASES

For this project, the Crossroads DBProtector Program will be delivered in three phases as generally described below and as more particularly
set forth in the DBProtector .3.0 System Requirements Document v 1.0 (― SRD ‖), incorporated herein by reference thereto. The Program
delivered for each phase below will be considered a ―Complete Copy of Program‖ for purposes of interpretation of the Agreement. All dates set
forth below are estimates only. Failure to meet such dates shall not be a breach of this Agreement. HP shall have no right to reject the Program
or terminate this Agreement for failure to meet such dates, and Licensor shall have no liability for not meeting such dates, regardless of reason.

CHANGE ORDER PROCESS

The parties acknowledge that the SRD is an iterative document which will be updated from time to time during the project using a change order
process to be mutually agreed to by the parties. Under this process, either Licensor or HP may initiate a change request when some change or
event (including further understanding of requirements) has occurred that impacts the SRD. Licensor may reject any change request which
materially increases the level of effort required to deliver the Program.

PHASE 1

General description of functionality with respect to Crossroads DBProtector Database Logging to be delivered by January 15, 2010:

                      Logging of date, time, user ID, IP address, login success and failures, login connects and disconnect, SQL Text and
                       DBProtector activities

                      View log

                      Digitally signed audit log

                      Export log in an XML format with an XSL style sheet to aid viewing in an XML editor

                      Re-branding the product to HP

                      1 gigabit/second performance

                      Role-based access to DBProtector

                      JPMC Linux server security requirements

                      Integration with HP Remote Support Pack

                      In-band mode

                      HP ProLiant hardware

PHASE 2

General description of functionality with respect to Crossroads DBProtector Database Logging to be delivered by April 1, 2010:

                 Integration with syslog / RSA Envision


                                                                                                                                   Page 50 of 51
PHASE 3

General description of functionality with respect to Crossroads DBProtector Database Security to be delivered by August 15, 2010:

                    Full protocol decoding and SQL parsing

                    Full logging of events for user ID, client IP address, date and time, server, database, table, column, stored procedures,
                     DQL (select), DML (delete, insert, update), DDL (drop, truncate, create, alter), Rights (revoke, grant) , # rows returned,
                     Log-in successes and failure, Policy Action (Enable/Block), and SQL Query Statement (text, tables, columns)

                    Licensed policy enforcement by alerting or blocking

                    Query modification for row-level security and column-level security

                    10 gigabit/second performance

                    High availability

                    Reporting for Audit, Policy, Baseline, Discovery

                    Granular audit archive with digitally signed audit data for ―tamper evidence‖, integration with Network Attached
                     Storage for external storage, and export of audit data for 3rd party validation

HP PROJECT ASSUMPTIONS/DEPENDENCIES

       HP will provide Licensor with documentation to HP Neoview Database protocol, and all updates thereto

       HP will provide Licensor with access to a Neoview platform running the HP Neoview Database during the term of the Agreement
        either through HP‘s Advanced Technology Center (ATC) or a mutually acceptable loan agreement.

       HP will provide Licensor with access to HP Neoview SQL Query structure and all updates thereto.

       HP will provide Licensor access to Business Information Applications that issue queries to the HP Neoview database.

       HP will provide Licensor with non-binding written product enhancement requests (POD) for each release not less than six (6) months
        prior to such release.

       HP will provide Licensor access to HP personnel that can share knowledge and expertise of the Neoview architecture and design as
        reasonably necessary for Licensor to develop the Program and ensure the Program supports the HP Product as otherwise required
        hereunder.

       HP will provide Licensor with access to a Neoview platform running the HP Neoview Database with a network topology that reflects
        a typical Neoview customer network topology and in particular the network topology at JPMC.

       HP will provide Licensor with access to a Neoview platform running the HP Neoview Database with a database schema, load, and
        traffic of a typical Neoview customer environment to run performance tests.


                                                                                                                                 Page 51 of 51
                                                                  Exhibit 10.12.1

           COMMERCIAL INDUSTRIAL LEASE AGREEMENT

PRINCIPAL LIFE INSURANCE COMPANY, AN IOWA CORPORATION, LANDLORD

                             AND

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

                                                                     Page No.
1.    PREMISES, TERM, INITIAL IMPROVEMENTS, ACCEPTANCE OF PREMISES          3

2.    RENT AND SECURITY DEPOSIT                                            3

3.    TAXES                                                                7

4.    LANDLORD‘S MAINTENANCE AND REPAIR OBLIGATIONS                        7

5.    TENANT‘S MAINTENANCE AND REPAIR OBLIGATIONS                          8

6.    ALTERATIONS BY TENANT                                               10

7.    SIGNS                                                               11

8.    UTILITIES                                                           12

9.    INSURANCE BY TENANT                                                 12

10.   SUBROGATION OF RIGHTS OF RECOVERY                                   13

11.   CASUALTY DAMAGE                                                     14

12.   LIABILITY, INDEMNIFICATION, AND NEGLIGENCE                          15

13.   USE; COMPLIANCE WITH LAWS; PARKING                                  16

14.   INSPECTION, ACCESS AND RIGHT OF ENTRY; NEW CONSTRUCTION             17

15.   ASSIGNMENT AND SUBLETTING                                           17

16.   CONDEMNATION                                                        19

17.   SURRENDER AND REDELIVERY OF PREMISES; HOLDING OVER                  19

18.   QUIET ENJOYMENT                                                     20

19.   EVENTS OF DEFAULT                                                   20

20.   REMEDIES                                                            21

21.   LANDLORD‘S DEFAULT AND LIMITATIONS OF LIABILITY                     22

22.   MORTGAGES                                                           23

23.   ENCUMBRANCES                                                        24

24.   MISCELLANEOUS                                                       24

25.   NOTICES                                                             28

26.   HAZARDOUS WASTE                                                     28

27.   LANDLORD‘S LIEN                                                     30
28.     TENANT‘S ACKNOWLEDGEMENTS   30

RIDER                               33

EXHIBIT A                           38

EXHIBIT A-1                         39

EXHIBIT B                           40

EXHIBIT C                           46

EXHIBIT D                           47

EXHIBIT E                           49

EXHIBIT F                           50
                               LIST OF DEFINED TERMS

                                                       Page No.

Additional Rent                                               3
Affiliate                                                    24
Building‘s Structure                                          7
Claimant                                                     22
Collateral                                                   30
Construction Management Fee                                  11
Environmental Laws                                           28
Event of Default                                             20
Final Calendar Year                                           5
Hazardous or Toxic Materials                                 28
HVAC System                                                   9
Indemnified Parties                                          24
Landlord‘s Mortgagee                                         23
Law                                                          24
Laws                                                         24
Loss                                                         15
Mortgage                                                     23
Operating Expenses                                            3
Parking Areas                                                16
Primary Lease                                                23
Repair Period                                                14
Reserved Right                                               17
Rules and Regulations                                        16
Sign Requirements                                            11
Taking                                                       19
Taxes                                                         7
Tenant Parties                                               24
Tenant Party                                                 24
Transfer                                                     17
UCC                                                          30
Vacation Date                                                17
                                                                                Square Feet             37,800
                                                                                Address:                Stonelake 6
                                                                                                        11000 North Mopac
                                                                                                        Expressway
                                                                                                        Suite 100
                                                                                                        Austin, TX 78749

                                                    LEASE AGREEMENT

This Lease Agreement (this ― Lease ‖) is entered into by PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation (―
Landlord ‖), and CROSSROADS SYSTEMS, INC., a Delaware corporation (― Tenant ‖). The terms referenced in the Basic Lease
Information above are hereby incorporated herein by this reference.

                                                BASIC LEASE INFORMATION

Effective Date:              October 31, 2005

Tenant:                      Crossroads Systems, Inc., a Delaware corporation

Tenant‘s Address:            Crossroads Systems, Inc.
                             11000 North Mopac Expressway, Suite 100
                             Austin, TX 78759

Tenant‘s Contact:            John King          email/Telephone: jking@crossroads.com /512-928-7100

Landlord:                     Principal Life Insurance Company, an Iowa corporation

Landlord‘s Address:          PRINCIPAL LIFE INSURANCE COMPANY
                             801 Grand Ave.
                             Des Moines, Iowa 50392-1370
                             Attn: Commercial Real Estate Equities, Central States Region

                             With a copy to:

                             Trammell Crow Company
                             P.O. Box 2176
                             Austin, Texas 78768-2176
                             Attn: Property Manager of 4030 West Braker Lane

Payments:                    All Rent payments shall be sent to:

                             Principal Life Insurance Co.
                             Property 009010
                             Lockbox 90030111
                             PO Box 301111
                             Los Angeles, CA 90030-1111

Building:                    The ―Building‖ shall mean the building and improvements located at 11000 North Mopac Expressway in
                             Austin, Travis County, Texas, comprising approximately 108,000 net rentable square feet as described in
                             Exhibit ―A‖ attached to this lease.

Premises:                    Approximately 37,800 net rentable square feet as outlined on the plan attached to this Lease as Exhibit ―A‖
                             and whose street address is 11000 North Mopac Expressway, Suite 100, Austin, TX 78749.


                                                                   1
Original Term:                  Sixty-six (66) full calendar months (and any partial month, if applicable), commencing on the
                                Commencement Date (as defined below) and ending on the Expiration Date (as defined below) subject to
                                adjustment and earlier termination as provided in the Lease.

Commencement Date:              The EARLIER of (i) March 1, 2006 (―Outside Date‖), (ii) the Date of Substantial Completion as set forth
                                in Exhibit B , or (iii) ninety (90) days following the date of the initial local approvals permitting initial
                                construction are issued. Following the date of the full execution of this Lease and prior to the
                                Commencement Date, provided that Tenant has supplied evidence of Tenant‘s insurance to Landlord,
                                Tenant may access the Premises for any reason. During any such early entry, all provisions of this Lease,
                                except the payment of rental, shall apply. During any such early entry, Tenant shall coordinate
                                construction efforts with Landlord so as not to interfere with any construction efforts of Landlord. Under
                                no circumstances shall the Outside Date be delayed due to a delay in Tenant‘s initial build out of the
                                Premises. Notwithstanding the foregoing, the Outside Date may be extended if a delay is the result of
                                Landlord‘s delays (e.g., Landlord‘s failure to timely approve drawings, failure to permit access or provide
                                necessary information) and Landlord has received notice of any potential delay from Tenant.

Expiration Date:                The last day of the sixty-sixth (66 th ) full calendar month following the Commencement Date.

Security Deposit:               Forty Three Thousand Ninety Two and 00/100ths Dollars ($43,092.00).

Base Rent:

                                                                                                  Base Rent
                                                                                                                          Monthly Base
                                Months                                                            PSF/Mo.                 Rent
                                Commencement Date – Month 6                                       $              0.00     $           0.00
                                Months 7 - 18                                                     $              0.70     $      26,460.00
                                Months 19 - 42                                                    $              0.80     $      30,240.00
                                Months 43 – 66                                                    $              0.90     $      34,020.00

                                For purposes of clarification, ―Month 6‖ means the end of the first six full calendar months of the Original
                                Term.
Amount Due on Lease Execution   Initial Monthly Base Rent                                                                    $         0.00
                                Initial Monthly Escrows (subject to adjustment)                                              $     9,072.00
                                Security Deposit                                                                             $ 43,092.00
                                Total Initial Monthly Payment                                                                $ 52,164.00


Permitted Use:                  Only for general office uses and, to the extent allowable under local zoning ordinances, light
                                manufacturing, assembly, integration, staging and testing of electronic parts in the course of Tenant‘s
                                business in keeping with the first-class office/industrial nature of the Building and for no other purpose
                                without Landlord‘s prior written consent. The Premises shall not be used for any use which is
                                disreputable. No retail sales may be made from the Premises.

Tenant‘s Proportionate Share:   The percentage obtained by dividing the net rentable square feet in the Premises by the rentable square feet
                                in the Building, or 35%.

Guarantor:                      None.


                                                                    2
1.                 PREMISES, TERM, INITIAL IMPROVEMENTS, ACCEPTANCE OF PREMISES.

 1.1                Premises . Landlord leases to Tenant, and Tenant leases from Landlord, the Premises as more fully depicted on the floor
plan attached as Exhibit A-1 , subject to the terms and conditions in this Lease (―Premises‖). The Premises are part of the Building located on
the real property described on Exhibit A (the ― Land ‖). All references to ―Building‖ shall individually and collectively refer to all buildings
and Parking Areas (herein defined) on the Land, now and during the lease Term (defined below), unless the context otherwise requires. ―
Common Areas ‖ will mean all areas, space, facilities, and equipment (whether or not located within the Building) made available by Landlord
for the common and joint use of Landlord, Tenant, and others designated by Landlord using or occupying space in the Building or on the Land
to the extent that the Common Areas are not expressly made a part of the Premises, and are made available for the use of all tenants in the
Building. Landlord hereby grants Tenant a non-exclusive right to use the Common Areas during the lease Term in common with others
designed by Landlord, subject to the terms and conditions of this Lease, including, without limitation, the restrictions on intended use and the
Rules and Regulations (defined below).

 1.2              Term . The lease Term shall begin on the Commencement Date, and end on the Expiration Date (― Original Term ‖). The
Original Term, together with any renewals and extensions, shall be referred to collectively as the ―Term.‖ Following the Commencement Date,
Landlord and Tenant shall execute an instrument specifying the Commencement Date and the Expiration Date of the Original Term.

 1.3               Initial Improvements . If an Exhibit B is attached to this Lease, Tenant shall construct in the Premises the improvements
(the ― Initial Improvements ‖ as defined in Exhibit B) described on the plans and specifications referenced on Exhibit B .

 1.4                Tenant‘s Acceptance of Premises . By occupying the Premises, Tenant accepts the Premises in its ―AS-IS, WHERE IS‖,
subject to any latent defects of which Tenant notifies Landlord within one year after the Commencement Date with all faults condition as of the
date of Tenant‘s occupancy; provided that Landlord represents and warrants that as of the Effective Date all existing mechanical, electrical, life
safety, plumbing and sprinkler systems (connected to the core) (―Building Systems‖) are in good working condition and repair, and in
compliance with local building code and other governmental agency requirements including ADA requirements (prior to Tenant‘s
construction), and except with respect to Landlord‘s obligation to perform or pay for any repair or other work as set forth in this Lease. As of
the date of Landlord‘s execution of this Lease, Landlord has not received written notice from any governmental entity that the Building or
Common Areas are not currently in compliance with any applicable laws.

          1.5        Option to Extend . See Section 2 of the Rider to Lease.

2.                 RENT AND SECURITY DEPOSIT .

 2.1               Rent; No Right of Offset . The Base Rent, the Additional Rent and all other payments and reimbursements required to be
made by Tenant under this Lease, including any sums due under the attached Exhibit B , shall constitute ― Rent .‖ Tenant shall make each
payment of the following items of Rent when due, without prior notice, demand, deduction or offset (except as expressly set forth herein)

 2.2               Base Rent . The first monthly installment of Base Rent, plus the other monthly charges set forth in Section 2.3, shall be due
on the date Tenant signs the Lease. Monthly installments of Base Rent shall then be due within five days after the first day of each calendar
month following the Commencement Date. If the Term begins on a day other than the first day of a month or ends on a day other than the last
day of a month, the Base Rent and Additional Rent for each partial month shall be prorated.

 2.3                Additional Rent . On the same day that Base Rent is due, Tenant shall pay as ― Additional Rent ‖ Tenant‘s Proportionate
Share of all costs incurred in operating and maintaining the Land, Building and Common Areas (collectively ― Operating Expenses ―). Tenant
also shall pay as ― Additional Rent ― Tenant‘s Proportionate Share of Taxes (defined in Section 3) and all late fees incurred by Tenant.


                                                                        3
 2.3.1              Operating Expenses .

 2.3.1.1                Operating Expenses Inclusions . Operating Expenses shall include all expenses and disbursements of every kind which
Landlord incurs, pays or becomes obligated to pay in connection with the ownership, operation and maintenance of the Building (including the
associated Parking Areas as herein defined) and Land (subject to the exclusions from Operating Expenses set forth in Section 2.3.1.2 below)
determined in accordance with GAAP fairly and consistently applied, including, but not limited to, the following: (1) Taxes (defined below)
and the cost of any tax consultant employed to assist Landlord in determining the fair tax valuation of the Building and Land; (2) the cost of all
utilities which are not billed separately to a tenant of the Building for above-building standard utility consumption; (3) the cost of insurance; (4)
the cost of repairs, replacement, property management fees and expenses, landscape maintenance and replacement, security service (if
provided), sewer service (if provided), trash service (if provided); (5) the cost of dues, assessments, and other charges applicable to the Land
payable to any property or community owner association under restrictive covenants or deed restrictions to which the Premises are subject; (6)
the cost of any labor-saving or energy-saving device or other equipment installed in the Building or on the Land (which device or equipment is
not primarily for the benefit of any particular tenant), amortized over a period together with an amount equal to interest at an amortization rate
on the unamortized balance (provided that the annual amortization does not exceed the actual annual cost savings realized), as determined
using GAAP consistently applied; (7) alterations, additions, and improvements made by Landlord to comply with Law (defined below), which,
if considered to be capital improvements using GAAP consistently applied, shall be amortized over a period together with an amount equal to
interest at an amortization rate on the unamortized balance, as determined using GAAP; and (8) wages and salaries of personnel up to and
including the level of Property Manager. Any Operating Expenses which are included in expenses for other areas of Landlord‘s business park
or properties shall be equitably prorated.

 For the purpose of determining Tenant‘s Proportionate Share of Operating Expenses, ―controllable‖ Operating Expenses shall not increase by
more than five percent (5%) per year on a cumulative and compounded basis (for example, if controllable Operating Expenses are $1.00 / rsf in
year one, then they shall not exceed $1.05 in year two, $1.10 in year three, $1.16 in year four and so on). It is understood and agreed that
controllable Operating Expenses shall not include trash removal, utility expenses, taxes, insurance premiums and any other cost beyond the
reasonable control of Landlord. Management fees shall not exceed five percent (5%) of gross revenue.

 2.3.1.2                Operating Expense Exclusions . Operating Expenses shall not include the following (1) any financing transactions,
refinancing fees and loan costs for interest, fees, amortization, or other payments (including late payment penalties) on loans to Landlord; (2)
expenses incurred in leasing or procuring tenants, including but not limited to commissions and brokerage fees (including rental fees); (3) any
in-house legal or accounting fees and any legal expenses other than those incurred for the general benefit of the Building‘s tenants; (4)
allowances, concessions, and other costs of renovating or otherwise improving space for occupants of the Building or vacant space in the
Building; (5) federal income taxes imposed on or measured by the income of Landlord from the operation of the Building; (6) rents due under
ground leases; (7) costs incurred in selling, syndicating, financing, mortgaging, or hypothecating any of Landlord‘s interests in the Building;
(8) expenses for repairs, restoration or other work occasioned by fire, wind, the elements or other casualty or any other costs to the extent
covered by insurance; (9) any depreciation allowance or expense; (10) any utilities or other expenses which are separately metered or
calculated and charged to Tenant or any other tenant in the Building; (11) costs incurred by Landlord for alterations which are considered new
capital improvements or capital replacements (such as a roof replacement) under Generally Accepted Accounting Principles consistently
applied, except for items in clauses (6) and (7) in Section 2.3.1.1 above (12) any costs, fines and penalties incurred due to violations by
Landlord of any governmental rule or authority in existence on the date of the execution hereof; (13) expenses for the replacement of any item
to the extent covered under warranty; (14) cost of repairs necessitated by the Landlord‘s negligence or willful misconduct, or of correcting any
latent defects or original design defects in the Building construction, materials or equipment, (15) wages and salaries of personnel above the
level of Property Manager, (16) costs incurred by Landlord due to the violation by Landlord or any other tenant of the terms and conditions of
any lease of space in the Building, (17) tax penalties incurred as a result of Landlord‘s negligence, inability or unwillingness to make payments
and/or to file any tax or informational returns when due, (18) any and all costs arising from the presence of hazardous materials or substances
(as defined by applicable laws in effect on the date this lease is executed) in or about the Premises, the Building or the Land, existing prior to
the Commencement Date or otherwise caused by the negligence or willful misconduct of Landlord, (19) costs arising from Landlord‘s
charitable or political contributions, (20) costs for the acquisition of sculpture, paintings or other objects of art, (21) any Operating Expenses
not billed to Tenant within two (2) years after the expiration of the Operating Year in which such Operating Expenses were incurred, (22)
charges for any services provided for the benefit of a tenant of the Building, (23) marketing and advertising expenses incurred with leasing of
the Building, (24) cost incurred in connection with upgrading the Building to comply with the current interpretation of disability, life, fire and
safety codes, ordinances, statutes or other laws in effect prior to the Commencement Date, including without limitation, the ADA, including
penalties or damages incurred due to such non-compliance; (24) off-site overhead, (25) all amounts paid to Affiliates of Landlord for services
on or to the Building which are materially in excess of competitive costs for such services; and (26) property management fees in excess of five
percent (5%) of gross revenues.


                                                                         4
 2.3.1.3               Operating Expense Calculation and Notices . The initial monthly payments for Operating Expenses shall be calculated
by taking 1/12 of Landlord‘s estimate of Tenant‘s Proportionate Share of Operating Expenses for a particular calendar year (or any portion of a
year as determined by Landlord). The initial monthly payments are estimates only, and shall be increased or decreased annually to reflect the
projected actual Operating Expenses for a particular year. If Landlord fails to give Tenant notice of its estimate of Tenant‘s Proportionate
Share of Operating Expenses in accordance with this subsection for any calendar year, then Tenant shall continue making Additional Rent
payments in accordance with the estimate for the previous calendar year until a new estimate is provided by Landlord. If during any year
Landlord determines in good faith that, because of an unexpected increase in Operating Expenses with evidence provided to Tenant, Landlord‘s
estimate of Operating Expenses was too low, then Landlord shall have the right, no more than once in a calendar year, to give a new statement
of the estimated Proportionate Share of Operating Expenses due from Tenant for the applicable calendar year or the balance of the estimated
amount and to bill Tenant for any deficiencies which have accrued during the calendar year or any portion of the year, and Tenant shall then
make monthly payments based on the new statement. Any estimate deficiencies shall be amortized over the remaining monthly payments for
such year. Within a reasonable time after the end of each calendar year and the Expiration Date, Landlord shall prepare and deliver to Tenant a
statement certified by an agent of Landlord to be correct to their knowledge (―Final Statement‖) showing Tenant‘s actual Proportionate Share
of Operating Expenses for the applicable calendar year, provided that with respect to the calendar year in which the Expiration Date occurs, (1)
that the calendar year shall be deemed to have commenced on January 1 of that year and ended on the Expiration Date (the ― Final Calendar
Year ―) and (2) Landlord shall have the right to estimate the actual Operating Expenses allocable to the Final Calendar Year. Unless Tenant
makes written exception to any item within three hundred sixty five (365) days after Landlord furnishes its annual statement of Tenant‘s
Additional Rent, the statement shall be considered as final and accepted by Tenant. If Tenant‘s total monthly payments of its Proportionate
Share for the applicable calendar year are more than Tenant‘s actual Proportionate Share of Operating Expenses, then Landlord shall retain the
excess and credit the amount in full against Tenant‘s future Additional Rent payments as such Additional Rent obligations are incurred. With
respect to the Final Calendar Year, Landlord shall pay to Tenant the amount of all excess payments, less any additional amounts then owed to
Landlord within thirty (30) days following the date on which Landlord furnishes a statement of Tenant‘s Additional Rent. If Tenant‘s total
monthly payments of its Proportionate Share of Operating Expenses for any year are less than Tenant‘s actual Proportionate Share of Operating
Expenses for that year, Tenant shall pay the difference to Landlord within thirty (30) days after Landlord‘s written request for payment
accompanied by the statement. There shall be no duplication of costs for reimbursements in calculating Operating Expenses. In the event
Landlord receives a refund or credit of Operating Expenses subsequent to the year in which such expense was paid and charged to Operating
Expenses, Landlord shall promptly pay to Tenant the amount of such refund or credit to the extent Tenant directly or indirectly was charged for
such Operating Expenses during a prior year. Tenant shall not be required to pay any Operating Expenses prior to the Commencement Date.


                                                                       5
 Tenant shall have the right to conduct a Tenant's Review, as hereinafter defined, at Tenant's sole cost and expense (including, without
limitation, photocopy and delivery charges), upon thirty (30) days' prior written notice to Landlord. ―Tenant's Review‖ shall mean a review of
Landlord's books and records relating to (and only relating to) the Operating Expenses payable by Tenant hereunder for the most recently
completed calendar year (as reflected on Landlord's Final Statement) by Tenant or third party auditor (―Third Party Auditor‖) provided that as
a condition precedent to any such inspection by a Third Party Auditor, Tenant shall deliver to Landlord a copy of Tenant‘s written agreement
with such Third Party Auditor, which agreement shall include provisions which state that (i) such Third Party Auditor will not in any manner
solicit or agre to represent any other tenant of the Building with respect to an audit or other review of Landlord‘s accounting records for the
Building, and (ii) such Third Party Auditor shall maintain in strict confidence any and all information obtained in connection with the Tenant
Review and shall not disclose such information to any person or entity other than to the management personnel of Tenant. Tenant must elect to
perform a Tenant's Review by written notice of such election received by Landlord within two hundred seventy (270) days following Tenant's
receipt of Landlord's Final Statement for the most recently completed calendar year. In the event that Tenant fails to make such election in the
required time and manner required or fails to diligently perform such Tenant's Review to completion, then Landlord's calculation of Operating
Expenses shall be final and binding on Tenant. Tenant hereby acknowledges and agrees that even if it has elected to conduct a Tenant's
Review, Tenant shall nonetheless pay all Tax Operating Expense and Expense Operating Expense payments to Landlord, subject to
readjustment. Tenant further acknowledges that Landlord's books and records relating to the Building may not be copied in any manner, are
confidential, and may only be reviewed at a location reasonably designated by Landlord; but Landlord will make such records available within
the metropolitan area in which the Premises is located. Tenant shall provide to Landlord a copy of Tenant's Review as soon as reasonably
possible after the date of such Review. If Tenant's Review reflects a reimbursement owing to Tenant by Landlord, and if Landlord disagrees
with Tenant's Review, then Tenant and Landlord shall jointly appoint an auditor to conduct a review (―Independent Review‖), which
Independent Review shall be deemed binding and conclusive on both Landlord and Tenant, provided that such Independent Review must
address all issues raised by the Tenant‘s Review. If the Independent Review results in a reimbursement owing to Tenant equal to five percent
(5%) or more of the amounts reflected in the Final Statement, the costs of the Tenant‘s Review and Independent Review shall be paid by
Landlord, but otherwise Tenant shall pay the costs of Tenant's Review and the Independent Review. Under no circumstances shall Tenant
conduct a review of Landlord's books and records whereby the auditor operates on a contingency fee or similar payment arrangement. Any
such reviewer must sign a commercially reasonable non-disclosure, non-solicitation, and confidentiality agreement. Landlord will promptly
pay to Tenant any overpayment disclosed by the Tenant‘s Review, or, if disputed, by the subsequent Independent Review.

