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                                                                   EXHIBIT 10.12


                              EMPLOYMENT AGREEMENT

                  This Employment Agreement (this "AGREEMENT") is made and
entered into effective as of October 13, 2003, by and between Crossroads
Systems, Inc., a Delaware corporation (the "COMPANY"), and Robert Sims, an
individual (the "EXECUTIVE").

                                    RECITALS

                  WHEREAS, the Company desires to promote Executive and
Executive desires to remain with the Company; and;

                  WHEREAS, the Company and Executive have determined that it is
in their respective best interest to enter into this Agreement on the terms and
conditions as set forth herein.

                                    AGREEMENT

                  NOW, THEREFORE, in consideration of the premises and the
mutual covenants and promises contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:

         1.       EMPLOYMENT TERMS AND DUTIES

                  1.1      EMPLOYMENT. The Company hereby agrees to promote
Executive, and Executive hereby desires to remain employed by the Company, upon
the terms and conditions set forth in this Agreement.

                 1.2      DUTIES AND OUTSIDE ACTIVITIES.

                           1.2.1