 2.3.1.4               Grossed-Up Operating Expenses . If during any year the Building is less than one hundred percent (100%) occupied,
then, for purposes of calculating Tenant‘s Proportionate Share of Operating Expenses for that year, the amount of Operating expenses that
fluctuates with Building occupancy shall be ―grossed-up‖ to the amount which, in Landlord‘s reasonable estimation, it would have been had the
Building been one hundred percent (100%) occupied for that entire year. In the event that Landlord, in calculating the Operating Expenses of
the Building, ―grosses-up‖ the Operating Expenses that fluctuate with Building occupancy incurred during the year in question, then Landlord
agrees that the ―gross-up‖ of Expenses shall be limited to Operating Expenses that fluctuate with Building occupancy and the following items
of Operating Expenses shall not be adjusted in the ―gross-up‖ calculation: (1) Taxes, (2) amortized capital improvements costs, (3) insurance
premiums, (4) landscaping expenses, and (5) any other fixed-cost items that are not subject to fluctuation based on
occupancy. Notwithstanding the foregoing, Landlord shall not recover as Operating Expenses more than 100% of the Operating Expenses
actually paid by Landlord.

 2.3.2               Late Fee . If any Rent or other payment required of Tenant under this Lease is not paid within five (5) days of when due,
Landlord may charge Tenant, and Tenant shall pay upon demand, a fee equal to five percent of the delinquent payment to reimburse Landlord
for its cost and inconvenience incurred as a consequence of Tenant‘s delinquency; provided, however, Tenant shall be entitled to written notice
and a five (5) day cure period on one (1) occasion during any twelve (12) month period before such late fee is assessed. All such fees shall be
Additional Rent.

 2.4              Initial Monthly Rent . The amounts of the initial monthly Base Rent and Additional Rent for Tenant‘s Proportionate Share
of Operating Expenses and Taxes are set forth in the Summary of Lease Terms.


                                                                       6
 2.5                Security Deposit . Tenant shall deposit the Security Deposit with Landlord on the date this Lease is executed by Tenant,
which shall be held by Landlord to secure Tenant‘s obligations under this Lease. The Security Deposit is not an advance rental deposit or a
measure of Landlord‘s damages for an Event of Default (defined below). Landlord may use any portion of the Security Deposit to satisfy
Tenant‘s unperformed obligations under this Lease, to reimburse Landlord for performing any such obligations or to compensate Landlord for
its damages arising from Tenant's failure to perform its obligations, without prejudice to any of Landlord‘s other remedies. If so used, Tenant
shall, upon request, pay Landlord an amount that will restore the Security Deposit to its original amount. Landlord also may require Tenant to
provide Landlord with an additional amount to be held as part of the Security Deposit if Tenant exercises its expansion option hereunder. The
Security Deposit shall be Landlord‘s property. Tenant shall not be entitled to interest on any security deposit amount and Landlord may
commingle such Security Deposit with any other of its funds. Tenant agrees that it will not assign or encumber or attempt to assign or
encumber the monies deposited with Landlord as the Security Deposit and that Landlord and its successors and assigns shall not be bound by
any such actual or attempted assignment or encumbrance. The unused portion of the Security Deposit, along with a list of deductions, will be
returned to Tenant within forty-five (45) days after the Expiration Date, provided that Tenant has fully and timely performed its obligations
under this Lease or cured any deficiencies at that time.

3.                 TAXES

 3.1                Real Property Taxes . The term ― Taxes ― shall include all taxes, assessments and governmental charges that accrue against
the Premises, the Land, and the Building, whether federal, state, county, or municipal, and whether imposed by taxing or management districts
or authorities presently existing or hereafter created. Landlord shall pay the Taxes, and Tenant shall pay Landlord for Tenant's Proportionate
Share of the Taxes. If, during the Term, there is levied, assessed or imposed on Landlord a capital levy or other tax directly on the Rent; or a
franchise tax, assessment, levy or charge measured by or based, in whole or in part, upon the Rent; then all such taxes, assessments, levies or
charges, or any part so measured or based, shall be included within the term ―Taxes.‖ If the Building is occupied by more than one tenant and
the cost of any improvements constructed in the Premises for Tenant is disproportionately higher than the cost of improvements constructed in
the premises of other tenants of the Building, then Landlord may require that Tenant pay the amount of additional Taxes directly attributable to
such improvements (but only as evidenced by correspondence or other documentation with the taxing authority attributing additional Taxes to
Tenant‘s improvements, which evidence shall be provided to Tenant) in addition to its Proportionate Share of other Taxes. In determining
whether the cost of any improvements constructed in the Premises for Tenant is disproportionately higher than the cost of improvements
constructed in the premises of other tenants of the Building, factors shall consist of the following: (1) percentage of office finish of the
Premises, (2) levels of office finish, (3) parking, (4) and other differing and distinguishing factors between the improvements constructed in
the Tenant's Premises and the improvements constructed in the premises of other tenants.

 3.2                   Personal Property Taxes . Tenant shall before delinquency pay all taxes and assessments levied or assessed against any
personal property, trade fixtures or alterations placed in or about the Premises; and upon Landlord's request, deliver to it receipts from the
applicable taxing authority or other evidence acceptable to Landlord to verify that the taxes have been paid. If any such taxes are levied or
assessed against Landlord or its property, and (1) Landlord pays them or (2) the assessed value of Landlord‘s property is increased and
Landlord pays the increased taxes, then Tenant shall pay to Landlord the amount of all such taxes within ten (10) days after Landlord‘s request
for payment. All such amounts shall bear interest from the date paid by Landlord to the applicable taxing authority until reimbursed by Tenant
at the rate set forth in Section 24.13.

4.                  LANDLORD‘S MAINTENANCE AND REPAIR OBLIGATIONS . This Lease is intended to be a net lease; accordingly,
Landlord‘s maintenance obligations during the Term as may be extended shall consist of only the replacement and repair of the Building‘s roof,
maintenance and repair of the foundation, any common areas , including but not limited to the elevators, lobbies and restrooms, maintenance of
the Land (including but not limited to the maintenance and replacement of landscaping, Parking Areas, and sidewalks), portions of systems
servicing the Building to the extent not exclusively servicing the Premises, and maintenance of the structural members of the exterior walls
(collectively the ― Building‘s Structure and Common Areas ―) and shall operate the Building consistent with similar first class office/industrial
buildings within a ten (10) mile radius of the Building. Landlord shall be responsible for ensuring that the Building‘s Structure and Common
Areas comply with local building code and other governmental agency requirements including ADA requirements (unless caused to be out of
compliance by the initial or any subsequent Tenant alterations). Landlord shall not be responsible for: (1) any non-routine or latent
maintenance until Tenant delivers to Landlord written notice of the need for maintenance, (2) such alterations to the Building‘s Structure and
Common Areas required by Law because of Tenant‘s particular use of all or a portion of the Premises as opposed to use for normal and
customary business office or assembly operations (all alterations shall be performed by Tenant), or (3) repairs to skylights, windows, glass or
plate glass, doors, special storefronts or office entries, all of which shall be maintained by Tenant. Except for maintaining the Building's
Structure and Common Areas, Landlord shall not be required to maintain or repair at Landlord's expense any other portion of the
Premises. LANDLORD‘S LIABILITY FOR ANY DEFECTS, REPAIRS, REPLACEMENT OR MAINTENANCE FOR WHICH
LANDLORD IS RESPONSIBLE UNDER THIS LEASE SHALL BE LIMITED TO THE COST OF PERFORMING SUCH WORK. Tenant
shall give Landlord notice of any repairs as may be required hereunder and Landlord shall proceed to promptly make such repairs, subject to
weather conditions and other reasonable factors.


                                                                       7
Subject to the provisions contained herein relating to force majeure, condemnation, and casualty, and provided further that Tenant is not then if
default, Tenant shall have the following self help rights to perform Landlord‘s duties under the Lease:

 (a) Emergency . If there is an emergency that threatens person or property and requires immediate intervention to prevent further loss, then
Tenant may only take such measures as are reasonably necessary to prevent further loss and stabilize the emergency. Tenant shall use
commercially reasonable efforts to inform Landlord of such emergency as soon as possible. If so directed by Landlord during the emergency
situation, Tenant shall cease its self help activities, provided that Landlord promptly takes curative action to prevent further loss.

 (b) Non-Emergency . In the event that Landlord fails to make any repairs to the Building or Premises or otherwise fails to comply with any
other obligation under this Lease, and such failure materially and adversely affects Tenant‘s ability to do business from the Premises, Tenant
shall provide written notice to Landlord, specifying the failure and required action. Landlord shall cure such default within ten (10) business
days after receipt of such notice (provided that if such failure cannot be cured within ten (10) business days, then such longer period as may
reasonably be required provided that Landlord proceeds diligently to cure such failure). In the event that Landlord fails to make the applicable
repairs in the specified time period, then Tenant shall provide a second written notice to Landlord, which notice shall describe the work that
Tenant intends to undertake and the estimated cost of such work, to the extent practical. In the event that Landlord fails to commence
applicable repairs within five (5) business days following receipt of the second notice, Tenant may proceed to make the repairs that Landlord
failed to make. Notwithstanding the foregoing, Tenant shall not make any such repairs in the event that prior to any such repairs Landlord
gives to Tenant written notice of the legitimate business reasons (other than lack of funds) as to why Landlord is not willing to make such
repairs in the time requested by Tenant, provided that such failure does not materially and adversely affect Tenant‘s ability to do business from
the Premises or the first class office/industrial appearance of the Building and Common Areas. By way of example and not by limitation, it
may be more effective for Landlord to make certain non-emergency repairs during warmer months of the year.

 (c) Standard . All repairs by Tenant shall be made in a good and workmanlike manner, and otherwise in accordance with the terms and
conditions of this Lease (except for provisions requiring Landlord‘s consent).

 (d) Reimbursement . Landlord shall reimburse to Tenant the reasonable (taking into consideration the exigencies of the activity) cost of such
activities within thirty (30) days following the date of Landlord‘s receipt of fully paid invoices, lien waivers (if applicable) and such other
information and documentation as Landlord may reasonably require,at Landlord‘s expense. In the event Landlord fails to timely reimburse
Tenant for such properly documented cost, then Tenant may deduct such amounts from Rent next due.

 (e) Exclusive Remedy . Tenant‘s self help rights set forth this section are Tenant‘s sole and exclusive remedy and in lieu of any other rights
or remedies that may be available to Tenant under this Lease, at law or in equity.

5.                 TENANT’S MAINTENANCE AND REPAIR OBLIGATIONS

 5.1                 Tenant‘s Maintenance of the Premises . Tenant shall maintain all parts of the Premises except for maintenance work for
which Landlord is expressly responsible for under Section 4 in good condition and shall promptly make all necessary repairs and replacements
to the Premises, unless delayed by Landlord pursuant to Section 6. All repairs and replacements performed by or on behalf of Tenant shall be
performed in a good and workmanlike manner acceptable in all respects to Landlord, and in accordance with Landlord's standards applicable to
alterations or improvements performed by Tenant. Notwithstanding anything in this Lease to the contrary, Tenant shall not be required to
make any repair to, modification of, or addition to the Building Structure and Common Areas and/or the Building Systems except and to the
extent required because of Tenant‘s use of all or a portion of the Premises for other than normal and customary business office operations
and/or to the extent required because of Tenant‘s installation of improvements or alterations which do not constitute customary business office
improvements.


                                                                       8
 5.2                Tenant‘s Repair . Tenant shall repair and pay for any damage caused by a Tenant Party (defined below) or caused by any
failure by Tenant to perform obligations under this Lease, unless delayed by Landlord pursuant to Section 6. Tenant and any Tenant Party shall
use commercially reasonable efforts not do anything in performing any repairs that would inhibit or prevent other tenants' use and enjoyment of
the Common Areas.

 5.3                HVAC System . Landlord shall deliver the HVAC System, as hereinafter defined, as well as the Building Systems servicing
the Premises, to Tenant in good working order and repair, and Landlord shall pay for any costs over Five Hundred Dollars ($500.00) per
occurrence, of all parts and labor for repairs to the HVAC System and replacements thereof necessitated by ordinary wear and tear for a period
of twelve (12) months following the Commencement Date (provided that (i) Landlord pre-approves in writing any applicable repair or
replacement, which approval shall not be unreasonably withheld or delayed, and (ii) to the extent the repair or replacement was not necessitated
by Tenant‘s failure to maintain or negligence). After the initial twelve (12) month period, Tenant shall be responsible for the cost of any
repairs to the HVAC system and Tenant shall maintain, the heating, air conditioning, and ventilation equipment and system and the hot water
equipment (collectively the ― HVAC System ―) in good repair and condition and in accordance with Law and with the equipment
manufacturers‘ suggested operation/maintenance service program. Such obligation shall include the replacement of all equipment necessary to
maintain the HVAC System servicing the Premises in good working order. Within thirty (30) days after the Commencement Date, Tenant shall
deliver to Landlord copies of contracts entered into by Tenant for regularly scheduled preventive maintenance and service contracts for the
HVAC System, each contract in a form and substance and with a contractor reasonably acceptable to Landlord. At least fourteen (14) days
before the Expiration Date, the earlier termination of this Lease, or the termination of Tenant's right to possess the Premises, Tenant shall
deliver to Landlord a certificate from an engineer reasonably acceptable to Landlord certifying that the HVAC System is then in good repair
and working order. Landlord shall provide Tenant with reasonable access to the HVAC System 24X7X365 so that Tenant may control and use
the HVAC as desired at all times. The HVAC System shall be dedicated to Tenant and not shared with any other tenant in the Building.

 Notwithstanding the foregoing to the contrary, provided Tenant enters into a regularly scheduled preventative maintenance and service
contract for the HVAC System with a reputable HVAC contractor pursuant to the provisions of this Section 5.3, if at any time during the Term
the HVAC unit serving the Premises requires replacement or a repair in excess of $3,000 for the repair project (as recommended by the
contractor approved by Landlord and Tenant) and such need for replacement or applicable repair is due to ordinary wear and tear (and not to
the extent due to any misuse or abuse of the unit by Tenant or failure of Tenant to properly maintain the unit), then the cost of such replacement
or applicable repair shall be amortized over the useful life of the unit in accordance with GAAP and Tenant shall only be required to pay that
portion of the cost applicable to the Term (as may be extended). Landlord must pre-approve, in writing, any such replacement, repair or
improvement, which such approval shall not be unreasonably withheld or delayed. Except as set forth above, Tenant shall be liable for any
additional or other repairs or replacements of the HVAC System during the Term.

 5.4                Landlord‘s Optional Performance of Tenant‘s Obligations . Landlord has the right, but not the obligation, to perform or
provide any maintenance, repairs or replacements to be performed by Tenant under Section 5 and to provide any utility service that Tenant is
required to provide under Section 8 below, upon ten (10) days prior written notice to Tenant. If Tenant fails to perform or provide any
maintenance, repairs or replacements to be performed by Tenant under Section 5 or to provide any utility service which Tenant is required to
provide under Section 8 below and such failure is not attributable to Landlord under Section 6, and should Landlord elect to do so after the
notice period set forth in the preceding sentence, then Tenant shall reimburse Landlord for all out of pocket expenses and costs incurred by
Landlord in performing Tenant's obligations plus an additional five percent of such amount to compensate Landlord for the overhead and
administrative costs relating to the performance of all such obligations. All such amounts owing pursuant to this Section 5 shall be deemed
Rent under this Lease, which Tenant shall pay Landlord within ten (10) days after Landlord's request for payment.


                                                                        9
6.                  ALTERATIONS BY TENANT .

 6.1                 No Tenant Alterations . Tenant shall not make any changes, modifications, alterations, additions or improvements to the
Premises, or install any heat or cold generating equipment, or other equipment, machinery or devices in the Premises or any other part of the
Building without the prior written consent of Landlord. Notwithstanding the foregoing, Tenant may install heat generating equipment,
environmental chambers, machinery and related devices as part of its assembly, integration, testing, staging and light manufacturing of
electronics, as well as one or more microwaves, a refrigerator, gas grill (on the exterior deck/patio to be approved as part of the Space Plans)
and related items in the Premises, provided that Tenant removes the same upon the expiration or sooner termination of this Lease and repairs
any damage caused by installation, use or removal. In addition to foregoing, provided that (i) Tenant is not then in default beyond any
applicable notice and grace period, (ii) Tenant‘s provides prior written notice to Landlord of the proposed work, (iii) Tenant complies with all
laws, insurance requirements and lien covenants, (iv) the proposed work does not adversely affect the Building‘s structure or the electrical,
mechanical, plumbing, or life/safety systems of the Building, and (v) no building permit (or similar permit) is required, and (vi) the aggregate
(per project) cost of such work does not exceed $25,000.00, then Landlord‘s consent shall not be required.

 6.2                 Requirements for Landlord‘s Written Consent . If Landlord‘s consent is required hereunder, Landlord shall not be required
to notify Tenant of whether it consents to any Tenant alterations until it has received plans and specifications (if required) which are reasonably
detailed to allow construction of the work depicted in them to be performed in a good and workmanlike manner, and Landlord has had a
reasonable opportunity to review them, which shall not exceed ten (10) days. If Landlord disapproves any alterations, Landlord shall provide
Landlord‘s reasons for disapproval. Without in any way limiting Landlord's rights to refuse its consent to Tenant's proposed alterations, if
Landlord consents in writing to Tenant's proposed alterations, then Landlord's consent shall be conditioned without limitation on all of the
following: (1) Landlord's reasonable approval of the contractor making the alterations and approving each contractor's insurance coverage
provided in connection with the alterations, (2) Landlord's supervision of the installation, (3) Landlord's reasonable approval of final plans and
specifications for the alterations, (4) the appropriate governmental agency, if any, having final and complete plans and specifications for such
work, and (5) whether any alterations to the Premises, or installations of any equipment would do any of the following: (i) adversely affect
structural or load bearing portions of the Premises or the Building, (ii) result in a material increase of electrical usage above the normal type of
amount of electrical current to be provided by Landlord, (iii) result in a material increase of Tenant's use of heating or air conditioning, (iv)
impact mechanical, electrical or plumbing systems in the Premises or the Building, (v) affect the exterior appearance of the Building, or (vi),
violate any provision in Sections 13 or 26 of this Lease or Exhibit B, attached hereto. If the alterations will affect the Building‘s Structure and
Common Areas, HVAC System, or mechanical, electrical, or plumbing systems, then the plans and specifications must be prepared by a
licensed engineer. Landlord‘s approval of any plans and specifications shall not be a representation that the plans or the work depicted in them
will comply with any applicable Law (defined below) or be adequate for any purpose, but shall merely be Landlord‘s consent to Tenant's
installation of the alterations. Landlord shall have the right, but not the obligation, to periodically inspect the work in the Premises and may
require changes in the method or quality of the work if Tenant has not complied with the provisions hereof. If Landlord's consent is granted,
any such Alterations shall be made at Tenant's sole cost and expense.

 6.3                 Tenant‘s Obligations . Upon completion of any Alteration, Tenant shall deliver to Landlord accurate, reproducible
―as-built‖ plans. If Tenant has not delivered to Landlord the as-built drawings within thirty (30) days of completion of the alterations, Landlord
may contract for production of as-built drawings at Tenant's sole cost and expense by providing Tenant five (5) days written notice of
Landlord‘s intent to contract for such drawings. Tenant shall reimburse Landlord for such costs within ten (10) days of Landlord's request for
payment. All work performed by Tenant in the Premises, including work relating to the alterations or their repair, shall be performed in a good
and workmanlike manner in accordance with Law (defined below) and with Landlord's and Landlord's insurance carriers' specifications and
requirements as provided to Tenant.


                                                                        10
                   6.4                 Ownership of Alterations . Upon the Expiration Date or earlier termination of this Lease, Tenant shall
return the Premises to Landlord clean and in good order and condition, except for: (1) ordinary wear and tear, (2) damage that Landlord has the
obligation to repair under the terms of this Lease, (3) all changes, modifications, alterations, additions or improvements that Tenant does not
have the obligation to remove under the terms of this Section 6.4, and (4) damage by casualty. Except as provided below, all changes,
modifications, alterations, additions or improvements and property at the Premises (including wall to wall carpeting, paneling or other wall
covering and any other surface material attached to or affixed to the floor, wall or ceiling of the Premises) will remain in and be surrendered
with the Premises upon the Expiration Date or earlier termination of this Lease, and Tenant waives all rights to any payment, reimbursement or
compensation for the property that must remain at the Premises in accordance with this subsection. Tenant must, however, remove from the
Premises prior to the Expiration Date or earlier termination of this Lease any changes, modifications, alterations, additions or improvements
that Landlord has designated for removal at the time of Landlord's written approval of such changes, modifications, alterations, additions or
improvements. Subject to the foregoing, Landlord shall notify Tenant of any items that will need to be removed prior to or immediately
following the Joint Inspection set forth in Section 17.1 below. Notwithstanding the foregoing, Landlord shall only be able to require removal
of Tenant alterations which would materially add to Landlord‘s demolition costs of usual office tenant improvements. Tenant shall not be
required to remove from the Premises any of the changes, modifications, alterations, additions or improvements that are contemplated in
Exhibit ―B‖ or those that do not require Landlord's approval. Tenant must promptly repair any damage to the Premises caused by its removal
of personal property, changes, modifications, alterations, additions or improvements.

 6.5               Trade Fixtures . Tenant may erect shelves, bins, partitions, movable fixtures, machinery, communications equipment,
manufacturing devices, environmental chambers, and other trade fixtures provided that such items (1) do not alter the basic character of the
Premises or the Building; (2) do not overload or damage the same; and (3) may be removed without damage to the Premises. Such items shall
remain the property of Tenant. Unless Landlord specifies in writing otherwise, all alterations, additions, and improvements shall be Landlord‘s
property when installed and remaining in the Premises on the Expiration Date.

 6.6                Construction Management Fee . In connection with any such Alteration requiring Landlord approval above, Tenant shall
pay to Landlord a ― Construction Management Fee ― of five percent of all costs incurred for such work.

 6.7                Existing Furniture . Landlord shall convey via a quit claim bill of sale any rights that Landlord has in any furniture within
the Premises as of the Commencement Date. Landlord shall use commercially reasonable efforts to obtain the furniture from the existing
tenant within the Premises.

7.                 SIGNS

 7.1                Premises‘ Exterior . Tenant shall not without Landlord's prior written consent (1) make any changes to the exterior of the
Premises or the Building, (2) install any exterior lights, decorations, balloons, flags, pennants, banners or paintings, (3) erect or install any
signs, windows, blinds, draperies, window treatments, bars, security installations, or door lettering, decals, window or glass-front stickers,
placards, decorations or advertising media of any type that is visible from the exterior of the Premises. As to (3) only, such consent shall not be
unreasonably withheld, delayed or conditioned. Subject to Tenant complying with all applicable Laws, Landlord hereby consents to the
exterior door and exterior deck area to be built as described in the Space Plan referenced in the Work Letter attached hereto.

 7.2                Requirements for Landlord‘s Written Consent . Landlord shall not be required to notify Tenant in writing of whether it
consents to any sign until Landlord (1) has received detailed, to-scale drawings specifying the design, material composition, color scheme, and
method of installation, and (2) has had a reasonable opportunity to review them. Notwithstanding the foregoing, Landlord shall not
unreasonably withhold its consent.

 7.3                 Sign Requirements . Landlord‘s signs and lettering requirements are reflected in Exhibit E , if applicable. Tenant shall
erect any signs in accordance with the plans and specifications, in a good and workmanlike manner, in accordance with all Laws and
architectural guidelines in effect for the area in which the Building is located and will obtain all requisite governmental approvals (the ―Sign
Requirements― ), and in a manner so as not to unreasonably interfere with the use of the Building grounds while such construction is taking
place; thereafter, Tenant shall maintain the sign in a good, clean, and safe condition in accordance with the Sign Requirements.


                                                                        11
 7.4                  Sign Removal . After the Expiration Date or earlier termination of this Lease or after Tenant's right to possess the Premises
has been terminated pursuant to Section 20, Landlord may require that Tenant remove the sign by delivering to Tenant written notice within
thirty (30) days after the termination of the Lease. If Landlord so requests, Tenant shall within ten (10) days after Tenant's receipt of the notice
remove the sign, repair all damage caused by the sign and its installation and removal, and restore the Building to its condition before the
installation of the sign including, but not limited to, making the following restoration and repair work: hole punching, electrical work, and
repair of Building exterior discoloration or fading made noticeable by removal of the signage. If Tenant fails timely to remove the sign and
perform the repair work, Landlord may, without compensation to Tenant, (1) use the sign, or (2) at Tenant's expense, remove the sign, perform
the related restoration and repair work, and dispose of the sign in any manner Landlord deems appropriate.

8.                  SERVICES AND UTILITIES . Landlord shall provide roving attendant service for the entire business park of which the
Building is a part, such attendant shall be on duty generally during evening and early morning hours. Landlord shall provide a controlled
access system for the Building which enables 24X7X365 access to the Premises by Tenant, subject to reasonable rules and regulations for after
hours entry. Tenant shall obtain and pay for all water, gas, electricity, heat, telephone, sewer, sprinkler charges and other utilities and services
used at the Premises, together with any taxes, penalties, surcharges, maintenance charges, and similar charges pertaining to Tenant‘s use of the
Premises. Tenant shall heat the Premises as necessary to prevent any freeze damage to the Premises or any portion. Tenant's use of electric
current shall at no time exceed the capacity of the feeders or lines to the Building or the risers or wiring installation of the Building or the
Premises. Landlord may, at Tenant‘s expense, separately meter and bill Tenant directly for its use of any such utility service, in which case the
amount separately billed to Tenant for Building standard utility service shall not be duplicated in Tenant‘s obligation to pay Additional Rent
under Section 2.3. Landlord shall not be liable for any interruption or failure of utility service to the Premises, and Tenant shall not be entitled
to any abatement or reduction of Rent by reason of any interruption or failure of utilities or other services to the Premises except as set forth
below. Any interruption or failure in any utility or service shall not be construed as an eviction, constructive or actual of Tenant or as a breach
of the implied warranty of suitability, and shall not relieve Tenant from the obligation to perform any covenant or agreement under this
Lease. In no event shall Landlord be liable for damage to persons or property, including, without limitation, business interruption, damages, or
shall Landlord be in default under this Lease, as a result of any such interruption or failure. All amounts due from Tenant under this Section 8
shall be payable within ten (10) days after Landlord‘s request for payment. Notwithstanding the foregoing, in the event such interruption of
services described in this Section 8 (and results from causes within Landlord‘s reasonable control, and is not due to Tenant‘s negligence, the act
of a third party not acting on behalf of Landlord, or force majuere) and continues for more than five (5) consecutive days following written
notice to Landlord, and results in the denial or otherwise renders impractical the intended use of substantially all of the Premises (such as loss
of electricity or high speed data access) then Tenant shall receive a Base Rent abatement for each day thereafter until the service is restored,
unless and to the extent Tenant is able to collect insurance proceeds for such interruption. In the event of damage from casualty, Section 11
below shall apply.

9.                  INSURANCE . Tenant shall, during the Lease Term, procure at its expense and keep in force the following insurance:

 9.1                 Commercial General Liability Insurance . Commercial general liability insurance naming the Landlord, Landlord's
Mortgagee (defined below), and Property Manager as additional insureds and loss payees against any and all claims for bodily and property
damage occurring in or about the Premises arising from or in connection with Tenant‘s use or occupancy of the Premises. The insurance policy
or policies shall have a combined single limit of not less than One Million Dollars ($1,000,000) per occurrence with a Two Million Dollar
($2,000,000) aggregate limit and excess umbrella liability insurance in the amount of Two Million Dollars ($2,000,000). If Tenant has other
locations that it owns or leases, the policy shall include an aggregate limit per location endorsement. The liability insurance shall be primary
and not ―contributing to‖ any insurance available to Landlord, and Landlord‘s insurance shall be in excess of all of Tenant's insurance. In no
event shall the limits of Tenant's insurance limit its liability under this Lease. Tenant shall also keep in force business interruption and/or
business income insurance covering, among other things, the payment of Tenant‘s continuing rental expenses for a period of up to twelve (12)
months that may occur as a result of loss or damage to the Building caused by an insured peril; this policy or policies must name Tenant as
insured and must also name Landlord, Property Manager and Landlord's Mortgagees (defined below) as additional insureds (endorsement form
CG 2026 1185, or its equivalent) and loss payees, and must contain a mortgagee clause in favor of Landlord's designated mortgagees. Tenant
shall also keep in force all other insurance that Landlord deems necessary and prudent or that is required by Landlord‘s beneficiaries or
mortgagees of any deed of trust or mortgage encumbering the Premises, the Building, or the Land, provided that in no event shall Tenant be
required to keep in force any other insurance which similarly situated tenants are not generally required to keep in force.


                                                                        12
 9.2                 Property Insurance . Property insurance insuring: 1) all fixtures, alterations, additions, partitions, improvements and
equipment installed in the Premises, 2) trade fixtures, 3) inventory, and 4) personal property located on or in the Premises for perils covered by
the causes of loss - special form (all risk), including coverage for flood, earthquake and damages from any boiler and machinery, if
applicable. The insurance shall be written on a replacement cost basis in an amount equal to one hundred percent of the full replacement value
of the aggregate of the foregoing.

 9.3               Workers‘ Compensation Insurance . Workers‘ compensation insurance in accordance with the Laws of the State of Texas
and employer‘s liability insurance in an amount not less than Five Hundred Thousand Dollars ($500,000.00). The worker‘s compensation
insurance must include an all-states endorsement.

 9.4                 Standard of Tenant‘s Insurance . Each policy required to be maintained by Tenant shall be with companies rated A-VIII or
better in the most current issue of Best‘s Insurance Reports and will contain endorsements that (1) such insurance may not lapse with respect to
Landlord or its Property Manager or be canceled or amended with respect to Landlord or its Property Manager without the insurance company's
giving Landlord and its Property Manager at least thirty (30) days prior written notice of every cancellation or amendment, (2) Tenant shall be
solely responsible for payment of premiums, (3) in the event of payment of any loss covered by any policy, Landlord or Landlord's designees
shall be paid first by the insurance company for Landlord's loss and Tenant's insurance shall be primary in the event of overlapping coverage
with insurance which may be carried by Landlord. Insurers shall be licensed to do business in the state in which the Premises are located and
domiciled in the United States. Any deductible amounts under any required insurance policies shall not exceed $10,000. Tenant shall deliver
to Landlord duplicate originals of certificates of insurance, and certified copies of the policies when requested by Landlord. Tenant shall have
the right to provide insurance in a ―blanket‖ policy, if the required blanket policy expressly provides coverage to the Premises and to Landlord
as required by this Lease.

 9.5                 Landlord‘s Rights . In the event Tenant does not purchase the insurance required by this Lease or keep any required
insurance in full force and effect, Landlord may, but shall not be obligated to, purchase the necessary insurance and pay the premium. Tenant
shall repay to Landlord, as Additional Rent, the amount so paid promptly upon demand. In addition, Landlord may recover from Tenant and
Tenant agrees to pay, as Additional Rent, any and all expenses, including attorneys‘ fees, litigation expenses, and damages which Landlord
may sustain by reason of the failure of Tenant to obtain and maintain any insurance.

 9.6               Nature of Tenant‘s Obligation . Tenant‘s insurance obligations under this Section 9 are freestanding obligations which are
not dependent on any other conditions or obligations under this Lease.

10.                SUBROGATION OF RIGHTS OF RECOVERY . LANDLORD AND TENANT MUTUALLY WAIVE THEIR
RESPECTIVE RIGHTS OF RECOVERY AGAINST EACH OTHER FOR ANY LOSS OF, OR DAMAGE TO, EITHER PARTY’S
PROPERTY, TO THE EXTENT THAT THE LOSS OR DAMAGE IS INSURED UNDER AN INSURANCE POLICY REQUIRED
UNDER THIS LEASE TO BE IN EFFECT AT THE TIME OF THE LOSS OR DAMAGE. Each party shall obtain any special
endorsements, if required by its insurer, under which the insurer shall waive its rights of subrogation against the other party. The provisions of
this Section 10 shall not apply in those instances in which waiver of subrogation would cause either party‘s insurance coverage to be voided or
otherwise made uncollectible. Notwithstanding the foregoing, a party‘s waiver of liability under this Section 10 shall not apply to its right to
seek compensation from the other Party for any deductible amounts under its insurance.


                                                                       13
11.                CASUALTY DAMAGE .

 11.1               Excessive Damage and Destruction . Tenant immediately shall give written notice to Landlord of any material damage to
the Premises, the Building, or the Land of which Tenant is aware. If the Premises, the Building, or the Land are totally destroyed by an insured
peril, or so damaged by an insured peril that, in Landlord‘s reasonable estimation, rebuilding or repairs cannot be substantially completed with
reasonable diligence (exclusive of leasehold improvements Tenant makes) within one hundred eighty (180) days after the date of Landlord‘s
actual knowledge of the damage, then Landlord may terminate this Lease by delivering to Tenant written notice of termination within thirty
(30) days after the damage. If the Premises, the Building, or the Land are totally destroyed by an insured peril, or so damaged by an insured
peril that, in Landlord's reasonable estimation, rebuilding or repairs cannot be substantially completed (exclusive of leasehold improvements
Tenant makes) within one hundred eighty (180) days after the date of Landlord's actual knowledge of the damage, and a Tenant Party did not
cause such damage through Tenant‘s negligence or willful misconduct, then Tenant may terminate this Lease by delivering to Landlord written
notice of termination within thirty (30) days following the date of such damage or destruction. In either event, the Rent shall be abated during
the unexpired portion of this Lease, effective upon the date the damage occurred. Time is of the essence with respect to the delivery of all
notices of damage and termination. Notwithstanding the foregoing, Tenant may not terminate the Lease if a Tenant Party caused the damage
through Tenant‘s gross negligence or willful misconduct. Notwithstanding the foregoing, the Rent shall not be abated if a Tenant Party caused
the damage through Tenant‘s negligence or willful misconduct or if Tenant fails to keep in force the insurance described in Section 9.4 above,
except to the extent that Landlord actually receives proceeds from rental interruption insurance applicable to this Lease.

 11.2                Restoration of Premises . Subject to Section 11.3, if this Lease is not terminated under Section 11.1, (or if the Building or
the Premises are damaged but not totally destroyed by any insured peril, and in Landlord's reasonable estimation, rebuilding or repairs can be
substantially completed within one hundred eighty (180) days after the date of Landlord's actual knowledge of such damage, this Lease shall
not terminate), then Landlord shall diligently repair and restore the Premises to substantially its previous condition within such one hundred
and eighty (180) period, except that Landlord shall not be required to rebuild, repair or replace any part of the Premises alterations, other
improvements, or personal property required to be covered by Tenant‘s insurance under Section 9. If the damages occurs during the last year
of the Lease, and the damage causes major and substantial interference with the operation of Tenant‘s business for more than sixty (60) days,
Tenant, may in its sole discretion, terminate this Lease in written notice to Landlord. If the Premises are untenantable (i.e., business is
impractical to be conducted on the Premises), in whole or in part, during the period beginning on the date the damage occurred and ending on
the date of substantial completion of Landlord‘s repair or restoration work in any event not to exceed one hundred and eighty (180) days
following the date the damage occurred (the ― Repair Period ―), then the Rent for that period shall be reduced to such extent as may be fair and
reasonable under the circumstances and the Term shall be extended by the number of days in the Repair Period. Notwithstanding the foregoing,
the Rent shall not be abated if a Tenant Party caused the damage through Tenant‘s negligence or willful misconduct, or if Tenant fails to keep
in force the insurance described in Section 9.1 above, except to the extent that Landlord actually receives proceeds from rental interruption
insurance applicable to this Lease.

 11.3               Insurance . If the Premises are destroyed or substantially damaged by any peril not covered by the insurance maintained by
Landlord (and Landlord has maintained the property insurance required to be maintained hereunder), or any Landlord‘s Mortgagee (defined
below) requires that insurance proceeds be applied to the indebtedness secured by its Mortgage (defined below) or to the Primary Lease
(defined below) obligations, or the insurance proceeds available to Landlord to restore the building are insufficient in Landlord's reasonable
opinion, then Landlord may terminate this Lease by delivering written notice of termination to Tenant within thirty (30) days of the later of the
date upon which any destruction or damage incurred, or the date upon which Landlord learns there are not enough insurance proceeds, or
Landlord learns of any such requirement by any Landlord‘s Mortgagee, as applicable. In the event Landlord terminates the Lease, all rights
and obligations hereunder shall cease and terminate, except for any liabilities which accrued before the Lease terminates.


                                                                       14
12.          LIABILITY, INDEMNIFICATION, AND NEGLIGENCE .

 12.1          TENANT’S INDEMNITY OF LANDLORD. SUBJECT TO SECTION 12.2 AND 12.3, TENANT SHALL
DEFEND, AND HOLD HARMLESS THE INDEMNIFIED PARTIES (AS DEFINED IN SECTION 24.1) FROM AND AGAINST
ALL FINES, SUITS, LOSSES, COSTS, LIABILITIES, CLAIMS, DEMANDS, ACTIONS AND JUDGMENTS OF EVERY KIND OR
CHARACTER, TO THE EXTENT SUCH CLAIMS, (1) ARISE FROM TENANT’S FAILURE TO PERFORM ITS COVENANTS
UNDER THIS LEASE, (2) ARE ASSERTED AGAINST ANY OF THE INDEMNIFIED PARTIES ON ACCOUNT OF ANY LOSS
(DEFINED BELOW IN SECTION 12.2) TO THE EXTENT THAT ANY SUCH LOSS MAY BE INCIDENT TO, ARISE OUT OF,
OR BE CAUSED, EITHER PROXIMATELY OR REMOTELY, WHOLLY OR IN PART, BY A TENANT PARTY (DEFINED
BELOW IN SECTION 24.1) OR ANY OTHER PERSON ENTERING UPON THE PREMISES UNDER OR WITH A TENANT
PARTY’S EXPRESS OR IMPLIED INVITATION OR PERMISSION, (3) ARISE FROM OR OUT OF THE OCCUPANCY OR USE
OF THE PREMISES BY A TENANT PARTY OR (4) ARISE FROM OR OUT OF ANY OCCURRENCE IN THE PREMISES,
HOWEVER CAUSED, OR SUFFERED BY, RECOVERED FROM OR ASSERTED AGAINST ANY INDEMNIFIED PARTIES BY
A TENANT PARTY , PROVIDED THAT LANDLORD: (A) PROMPTLY NOTIFIES TENANT IN WRITING OF ANY CLAIM;
AND (B) PROVIDES TENANT WITH ALL ASSISTANCE, INFORMATION REQUIRED AND SOLE AUTHORITY FOR THE
DEFENSE AND SETTLEMENT OF THE CLAIM. INDEMNIFICATION OF THE INDEMNIFIED PARTIES BY TENANT
SHALL NOT APPLY TO THE EXTENT SUCH LOSS, DAMAGE, OR INJURY IS CAUSED BY THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF ANY OF THE INDEMNIFIED PARTIES OR THE BREACH OF THIS LEASE BY LANDLORD .

 12.2          LIABILITY . NEITHER PARTY SHALL BE LIABLE TO THE THE OTHER PARTY FOR ANY INJURY TO
OR DEATH OF ANY PERSON OR PERSONS OR THE DAMAGE TO OR THEFT, DESTRUCTION, LOSS, OR LOSS OF USE OF
ANY PROPERTY OR INCONVENIENCE (COLLECTIVELY AND INDIVIDUALLY A ― LOSS ―) CAUSED BY CASUALTY,
THEFT, FIRE, THIRD PARTIES, REPAIR, OR FAILURE TO REPAIR, OR ALTERATION OF ANY PART OF THIS BUILDING,
OR ANY OTHER CAUSE, UNLESS DUE TO THE NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH PARTY, IN WHOLE
OR IN PART.

 12.3         LANDLORD’S INDEMNIFICATION . SUBJECT TO RELEASES BY TENANT, WAIVER OF SUBROGATION
AND LIMITATIONS ON LANDLORD’S LIABILITY, LANDLORD AGREES TO INDEMNIFY, DEFEND AND HOLD TENANT
AND ITS OFFICERS, DIRECTORS, PARTNERS AND EMPLOYEES HARMLESS FROM AND AGAINST ALL LIABILITIES,
LOSSES, DEMANDS, ACTIONS, EXPENSES OR CLAIMS, INCLUDING REASONABLE ATTORNEYS' FEES AND COURT
COSTS BUT EXCLUDING CONSEQUENTIAL DAMAGES, FOR INJURY TO OR DEATH OF ANY PERSON OR FOR DAMAGE
TO ANY PROPERTY TO THE EXTENT SUCH ARE DETERMINED TO BE CAUSED BY EITHER (I) THE NEGLIGENCE OR
WILLFUL MISCONDUCT OF LANDLORD, ITS AGENTS, EMPLOYEES, OR CONTRACTORS IN OR ABOUT THE PREMISES
OR BUILDING, OR (II) THE BREACH BY LANDLORD OF THIS LEASE.

12.4          Survival . The provisions of this Section 12 shall survive the expiration or earlier termination of this Lease.


                                                                  15
13.                USE; COMPLIANCE WITH LAWS; PARKING .

                    13.1               Permitted Use . The Premises shall, subject to the remaining provisions of this Section, be used only for
the Permitted Use and for no other purpose without Landlord‘s prior written consent, which consent shall not be unreasonably withheld,
delayed or conditioned. No retail sales may be made from the Premises. The Premises shall not be used for any use which is disreputable, and
no part of the Premises shall be used as an escort service, a massage parlor or spa, blood bank, abortion clinic, or for the sale, distribution or
display (electronically or otherwise) of materials or merchandise of a pornographic nature or merchandise generally sold in an adult book or
adult videotape store (which are defined as stores in which any portion of the inventory is not available for sale or rental to children under 18
years old because such inventory explicitly details with or depicts human sexuality). Tenant shall not sell, display, transmit or distribute
(electronically or otherwise) materials or merchandise of a pornographic nature or merchandise generally sold in an adult book or adult video
tape store (as defined above). Tenant shall not use the Premises as living or sleeping quarters or a residence. Tenant shall not use the Premises
to receive, store or handle any product, material or merchandise that is explosive or highly inflammable or hazardous or would violate any
provision in Section 26. Outside storage, including without limitation, storage in non-operative or stationary trucks, trailers and other vehicles,
and vehicle maintenance or repair is prohibited without Landlord's prior written consent. Tenant shall keep the Premises neat and clean at all
times. Tenant shall not permit any objectionable or unpleasant odors, smoke, dust, gas, light, noise or vibrations to emanate from the Premises;
nor commit, suffer or permit any waste in or upon the Premises; nor at any time sell, purchase or give away or permit the sale, purchase or gift
of food in any form by or to any of Tenant's agents or employees or other parties in the Premises except through vending machines in
employees' lunch or rest areas within the Premises for use by Tenant's employees only; nor take any other action that would constitute a public
or private nuisance or would disturb the quiet enjoyment of any other tenant of the Building, or unreasonably interfere with, or endanger
Landlord or any other person; nor permit the Premises to be used for any purpose or in any manner that would (1) void the insurance thereon,
(2) increase the insurance risk, (3) violate any Law (defined below) including, but not limited to, any zoning ordinance, or (4) be dangerous to
life, limb or property. Tenant shall pay to Landlord on demand any increase in the cost of any insurance on the Premises or the Building
incurred by Landlord, which is caused by Tenant‘s particular use of the Premises (as opposed to general office or light manufacturing use) or
because Tenant vacates the Premises, and acceptance of such payment shall not constitute a waiver of any of Landlord's other rights or
remedies nor a waiver of Tenant's duty to comply herewith.

 13.2               Compliance with Laws . Tenant shall be solely responsible for satisfying itself and Landlord that the Permitted Use will
comply with all applicable Laws. Tenant shall, at its sole cost and expense, be responsible for complying with all Laws (defined below) and
Rules and Regulations (defined below) applicable to the use, occupancy, and condition of the Premises. Tenant shall promptly correct any
violation of a Law, or Rules or Regulations with respect to the Premises. Tenant shall comply with any direction of any governmental
authority having jurisdiction which imposes any duty upon Tenant or Landlord with respect to the Premises, or with respect to the occupancy
or use thereof. Landlord shall be responsible for the Common Areas, Building (including rest rooms) and Land in complying with Laws.

 13.3                Compliance with Rules and Regulations . Tenant will comply with such rules and regulations (the ― Rules and
Regulations ― ) generally applying to tenants in the Building (and non-discriminatory to Tenant) as may be adopted from time to time by
Landlord for the management, cleanliness of, and the preservation of good order and protection of the Premises, the Building and the Land. A
current copy of the Rules and Regulations applicable to the Building is attached hereto as Exhibit D . All such Rules and Regulations are
hereby made a part hereof. All changes and amendments to the Rules and Regulations sent by Landlord to Tenant in writing and conforming to
the foregoing standards shall be carried out and observed by Tenant. Landlord hereby reserves all rights necessary to implement and enforce
the Rules and Regulations and each and every provision of this Lease. Landlord agrees that it shall not enforce the Rules and Regulations more
stringently against Tenant than against any other tenant of the Building. Additionally, no changes to the Rules and Regulations shall increase
Tenant‘s monetary obligations or materially adversely affect Tenant‘s rights under this Lease nor shall Tenant be required to comply with any
Rules and Regulations which prevent Tenant‘s permitted uses of the Premises. In the event of a conflict between the Rules and Regulations
and the terms and conditions of this Lease, the terms and conditions of this Lease shall control.

 13.4                Parking . Tenant and its employees, agents and invitees shall have the non-exclusive right to use, in common with others,
Tenant‘s Proportionate Share of any parking areas associated with the Building which Landlord has designated for such use (the ― Parking
Areas ―), subject to (1) such Rules and Regulations (as defined herein) as Landlord may promulgate from time to time (subject to Section 13.3)
and (2) rights of ingress and egress of other tenants and their employees, agents and invitees. Landlord does not reserve or allocate parking
spaces at the Premises nor guarantee its availability on a daily basis. However, in no instances shall Tenant allow its employees, agents and
invitees to occupy more spaces in the Parking Areas that exceed the ratio of 4.26 parking spaces per 1,000 net rentable square feet of the
Premises. Tenant shall take reasonable measures to ensure that its employees, agents and invitees do not occupy more than the above
referenced quantity of parking. Tenant shall only permit parking by its employees, agents or invitees of appropriate vehicles in appropriate
designated Parking Areas. Landlord shall not be responsible for enforcing Tenant‘s parking rights against any third parties. Landlord shall use
commercially reasonable efforts to enforce abuse of parking rights by other tenants. Tenant shall have six (6) designated parking spaces in
front of the Premises, the exact area of which shall be mutually agreed upon, as Tenant visitor parking (provided, however, Landlord shall not
be responsible for preventing non-visitors from using such designated spaces).


                                                                        16
14.                  INSPECTION; ACCESS AND RIGHT OF ENTRY; NEW CONSTRUCTION . Without being deemed or construed
as committing an actual or constructive eviction of Tenant and without abatement of Rent, Landlord and Landlord‘s agents and representatives
may enter the Premises with reasonable notice during business hours to inspect the Premises; to make such repairs as may be required or
permitted under this Lease; to perform any unperformed obligations of Tenant hereunder; and to show the Premises to prospective purchasers,
mortgagees, ground lessors, and during the last (6) months of the Term tenants, provided that Landlord shall use reasonable efforts to avoid
interfering with or disrupting Tenant‘s business. Subject to the foregoing, Tenant hereby waives any claim for damages for any injury or
inconvenience or interference with Tenant's business, any loss of occupancy or quiet enjoyment of the Premises, and any other loss occasioned
thereby. Landlord shall have the right to use any and all means which Landlord may deem proper to enter the Premises in an emergency
without liability therefor. During the last six (6) months of the Term, Landlord may erect a sign on the Building indicating that the Premises
are available for lease, provided that such sign is not erected in the Premises or the exterior south-facing portion of the Building containing the
Premises if Tenant is physically in the space. Tenant shall notify Landlord in writing of its intention to vacate the Premises at least thirty (30)
days before Tenant will vacate (if the vacation date is not the Expiration Date) the Premises (in order to accommodate the Joint Inspection as
set forth in Section 17.1 below); such notice shall specify the date on which Tenant intends to vacate the Premises (the ― Vacation Date
―). Furthermore, Landlord hereby reserves the right and at all times shall have the right to repair, change, redecorate, alter, improve, modify,
renovate, enclose or make additions to any part of the Building, Building's Structure, Common Areas or the Land, to enclose and/or change the
arrangement and/or location of driveways or Parking Areas or landscaping or other Common Areas; and to construct new improvements on
adjacent parcels of land, all, Tenant agrees, without having committed an actual or constructive eviction of Tenant or breach of the implied
warranty of suitability and without an abatement of Rent (the ― Reserved Right ‖). When exercising the Reserved Right, Landlord will use
reasonable efforts not to unreasonably interfere with Tenant's use and occupancy of the Premises.

15.                 ASSIGNMENT AND SUBLETTING .

 15.1.                 Transfers . Tenant shall not, without the prior written consent of Landlord, which consent shall not be unreasonably
withheld, delayed or conditioned, (1) advertise that any portion of the Premises is available for lease or cause or allow any such advertisement,
(2) assign, transfer, or encumber this Lease or any estate or interest herein, whether directly or by operation of law, (3) permit any other entity
to become Tenant hereunder by merger, consolidation, or other reorganization, (4) if Tenant is an entity other than a corporation whose stock is
publicly traded, permit the transfer of an ownership interest in Tenant so as to result in a change in the current control of Tenant, (5) sublet any
portion of the Premises, (6) grant any license, concession, or other right of occupancy of any portion of the Premises, or (7) permit the use of
the Premises by any parties other than Tenant (any of the events listed in Sections 15.1 (1) through (7) being a ― Transfer ―). If Tenant
requires Landlord‘s consent to a Transfer, then Tenant shall provide Landlord with a written description of all terms and conditions of the
proposed Transfer, copies of the proposed documentation, and the following information about the proposed transferee: name and address;
reasonably satisfactory information about its business and business history; its proposed use of the Premises; financial, and other credit
information; and general references sufficient to enable Landlord to determine the proposed transferee‘s creditworthiness and
character. Notwithstanding the foregoing, provided that Tenant gives prior written notice to Landlord and Tenant is not then in default, then
Tenant shall have the right at any time to sublease, assign or otherwise permit occupancy of all or any portion of the Premises, without
Landlord‘s approval or consent, to (i) any Affiliate of Tenant, or to any successor entity arising out of a change in control, whether by merger
or acquisition of substantially all Tenant‘s assets or, provided that such transferee or surviving corporation has a net worth at least as favorable
as Tenant immediately prior to the transfer, and (ii) an entity which consists of people which previously worked at the Premises and are now
spinning off from Tenant (each a ―Permitted Transfer‖). Tenant may retain one hundred percent (100%) of any revenues derived from any
sublease or assignment arising from a Permitted Transfer.


                                                                        17
 15.2                Landlord‘s Written Consent Requirements . In determining whether Landlord shall consent to any proposed assignment or
subletting of the Premises, Landlord will consider the following factors: provided that the proposed transferee (1) has creditworthiness
reasonably acceptable to Landlord, (2) has a good reputation in the business community, (3) does not engage in business that does not violate
any exclusive use clause of any other tenants in the Building, (4) is not negotiating the lease of competing space in the Building or other
buildings in the Austin, Texas metropolitan area owned by Landlord or its affiliates, (5) will use the Premises consistent with the permitted use
allowed under the Lease which shall not be environmentally harmful as agreed to in Section 26 of this Lease. In addition, the Transfer shall not
constitute a violation of the Employee Retirement Income Security Act of 1974, as amended (ERISA). In the event the proposed transferee
does not meet all the above factors, then Landlord may withhold its consent in its sole discretion. Tenant shall pay to Landlord a transfer
request fee of $1,000 which Tenant will submit to Landlord along with its written request for review of the proposed assignment or subletting
(except for Permitted Transfers), regardless of whether Landlord subsequently grants its approval of the proposed assignment or subletting.

 15.3                Obligations of Tenant and Proposed Transferee . If Landlord consents to a proposed Transfer, then the proposed transferee
shall deliver to Landlord a written agreement, in a form satisfactory to Landlord, whereby the proposed transferee expressly assumes the
Tenant‘s obligations hereunder (however, in the event of transfer of less than all of the space in the Premises the proposed transferee shall be
liable only for obligations under this Lease that are properly allocable to the space subject to the Transfer, and only to the extent of the rent it
has agreed to pay Tenant). . Landlord‘s consent to a Transfer shall not release any Guarantor of Tenant's obligations hereunder nor release
Tenant from performing its obligations under this Lease, but rather Tenant and its transferee shall be jointly and severally liable, except to the
extent any subsequent modifications to the Lease by Landlord and the transferee increase Tenant‘s obligations under the Lease. No such
Transfer shall constitute a novation. Landlord‘s consent to any Transfer shall not waive Landlord‘s rights as to any subsequent Transfers. If a
default occurs while the Premises or any part thereof are subject to a Transfer, then Landlord, in addition to its other remedies, may collect
directly from such transferee all rents becoming due to Tenant and apply such rents against Tenant‘s Rent obligations. Tenant authorizes its
transferees to make payments of Rent directly to Landlord upon receipt of notice from Landlord to do so. If Landlord should fail to notify
Tenant in writing of its decision within the thirty (30) day period after Landlord's receipt of Tenant's written request for Landlord's consent to a
Transfer, then Landlord shall be deemed to have refused to consent to the proposed Transfer and to have elected to keep this Lease in full force
and effect; provided, that Tenant may thereafter give a second written notice to Landlord requesting said transfer and if Landlord fails to
respond thereto within five (5) business days, Landlord shall be deemed to have consented to such transfer.

 15.4                 Landlord‘s Recapture Right . This Section 15.4 shall not apply to Permitted Transfers, to a sublease of less than the entire
Premises, or to a sublease for less then substantially all of the remainder of the Term. Within ten (10) business days after Landlord's receipt of
Tenant's submission of Tenant‘s written request for Landlord‘s consent to a Transfer, Landlord shall have the option (without limiting
Landlord's other rights under this Lease) of terminating this Lease (or, as to a subletting or assignment, terminate this Lease as to the portion of
the Premises proposed to be sublet or assigned) as of the date the proposed Transfer was to be effective. Tenant may retract its Transfer request
prior to the effective date of termination, in which event Landlord‘s recapture shall not be effective. If Landlord terminates this Lease as to all
the Premises, then this Lease shall cease and Tenant shall pay to Landlord all Rent accrued through the cancellation date.

 15.5                 Excess Rent . Notwithstanding anything to the contrary contained in Section 15 of this Lease, Tenant hereby assigns,
transfers and conveys fifty percent (50%) of any Profits (as hereinafter defined) derived from the sublease, and Tenant shall hold such amounts
in trust for Landlord and pay them to Landlord within ten (10) days after receipt. ―Profits‖ shall mean the gross revenue derived from the
assignee or sublessee during the sublease term or during the assignment, with respect to the space covered by the sublease or the assignment
(―Transferred Space‖), less: (a) the gross revenue paid to Landlord by Tenant during the period of the sublease or during the assignment with
respect to the Transferred Space; (b) the gross revenue as to the Transferred Space paid to Landlord by Tenant for all days the Transferred
Space was vacated from the date that Tenant first vacated the Transferred Space until the date the assignee or sublessee was to pay Rent; (c)
any improvement allowance or other economic concession (planning allowance, moving expenses, etc.), paid by Tenant to sublessee or
assignee; (d) brokers‘ commissions; (e) attorneys‘ fees; (f) lease takeover payments; (g) costs of advertising the space for sublease or
assignment; (h) unamortized cost of initial and subsequent improvements to the Premises by Tenant; and (i) any other costs actually paid in
assigning or subletting the Transferred Space or in negotiating or effectuating the assignment or sublease; provided, however, under no
circumstance shall Landlord be paid any Profits until Tenant has recovered all the items set forth in subparts (a) through (i) for such
Transferred Space, it being understood that if in any year the gross revenues, less the deductions set forth in subparts(a) through (i) above (the
―Net Revenues), are less than any and all costs actually paid in assigning or subletting the affected space (collectively ―Transaction Costs‖), the
amount of excess Transaction Costs shall be carried over to the next year and then deducted from Net Revenues with the procedure repeated
until a Profit is achieved.


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16.                  CONDEMNATION . If more than fifty percent of the Premises is taken for any public or quasi-public use by right of
eminent domain or private purchase in lieu thereof (a ― Taking ―), or the Taking prevents or materially interferes with the use of the remainder
of the Premises for the purpose for which they were leased to Tenant, either party may terminate this Lease by delivering to the other written
notice thereof within thirty (30) days after the Taking, in which case Rent shall be abated during the unexpired portion of the Term, effective on
the date of such Taking. If (1) less than fifty percent of the Premises are subject to a Taking and Tenant continues to have reasonable means of
access to the Premises and the Parking Areas and Common Areas are sufficient to support Tenant‘s use and enjoyment of the Premises as
originally contemplated hereunder; or (2) more than fifty percent of the Premises are subject to a Taking, but the Taking does not prevent or
materially interfere with the use of the remainder of the Premises for the purpose for which they were leased to Tenant (and Tenant continues to
have reasonable access to the Premises and the Parking Areas and Common Areas are sufficient to support Tenant‘s use and enjoyment of the
Premises as originally contemplated hereunder), then neither party may terminate this Lease, but the Rent payable during the unexpired portion
of the Term shall be reduced to such extent as may be fair and reasonable under the circumstances. All compensation awarded for any Taking
shall be the property of Landlord, and Tenant hereby assigns any interest it may have in any such award to Landlord; however, Landlord shall
have no interest in any separate award made to Tenant (which does not reduce Landlord's award) for loss of Tenant's business or goodwill, for
the taking of Tenant‘s trade fixtures, Tenant‘s improvements (not provided by an allowance) or on account of Tenant's moving and relocation
expenses and depreciation to and removal of Tenant's physical personal property, if a separate award for such items is made to Tenant.

17.                SURRENDER AND REDELIVERY OF PREMISES; HOLDING OVER .

 17.1               Surrender and Redelivery of Premises . No act by Landlord shall be an acceptance of a surrender of the Premises, and no
agreement to accept a surrender of the Premises shall be valid, unless it is in writing and signed by Landlord. Such signature shall not be
unreasonably withheld, conditioned or delayed. Tenant's delivery of the keys or access cards to Property Manager or any agent or employee of
Landlord shall not operate as a termination of this Lease or a surrender of the Premises.

 17.1.1                Joint Inspection . At least thirty (30) days before the Vacation Date, Tenant shall arrange to meet with Landlord for a
joint inspection of the Premises. After such inspection, Landlord shall prepare a list of items that Tenant must perform before the Vacation
Date solely to deliver the Premises in the condition required in Section 17.1.3 below. If Tenant fails to arrange for such inspection, then
Landlord may conduct such inspection and Landlord's determination of the work Tenant is required to perform before the Vacation Date shall
be conclusive. If Tenant fails to perform such work before the Vacation Date, then Landlord may perform such work at Tenant's cost. Tenant
shall pay all cost incurred by Landlord in performing such work within ten (10) days after Landlord's request thereof.

 17.1.2              Tenant‘s Payment Obligations . Tenant shall also, prior to vacating the Premises, pay to Landlord the amount, as
estimated by Landlord, of Tenant's obligation hereunder for Operating Expenses for the remainder of the Term. All such amounts shall be used
and held by Landlord for payment of such obligations of Tenant hereunder, with Tenant being liable for any additional costs therefor upon
demand by Landlord or with any excess to be returned to Tenant after all such obligations have been determined and satisfied as the case may
be. Any Security Deposit held by Landlord may be credited against the amount due by Tenant under this Section 17.


                                                                       19
 17.1.3                 Condition of Premises . After the Expiration Date or earlier termination of this Lease, or the termination of Tenant‘s right
to possess the Premises, Tenant shall (1) deliver to Landlord the Premises in a safe, ―broom clean,‖ neat, sanitary, and operational condition
with all improvements and alterations as set forth in Section 6.4 located thereon in good repair and condition (subject to Landlord‘s repair and
maintenance obligations), reasonable wear and tear and casualty loss excepted (subject, however, to Tenant‘s maintenance obligations), and
with the HVAC System, lights and light fixtures (including ballasts), and overhead doors and related equipment in good working order, (2)
deliver to Landlord all keys and parking and access cards to the Premises, and (3) remove all signage placed on the Premises, the Building, or
the Land by or at Tenant‘s request. All fixtures, alterations, additions, and improvements (whether temporary or permanent) shall be
Landlord‘s property and shall remain on the Premises, except as provided in the next two sentences. Provided that Tenant has performed all of
its obligations hereunder, Tenant may remove all unattached trade fixtures, furniture, and personal property placed in the Premises by Tenant
(but Tenant shall not remove any such item which was paid for, in whole or in part, by Landlord). Additionally, Tenant shall remove such
alterations, additions, improvements, fixtures, equipment, wiring, furniture, trade fixtures and other property as may be required under Section
6.4 above. All items not so removed shall, at the sole option of Landlord, be deemed abandoned by Tenant and may be appropriated, sold,
stored, destroyed, or otherwise disposed of by Landlord without notice to Tenant and without any obligation to account for such items, and
Tenant shall pay for the costs incurred by Landlord in connection therewith. All work required of Tenant under this Section 17 shall be
coordinated with Landlord and be done in a good and workmanlike manner, in accordance with all Laws (defined below), and so as not to
damage the Building or unreasonably interfere with other tenants‘ use of their premises. Tenant shall, at its expense, repair all damage caused
by any work performed by Tenant under this Section 17.. If Tenant fails to perform work under this Section 17, and Landlord has provided
written notice thereof and reasonable opportunity to cure, then Tenant shall pay all costs incurred by Landlord in performing such work within
ten (10) days after Landlord's request thereof.

 17.2               Holding Over . If a Tenant Party fails to vacate the Premises after the Expiration Date or earlier termination of this Lease,
then a Tenant Party's possession of the Premises shall constitute and be construed as a tenancy at will only, subject, however, to all of the
terms, provisions, covenants and agreements on the part of Tenant under this Lease, and such Tenant Party shall be subject to immediate
eviction and removal following thirty (30) days‘ prior written notice; Tenant or any such Tenant Party covenants and agrees to pay Landlord, in
addition to the other Rent due hereunder, if any, as Rent for the period of such holdover a prorated daily Base Rent equal to the sum of one
hundred fifty percent of the daily Base Rent plus one hundred percent of the Additional Rent, both payable during the last month of the
Term. Tenant's unauthorzied possession of the Premises after the Expiration Date or earlier termination of this Lease shall constitute an Event
of Default under Section 19.5 herein, except that the notice and cure period shall be thirty (30) days. The Rent during such holdover period
shall be payable to Landlord from time to time on demand; provided, however, if no demand is made during a particular month, holdover rent
accruing during such month shall be paid in accordance with the provisions of this Section 17. Tenant will vacate the Premises and deliver
same to Landlord immediately upon Tenant's receipt of notice from Landlord to so vacate. No holding over by a Tenant Party (whether with or
without the consent of Landlord), and no payments of money by Tenant to Landlord after the end of the Term, shall operate to reinstate,
continue or extend the Term, and no extension of this Term shall be valid unless evidenced by a writing signed by both Landlord and
Tenant. No payments of money by Tenant (other than the holdover rent accruing during such holdover period paid in accordance with the
provisions of this Section 17) to Landlord after the Expiration Date or earlier termination of this Lease shall constitute full payment of Rent
under the terms of this Lease. Tenant shall be liable for all damages resulting from a Tenant Party's unauthorized holding over beyond the
above-referenced thirty (30) day notice and cure period.

18.                 QUIET ENJOYMENT . Landlord covenants that it has the right to make this Lease for the Term and that if there is no
Event of Default hereunder, Tenant shall peaceably and quietly hold and enjoy the Premises for the Term, without hindrance from Landlord or
any party claiming by, through or under Landlord, but not otherwise, subject, however, to all of the provisions of this Lease and all Laws
(defined below), liens, encumbrances and restrictive covenants to which the Land is subject. Landlord shall not be responsible for the acts or
omissions of any other tenant or third party that may interfere with Tenant‘s use and enjoyment of the Premises, provided that Landlord use
commercially reasonable efforts to enforce any rights it may have against such tenant or third party to halt such interference.

19.                 EVENTS OF DEFAULT . The occurrence of any of the following events shall constitute an ― Event of Default ― under
this Lease:

 19.1               Monetary Default; Failure to Pay Rent . Tenant fails to pay Rent when due or any payment or reimbursement required
under this Lease or under any other lease with Landlord when due, and in either case such failure continues for a period of five (5) days from
the date such payment was due; provided, however, Tenant shall be entitled to written notice and a five (5) day cure period on two (2)
occasions during any twelve (12) month period, not to exceed a total of five (5) such notices and cure periods, before Tenant shall be deemed to
be in default.


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 19.2                 Bankruptcy; Insolvency . The filing of a petition by or against Tenant or any Guarantor of Tenant‘s obligations hereunder
(1) in any bankruptcy or other insolvency proceeding; (2) seeking any relief under any debtor relief Law; (3) for the appointment of a
liquidator, receiver, trustee, custodian, or similar official for all or substantially all of Tenant‘s property or for Tenant‘s interest in this Lease; or
(4) for reorganization or modification of Tenant‘s capital structure (however, if any such petition is filed against Tenant, then the filing of such
petition shall not constitute an Event of Default, unless it is not dismissed within 45 days after the filing thereof).

 19.3                Vacation; Failure to Continuously Operate . Tenant (1) vacates all or a substantial portion of the Premises or (2) fails to
continuously operate its business at the Premises for the permitted use set forth herein. However, Tenant shall be allowed to cease operations
in the Building without causing a default, provided that Tenant: (1) delivers to Landlord a written notice of a forwarding address where
Landlord can provide required notice under this Lease, (2) maintains its regularly scheduled HVAC maintenance program as required in
Section 5.3 herein, (3) and preventative maintenance agreements with vendors reasonably approved by the Landlord to maintain the interior of
the Premises, including the mechanical, electrical, and plumbing systems in a clean and adequate condition, (4) promptly upon demand
reimburses Landlord for any increases in Landlord‘s insurance attributable to Tenant‘s vacation of the Premises, and (5) Tenant is not in default
of any of the terms, covenants and conditions, hereof, including the timely payment of all Rent to Landlord when due or any payment or
reimbursement required under this Lease.

 19.4                Liens; Encumbrances . Tenant fails to discharge any lien placed upon the Premises in violation of Section 23 within ten
(10) days after any such lien or encumbrance is filed against the Premises.

 19.5                Non-Monetary Default; Failure to Perform . Tenant fails to comply with any term, provision or covenant of this Lease
(other than those listed in this Section 19), and such failure continues for thirty (30) days after Tenant‘s receipt of notice of such breach by
Landlord, or if incapable of being cured within such period, Tenant fails to diligently proceed to cure such breach (provided that in no event
shall such cure period be longer than ninety days from receipt of notice) unless otherwise specified in this Lease, after written notice thereof to
Tenant.

20.                 REMEDIES .

 20.1              Upon any Event of Default, Landlord may, in addition to all other rights and remedies afforded Landlord hereunder or by
Law, take any of the following actions:

 20.1.1                Terminate the Lease . Terminate this Lease by giving Tenant written notice thereof, in which event, Tenant shall pay to
Landlord the sum of (1) all Rent accrued hereunder through the date of termination, (2) all amounts due under Section 20.2, and (3) an amount
equal to (i) the total Rent that Tenant would have been required to pay for the remainder of the Term discounted to present value at a per
annum rate equal to the ―Prime Rate‖ as published on the date this Lease is terminated by The Wall Street Journal, Southwest Edition, in its
listing of ―Money Rates‖, minus (ii) the then present fair rental value of the Premises for such period, similarly discounted; or

                                      20.1.2                Terminate Tenant‘s Right of Possession . Terminate Tenant‘s right to possess the
Premises without terminating this Lease by giving written notice thereof to Tenant, in which event Tenant shall pay to Landlord (1) all Rent
and other amounts accrued hereunder to the date of termination of possession, (2) all amounts due from time to time under Section 20.2, and
(3) all Rent and other sums required hereunder to be paid by Tenant during the remainder of the Term, diminished by any net sums thereafter
received by Landlord through reletting the Premises during such period. Landlord shall use commercially reasonable efforts (consistent with
applicable law) to mitigate its damages after an Event of Default by Tenant; provided, however, Landlord does not guaranty that any such
mitigation efforts shall be successful. Further, Landlord shall not be obligated to relet the Premises before leasing other portions of the
Building, and Tenant‘s obligations hereunder shall not be diminished because of Landlord‘s failure to relet the Premises or to collect Rent due
for a reletting. Tenant shall not be entitled to the excess of any consideration obtained by reletting over the Rent due hereunder. Reentry by
Landlord in the Premises shall not affect Tenant‘s obligations hereunder for the unexpired Term; rather, Landlord may, from time to time, bring
action against Tenant to collect amounts due by Tenant, without the necessity of Landlord‘s waiting until the expiration of the Term. Actions to
collect amounts due by Tenant to Landlord under this subsection may be brought from time to time on one or more occasions, without the
necessity of Landlord waiting until the Expiration Date of this Lease. Unless Landlord delivers written notice to Tenant expressly stating that it
has elected to terminate this Lease, all actions taken by Landlord to exclude or dispossess Tenant of the Premises shall be deemed to be taken
under this subsection. If Landlord elects to proceed under this Section 20.1.2, it may at any time elect to terminate this Lease under
Section 20.1.1; or


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 20.1.3               Lock Out . Additionally, without notice, Landlord may alter locks or other security devices at the Premises to deprive
Tenant of access thereto, and Landlord shall not be required to provide a new key or right of access to Tenant. This Lease supercedes Section
93.002 of the Texas Property Code to the extent of any conflict.

 20.2                 Landlord‘s Other Rights and Remedies . Upon any Event of Default, Tenant shall pay to Landlord all costs incurred by
Landlord (including court costs and attorneys‘ fees and expenses) in (1) obtaining possession of the Premises, (2) removing and storing
Tenant‘s or any other occupant‘s property, (3) repairing, restoring, altering, remodeling, or otherwise putting the Premises into condition
acceptable to a new tenant, (4) reletting all or any part of the Premises (including brokerage commissions, cost of tenant finish work similar to
Tenant‘s improvements, and other costs incidental to such reletting), (5) performing Tenant‘s obligations which Tenant failed to perform other
than the payment of Rent, and (6) enforcing, or advising Landlord of, its rights, remedies, and recourses. Landlord‘s acceptance of Rent
following an Event of Default shall not waive Landlord‘s rights regarding such Event of Default. Landlord‘s receipt of Rent with knowledge
of any default by Tenant hereunder shall not be a waiver of such default, and no waiver by Landlord of any provision of this Lease shall be
deemed to have been made unless set forth in writing and signed by Landlord. No waiver by Landlord of any violation or breach of any of the
terms contained herein shall waive Landlord‘s rights regarding any future violation of such term or violation of any other term. If Landlord
repossesses the Premises pursuant to the authority herein granted, then Landlord shall have the right to (i) keep in place and use or (ii) remove
and store, at Tenant‘s expense, all of the furniture, trade fixtures, equipment and other personal property in the Premises, including that which
is owned by or leased to Tenant at all times before any foreclosure thereon by Landlord or repossession thereof by any lessor thereof or third
party having a lien thereon. Landlord may relinquish possession of all or any portion of such furniture, trade fixtures, equipment and other
property to any person (a ― Claimant ―) who presents to Landlord a copy of any instrument represented by Claimant to have been executed by
Tenant (or any predecessor of Tenant) granting Claimant the right under various circumstances to take possession of such furniture, trade
fixtures, equipment or other property, without the necessity on the part of Landlord to inquire into the authenticity or legality of the
instrument. Landlord may, at its option and without prejudice to or waiver of any rights it may have, (a) escort Tenant to the Premises to
retrieve any personal belongings of Tenant and/or its employees not covered by the Landlord‘s statutory lien or the security interest described
in Section 27 or (b) obtain a list from Tenant of the personal property of Tenant and/or its employees that is not covered by the Landlord‘s
statutory lien or the security interest described in Section 27, and make such property available to Tenant and/or Tenant‘s employees; however,
Tenant first shall pay in cash all costs and estimated expenses to be incurred in connection with the removal of such property and making it
available. The rights of Landlord herein stated in this Section 20 are cumulative and in addition to any and all other rights that Landlord has or
may hereafter have at law or in equity, and Tenant hereby agrees that the rights herein granted Landlord are commercially reasonable.

                    20.3              Landlord‘s Recapture Right . After Tenant‘s vacation of all or a substantial part of the Premises and a
resulting Event of Default under Section 19.3, Landlord shall have the option (without limiting Landlord's other rights under this Lease) of
terminating this Lease upon written notice to the Tenant. If Landlord terminates this Lease as to all or any portion of the Premises, then this
Lease shall cease for such portion of the Premises and Tenant shall pay to Landlord all Rent accrued through the cancellation date relating to
the portion of the Premises covered by the Landlord‘s termination. Thereafter, Landlord‘s termination will be without liability to Tenant.

21.                LANDLORD’S DEFAULT AND LIMITATIONS OF LIABILITY .

 21.1.              DEFAULTS BY LANDLORD . If Landlord fails to perform any of its obligations hereunder within thirty (30) days (or
such longer period as may reasonably be required, so long as Landlord diligently proceeds to cure such failure) after written notice from Tenant
specifying such failure, Tenant‘s exclusive and sole remedy shall be an action for damages. Tenant is granted no contractual right of
termination by the Lease, except to the extent and only to the extent set forth in Section 11.1 and 16 or as otherwise expressly set forth
hereunder.


                                                                       22
 21.2               LIMITATIONS ON LANDLORD’S LIABILITY .

THE LIABILITY OF LANDLORD TO A TENANT PARTY FOR ANY DEFAULT BY LANDLORD, SHALL BE LIMITED TO
ACTUAL AND DIRECT DAMAGES. IN NO EVENT SHALL LANDLORD BE LIABLE TO A TENANT PARTY FOR
CONSEQUENTIAL OR SPECIAL DAMAGES BY REASON OF A FAILURE TO PERFORM (OR A DEFAULT) BY LANDLORD
HEREUNDER OR OTHERWISE. EXCEPT FOR CLAIMS WHICH MAY BE COVERED BY INSURANCE, IF A TENANT
PARTY SHALL RECOVER A MONEY JUDGMENT AGAINST LANDLORD, THE TENANT PARTY AGREES THAT SUCH
MONEY JUDGMENT SHALL BE SATISFIED SOLELY BY LANDLORD'S INTEREST IN THE PREMISES AND BUILDING, AS
THE SAME MAY THEN BE ENCUMBERED, AND/OR INSURANCE PROCEEDS, AND LANDLORD, ITS AFFILIATES,
PARTNERS, OFFICERS, DIRECTORS, SHAREHOLDERS, AND EMPLOYEES SHALL NOT BE LIABLE OTHERWISE FOR
ANY OTHER CLAIM ARISING OUT OF OR RELATING TO THIS LEASE.

LANDLORD SHALL NOT BE LIABLE TO A TENANT PARTY FOR ANY CLAIMS, ACTIONS, DEMANDS, COSTS, EXPENSES,
DAMAGE, OR LIABILITY OF ANY KIND ARISING FROM THE USE, OCCUPANCY OR ENJOYMENT OF THE PREMISES
BY A TENANT PARTY AS A RESULT OF ANY LOSS OF OR DAMAGE TO PROPERTY OF TENANT OR OF OTHERS
LOCATED IN THE PREMISES OR THE BUILDING BY REASON OF THEFT OR BURGLARY, EXCEPT TO THE EXTENT
ARISING OUT OF LANDLORD’S NEGLIGENCE OR WILFUL MISCONDUCT

 21.3               Examination of Lease; No Contract Until Execution by Parties . Submission by Landlord of this instrument to Tenant for
examination or signature does not constitute a reservation of or option for lease. This Lease will be effective as a lease or otherwise only upon
execution by both Landlord and Tenant. If Tenant is a corporation (including any form of professional association), limited liability company,
partnership (general or limited), or other form of organization other than an individual, then each individual executing this Lease on behalf of
Tenant hereby covenants, warrants and represents: (1) that such individual is duly authorized to execute and deliver this Lease on behalf of
Tenant in accordance with the organizational documents of Tenant; (2) that this Lease is binding upon Tenant; (3) that Tenant is duly organized
and legally existing in the state of its organization, and is qualified to do business in the State of Texas; (4) that upon request, Tenant will
provide Landlord with true and correct copies of all organizational documents of Tenant, and any amendments thereto; and (5) that the
execution and delivery of this Lease by Tenant will not result in any breach of, or constitute a default under, any mortgage, deed of trust, lease,
loan, credit agreement, partnership agreement or other contract or instrument to which Tenant is a party or by which Tenant may be bound. If
Tenant is a form of organization other than an individual, Tenant will, prior to the Commencement Date, deliver to Landlord written
documentation reasonably satisfactory to Landlord evidencing the authority of an authorized representative of Tenant to enter into the Lease
and bind Tenant to all of the obligations of Tenant under the Lease.

22.                MORTGAGES .

                   22.1                Lease Subordinate to Mortgage . This Lease shall be subordinate to any deed of trust, mortgage or other
security instrument (a ― Mortgage ―), and any ground lease, master lease, or primary lease (a ― Primary Lease ―) that now or hereafter covers
any portion of the Premises (the mortgagee under any Mortgage or the lessor under any Primary Lease is referred to herein as ― Landlord’s
Mortgagee ―), and to increases, renewals, modifications, consolidations, replacements, and extensions thereof. However, any Landlord‘s
Mortgagee may elect to subordinate its Mortgage or Primary Lease (as the case may be) to this Lease by delivering written notice thereof to
Tenant. The provisions of this Section 22 shall be self-operative, and no further instrument shall be required to effect such subordination;
however, Tenant shall from time to time within ten (10) days after request therefor, execute any instruments that may be required by any
Landlord‘s Mortgagee to evidence the subordination of this Lease to any such Mortgage or Primary Lease. If Tenant fails to execute the same
within such ten (10) day period, Tenant's failure to execute such instruments shall immediately constitute an Event of Default under Section
19.5. Following a the second written notice to Tenant and a three (3) business day cure period, and in addition to Landlord's other available
remedies, Tenant shall pay Landlord a late fee of One Hundred Dollars ($100.00) per day for each day such instruments are not returned past
said three (3) business day period. Furthermore, Tenant shall be liable to Landlord for any and all damages caused by Tenant's delinquency
which results in delays to the closing of such mortgage or other financing activity.


                                                                        23
 22.2               Attornment . Tenant shall attorn to any party succeeding to Landlord‘s interest in the Premises, whether by purchase,
foreclosure, deed in lieu of foreclosure, power of sale, termination of lease, or otherwise, upon such party‘s request, and shall execute such
agreements confirming such attornment as such party may reasonably request. Tenant's obligation to attorn to any purchase or mortgagee shall
be conditioned upon receipt of a commercially reasonable non-disturbance agreement and upon assumption by such purchaser or mortgagee of
Landlord's obligations under this Lease. Tenant shall not seek to enforce any remedy it may have for any default on the part of Landlord
without first giving written notice by certified mail, return receipt requested, specifying the default in reasonable detail to any Landlord‘s
Mortgagee whose address has been given to Tenant, and affording such Landlord‘s Mortgagee a reasonable opportunity to perform Landlord‘s
obligations hereunder.

 22.3               No Landlord‘s Mortgagee‘s Liability . Notwithstanding any such attornment or subordination of a Mortgage or Primary
Lease to this Lease, the Landlord‘s Mortgagee shall not be liable for any acts of any previous landlord, shall not be obligated to install the
Initial Improvements, and shall not be bound by any amendment to which it did not consent in writing nor any payment of Rent made more
than one month in advance.

23.                ENCUMBRANCES .

 23.1                No Liens . Tenant has no authority, express or implied, to create or place any lien or encumbrance of any kind or nature
whatsoever upon, or in any manner to bind Landlord‘s property or the interest of Landlord or Tenant in the Premises or to charge the rent for
any claim in favor of any person dealing with Tenant, including those who may furnish materials or perform labor for any construction or
repairs. Tenant shall timely pay or cause to be paid all sums due for any labor performed or materials furnished in connection with any work
performed on the Premises by or at the request of Tenant. Notwithstanding the foregoing, Tenant shall give Landlord immediate written notice
of the placing of any lien or encumbrance against the Premises, Building or Land.

 23.2                Landlord‘s Rights . In the event that Tenant shall not, within ten (10) days following notification to Tenant of the
imposition of any such lien, cause the same to be released of record by payment or the posting of a bond in amount, form and substance
acceptable to Landlord, Landlord shall have, in addition to all other remedies provided herein and by law, the right but not the obligation, to
cause the same to be released by such means as it shall deem proper, including payment of or defense against the claim giving rise to such
lien. Notwithstanding the foregoing, Tenant may, at its own expense, contest or protest any lien which Tenant is required hereunder to
discharge, provided Tenant posts a bond in an amount equal to the amount of the claim evidenced by such lien, plus Landlord's reasonable
estimate of the interest which will or may accrue thereon and the expenses Landlord may incur in connection with such lien, in order to protect
the interests of Landlord in and to the Premises and provided further that Tenant discharges any such lien upon and at the time of any final
judgment or other resolution of such contest or protest. Nothing in this Lease shall be deemed or construed in any way as constituting the
consent or request of Landlord, express or implied, by inference or otherwise, to any contractor, subcontractor, laborer or materialman for the
performance of any labor or the furnishing of any materials for any specific improvement, alteration or repair of or to the Building or the
Premises or any part thereof, nor as giving Tenant any right, power or authority to contract for or permit the rendering of any services or the
furnishing of any materials that would give rise to the filing of any mechanic's or other liens against the interest of Landlord in the Building,
Land or the Premises. Nothing in this Section 23 modifies an Event of Default under Section 19.4 herein.

24.                MISCELLANEOUS .

 24.1                Laws; Affiliate; Tenant Party . Words of any gender used in this Lease shall include any other gender, and words in the
singular shall include the plural, unless the context otherwise requires. The captions inserted in this Lease are for convenience only and in no
way affect the interpretation of this Lease. The following terms shall have the following meanings: ― Laws ― shall mean all federal, state, and
local laws, zoning ordinances, municipal regulations, rules, and regulations; all court orders, governmental directives, and governmental orders,
all Environmental Laws (as defined below), all applicable laws, regulations and building codes governing nondiscrimination accommodations
and commercial facilities, and all restrictive covenants affecting the Property, and ― Law ‖ shall mean any of the foregoing; ― Affiliate ― shall
mean any person or entity which, directly or indirectly, controls, is controlled by, or is under common control with the party in question; ―
Tenant Party ― or collectively the ― Tenant Parties ― shall include Tenant, any assignees claiming by, through, or under Tenant, any
subtenants claiming by, through, or under Tenant, and any of their respective agents, contractors, employees, and invitees; and ― Indemnified
Parties ― shall include Landlord, its successors, assigns, agents, employees, contractors, Property Manager, partners, directors, officers and
affiliates.


                                                                       24
 24.2                Joint and Several Liability . If there is more than one Tenant, then the obligations hereunder imposed upon Tenant shall be
joint and several, whether or not Tenant's obligations arise during the Original Term of this Lease, during any renewal or extension, or a
holdover term or thereafter. If there is a Guarantor of Tenant's obligations hereunder, then the obligations hereunder imposed upon Tenant
shall be the joint and several obligations of Tenant and such Guarantor, and Landlord need not first proceed against Tenant before proceeding
against such Guarantor nor shall any such Guarantor be released from its Guaranty for any reason whatsoever.

 24.3                Landlord‘s Assignment; Authority of Tenant . Landlord may transfer and assign, in whole or in part, its rights and
obligations in the Building, Land, or Premises that are the subject to this Lease, provided that the assignee expressly assumes all obligations
under the Lease, in which case Landlord shall have no further liability hereunder. Each party hereby represents and warrants to the other party
that such party has due authorization by partners, or other appropriate documentation evidencing the due authorization of such party to enter
into this Lease. Tenant and each person signing this Lease on behalf of Tenant represents to Landlord as follows: Tenant and its general
partners and managing members, if applicable, are each duly organized and legally existing under the laws of the state of its incorporation and
are duly qualified to do business in the state where the Building is located. Tenant and its general partners and managing members, if
applicable, each have all requisite power and all governmental certificates of authority, licenses, permits, qualifications and other
documentation to lease the Premises and to carry on its business as now conducted and as contemplated to conducted. Each person signing on
behalf of Tenant is authorized to do so.

 24.4                 Force Majeure . Whenever a period of time is herein prescribed for action to be taken by Landlord or Tenant, the party
taking the action shall not be liable or responsible for, and there shall be excluded from the computation of any such period of time, any delays
due to strikes, riots, acts of God, shortages of labor or materials, war, terrorism, governmental actions or inactions or laws, regulations, or
restrictions, or any other causes of any kind whatsoever which are beyond the control of such acting party; provided, however, in no event shall
the foregoing apply to the financial obligations of Tenant under this Lease, including, without limitation, Tenant's obligation to promptly pay
Base Rent, Additional Rent, reimbursements or any other amount payable to Landlord as well as Tenant's obligation to maintain insurance
hereunder.

                    24.5                Certificate of Occupancy; Financial Statements; Estoppel Certificates . Prior to Tenant's occupancy of the
Premises, Landlord shall obtain (with Tenant‘s full cooperation) a Certificate of Occupancy for the Premises from the appropriate
governmental authority. Tenant shall, from time to time, but not more than twice per calendar year, within ten (10) days after request of
Landlord, deliver to the Landlord or Landlord‘s designee either (i) the then most current publicly disclosed and audited statement of Tenant‘s
current financial condition (if audited financial information is not available for a period ending within the then past twelve months, then Tenant
shall supply a current (to the last completed fiscal quarter) publicly disclosed and unaudited financial statement certified by an officer as true,
accurate and complete) (if Tenant no longer reports financial information to the Securities and Exchange Commission, then the ―publicly
disclosed‖ requirement shall be deleted), or (ii) an estoppel certificate stating that this Lease is in full effect, the date to which Rent has been
paid, the unexpired Term and such other factual matters pertaining to this Lease as may be requested by Landlord. Tenant‘s obligation to
furnish the above-described items in a timely fashion is a material inducement for Landlord‘s execution of this Lease. If Tenant fails to execute
any such estoppel certificate within such ten (10) day period, Tenant's failure to execute any such estoppel certificate shall immediately
constitute an Event of Default under Section 19.5. Following a the second written notice to Tenant and a three (3) business day cure period,
and in addition to Landlord's other available remedies, Tenant shall pay Landlord a late fee of One Hundred Dollars ($100.00) per day for each
day such estoppel certificate is not returned past said three (3) day period. Furthermore, Tenant shall be liable to Landlord for any and all
damages caused by Tenant's delinquency which results from Tenant's failure to execute such estoppel certificate


                                                                        25
24.6               Entire Agreement . This Lease, together with all Exhibits and Riders attached hereto, constitutes the entire agreement of the
Landlord and Tenant with respect to the subject matter of this Lease, and contains all of the covenants and agreements of Landlord and Tenant
with respect thereto. Landlord and Tenant each acknowledge that no representations, inducements, promises or agreements, oral or written,
have been made by Landlord or Tenant, or anyone acting on behalf of Landlord or Tenant, which are not contained herein, and any prior
agreements, promises, negotiations, or representations not expressly set forth in this Lease are of no effect. This Lease may not be altered,
changed or amended except by an instrument in writing signed by both parties hereto.

 24.7               Survival of Indemnities and Obligations . Each indemnity agreement and hold harmless agreement contained herein shall
survive the expiration or termination of the Lease. Additionally, all obligations of Tenant hereunder not fully performed by the end of the
Term shall survive, including, without limitation, all payment obligations with respect to Taxes and insurance and all obligations concerning
the condition and repair of the Premises.

 24.8              [Intentionally Omitted]

 24.9                Severability . If any provision of this Lease is illegal, invalid or unenforceable, then the remainder of this Lease shall not
be affected thereby.

 24.10               Effective Date . All references in this Lease to ― Effective Date ‖ or similar references shall be deemed to refer to the last
date, in point of time, on which all parties hereto have executed this Lease.

 24.11             Brokerage Commissions . Landlord and Tenant each warrant to the other that they have not dealt with any broker or agent
other than Trammell Crow Company and The Staubach Company Central Texas, LLC and that they know of no broker or agent who are or
might be entitled to a commission in connection with this Lease. TENANT AND LANDLORD SHALL EACH INDEMNIFY THE
OTHER AGAINST ALL COSTS, ATTORNEYS’ FEES, AND OTHER LIABILITIES FOR COMMISSIONS OR OTHER
COMPENSATION CLAIMED BY ANY BROKER OR AGENT CLAIMING THE SAME BY, THROUGH, OR UNDER TENANT
OR LANDLORD, RESPECTIVELY.

 24.12              Confidentiality . The business terms and conditions of this Lease are confidential and Tenant shall not disclose the terms of
this Lease to any other tenant or occupant (or prospective tenant or occupant) of the Building (or associated business park) or their real estate
broker or agents.

 24.13              Interest . Tenant shall pay interest on all past-due Rent from the date due until paid at the lesser of 1% per month or at the
maximum lawful rate. In no event, however, shall the charges permitted under this Section 24.13 or elsewhere in this Lease, to the extent they
are considered to be interest under applicable Law, exceed the maximum lawful rate of interest.

                     24.14              Time . Time is of the essence in this Lease and in each and all of the provisions hereof. Whenever a
period of days is specified in this Lease, such period shall refer to calendar days unless otherwise expressly stated in this Lease. The foregoing
is subject to all express cure periods and rights set forth herein.

 24.15                Attorneys‘ Fees . In the event of the filing of any legal action or proceeding brought by either party against the other arising
out of this Lease, the prevailing party shall be entitled to recover reasonable attorneys' fees and costs incurred in such action (including, without
limitation, all costs of appeal) and such amount shall be included in any judgment rendered in such proceeding.

 24.16         Choice of Law and Exclusive Venue . THIS LEASE SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, EXCEPT AS SUCH LAWS ARE PREEMPTED BY
APPLICABLE FEDERAL LAW, WITHOUT REGARD TO ANY CONFLICT OF LAWS RULE OR PRINCIPLE WHICH MIGHT
REFER THE CONSTRUCTION OR ENFORCEMENT OF THIS LEASE TO THE LAWS OF ANOTHER
JURISDICTION. JURISDICTION AND VENUE FOR ANY ACTION HEREUNDER SHALL BE EXCLUSIVELY IN AUSTIN,
TRAVIS COUNTY, TEXAS EITHER IN TEXAS STATE DISTRICT COURT OR IN FEDERAL DISTRICT COURT.


                                                                         26
 24.17        Waiver of Right to Trial By Jury . TENANT AND LANDLORD EACH: (1) AGREE NOT TO ELECT A TRIAL
BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS LEASE OR THE RELATIONSHIP BETWEEN THE
PARTIES AS TENANT AND LANDLORD THAT CAN BE TRIED BY A JURY; AND (2) WAIVE ANY RIGHT TO TRIAL BY
JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE
FUTURE. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND
VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.

 24.18       Waiver of Right to File Tax Protest . WITH RESPECT TO THE BUILDING OR ANY PORTION THEREOF,
TENANT HEREBY WAIVES ALL RIGHTS UNDER SECTIONS 41.413 AND 42.015 OF THE TEXAS TAX CODE OR ANY
SIMILAR OR CORRESPONDING LAW: (1) TO PROTEST A DETERMINATION OF APPRAISED VALUE OR TO APPEAL AN
ORDER DETERMINING A PROTEST; AND (2) TO RECEIVE NOTICES OF REAPPRAISALS.

 24.19              (1) Tenant represents and warrants that (a) Tenant and each person or entity owning an interest in Tenant is (i) not currently
identified on the Specially Designated Nationals and Blocked Persons List maintained by the Office of Foreign Assets Control, Department of
the Treasury (―OFAC‖) and/or on any other similar list maintained by OFAC pursuant to any authorizing statute, executive order or regulation
(collectively, the ―List‖), and (ii) not a person or entity with whom a citizen of the United States is prohibited to engage in transactions by any
trade embargo, economic sanction, or other prohibition of United States law, regulation, or Executive Order of the President of the United
States, (b) none of the funds or other assets of Tenant constitute property of, or are beneficially owned, directly or indirectly, by any
Embargoed Person (as hereinafter defined), (c) no Embargoed Person has any interest of any nature whatsoever in Tenant (whether directly or
indirectly), (d) none of the funds of Tenant have been derived from any unlawful activity with the result that the investment in Tenant is
prohibited by law or that the Lease is in violation of law, and (e) Tenant has implemented procedures, and will consistently apply those
procedures, to ensure the foregoing representations and warranties remain true and correct at all times. The term ―Embargoed Person‖ means
any person, entity or government subject to trade restrictions under U.S. law, including but not limited to, the International Emergency
Economic Powers Act, 50 U.S.C. §1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Orders or
regulations promulgated thereunder with the result that the investment in Tenant is prohibited by law or Tenant is in violation of law.

 (2) Tenant covenants and agrees (a) to comply with all requirements of law relating to money laundering, anti-terrorism, trade embargos and
economic sanctions, now or hereafter in effect, (b) to immediately notify Landlord in writing if any of the representations, warranties or
covenants set forth in this paragraph or the preceding paragraph are no longer true or have been breached or if Tenant has a reasonable basis to
believe that they may no longer be true or have been breached, (c) not to use funds from any ―Prohibited Person‖ (as such term is defined in the
September 24, 2001 Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or
Support Terrorism) to make any payment due to Landlord under the Lease and (d) at the request of Landlord, to provide such information as
may be requested by Landlord to determine Tenant‘s compliance with the terms hereof.

 (3) Tenant hereby acknowledges and agrees that Tenant‘s inclusion on the List at any time during the Lease Term shall be a material default
of the Lease. Notwithstanding anything herein to the contrary, Tenant shall not permit the Premises or any portion thereof to be used or
occupied by any person or entity on the List or by any Embargoed Person (on a permanent, temporary or transient basis), and a ny such use or
occupancy of the Premises by any such person or entity shall be a material default of the Lease.

 24.20             At all times during the term of this Lease, Tenant shall ensure that all wiring and cabling that it installs within the Premises
or Building complies with all provisions of local fire and safety codes, as well as with the National Electric Code. Further, upon the expiration
or sooner termination of the Term, Tenant shall remove all wiring and cabling within the Premises and the Building (including the plenums,
risers and rooftop) placed there by or at the direction of Tenant, unless excused in writing by Landlord. Without limitation to the remedies
available to Landlord in the event that Tenant fails to comply with the terms and conditions of this subsection, Tenant shall forfeit such sums
from the Security Deposit (or otherwise pay to Landlord) the actual cost for the removal and disposal of any such wires and cabling.


                                                                        27
25.                 NOTICES . Each provision of this instrument or of any applicable Laws and other requirements with reference to the
sending, mailing or delivering of notice or the making of any payment hereunder shall be deemed to be complied with, when and if, the
following steps are taken:

 25.1              Rent Payments to Landlord . All Rent shall be payable to Landlord at the address for Landlord set forth below or at such
other address as Landlord may specify from time to time by written notice delivered in accordance herewith. Tenant‘s obligation to pay Rent
shall not be deemed satisfied until such Rent has been actually received by Landlord.

 25.2                Payments to Tenant . All payments required to be made by Landlord to Tenant hereunder shall be payable to Tenant at the
address set forth below, or at such other address within the continental United States as Tenant may specify from time to time by written notice
delivered in accordance herewith. Landlord‘s obligation to pay such amounts hereunder shall not be deemed satisfied until such amounts have
been actually received by Tenant.

 25.3                Written Notices . Any written notice or document required or permitted to be delivered hereunder shall be deemed to be
delivered upon the earlier to occur of (1) tender of delivery (in the case of a hand-delivered notice), (2) deposit in the United States Mail,
postage prepaid, Certified Mail, (3) nationally recognized overnight courier, or (4) receipt by facsimile transmission followed by an overnight
courier letter, in each case, addressed to the parties hereto at the respective addresses set out below, or at such other address as they have
theretofore specified by written notice delivered in accordance herewith. If Landlord has attempted to deliver notice to Tenant at Tenant‘s
address reflected on Landlord‘s books but such notice was returned or acceptance thereof was refused, then Landlord may post such notice in
or on the Premises, which notice shall be deemed delivered to Tenant upon the posting thereof.

 25.4                Multiplicity . If and when included within the term ―Tenant,‖ as used in this instrument, there is more than one person, firm
or corporation, all shall jointly arrange among themselves for their joint execution of a notice specifying an individual at a specific address
within the continental United States for the receipt of notices and payments to Tenant. All parties included within the terms ―Landlord‖ and
―Tenant,‖ respectively, shall be bound by notices given in accordance with the provisions of Section 25 to the same effect as if each had
received such notice.

26.                 HAZARDOUS WASTE

                    26.1               Definitions . For purposes of this Lease, ― Hazardous or Toxic Materials ― shall mean all materials,
substances, wastes and chemicals classified, defined, listed or regulated as, or containing, a ―hazardous substance,‖ ―hazardous waste,‖ ―toxic
substance,‖ ―pollutant,‖ ―contaminant,‖ ―oil,‖ ―hazardous material,‖ solid waste,‖ and/or ―regulated substance‖ under any Environmental Law,
but excluding office cleaning and supplies described in Section 26.3. As used herein, the term ― Environmental Laws ― shall mean any and all
statutes, rules, regulations, ordinances, orders, permits, licenses, and other applicable legal requirements, relating directly or indirectly to
human health or safety or the environment, or the presence, handling, treatment, storage, disposal, recycling, reporting, remediation,
investigation, or monitoring of hazardous or toxic materials.

 26.2                 Prohibited Uses . Except as expressly permitted by Section 26.3 below, Tenant shall not incorporate into, use, release,
conduct any activity that will produce, or otherwise place or dispose of at, in, under or near the Premises, the Building or the Land any
Hazardous or Toxic Materials. Tenant shall not (1) occupy or use the Premises, nor permit any portion of the Premises to be occupied or used
(i) except in compliance with all Laws, ordinances, governmental or municipal regulations, and orders, including without limitation
Environmental Laws, or (ii) in a manner which may be dangerous to life, limb or property; (2) cause anything to be done which would in any
way increase the rate of fire, liability, or any other insurance coverage on the Premises, the Building, or its contents; (3) use the Premises or any
portion as a landfill or dump; (4) install any underground tanks of any kind; (5) cause any Hazardous or Toxic Materials to be brought onto the
Premises except as permitted by Section 26.3 below; or (6) allow any surface or subsurface conditions to exist or come into existence that
constitute or may, with the passes of time constitute a public or private nuisance.


                                                                         28
 26.3                Permissive Uses . Tenant may use and temporarily store cleaning and office supplies used in the ordinary course of
Tenant‘s business (including electronic product processing, integration, manufacturing and assembly) and then only if (1) such materials are in
small quantities, properly labeled and contained, (2) with respect to solvents or other material quantities of materials used in manufacturing and
assembly (as opposed to office supplies, janitorial supplies and the like) notice of and a copy of the current material safety data sheet is first
delivered to, and written consent is obtained from, Landlord for each such Hazardous or Toxic Material and (3) such materials are used,
transported, stored, handled and disposed of off-site at properly authorized facilities in accordance with all applicable governmental laws, rules
and regulations, including without limitations, all Environmental Laws, as defined below.

 26.4               Landlord‘s Rights . Landlord shall have the right to periodically inspect, take samples for testing and otherwise investigate
(subject to Landlord‘s entry obligations under Section 14) the Premises for the presence of Hazardous or Toxic Materials.

 26.5               Remediation .

   26.5.1                Tenant‘s Obligations . If Tenant ever has knowledge of the presence in the Premises or the Building or the Land of
  Hazardous or Toxic Materials (excluding those expressly permitted hereunder) which affect the Premises, Tenant shall notify Landlord
  thereof in writing promptly after obtaining such knowledge. If at any time during or after the term, the Premises, Land or Building are found
  to have Hazardous or Toxic Materials in, on or under them, except for such conditions that were present prior to the Commencement Date of
  the Lease, and such Hazardous or Toxic Materials were placed on or in the Premises, Land or Building by Tenant‘s Parties (excluding
  invitees, without Tenant‘s knowledge), then Tenant shall promptly, diligently, and expeditiously investigate, clean up, remove and dispose of
  the material causing the violation, in compliance with all applicable governmental standards, Laws, rules and regulations, including without
  limitation, applicable Environmental Laws and the then prevalent industry practice and standards, and Tenant shall repair any damage to the
  Premises or the Building or the Land as soon as practicable. Tenant shall notify Landlord in advance of its method, time and procedure for
  any investigation, remediation or monitoring of Hazardous or Toxic materials, and Landlord shall have the right to require reasonable
  changes in such method, time or procedure as Landlord considers appropriate to prevent interference with any use, occupancy, care,
  appearance or maintenance of the Land or the Building, or the Premises or the rights of other tenants or to require the same to be done after
  normal business hours. Under no circumstances shall any remediation by Tenant leave any Hazardous or Toxic Materials at, in, or under the
  Premises, the Land, or the Building without first obtaining the prior written consent of Landlord. Notwithstanding anything in this Lease to
  the contrary, the liability of the Tenant, and any indemnities provided by the Tenant, shall not extend to Hazardous or Toxic Materials that
  were not placed on the Premises, in the Building, or on the Land by Tenant‘s Parties (excluding invitees, without Tenant‘s knowledge),
  which shall be the responsibility of Landlord. In addition, Landlord shall not include in Operating Expenses, or pass on to Tenant directly or
  indirectly, the cost incurred by Landlord in monitoring, reporting, testing, abating and/or removing Hazardous or Toxic Materials that were
  contained in the Premises, in the Building and/or on the Land at the time that the Lease was executed.

 26.5.2               Landlord‘s Rights . Notwithstanding the foregoing, Landlord shall have the right, but not the obligation, to perform the
work described in Section 26.5.1 and all costs and expenses associated therewith shall be due and payable by Tenant upon demand.

 26.6               Tenant‘s Representation . Tenant represents to Landlord that, except as has been disclosed to Landlord in writing, Tenant
nor any of its managers, have ever been cited for or convicted of any violations under applicable Laws, rules or regulations, including without
limitation, Environmental Laws. Tenant has completed the Hazardous Materials Disclosure Certificate that is attached hereto as Exhibit ―F‖.


                                                                       29
 26.7         TENANT’S INDEMNITY . TENANT AGREES TO INDEMNIFY, DEFEND AND HOLD HARMLESS THE
INDEMNIFIED PARTIES FROM AND AGAINST ALL OBLIGATIONS (INCLUDING REMOVAL AND REMEDIAL ACTIONS),
LOSSES, CLAIMS, SUITS, JUDGMENTS, LIABILITIES (INCLUDING WITHOUT LIMITATION STRICT LIABILITIES),
PENALTIES, DAMAGES COSTS AND EXPENSES (INCLUDING ATTORNEYS’ AND CONSULTANTS’ FEES AND EXPENSES)
OF ANY KIND OR NATURE WHATSOEVER THAT MAY AT ANY TIME BE INCURRED BY, IMPOSED ON OR ASSERTED
AGAINST THE INDEMNIFIED PARTIES DIRECTLY OR INDIRECTLY BASED ON, OR ARISING OUT OF OR RESULTING
FROM (1) THE ACTUAL OR ALLEGED PRESENCE OR RELEASE OF HAZARDOUS OR TOXIC MATERIALS ON, AT, IN,
UNDER FROM OR NEAR THE PREMISES, THE BUILDING, OR THE LAND WHICH IS CAUSED BY A TENANT PARTY
(EXCLUDING INVITEES WITHOUT TENANT’S KNOWLEDGE) OR AT THE DIRECTION OR PERMISSION OF A TENANT
PARTY (EXCLUDING INVITEES WITHOUT TENANT’S KNOWLEDGE) AND/OR (2) TENANT’S OPERATION OR USE OF
THE PREMISES AND/OR (3) NON-COMPLIANCE WITH ENVIRONMENTAL LAWS, OR THE CONDUCT OF OBLIGATIONS
HEREUNDER, BY A TENANT PARTY, OR AT THE DIRECTION OR PERMISSION OF A TENANT PARTY, (4) THE
DIMUNITION OF PROPERTY VALUE AND THE RESULTING EFFECTS UPON LANDLORD’S TITLE TO THE PREMISES,
THE BUILDING AND THE LAND CAUSED BY, OR ALLEGED TO BE CAUSED BY THE ACTUAL OR ALLEGED PRESENCE
OR RELEASE OF HAZARDOUS OR TOXIC MATERIALS ON, AT, IN, UNDER, FROM OR NEAR THE PREMISES, THE
BUILDING, OR THE LAND WHICH IS CAUSED BY A TENANT PARTY (EXCLUDING INVITEES WITHOUT TENANT’S
KNOWLEDGE) OR AT THE DIRECTION OR PERMISSION OF A TENANT PARTY (EXCLUDING INVITEES WITHOUT
TENANT’S KNOWLEDGE).

 26.8               Survival . The provisions of this Section 26 shall survive the Expiration Date or earlier termination of this Lease.

27.                  LANDLORD’S LIEN . LANDLORD HEREBY SUBORDINATES ITS LIEN RIGHTS TO THE LIEN RIGHTS OF
ANY UNAFFILIATED THIRD-PARTY LENDER OF TENANT. In addition to the statutory landlord‘s lien, Tenant grants to Landlord, to
secure performance of Tenant‘s obligations hereunder, a security interest in all goods, inventory, equipment, trade fixtures, furniture,
improvements, fixtures, chattel paper, accounts, and general intangibles, and other personal property of Tenant now or hereafter situated on or
relating to Tenant‘s use of the Premises, and all proceeds therefrom (the ― Collateral ―), and the Collateral shall not be removed from the
Premises without the consent of Landlord until all obligations of Tenant have been fully performed. ―Collateral‖ shall not include items sold,
transferred or disposed of in the ordinary course of business. Upon the occurrence of an Event of Default, Landlord may, in addition to all other
remedies, without notice or demand except as provided below, exercise the rights afforded a secured party under the Uniform Commercial
Code of the State in which the Building is located (the ― UCC ―). In connection with any public or private sale under the UCC, Landlord shall
give Tenant five (5) days prior written notice of the time and place of any public sale of the Collateral or of the time after which any private
sale or other intended disposition thereof is to be made, which is agreed to be a reasonable notice of such sale or other disposition. Tenant
grants to Landlord a power of attorney to execute and file any financing statement or other instrument necessary to perfect Landlord‘s security
interest under this Section 27, which power is coupled with an interest and is irrevocable during the Term. Landlord may also file a copy of
this Lease or as a financing statement to perfect its security interest in the Collateral.

28.            TENANT’S ACKNOWLEDGEMENTS . TENANT ACKNOWLEDGES THAT (1) EXCEPT AS OTHERWISE
SET FORTH IN THIS LEASE OR ANY EXHIBITS OR RIDERS, IT HAS INSPECTED AND ACCEPTS THE PREMISES IN AN
―AS-IS, WHERE IS‖ WITH ALL FAULTS CONDITION, (2) THE BUILDINGS AND IMPROVEMENTS COMPRISING THE
SAME ARE SUITABLE FOR THE PURPOSE FOR WHICH THE PREMISES ARE LEASED AND LANDLORD HAS MADE NO
WARRANTY, REPRESENTATION, COVENANT, OR AGREEMENT WITH RESPECT TO THE MERCHANTABILITY OR
FITNESS FOR ANY PARTICULAR PURPOSE OF THE PREMISES, (3) THE PREMISES ARE IN GOOD AND SATISFACTORY
CONDITION, (4) NO REPRESENTATIONS AS TO THE REPAIR OF THE PREMISES, NOR PROMISES (EXPRESS OR
IMPLIED) TO ALTER, REMODEL OR IMPROVE THE BUILDING OR PREMISES OR ANY OTHER PART OF THE LAND
HAVE BEEN MADE BY LANDLORD (UNLESS AND EXCEPT AS MAY BE SET FORTH IN EXHIBIT B ATTACHED TO THIS
LEASE, IF ONE SHALL BE ATTACHED, OR AS IS OTHERWISE EXPRESSLY SET FORTH IN THIS LEASE), (5) THERE ARE
NO REPRESENTATIONS OR WARRANTIES, EXPRESSED, IMPLIED OR STATUTORY, THAT EXTEND BEYOND THE
DESCRIPTION OF THE PREMISES, AND (6) NO RIGHTS, EASEMENTS OR LICENSES ARE ACQUIRED BY TENANT BY
IMPLICATION OR OTHERWISE, EXCEPT AS EXPRESSLY SET FORTH IN THIS LEASE.


                                                                       30
29.         WAIVER . TENANT WAIVES ITS RIGHTS UNDER THE DECEPTIVE TRADE PRACTICES – CONSUMER
PROTECTION ACT, SECTION 17.41, ET. SEQ., BUSINESS CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS
AND PROTECTIONS, AFTER CONSULTATION WITH AN ATTORNEY OF TENANT’S OWN SELECTION, TENANT
VOLUNTARILY CONSENTS TO THIS WAIVER.

                                 [Remainder of Page Intentionally Left Blank]


                                                     31
This Lease is dated for identification purposes only as of October 31, 2005

TENANT:

CROSSROADS SYSTEMS, INC.,
a Delaware corporation

Name:
Printed Name:
Title:
Date:

LANDLORD:

PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation, for its Principal U.S. Property Separate Account, formerly known as
Principal Life Insurance Company, an Iowa corporation, for its Real Estate Separate Account

By:      PRINCIPAL REAL ESTATE INVESTORS, LLC, a Delaware limited liability company, its authorized signatory

Name:
Printed Name:
Title:
Date:

Name:
Printed Name:
Title:


                                                                       32
                                                                RIDER TO LEASE

                                                               Additional Provisions

1.          This Rider Controls . The provisions set forth in this Rider control to the extent they conflict with any provision or provisions set
forth in the body of this Lease Agreement.

2.           Letter of Credit . In addition and without limitation to any other security deposit or other security held by Landlord, within ten
(10) business days following the full execution hereof, Tenant shall deposit with Landlord a clean, unconditional and irrevocable standby letter
of credit issued by a bank reasonably acceptable to Landlord (the ―Bank‖), automatically renewing on an annual basis, in the initial amount of
One Million Two Hundred Thousand and No/100ths Dollars ($1,200,000.00) PLUS an amount equal to the Additional Allowance as defined in
the Work Letter, PLUS an amount equal to any allowances given to Tenant by Landlord under the Expansion Option set forth in Section 4
below, which letter of credit shall be substantially in the form annexed hereto as Exhibit G and incorporated herein by this reference (the
―Letter of Credit‖). The beneficiary shall be an entity named by Landlord. The Letter of Credit shall provide for written notice of non-renewal
to be sent directly to the Landlord at least thirty (30) days prior to such renewal date and the expiration date contained in the Letter of Credit
shall be a date no earlier than ninety (90) days following the Expiration Date. The amounts secured by the Letter of Credit shall be deemed to
be a part of (and in addition to) the Security Deposit under the Lease. Landlord may draw upon the Letter of Credit as reasonably necessary, in
whole or in part, if (1) Tenant defaults with respect to any of the terms, conditions or provisions of this Lease on the Tenant‘s part to be
observed or performed, including but not limited to the payment of Base Rent and Additional Rent, and such default continues beyond the
applicable grace period, or (2) Tenant, or anyone holding possession of the Premises through Tenant, holds over in the Premises after the
expiration or sooner termination of the term of this Lease, or (3) Landlord is given notice that the Bank is terminating the Letter of Credit and
Tenant is unable to deliver a replacement Letter of Credit within a reasonable time, but in no event later than twenty (20) days prior to the
termination date, or (4) such Letter of Credit expires as of a stated date by its terms and is not replaced with a Letter of Credit meeting the
criteria set forth herein at least fifteen (15) days prior to such Letter of Credit‘s stated expiration date. The Landlord represents that it will not
present the Letter of Credit for payment except as specifically set forth herein, such representation to survive the expiration or earlier
termination of this Lease. The Letter of Credit shall provide that it shall be payable to Landlord thirty (30) days after presentation to the Bank
of (1) the original of the Letter of Credit, (2) proof of mailing of the required notice to Tenant, and (3) an affidavit stating that Tenant has failed
to comply with the requirements set forth in this Lease Rider Section 2. The Letter of Credit shall contain a provision whereby the Bank
agrees to pay the sight draft or give notice of discrepancies on the date of presentation and waives its right to wait seven banking days pursuant
to Article 13(b) of the ICC Uniform Customs and Practice for Documentary Credits (1993 revision). The Letter of Credit shall permit partial
draws. Further, the Letter of Credit shall permit the beneficiary to transfer, at Landlord‘s expense for such transfer, the Letter of Credit to a
subsequent owner or beneficiary, and thereupon Landlord shall be discharged from further liability with respect to the Letter of Credit. The
following language is required to be included in all Letters of Credit: ―A sight draft submitted to the Bank by Beneficiary is to be accompanied
by (i) an affidavit from Beneficiary stating that Beneficiary has the right to draw upon this Letter of Credit based upon the terms of the lease
dated October 31, 2005; (ii) proof of mailing of the applicable notice to Tenant as required by the Lease, and (iii) the original Letter of Credit‖.

 Tenant hereby acknowledges that the security provided by the Letter of Credit is provided as a continuing material inducement to the
Landlord, is provided as current and ongoing value to the Landlord, and constitutes an ongoing contemporaneous exchange for new value given
for the Tenant's tenancy throughout the Term of the Lease, as may be extended as provided in the Lease.

 The face amount of the Letter of Credit shall decline on each anniversary of the Commencement Date, on the condition and only for so long
that no Event of Default (beyond any applicable notice and cure period) shall then be in effect, without requirement of notice to Landlord by
Tenant, by the greater of (i) twenty percent (20%) of the original total of the Letter of Credit (including any Additional Allowance) or (ii) in the
event the shareholder equity of Tenant during the immediately preceding calendar quarter is at least $23,250,000.00 (as reported in the
then-most recent quarterly reported financial statements (or if not then publicly held, as certified by Tenant‘s CFO pursuant to audited financial
statements) prior to the applicable anniversary of the Commencement Date, twenty five percent (25%) of the original total of the Letter of
Credit (including any Additional Allowance); . All reasonable charges under the Letter of Credit are to be paid by the Landlord.


                                                                          33
 At any time that an Event of Default occurs, Landlord (or the beneficiary) shall in its discretion have the right and option to draw down the
Letter of Credit to the extent reasonably necessary and apply the proceeds or any part thereof to any applicable amounts owed to Landlord..
The proceeds of the Letter of Credit remaining after application of funds, if applicable, shall be held by Landlord as a cash security deposit
without interest accruing thereon and subject to being commingled with the security deposits of other tenants. Landlord (or the beneficiary)
shall also have the right to draw down the entire Letter of Credit in the event Landlord does not receive notice that the date of expiry of the
Letter of Credit will be extended by the issuing bank and Tenant fails to obtain and present to Landlord at least twenty (20) days prior to the
expiration of the Letter of Credit a substitute Letter of Credit. If the Landlord partially draws down the Letter of Credit, Tenant shall, within
thirty (30) days after Landlord gives Tenant notice thereof, cause the amount of the Letter of Credit to be restored to its original amount, or to
substitute cash security instead. The failure by Tenant to cause the Letter of Credit to be so restored within the foregoing time period shall be
deemed a default pursuant to the Lease,and in addition to other remedies at law or equity, Landlord may, upon an additional five (5) business
days‘ written notice, at its option draw down the entire remaining portion of the Letter of Credit and keep the remaining amounts as a cash
security deposit. The Letter of Credit shall not in any way limit any liability of Tenant under the Lease, as hereby amended, nor shall the
Letter of Credit be deemed to be ―liquidated damages.‖ If claims of the Landlord exceed the amount of the Letter of Credit, Tenant shall
remain liable for the balance of such claims.

                  Tenant shall have the right to substitute one Letter of Credit for another if the substitute Letter of Credit meets the
requirements of this Section 2 and is in form reasonably satisfactory to the Landlord. In addition, Tenant shall substitute another Letter of
Credit meeting the requirement of this Section 2 if the Bank which has issued the Letter of Credit becomes insolvent or the or letter of credit
is void, unenforceable or uncollectible.

3.         Termination Option . Landlord hereby grants to Tenant an option (―Termination Option‖) to terminate this Lease after the
forty-second (42 nd ) month of the Lease (―Termination Effective Date‖) subject to the following provisions.

 (a)        Termination Notice . The Termination Option shall be exercisable by Tenant by written notice (―Termination Notice‖) to Landlord
of Tenant's election to exercise the Termination Option, such notice to be received by Landlord on or before two hundred seventy (270) days
prior to the Termination Effective Date. Effective on the date the Termination Notice is received by Landlord, all options granted pursuant to
Paragraph 4 (―Expansion Option‖) and Paragraph 5 (captioned Extension Option) below shall be deemed waived and of no further force or
effect.

 (b)         Termination Fee . Tenant acknowledges and agrees that Landlord shall have expended broker commissions and tenant
improvement allowances (the Allowance and Additional Allowance) (―Expenses‖). For purposes of clarification, the broker commissions for
the initial Lease (but not amendments) shall be $154,224.00. Therefore, in consideration of Landlord's agreement to allow the termination of
this Lease, Tenant shall pay to Landlord an amount equal to the unamortized portion of all Expenses attributable to this Lease and any
amendment(s) hereto (with interest accruing on such Expenses at the rate of nine percent (9%) per year and amortized on a straight-line basis)
as may be reasonably calculated by Landlord (―Termination Fee‖). Such Termination Fee shall be paid by Tenant to Landlord one half as of
the Termination Notice and one half as of thirty (30) days prior to the Termination Effective Date. The Termination Fee shall not be deemed to
be a penalty. If the Termination Fee is not timely paid by Tenant to Landlord, the Termination Option shall lapse and Tenant shall have no
right to terminate this Lease as provided herein.

 (c)         Survival of Obligations . In the event Tenant has satisfied the provisions of Subsection (a) and (b) above, then, as of the
Termination Effective Date, all obligations of the parties shall cease and terminate in the same manner as upon expiration of the Term;
provided, however, that Tenant shall remain liable hereunder for all obligations and liabilities which accrue under the Lease through the
Termination Effective Date, including, without limitation, Tenant's obligation to pay Base Rent and Tenant's Share of Operating Expenses and
Taxes through the Termination Effective Date. Any such amounts not due and payable prior to the Termination Effective Date, but which
relate to the period prior to the Termination Effective Date, shall be paid by Tenant to Landlord within ten (10) days of Tenant‘s receipt of an
invoice therefor from Landlord.


                                                                       34
 (d)        No Default . Tenant may exercise the Termination Option only if Tenant is not in an Event of Default under any term or condition
of this Lease.

4.         Expansion Option .

 (a)        Expansion Space . Subject to the provisions hereinafter set forth, Landlord hereby grants to Tenant an option (―Expansion Option‖)
to lease an additional approximately 10,000 rentable square feet of space adjacent to the Premises as depicted on the floor plan attached hereto
and incorporated herein by this reference as Exhibit A (―Expansion Space‖), on the same terms and conditions as set forth in this Lease, except
as otherwise provided in this Section. Upon the exercise of the Expansion Option, Tenant‘s right to terminate this Lease pursuant to Section 3
above shall continue, but the Termination Fee shall be increased by the commissions, improvements and allowances paid for by Landlord under
this Section 4.

 (b)        Availability . Tenant hereby acknowledges that the Expansion Option is contingent upon the Expansion Space being available at
the time Landlord receives the Exercise Notice, as hereinafter defined; provided, however, that in the event Landlord desires to accept an a
bona-fide written offer (―Third Party Offer‖) to lease the Expansion Space or portion thereof from a third party, Landlord shall first notify
Tenant of such intent to lease the Expansion Space or portion thereof, and Tenant shall have a five (5) business day period from the delivery of
such notice by Landlord in which to give Landlord the Exercise Notice, as hereinafter defined. If Tenant fails deliver the Exercise Notice
within said five (5) day period, then Tenant‘s rights under this Section shall be subject to the Expansion Space being available.

 Notwithstanding the foregoing, in the event that the third-party offer is greater than 10,000 rentable square feet of space, then Tenant may not
elect to take the space on the conditions set forth herein, but must elect by written notice within said five (5) business day period to accept all
terms and conditions of the Third Party Offer.

 (c)        Exercise Notice . Tenant may exercise the Expansion Option by giving Landlord thirty (30) days' prior written notice (―Exercise
Notice‖) of its desire to lease the Expansion Space or portion thereof (―Exercise Notice Period‖). If the Exercise Notice is not received in the
required time period, then the Expansion Option shall be deemed null, void and of no further force or effect. The Exercise Notice shall set
forth the applicable date on which Tenant shall commence its lease of the Expansion Space (―Expansion Commencement Date‖), which date
shall be on the first day of the calendar month following the sixtieth (60 th ) day following the date on which Landlord delivers the Premises to
Tenant in the condition required herein, which date shall not be prior to the earlier of (i) the expiration of the thirty (30) day Exercise Notice
Period or (ii) if applicable, establishment of the Market Rental Rate*. .

*During said period, Tenant may make its initial improvements to the Expansion Space, subject to insurance requirements and other
requirements applicable to alterations as set forth in the Lease.

 (d)        Configuration; Size . The Exercise Notice shall also set forth Tenant's desired configuration and size of the Expansion Space, and,
in the event that Tenant desires to lease less than all of the Expansion Space, the configuration and size of the Expansion Space shall be subject
to Landlord's approval, at its sole discretion. Hereinafter, the term ―Expansion Space‖ shall be and shall mean the entire Expansion Space or
portion thereof so approved by Landlord, as applicable.

 (e)       Expansion Amendment . After receipt of the Exercise Notice, Landlord and Tenant shall enter into an amendment (―Expansion
Amendment‖) of this Lease setting forth the Expansion Space. Such Expansion Amendment shall provide that from and after the applicable
date on which the Expansion Space is leased to Tenant (―Expansion Commencement Date‖), this Lease shall be deemed modified as follows:

IF THE EXPANSION COMMENCEMENT DATE OCCURS ON OR BEFORE THE FIRST ANNIVERSARY OF THE
COMMENCEMENT DATE, THEN:


                                                                        35
                   (1)        the term ―Premises‖ shall be deemed to include the Expansion Space;
 (2)       the Monthly Base Rent payable for the Expansion Space shall be an amount determined by multiplying the number of rentable
square feet in the Expansion Space times the applicable square foot rate for monthly Base Rent contained in the Basic Lease Provisions in
effect from time to time during the Term;
 (3)       Tenant's Proportionate Share shall be increased (from and after the Expansion Commencement Date) by a percentage equal to the
actual number of rentable square feet in the Expansion Space divided by the number of rentable square feet in the Building;
 (4)       Tenant shall accept the Expansion Space ―as is‖ (subject to the same requirements with respect to the initial Premises set forth
herein); and
 (5)       Landlord shall contribute to the planning and construction of the initial alterations and improvements to such Expansion Space in an
amount equal to the lesser of (i) $28.00 multiplied by the number of rentable square feet in the Expansion Space, the product of which shall be
multiplied by a fraction, the numerator of which shall be the number of months between the Expansion Commencement Date and the
Expiration Date and the denominator of which shall be sixty-six (66) (which is the number of months in the Term), or (ii) the actual cost and
expense of such initial alterations and improvements.

IF THE EXPANSION COMMENCEMENT DATE OCCURS AFTER THE FIRST ANNIVERSARY OF THE COMMENCEMENT DATE,
THEN:

 (1)       the term ―Premises‖ shall be deemed to include the Expansion Space;
 (2)       the Monthly Base Rent payable for the Expansion Space shall be an amount agreed upon by Landlord and Tenant (which the parties
shall negotiate in good faith for a period not to exceed ten (10) business days, and if the parties shall fail to agree on an amount, then the
Monthly Base Rent shall be the Market Rental Rate as determined in Rider Section 5 below);
 (3)      Tenant's Proportionate Share shall be increased by a percentage equal to the actual number of rentable square feet in the Expansion
Space divided by the number of rentable square feet in the Building;
 (4)      Tenant shall accept the Expansion Space ―as is‖, unless otherwise agreed upon by the parties during the ten (10) business day period
referenced in item (2) above.

Except as set forth above, the terms and conditions of this Lease as they apply to the Premises shall govern Tenant's lease of the Expansion
Space.

 (f)      Not Transferable . Tenant acknowledges and agrees that the Expansion Option granted herein shall be deemed personal to Tenant
and if Tenant subleases, assigns or otherwise transfers any interests hereunder, other than a Permitted Transfer, prior to the exercise of
Expansion Option, such option shall lapse.

 (g)        No Default . Tenant may exercise the Expansion Option, and an exercise thereof shall be effective, only if at the time of Tenant's
exercise of the Expansion Option and on the Expansion Commencement Date (i) this Lease is in full force and effect, and (ii) Tenant is not in
default beyond any applicable notice and cure period.

 (h)        Subordination . Tenant's Expansion Option granted hereunder shall be subordinate to any and all existing rights or interests
conferred to other tenants for all or a portion of the Expansion Space, as contained in any lease, or otherwise, in effect on the date of execution
of this Lease including, without limitation, (i) options or rights regarding renewal, extension or expansion, (ii) subleases and (iii) assignments.


                                                                        36
5.         Extension Option . Tenant shall have the right and option to extend this Lease for one (1) consecutive period of five (5) years under
the same terms and conditions as stated in the Lease (the ―Extension Option‖), with the exceptions that (a) no further extension options shall
exist and (b) monthly rental for such extension term shall be based on the then prevailing ―Market Rental Rate‖ as determined by Landlord in
good faith based on the annual amount per rentable square foot that Landlord has accepted in current transactions between non-affiliated parties
from new, non-expansion, non-renewal and non-equity tenants of comparable credit-worthiness, for comparable space, for a comparable use
for a comparable period of time ("Comparable Transactions") in the Building, or if there are not a sufficient number of Comparable
Transactions in the Building, what a comparable landlord of a comparable building in the vicinity of the Building with comparable vacancy
factors would accept in Comparable Transactions. In any determination of Comparable Transactions appropriate consideration shall be given to
the annual rental rates per rentable square foot, the standard of measurement by which the rentable square footage is measured, the ratio of
rentable square feet to usable square feet, the type of escalation clause (e.g., whether increases in additional rent are determined on a net or
gross basis, and if gross, whether such increases are determined according to a base year or a base dollar amount expense stop), the extent of
Tenant's liability under the Lease, abatement provisions reflecting free rent and/or no rent during the period of construction or subsequent to the
commencement date as to the space in question, brokerage commissions, if any, which would be payable by Landlord in similar transactions,
length of the lease term, size and location of premises being leased, building standard work letter and/or tenant improvement allowances, if
any, and other generally applicable conditions of tenancy for such Comparable Transactions. The intent is that Tenant will obtain the same rent
and other economic benefits that Landlord would otherwise give in Comparable Transactions and that Landlord will make, and receive the
same economic payments and concessions that Landlord would otherwise make, and receive in Comparable Transactions.

Tenant may reject the Extension Option granted herein within ten (10) days following Tenant's receipt of Landlord‘s determination of the
prevailing market rental. The Extension Option shall be exercisable by Tenant, if at all, only by timely delivery to Landlord of written notice
of election on or before six (6) months prior to the expiration of the then current Lease Term, but no earlier than nine (9) months prior to the
expiration of the then current Lease Term. The option herein granted shall be deemed to be personal to Tenant, and if Tenant subleases any
portion of the Premises or otherwise assigns or transfers any interest thereof to another party, other than a Permitted Transfer, such option shall
lapse. In the event that Tenant is in default of any term or condition of the Lease beyond any applicable notice and grace period, then there
shall be no extension of this Lease as provided herein. If Tenant desires to continue with the extension, but objects to the Market Rental Rate
determined by Landlord, then Tenant must object to the same within said ten (10) day period. No later than ten (10) days thereafter, Landlord
and Tenant shall meet in an effort to negotiate, in good faith, the Market Rental Rate applicable to the Premises. If Landlord and Tenant have
not agreed upon the Market Rental Rate applicable to the Premises within five (5) days, then Landlord and Tenant shall attempt to agree, in
good faith, upon a single broker not later than fifteen (15) business days following Landlord‘s receipt of the Extension Notice who shall
determine the Market Rental Rate for the Premises. If Landlord and Tenant are unable to agree upon a single broker within such time period,
then Landlord and Tenant shall each appoint one broker not later than twenty (20) business days following Landlord‘s receipt of the Extension
Notice. Not later than twenty-five (25) business days following Landlord‘s receipt of the Extension Notice, the two appointed brokers shall
appoint a third broker. If either Landlord or Tenant fails to appoint a broker within the prescribed time period, the single broker appointed shall
determine the Market Rental Rate. If both parties fail to appoint brokers within the prescribed time periods, then the first broker thereafter
selected by a party shall determine the Market Rental Rate. If a single broker is chosen, then such broker shall determine the Market Rental
Rate applicable to the Premises. Otherwise, the Market Rental Rate shall be the arithmetic average of two (2) of the three (3) determinations
which are the closest in amount, and the third determination shall be disregarded. Landlord and Tenant shall instruct the brokers to complete
their determination of the Market Rental Rate not later than forty-five (45) days following Landlord‘s receipt of the Extension Notice. Each
party shall bear the costs of its own broker, and the parties shall share equally the cost of the single or third broker if applicable. Each broker
shall have at least five (5) years' experience in the leasing of similar commercial buildings in the submarket in which the Building is located
and shall be a licensed real estate broker.

6.         Signs . Landlord will permit Tenant to place its signage on the south exterior and the northeast exterior (either East end cap or
North end cap, as mutually agreed in good faith) of the Building. All costs associated with the fabrication, installation, maintenance, removal
and replacement of Tenant's signage shall be the sole responsibility of Tenant. Tenant shall maintain such signage in good condition and
repair. Tenant shall remove such signage and repair any damage caused thereby, at its sole cost and expense, upon the expiration or sooner
termination of the Lease. The color, content, size and other specifications of any such signage shall be in accordance with the terms and
conditions of the Lease, and shall be subject to Landlord's prior approval, which approval shall not be unreasonably withheld, conditioned or
delayed. Further, Tenant shall ensure that all signage complies with any and all applicable local zoning codes and building regulations, as well
as any and all sign criteria for Stonelake 6.


                                                                        37
                                                       EXHIBIT A

Building:            Stonelake 6

Address:             11000 North Mopac Expressway, Suite 100, Austin, Texas 78749-5428

Legal Description:   [Lot 2, Block A, Stonelake Office Park]


                                                               38
                 EXHIBIT A-1

[Site Plan Showing Premises and Expansion Space]


                      39
                                                                EXHIBIT B

                                                           WORK LETTER
                                                     PLANS TO BE AGREED UPON/
                                                        FINISH ALLOWANCE

        This is the Work Letter referred to in and specifically made a part of the Lease to which this Exhibit B is annexed, covering the
Premises, as more particularly described in the Lease. Landlord and Tenant agree as follows:

1.       Defined Terms . The following defined terms shall have the meaning set forth below and, unless provided to the contrary herein, the
remaining defined terms shall have the meaning set forth in the Lease:

Landlord's Representative:                                         Trammell Crow Company

Tenant's Representative:                                           Jeff Musgrove ( jmusgrove@AmericanRealty.com )

Tenant's General Contractor:                                       To be engaged by Tenant, subject to Landlord‘s prior written approval.

Allowance:                                                         The lesser of (a) One Million Fifty-Eight Thousand Four Hundred and
                                                                   No/100ths Dollars ($1,058,400.00) (i.e., $28.00 per rentable square foot
                                                                   of space within the Premises) or (b) Tenant Improvements Costs, as
                                                                   defined below. To the extent that the Allowance is inadequate to cover the
                                                                   cost of the initial Tenant Improvements as set forth in this Work Letter,
                                                                   Tenant shall have the right to receive from Landlord up to an additional
                                                                   $189,000.00 (i.e., $5.00 per rentable square foot of space) (―Additional
                                                                   Allowance‖), which Additional Allowance (or so much thereof as is used)
                                                                   shall be amortized over the initial Term with interest thereon at the fixed
                                                                   rate of 9.00% per annum and added to the Base Rent. In the event of a
                                                                   monetary default beyond any applicable notice and cure period, the
                                                                   outstanding balance of the Additional Allowance shall become fully
                                                                   liquidated and immediately due and payable. Wherever referenced, the
                                                                   term ―Allowance‖ shall be deemed to include the Additional Allowance.

Space Plan:                                                        To be prepared by Tenant and subject to the prior written approval of
                                                                   Landlord, which approval shall not be unreasonably withheld, conditioned
                                                                   or delayed. Landlord acknowledges and agrees that Landlord has
                                                                   approved the preliminary Space Plan attached hereto as Exhibit B-1 .

Construction Management Fee:                                       One percent (1%) of the actual costs paid to the general contractor
                                                                   (including contractor fees), not to exceed one percent (1%) of the
                                                                   Allowance plus that portion of the Additional Allowance that is actually
                                                                   used, which shall be deducted from the Allowance.

2.         Tenant Improvements . The term ―Tenant Improvements‖ shall mean the interior walls, partitions, doors, door hardware, wall
coverings, wall base, counters, lighting fixtures, electrical, plumbing and telephone wiring, cabling for computers, metering and outlets,
ceilings, floor and window coverings, HVAC system, fire sprinklers system, and other items of general applicability that Tenant desires to be
installed in the interior of the Premises (which are not otherwise the obligation of Landlord pursuant to the Lease). The term ―Tenant
Improvement Costs‖ shall mean the following:


                                                                     40
         (i)      Architect and engineer fees, and the fees of any consultant engaged by Tenant in connection with Tenant‘s design and/or
                  construction of the Tenant Improvements;
         (ii)     Plan check, permit and license fees relating to the Tenant Improvements;
         (iii)    Cost of construction of the Tenant Improvements, including costs of carpets and floor coverings;
         (iv)     Cost of any changes in the base, shell and core not otherwise required to be made by Landlord under the Lease, to include all
                  architectural and/or engineering fees and expenses incurred in connection therewith
         (v)      Cost of any changes to the Drawings or Tenant Improvements required by Laws; and
         (vi)     Sales and use taxes in connection with the construction of the Tenant Improvements;

3.       Performance of Tenant‘s Work .

          (a)       General . Tenant shall timely commence and diligently prosecute to full completion Tenant's Work in accordance with the
Drawings. The parties agree that no demolition work shall be commenced on the Premises until such time as Tenant has provided to Landlord
a copy of the demolition permit or other authorization of the City of Austin as required to be obtained from all applicable governmental
authorities. The parties agree that, other than demolition, no Tenant‘s Work shall commence until such time as Tenant has provided to
Landlord a copy of the building permit required to be obtained from all applicable governmental authorities. All materials, work, installations,
equipment and decorations of any nature whatsoever brought on or installed in the Premises before the commencement of the Term or during
the Term shall be at Tenant's risk, and neither Landlord nor any party acting on Landlord's behalf shall be responsible for any damage thereto
or loss or destruction thereof due to any reason or cause whatsoever, excluding by reason of Landlord's negligence or willful or criminal
misconduct.

          (b)        Demising . The parties acknowledge that the Premises shall be a portion of the Building, and that heretofore the Building
has not been partitioned into separate tenant spaces. Landlord acknowledges and agrees that Tenant shall only be required to install drywall on
its side of the demising wall, and only be required to separate electrical and mechanical services to the extent required for the Premises, all at
Tenant‘s sole cost and expense (subject to reimbursement through the Allowance).

4.        Drawings . Tenant shall engage the services of a licensed architect to prepare a space layout, drawings and specifications for all
Tenant Improvements, which architect shall be subject to Landlord's reasonable approval (the ―Architect‖). The following Architect is hereby
approved: Kampfe/ de Stjl, Inc. Tenant shall devote such time in consultation with Tenant's architect as shall be necessary to enable Tenant's
architect to develop complete and detailed architectural, mechanical and engineering drawings and specifications, as necessary, for the
construction of Tenant Improvements, showing thereon all Tenant Improvements substantially in accordance with the Space Plan
(―Drawings‖). Tenant hereby acknowledges and agrees that it is Tenant's sole and exclusive responsibility to cause the Tenant Improvements
and the Drawings to comply with all applicable laws, including the Americans with Disabilities Act and other ordinances, orders, rules,
regulations and requirements of all governmental authorities having jurisdiction thereof.

5.        Landlord's Approval . Tenant shall submit to Landlord complete and final Drawings for Tenant Improvements in the form of two
sets of Drawings. The Drawings shall be subject to the approval of Landlord, which approval shall not be unreasonably withheld. If Landlord
should disapprove such Drawings, Landlord shall specify in writing to Tenant the reasons for its disapproval and Tenant shall cause the same to
be revised to meet the Landlord and Tenant's mutual reasonable satisfaction and shall resubmit the same to Landlord, as so revised, on or
before the applicable Time Limit set forth below. Landlord shall approve or reject any requests within five (5) business days, unless a third
party professional, such as an architect, engineer or surveyor is required for the review process, in which event such Landlord will diligent
prosecute such review process and keep Tenant informed of the any timing issues.


                                                                       41
 6.        Changes . Tenant may request reasonable changes in the Drawings; provided, however, that (a) no change shall be made to the
Drawings without Landlord's Representative's prior written approval, which approval shall not be unreasonably withheld or delayed; (b) no
such request shall effect any structural change in the Building or otherwise render the Premises or Building in violation of applicable laws;
(c) Tenant shall pay any additional costs required to implement such change, including, without limitation, loss of rents, architecture and other
consultant fees, and increases in construction costs; and (d) such requests shall constitute an agreement by Tenant to any delay in completion
caused by Landlord's timely reviewing, and processing such change. If Tenant requests or causes any change, addition or deletion to the
Premises to be necessary after approval of the Drawings, a request for the change shall be submitted to Landlord's Representative, accompanied
by revised plans prepared by Tenant's architect, all at Tenant's sole expense.

7.       Tenant's Work . It is understood and agreed by the parties that, as hereinafter set forth, Tenant shall select a general contractor
(―General Contractor‖) and arrange for the construction and installation of Tenant Improvements itself in a good and workmanlike manner
(―Tenant's Work‖). On or before the applicable Time Limit set forth below, Tenant shall submit to Landlord the name of the General
Contractor, for Landlord's approval, which approval shall not be unreasonably withheld. . If Landlord shall properly reject any General
Contractor, Landlord shall advise Tenant of the reason(s) in writing and, Tenant shall choose another General Contractor. The following
General Contractors are hereby approved: Trimbuilt Construction, and Spaw Maxwell,. Tenant shall notify Landlord of its estimate of the
Tenant Improvement Costs.

8.       Tenant's Construction of Tenant Improvements .

          (a)       Payment; Landlord shall post and serve notices of non-liability in accordance with applicable laws. In the event any lien is
filed against the Building or any portion thereof or against Tenant's leasehold interest therein, the provisions of Article 9 shall apply.

         (b)         Indemnity . Tenant shall indemnify, defend (with counsel reasonably satisfactory to Landlord and Tenant) and hold
Landlord harmless from and against any and all suits, claims, actions, loss, cost or expense (including claims for workers' compensation,
attorneys' fees and costs) based on personal injury or property damage caused in, or contract claims (including, but not limited to claims for
breach of warranty) arising from Tenant's Work. Tenant shall repair or replace (or, at Landlord's election, reimburse Landlord for the cost of
repairing or replacing) any portion of the Building or item of Landlord's equipment or any of Landlord's real or personal property damaged, lost
or destroyed in the construction of Tenant Improvements.

         (c)        Contractors . The General Contractor employed by Tenant and any subcontractors thereof shall be (i) duly licensed in the
state in which the Premises are located,. On or before ten (10) business days prior to the commencement of any construction activity in the
Premises, Tenant shall obtain and provide Landlord with certificates evidencing Workers' Compensation, public liability and property damage
insurance in amounts and forms specified in an attachment to this Work Letter. Tenant's agreement with its General Contractor shall require
such contractors to provide daily clean up of the construction area to the extent such clean up is necessitated by the construction of Tenant
Work, and to take reasonable steps to minimize interference with other tenants' use and occupancy of the Building. Nothing contained herein
shall make or constitute Tenant as the agent of Landlord. Tenant and Tenant's contractors shall comply with any other reasonable rules,
regulations or requirements that Landlord may impose.

         (d)        Use of Common Areas . During the construction period, Tenant shall ensure that all trash and construction debris in the
Building and all common areas and the Premises are removed on a regular basis and that the Tenant‘s Work does not adversely impact safety in
such areas at all times. After hours construction activities by Tenant shall require reimbursement to Landlord for its costs for after-hours
supervision, which amount shall be in addition to the Construction Management Fee. Further, all construction activities shall be conducted so
as to use reasonable efforts to minimize interference with the use and occupancy of the Building by the tenants thereof. Such entry shall be
deemed to be under all the terms, covenants, provisions and conditions of the Lease.

          (e)       Assumption of Risk . All materials, work, installations, equipment and decorations of any nature whatsoever brought on or
installed in the Premises pursuant to the provisions of this Work Letter before the commencement of the Term or throughout the Term shall be
at Tenant's risk, and neither Landlord nor any party acting on Landlord's behalf shall be responsible for any damage thereto or loss or
destruction thereof due to any reason or cause whatsoever, excluding by reason of Landlord or such other party's negligence or willful or
criminal misconduct.


                                                                       42
 9.        Start Date . Tenant shall not be allowed access to the Premises to commence construction of Tenant Improvements until such time
as Tenant has provided to Landlord copies of the demolition permit(s) or valid authorization by the City of Austin and the contractors meeting
all of Landlord‘s insurance requirements (the ―Construction Entry Date‖). Except as may be otherwise specifically provided for herein, in all
instances where either Tenant's or Landlord's approval is required, if no written notice of disapproval is given within the applicable Time Limit,
at the end of such period the applicable party shall be deemed to have given its approval and the next succeeding time period shall
commence. Any delay in any of the foregoing dates (including any ―re-do‖, continuation or abatement of any item due to Tenant's or
Landlord's disapproval thereof) shall automatically delay all subsequent deadlines by a like amount of time.

10.      Allowance . Landlord shall pay all Tenant Improvement Costs in an amount not to exceed the Allowance. If the final costs for
Tenant's Work exceed the Allowance (―Excess Costs‖), those Excess Costs shall be paid by Tenant following full disbursement by Landlord of
the Allowance. Provided this Lease is in full force and effect and Tenant is not in Default hereunder beyond any applicable notice and grace
period, Landlord shall pay Allowance to Tenant consistent with the terms and conditions of this Section. Prior to, during and following
Tenant‘s Work, as the case may be, Landlord shall make monthly disbursements of the Allowance as follows:

    (i) On or before the twenty fifth (25 th ) day (the ―Submittal Date‖) of each calendar month commencing with the first calendar month
         following the execution of the contract with the General Contractor, the General Contractor or Tenant shall deliver to Landlord (a) a
         request for payment (―Draw Request‖); (b) invoices from all contractors, consultants, materialmen, laborers and suppliers directly
         retained by Tenant for Tenant‘s Work for the applicable payment period (which are covered by the Request for Payment); and (c)
         executed conditional mechanic‘s lien releases from subcontractors and other parties (who have potential mechanics‘ liens rights under
         applicable law), for all work requested to be paid; and (d) unconditional lien releases, if applicable, for all Tenant‘s Work paid for
         from the Allowance on any prior Draw Request. Landlord‘s receipt of the Draw Request shall be deemed to constitute Tenant‘s
         authorization for Landlord to disburse the amounts requested to General Contractor and to deduct such amounts from the Allowance.
    (ii) On or before ten (10) days after Landlord‘s receipt of a Draw Request (the ―Payment Date‖), and provided Landlord receives the
          items set forth in clauses (a) – (d) above, Landlord shall deliver a check to Contractor or Tenant, as directed by Tenant, in payment
          of the lesser of (A) the amounts so requested less a ten percent (10%) retention (the aggregate amount of such retentions to be
          known as the ―Final Retention‖), and (B) the balance of any remaining portion of the Allowance (not including an amount equal to
          the Final Retention).
    (iii) Checks for the Final Retention payable to General Contractor shall be delivered by Landlord, as directed by Tenant, to Tenant or
            the General Contractor within thirty (30) days following submission by Tenant of: (a) ―as-built‖ drawings showing all of Tenant
            Improvements, (b) a detailed breakdown of Tenant's final and total construction costs, together with receipted invoices showing
            payment thereof, (c) a certified, written statement from Tenant's architect that all of Tenant Improvements has been completed in
            accordance with the Drawings, (d) all required AIA forms, supporting final lien waivers, and releases executed by the architect,
            General Contractor, the major subcontractors and all subcontractors and suppliers in connection with Tenant Improvements who by
            law have potential mechanic‘s lien rights), (e) a copy of a certificate of occupancy or amended certificate of occupancy required
            with respect to the Premises, if applicable, together with all licenses, certificates, permits and other government authorizations
            necessary in connection with Tenant Improvements and the operation of Tenant's business from the Premises, and (f) proof
            reasonably satisfactory to Landlord that Tenant has complied with all of the conditions set forth in this Work Letter and has
            satisfactorily completed Tenant Improvements, including, at Landlord's option, a certificate from Landlord's construction manager
            after inspection of Tenant Improvements (―Final Retention Draw Request‖). Upon Landlord's receipt and approval of the Final
            Retention Draw Request, Landlord shall pay the balance of Allowance less the Construction Management Fee. Payment by
            Landlord shall be made within thirty (30) days, unless Landlord in good faith notifies Tenant, in writing, of its dispute (and the
            reasons therefor) of any or all of the Final Retention Draw Request. To the extent Landlord does not so reject any portion of said
            Final Retention Draw Request, Landlord shall timely pay such acceptable portion of the Final Retention Draw Request.


                                                                       43
 10.         Substantial Completion . Tenant Improvements shall be deemed substantially complete when all work called for by the Drawings
has been finished and the Premises is ready to be used and occupied by Tenant, even though minor items may remain to be installed, finished
or corrected and a certificate of occupancy has been issued (―Substantial Completion Date‖ or the ―Date of Substantial Completion‖). Tenant
shall cause the contractors to diligently complete any items of work not completed when the Premises are substantially complete. In the event
of any dispute as to substantial completion of Tenant Improvements, the statement of Landlord's construction manager shall be
conclusive. Substantial completion shall have occurred notwithstanding punch list items.

11.         Tenant's Representative . Tenant has designated Tenant's Representative as its sole representative with respect to the matters set
forth in this Work Letter, who shall have full authority and responsibility to act on behalf of Tenant as required in this Work Letter. Tenant
shall not change Tenant's Representative except upon prior written notice to Landlord.

12.        Landlord's Representative . Tenant acknowledges that neither Tenant's architect nor any contractor engaged by Tenant is Landlord's
agent and neither entity has authority to enter into agreements on Landlord's behalf or otherwise bind Landlord. Landlord has designated
Landlord's Representative as its sole representative with respect to the matters set forth in this Work Letter, who shall have full authority and
responsibility to act on behalf of Landlord as required in this Work Letter. Landlord shall not change Landlord's Representative except upon
notice to Tenant.

13.         No Representations or Warranties . Notwithstanding anything to the contrary contained in the Lease or herein, Landlord's
participation in the preparation of the Drawings, the cost estimates for Tenant and the construction of Tenant Improvements and/or Tenant
Improvements shall not constitute any representation or warranty, express or implied, that (i) the Drawings are in conformity with applicable
governmental codes, regulations or rules or (ii) Tenant Improvements, if built in accordance with the Drawings, will be suitable for Tenant's
intended purpose. Tenant acknowledges and agrees that Tenant Improvements are intended for use by Tenant and the specification and design
requirements for such improvements are not within the special knowledge or experience of Landlord. Landlord's obligations shall be to review
the Drawings; and any additional cost or expense required for the modification thereof to more adequately meet Tenant's use, whether during or
after construction thereof, shall be borne entirely by Tenant.

14.        Incorporation . This Work Letter is incorporated in the Lease; and all of the terms and provisions of the Lease are incorporated
herein by this reference.

                                                 [Remainder of Page Intentionally Left Blank]


                                                                       44
EXHIBIT B-1




    45
                          EXHIBIT C

[Intentionally Omitted]


                             46
                                                                EXHIBIT D

                                                       Building Rules and Regulations

 The following rules and regulations shall apply to the Premises, the Building, the Land and the appurtenances thereto. In the event of any
conflict between these rules and regulations and the terms and conditions of the Lease, the terms and conditions of the Lease shall control:

1.      Sidewalks, doorways, vestibules, halls, stairways, and other similar areas shall not be obstructed by tenants or used by any tenant for
        purposes other than ingress and egress to and from their respective leased premises and for going from one to another part of the
        Building.

2.      Plumbing, fixtures and appliances shall be used only for the purposes for which designed, and no sweeping, rubbish, rags or other
        unsuitable material shall be thrown or deposited therein. Damage resulting to any such fixtures or appliances from misuse by a tenant
        or its agents, employees or invitees, shall be paid by such tenant, and Landlord will not in any case be responsible therefor.

3.      No signs, advertisements or notices shall be painted or affixed on or to any windows or doors or other part of the Building without the
        prior written consent of Landlord. No curtains or other window treatments shall be placed between the glass and the Building
        standard window treatments.

4.      Movement in or out of the Building of furniture or office equipment, or dispatch or receipt by tenants of any bulky material,
        merchandise or materials which require use of stairways, or movement through the Building entrances or lobby shall be conducted
        under Landlord‘s supervision at such times and in such a manner as Landlord may reasonably require. Each tenant assumes all risks
        of and shall be liable for all damage to articles moved and injury to persons or public engaged or not engaged in such movement,
        including equipment, property and personnel of Landlord if damaged or injured as a result of acts in connection with carrying out this
        service for such tenant from the time of entering the property to completion of work and Landlord will not be liable for acts of any
        person engaged in, or any damage or loss to any of said property or persons resulting from, any act in connection with such service
        performed for a tenant.

5.      Landlord may prescribe weight limitations and determine the locations for safes and other heavy equipment or items, which shall in
        all cases be placed in the Building so as to distribute weight in a manner acceptable to Landlord which may include the use of such
        supporting devices as Landlord may require. All damages to the Building caused by the installation or removal of any property of a
        tenant, or done by a tenant‘s property while in the Building, shall be repaired at the expense of such tenant.

6.      Nothing shall be swept or thrown into the corridors, halls, or stairways. No birds, pets or animals shall be brought into or kept in, on
        or about any tenant‘s Premises. No portion of any tenant‘s Premises or the Building shall at any time be used or occupied as sleeping
        or lodging quarters.

7.      Tenant shall cooperate with Landlord‘s employees in keeping its leased Premises neat and clean.

8.      Tenant shall not make or permit any improper, objectionable or unpleasant noises or orders in the Building or otherwise interfere in
        any way with other tenants or persons having business with them. Smoking of cigarettes, cigars, and all tobacco products is
        prohibited on the Land and in the Building or Premises, except for locations specifically designated in Exhibit A-1 or the Space Plan.

9.      No machinery of any kind (other than normal office equipment or equipment required by Tenant‘s electronic parts assembling,
        staging and testing) shall be operated by any tenant in the Premises without Landlord‘s prior written consent, nor shall any tenant use
        or keep in the Building any flammable or explosive fluid or substance other than reasonable amounts of solvents and the like
        incidental to Tenant‘s electronic parts assembling, staging and testing.


                                                                      47
10.   Landlord will not be responsible for lost or stolen personal property, money or jewelry from tenant‘s Premises or public or common
      areas or Parking Areas.

11.   All tenants will refer all contractors, contractors‘ representatives and installation technicians to Landlord for Landlord‘s supervision,
      approval and control before the performance of any contractual services. This provision will apply to all work performed in the
      Building including but not limited to installations of telephones, telegraph equipment, electrical devices and attachments, doors,
      entrance ways, and any and all installations of every nature affecting floors, walls, woodwork, trim, window, ceilings, equipment and
      any other physical portion of the Building.

12.   Should a tenant require telegraphic, telephonic, enunciator or other communication service, other than as part of the initial Tenant
      Improvements pursuant to the Work Letter attached to the Lease, which shall be approved as part of the Space Plan approval,
      Landlord will direct the electrician where and how wires are to be introduced and placed and none will be introduced or placed except
      as Landlord will direct. Electric current will not be used for heating without Landlord‘s prior written permission.

13.   No vehicles(s) will be left in the Parking Areas for more than a forty-eight (48) hour period without the Landlord‘s prior written
      consent. No outside storage is permitted.

14.   Tenant shall give immediate notice to Landlord in case of any known emergency at the Premises, Building, or Land.

15.   Tenant shall keep door to unattended areas locked and shall otherwise exercise reasonable precautions to protect its property from
      theft, loss or damage. Landlord shall not be responsible for the theft, loss or damage of any property or for any error with regard to
      the exclusion from or admission to the Premises or the Building of any person. In case of invasion, mob, riot or public excitement,
      Landlord reserves the right to prevent access to the Premises or the Building during the continuance of same by closing the doors or
      taking other measures for the safety of the tenants and protection of the Premises or the Building and property or persons therewith.

16.   All keys shall be returned to Landlord upon the termination of this Lease and Tenant shall give to Landlord the explanations of the
      combinations of all safes, vaults and combination locks remaining with the Premises. Landlord may at all times keep a pass key to
      the Premises. All entrance doors to the Premises shall be left closed at all times and left locked when the Premises are not in use.

17.   Except arising out of Tenant‘s Permitted Use of the Premises and as otherwise expressly permitted in the Lease, Tenant shall not
      place, install or operate on the Premises or in any part of the Building, any engine, stove or machinery, or conduct mechanical
      operations or cook thereon or therein, or place or use in or about the Premises any explosives, gasoline, kerosene, oil, acids, caustics,
      or any inflammable, explosive, or hazardous materials without written consent of Landlord.

18.   Landlord reserves the right to rescind any of these Rules and Regulations and to make such other further Rules and Regulations as in
      its judgment will from time to time be needful for the safety, protection, care and cleanliness of the Premises, Building, and the Land
      the operation thereof, the preservation of good order therein and the protection and comfort of the tenants and their agents, employees,
      licensees and invitees, which Rules and Regulations, when made and written notice thereof if given to a tenant, will be binding upon
      it in like manner as if originally set forth herein.


                                                                    48
                                                                EXHIBIT E

                                                            [Sign and Lettering]

[To be delivered by Landlord to Tenant, and as may be updated from time to time, upon prior written notice to Tenant]


                                                                     49
                                                                   EXHIBIT F

                                        HAZARDOUS MATERIALS DISCLOSURE CERTIFICATE

Your cooperation in this matter is appreciated. Initially, the information provided by you in this Hazardous Materials Disclosure Certificate is
necessary for the Landlord (identified below) to evaluate and finalize a lease agreement with you as Tenant. After a lease agreement is signed
by you and the Landlord (the ―Lease Agreement‖), within 30 days following written request from Landlord, however no more than twice per
calendar year (unless the most recent information has materially changed and Tenant determines that new information needs to be provided to
Landlord more frequently) in accordance with the provisions of Section 26 of the signed Lease Agreement, upon Landlord‘s request, you are to
provide an update to the information initially provided by you in this certificate. The information contained in the initial Hazardous Materials
Disclosure Certificate and each subsequent certificate provided by you thereafter will be maintained in confidentiality by Landlord subject to
release and disclosure as required by (i) any lenders and owners and their respective environmental consultants, (ii) any prospective
purchaser(s) of all or any portion of the property on which the Premises are located, (iii) Landlord‘s requirement to defend itself or its lenders,
partners or representatives against any claim or demand, and (iv) any laws, rules, regulations, orders, decrees, or ordinances, including, without
limitation, court orders or subpoenas. Any and all capitalized terms used herein, which are not otherwise defined herein, shall have the same
meaning ascribed to such term in the signed Lease Agreement. Any questions regarding this certificate should be directed to, and when
completed, the certificate should be delivered to:

    Landlord Name:                                              Principal Life Insurance Company, an Iowa corporation

                                                                PRINCIPAL LIFE INSURANCE COMPANY
                                                                801 Grand Ave.
                                                                Des Moines, Iowa 50392-1370
                                                                Attn: Commercial Real Estate Equities, Central States Region

                                                                With a copy to:

                                                                Trammell Crow Company
                                                                P.O. Box 2176
                                                                Austin, Texas 78768-2176
                                                                Attn: Property Manager of 4030 West Braker Lane
    Name of (Prospective) Tenant:                               Crossroads Systems, Inc.
                                                                11000 North Mopac Expressway, Suite 100
                                                                Austin, TX 78749-5428

Contact Person, Title and Telephone Number(s):

Contact Person for Hazardous Waste Materials Management and Manifests and Telephone Number(s)



Address of (Prospective) Premises:

Length of (Prospective) initial Term:


                                                                        50
1.   GENERAL INFORMATION:

     Describe the initial proposed operations to take place in, on, or about the Premises, including, without limitation, principal products
     processed, manufactured or assembled, services and activities to be provided or otherwise conducted. Existing Tenants should
     describe any proposed changes to ongoing operations. (Attach additional sheets if necessary).




2.   USE, STORAGE AND DISPOSAL OF HAZARDOUS OR TOXIC MATERIALS

     2.1      Will any Hazardous or Toxic Materials be used  , generated  , stored E or disposed of  in, on or about the Premises?
              (Note: Generally all storage will be required to be fully contained). Existing Tenants should describe any Hazardous or
              Toxic Materials which continue to be used, generated, stored or disposed of in, on or about the Premises.

              Wastes                      Yes               No 

              Chemical Products           Yes               No 

              Other                       Yes               No 

     If yes is marked attach all MSDS's and please explain: (MSDS's Attached  )

     2.2      If yes is marked in Section 2.1, attach a list of any Hazardous or Toxic Materials to, be used, generated, stored or disposed of
              in, on or about the Premises, including the applicable hazard class and an estimate of the quantities of each such Hazardous
              or Toxic Materials at any given time; estimated annual throughout; the proposed location(s) and method of storage,
              including container sizes and types (excluding nominal amounts of ordinary household cleaners and janitorial supplies which
              are not regulated by any Environmental Laws); and the proposed locations) and method of disposal for each Hazardous or
              Toxic Material, including, the estimated frequency, and the proposed contractors or subcontractors. Existing Tenants should
              attach a list setting forth the information requested above such list should include actual data from ongoing operations and
              the identification of any variations in such information from the prior year's certificate. Attach a Site Plan indicating all
              storage areas - (Attached  ).

3.   STORAGE TANKS AND SUMPS

     3.1      Is any above or below ground storage of gasoline, diesel, petroleum, or other Hazardous or Toxic Material in tanks or sumps
              proposed in, on or about the Premises? Existing Tenants should describe any such actual or proposed activities, including
              any required SPCC Plan.

              Yes                         No 

                If Yes, please explain:




4.   WASTE MANAGEMENT

     4.1       (a)        Has your company been issued an EPA Hazardous Waste Generator I.D. Number? Existing Tenants should
              describe any additional identification numbers issued since the previous certificate.


                                                                    51
                 Yes                         No 

                    Describe RCRA status:




         (b)      Has your company been issued a solid waste registration number?

                 Yes                         No 

                    Describe status:




         4.2      Has your company filed a biannual or quarterly report as a hazardous waste generator?

                 Yes                         No 

                 If yes, attach a copy of the most recent report filed. (Attached  ).

5.       WASTEWATER TREATMENT AND DISCHARGE

         5.1      Will your company discharge wastewater or other wastes to:

                   _____ storm drain?                      _____ sewer?
                   _____ surface water?                    _____ facility treatment plant?
                   _____ grounds                           _____ no wastewater or other
         (i.e., compressor blow-down)        wastes discharge ([Existing Tenants should indicate any actual discharges. If so, describe the
nature of any proposed or actual discharges). (Note: Generally, discharges to storm drains will be prohibited without prior review and approval
from Landlord).




6.       AIR DISCHARGES

         6.1      Do you plan for any air filtration systems or stacks to be used in your company's operations in, on or about the Premises that
                  will discharge into the air; and will such air emissions be monitored? Existing Tenants should indicate whether or not there
                  are any such air filtration systems or stacks in use in, on or about the Premises which discharge into the air and whether such
                  air emissions are being monitored.

                 Yes                         No 

                    If yes, please explain:




         6.2      Do you propose to operate any of the following types of equipment, or any other equipment requiring an air emissions
                  permit? Existing Tenants should specify any such equipment being operated in, on or about the Premises.

                 _____ Spray booth(s)                             _____ Incinerator(s)
                 _____ Dip tank(s)                                _____ Drycleaning
                 _____ Drying oven(s)                             _____ Other (please describe)
                                                                  _____ No Equipment Requiring Air Permits


                                                                        52
             If yes, please explain:




     6.3   Do any of your operations generate an obvious odor:

           Yes                        No 

7.   HAZARDOUS OR TOXIC MATERIALS DISCLOSURES

     7.1   Has your company prepared or will it be required to prepare a Hazardous or Toxic Materials management plan
           (―Management Plan‖) pursuant to Fire Department or other governmental or regulatory agencies' requirements. Existing
           Tenants should indicate whether or not a Management Plan is required and has been prepared.

           Yes                        No 

           If yes, attach a copy of the Management Plan. Existing Tenants should attach a copy of any required updates to the
           Management Plan.

8.   ENFORCEMENT ACTIONS AND COMPLAINTS

     8.1   With respect to Hazardous or Toxic Materials or Environmental Laws, has your company ever been subject to any agency
           enforcement actions, administrative orders, or consent decrees designated as a PRP or has your company received requests
           for information, notice or demand letters (cited in violation of any environmental regulation), or any other inquiries
           regarding its operations? Existing Tenants should indicate whether or not any such actions, orders or decrees have been, or
           are in the process of being, undertaken or if any such requests have been received.

           Yes                        No 

           If yes, describe the actions, orders or decrees and any continuing compliance obligations imposed as a result of these actions,
           orders or decrees and also describe any requests, notices or demands, and attach a copy of all such documents. Existing
           Tenants should describe and attach a copy of any new actions, orders, decrees, requests, notices or demands not already
           delivered to Landlord pursuant to the provisions of Section 26 of the signed Lease Agreement.

     8.2   Have there ever been, or are there now pending, any lawsuits against your company regarding any environmental or health
           and safety concerns?

           Yes                        No 

           If yes, describe any such lawsuit and attach copies of the complaint(s), cross-complaint(s), pleadings and all other documents
           related thereto as requested by Landlord. Existing Tenants should describe and attach a copy of any new complaint(s),
           cross-complaint(s), pleadings and other related documents not already delivered to Landlord pursuant to the provisions of
           Section 26 of the signed Lease Agreement.




     8.3   Have there been any problems or complaints from past or current landlords, adjacent tenants, owners or other neighbors at
           your company's current facility with regard to environmental or health and safety or odor concerns? Existing Tenants should
           indicate whether or not there have been any such problems or complaints from adjacent tenants, owner; or other neighbors
           at, about or near the Premises.


                                                                53
                 Yes                        No 

                 If yes, please describe. Existing Tenants should describe any such problems or complaints not already disclosed to Landlord
                 under the provisions of the signed lease.




9.       PERMITS AND LICENSES

         9.1      Attach copies of all Hazardous or Toxic Materials permits and licenses issued to your company with respect to its proposed
                  operations in, on or about the Premises, including, without limitation, any wastewater discharge permits, air emissions
                  permits, and use permits or approvals. Existing Tenants should attach copies of any new permits and licenses as well as any
                  renewals of permits or licenses previously issued.

The undersigned hereby acknowledges and agrees that this Hazardous Materials Disclosure Certificate is being delivered in connection with,
and as required by, Landlord in connection with the evaluation and finalization of a Lease Agreement and will be attached thereto as an
exhibit. The undersigned further acknowledges and agrees that this Hazardous Materials Disclosure Certificate is being delivered in
accordance with, and as required by, the provisions of Section 26 of the Lease Agreement. The undersigned further acknowledges and agrees
that the Landlord and its partners, lender; and representatives may, and will, rely upon the statements, representations, warranties, and
certification is made herein and the truthfulness thereof in entering into the Lease Agreement and the continuance thereof throughout the term,
and any renewals thereof, of the Lease Agreement. I, ______________________, acting with full authority to bind the (proposed) Tenant and
on behalf of the (proposed) Tenant, certify, represent and warrant that the information contained in this certificate is true and correct.

(PROSPECTIVE) Tenant:

CROSSROADS SYSTEMS, INC.,
a Delaware corporation

By:
Title:
Date:


                                                                      54
                                                             EXHIBIT G

                                                  FORM OF LETTER OF CREDIT

                                           IRREVOCABLE CLEAN LETTER OF CREDIT

DATE OF ISSUE: _____________, 20__                                                                        CREDIT NUMBER:
                                                                                             DATE AND PLACE OF EXPIRY:
                                                                                             ___________ AT OUR COUNTERS
BENEFICIARY:                                                          APPLICANT:
PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation,                ________________________________
for its Principal U.S. Property Separate Account, formerly known as   ________________________________
Principal Life Insurance Company, an Iowa corporation, for its Real   ________________________________
Estate Separate Account
C/o Principal Real Estate Investors, LLC
 Department H137 – MRI #006810
 801 Grand Avenue
Des Moines, Iowa 50392
Attn: Operations Manager

UP TO AN AGGREGATE AMOUNT OF ____ HUNDRED ______________ THOUSAND AND NO/100THS DOLLARS
($______________________.00)

DEAR SIRS:

BY ORDER OF OUR CLIENT, ________________________________, WE HEREBY OPEN OUR CLEAN IRREVOCABLE LETTER OF
CREDIT NO. _______________ IN YOUR FAVOR FOR AN AMOUNT NOT TO EXCEED IN THE AGGREGATE ________ HUNDRED
________________ THOUSAND AND NO/100THS DOLLARS ($_______________.00) EFFECTIVE IMMEDIATELY.

FUNDS UNDER THIS CREDIT ARE AVAILABLE TO YOU AGAINST YOUR DRAFT ON US MENTIONING THEREON ―DRAWN
UNDER ________________ BANK, [CITY], [STATE], LETTER OF CREDIT NO. ____________.‖ A SIGHT DRAFT SUBMITTED TO
US BY BENEFICIARY IS TO BE ACCOMPANIED BY A CERTIFICATE FROM BENEFICIARY STATING THAT BENEFICIARY HAS
THE RIGHT TO DRAW UPON THIS LETTER OF CREDIT BASED UPON THE TERMS OF THE LEASE DATED
___________________________. WE AGREE TO PAY ANY SIGHT DRAFT AND TO GIVE NOTICE OF DISCREPANCIES ON THE
DATE OF PRESENTATION AND, FURTHER, WE WAIVE ANY RIGHT TO WAIT SEVEN BANKING DAYS PURSUANT TO
ARTICLE 13(B) OF THE ICC UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION).


                                                                 55
THIS LETTER OF CREDIT SHALL EXPIRE __________, 20___, HOWEVER, IT IS A CONDITION OF THIS LETTER OF CREDIT
THAT IT SHALL BE DEEMED AUTOMATICALLY EXTENDED, FROM TIME TO TIME, WITHOUT AMENDMENT, FOR ONE
YEAR FROM THE EXPIRY DATE HEREOF AND FROM EACH AND EVERY FUTURE EXPIRY DATE, UNLESS AT LEAST THIRTY
(30) DAYS PRIOR TO ANY EXPIRY DATE WE SHALL NOTIFY YOU BY REGISTERED MAIL THAT WE ELECT NOT TO
CONSIDER THIS LETTER OF CREDIT RENEWED FOR ANY SUCH ADDITIONAL PERIOD.

THIS LETTER OF CREDIT IS TRANSFERABLE IN ITS ENTIRETY OR IN ONE OR MORE PORTIONS TO ANY TRANSFEREE OR
TRANSFEREES WHO SHALL BE IDENTIFIED IN YOUR WRITTEN TRANSFER REQUEST, ISSUED SUBSTANTIALLY IN THE
FORM ATTACHED. UPON PRESENTATION OF YOUR WRITTEN TRANSFER REQUEST AND THIS LETTER OF CREDIT
ACCOMPANIED BY OUR TRANSFER FEES IN THE AMOUNT OF USD $100.00, WE SHALL FORTHWITH ISSUE OUR
IRREVOCABLE ADVICE OF TRANSFER TO THE DESIGNATED TRANSFEREE OR TRANSFEREES FOR THE UNUSED PORTION
HEREOF. EACH ADVICE OF TRANSFER ISSUED UPON SUCH TRANSFER MAY BE SUCCESSIVELY TRANSFERRED IN THE
SAME MANNER.

WE HEREBY IRREVOCABLY ENGAGE WITH YOU THAT THOSE DRAFTS AND/OR DOCUMENTS DRAWN IN CONFORMITY
WITH THE TERMS OF THIS CREDIT WILL BE FULLY HONORED ON PRESENTATION TO: _____________
[INSERT ADDRESS OF BANK]_____________

EXCEPT SO FAR AS OTHERWISE EXPRESSLY STATED, THIS DOCUMENTARY CREDIT IS SUBJECT TO THE UNIFORM
CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION) INTERNATIONAL CHAMBER OF COMMERCE
PUBLICATION NO. 500 (―UCP‖).

VERY TRULY YOURS,

BY:                                                 BY:
      AUTHORIZED SIGNATURE                                AUTHORIZED SIGNATURE


                                                   56
                                                                     ANNEX A

INSTRUCTIONS FOR TRANSFER OF LETTER OF CREDIT NO. _____________

[Name of Bank]                                                   Date:

We enclose the original of Letter of Credit No. __________ issued to us. As the beneficiary of the Letter of Credit, we hereby irrevocably
transfer to:


                                         [name of transferee]


                                         [address]

all of our rights to draw up to an aggregate sum of $_______________ under the Letter of Credit, subject to the same terms and conditions.

By this transfer, all of our rights in such Letter of Credit are transferred to the transferee [up to the amount above] and the transferee shall have
the sole rights as beneficiary thereof. Any amendments hereafter made to the Letter of Credit need not be advised to or approved by us before
being advised to the transferee.

Please notify the transferee, in such form as you deem appropriate, of the terms and conditions of the Credit as transferred, by _____________
[indicate mail or special courier].

I hereby certify that I am duly authorized to execute this Instruction.

                                                                  [NAME OF BENEFICIARY OF LOC]

                                                                  By:
                                                                  Name:
                                                                  Title:


                                                                           57
                                                                                                                              Exhibit 10.12.2
                                                    FIRST AMENDMENT TO LEASE

                                                     (Crossroads Systems – Stonelake 6)

 THIS FIRST AMENDMENT TO LEASE (―Amendment‖) is dated effective and for identification purposes as of December 15, 2009, and is
made by and between PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation (―Landlord‖), and CROSSROADS SYSTEMS,
INC., a Delaware corporation (―Tenant‖).

                                                                RECITALS:

 WHEREAS, Landlord and Tenant entered into that certain Lease Agreement dated on or about October 31, 2005 (―Lease‖), pertaining to the
premises currently comprised of a total of approximately 37,800 rentable square feet of space, commonly referred to as Suite 100 (―Premises‖),
of the building located at 11000 North Mopac Expressway, Austin, Texas 78749 (―Building‖); and

 WHEREAS, Landlord and Tenant desire to enter into this Amendment to adjust and extend the Term of the Lease and provide for certain
other matters as more fully set forth herein;

 NOW, THEREFORE, in consideration of the foregoing and the mutual covenants contained herein, the parties agree that the Lease shall be
amended in accordance with the terms and conditions set forth below.

1.        Definitions . The capitalized terms used herein shall have the same definitions as set forth in the Lease, unless otherwise defined
herein.

2.         Extension . The parties hereby acknowledge and agree that the Term of the Lease expires on August 31, 2011. However,
Landlord and Tenant desire to adjust and extend the Term on the terms and conditions set forth herein. Accordingly, subject to the terms and
conditions set forth in this Amendment, the Term is hereby adjusted and extended for an additional period of sixty (60) months (―Extension
Term‖), commencing on March 1, 2010 and expiring on February 28, 2015. Tenant hereby accepts the Premises in its present ―as-is‖ condition
during the Extension Term.

3.         Base Rent . During the Extension Term, Tenant shall pay to Landlord Base Rent in full and without offset or demand, provided
that such Base Rent shall be payable monthly as follows:

                                                                                Monthly
Dates                                                  Rate/RSF/mo.             Payment

03/01/10 – 05/31/10                                    $               0.75     $           0.00 *
06/01/10 – 05/31/11                                    $               0.75     $      28,350.00
06/01/11 – 05/31/12                                    $              0.775     $      29,295.00
06/01/12 – 05/31/13                                    $               0.80     $      30,240.00
06/01/13 – 05/31/14                                    $              0.825     $      31,185.00
06/01/14 – 02/28/15                                    $               0.85     $      32,130.00


                                                                      1
Except as otherwise set forth herein, Base Rent shall be payable pursuant to Article 2 of the Lease. During the Extension Term, Tenant shall
continue to pay any and all Additional Rent (as defined in Section 2.3 of the Lease), including, without limitation, Tenant's Proportionate Share
(as defined in the Basic Lease Terms of the Lease) of Operating Expenses (as defined in Section 2.3 of the Lease) and Taxes (as defined in
Section 3.1 of the Lease), and other amounts due and payable under the Lease.

* Such abatement shall apply solely to payment of the monthly installments of Base Rent and shall not be applicable to any other charges,
expenses or costs payable by Tenant under the Lease or this Amendment, including, without limitation, Tenant‘s obligation to pay its utilities
or Additional Rent. Landlord and Tenant agree that the abatement of rental and other payments contained in this Section is conditional and is
made by Landlord in reliance upon Tenant's faithful and continued performance of the terms, conditions and covenants of this Amendment and
the Lease and the payment of all monies due Landlord hereunder. In the event that Tenant‘s right to possess the Premises is terminated due to a
default under the terms and conditions of the Lease or this Amendment beyond any applicable notice and cure period, the unamortized portion
of all conditionally abated rental shall become fully liquidated and immediately due and payable (without limitation and in addition to any and
all other rights and remedies available to Landlord provided herein or at law and in equity).

4.          HVAC . Tenant may replace any existing HVAC unit or install an additional HVAC unit in the Premises pursuant to Article 6 of
the Lease at Tenant‘s sole cost and expense (―HVAC Improvements‖). The exact specifications of the HVAC Improvements are subject to the
prior written consent of Landlord, not to be unreasonably withheld, conditioned or delayed. Landlord shall reimburse to Tenant the lesser of (i)
Twelve Thousand and No/100ths Dollars ($12,000.00) or (ii) the actual cost of the HVAC Improvements (―HVAC Allowance‖). To qualify
for reimbursement, such HVAC Improvements must be constructed and a written request for reimbursement must be delivered to Landlord no
later than August 31, 2011. Tenant must coordinate all HVAC Improvements with Landlord and Landlord‘s roofing contractor, and ensure that
the roof warranty is not impaired or voided in any manner whatsoever. Landlord shall reimburse to Tenant the HVAC Allowance (or
applicable portion thereof) within thirty (30) days following Landlord's receipt of a written request therefor, which request shall include
applicable lien waivers, fully paid invoices, ―as built‖ drawings (to the extent applicable) and any and all other documentation as Landlord may
reasonably require.

5.        Extension Option . The Extension Option set forth in Section 5 of the Rider to Lease shall continue to be effective through the
remainder of the Term, as hereby extended.

6.        Expansion Option . The Expansion Option set forth in Section 4 of the Rider to Lease shall continue to be effective through the
remainder of the Term, as hereby extended.

7.        Waiver of Termination Option . Tenant expressly waives the Termination Option set forth in Section 3 of the Rider to Lease.

8.         Brokers . Tenant hereby represents and warrants to Landlord that Tenant has not dealt with any real estate brokers or leasing agents,
except Live Oak – Gottesman and Aquila Commercial (―Brokers‖), in the negotiation of this Amendment, and that no commissions are payable
to any party claiming through Tenant as a result of the consummation of the transaction contemplated by this Amendment, except to Brokers, if
applicable. Tenant hereby agrees to indemnify and hold Landlord harmless from any and all loss, costs, damages or expenses, including,
without limitation, all attorneys' fees and disbursements by reason of any claim of or liability to any other broker, agent, entity or person
claiming through Tenant (other than Brokers) and arising out of or in connection with the negotiation and execution of this Amendment.


                                                                       2
9.         Hazardous Materials Disclosure . Simultaneously with Tenant‘s execution of this Amendment, Tenant shall complete, execute
and deliver to Landlord the Hazardous Materials Disclosure Certificate in the form attached hereto as Exhibit A .

10.        Insurance . The limit of the umbrella portion of Tenant‘s commercial general liability policy as set forth in Article 9 of the Lease
is hereby increased to $5,000,000.

         11.       Securitization . The parties acknowledge that the letter of credit currently held by Landlord required under Section 2 of
the Rider to Lease is currently in full force and shall remain in full force and effect until August 2011 when it is scheduled to be reduced to
$0.00.

12.       Energy and Environmental Initiatives . So long as Tenant does not incur any costs (other than as may be allowed as an
Operating Expense under Section 2.3.1 of the Lease) or any interruption of business operations, Tenant shall fully cooperate with Landlord in
any programs in which Landlord may elect to participate relating to the Building‘s (i) energy efficiency, management, and conservation; (ii)
water conservation and management; (iii) environmental standards and efficiency; (iv) recycling and reduction programs; and/or (v) safety,
which participation may include, without limitation, the Leadership in Energy and Environmental Design (LEED) program and related Green
Building Rating System promoted by the U.S. Green Building Council.

13.        Miscellaneous . With the exception of those matters set forth in this Amendment, Tenant's leasing of the Premises shall be subject
to all terms, covenants and conditions of the Lease. In the event of any express conflict or inconsistency between the terms of this Amendment
and the terms of the Lease, the terms of this Amendment shall control and govern. Except as expressly modified by this Amendment, all other
terms and conditions of the Lease are hereby ratified and affirmed. The parties acknowledge that the Lease is a valid and enforceable
agreement and that Tenant holds no claims against Landlord or its agents which might serve as the basis of any other set-off against accruing
rent and other charges or any other remedy at law or in equity.


                                                                      3
IN WITNESS WHEREOF, the foregoing First Amendment to Lease is dated effective as of the date and year first written above.

LANDLORD:
PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation, for its Principal U.S. Property Separate Account, formerly known as
Principal Life Insurance Company, an Iowa corporation, for its Real Estate Separate Account
By:    PRINCIPAL REAL ESTATE INVESTORS, LLC, a Delaware limited liability company, its authorized signatory

By:      _/s/ Joe Wanninger                                                                  Date:    1/26/2010
Name:    Joe Wanninger
Title:   Investment Director
         Asset Management

By:      /s/ Brian K. Sandfort                                                               Date:    1/26/2010
Name:    Brian K Sandfort
Title:   Managing Director
         Asset Management

TENANT:
CROSSROADS SYSTEMS, INC.,
a Delaware corporation

By:      /s/ Rob Sims                                                                        Date:    1/6/10
Name:    Rob Sims
Title:   President and CEO


                                                                  4
                                                                                                                         Exhibit 23.2

                           CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


We hereby consent to the inclusion in this Amendment No. 1 to the Registration Statement on Form S-1 of our report dated March 9, 2011
relating to the consolidated financial statements of Crossroads Systems, Inc. for the two year period ended October 31, 2010.

We further consent to being named as ―Experts‖ in accounting and auditing as defined in this Registration Statement.


/s/ PMB Helin Donovan


Austin, TX
May 17, 2011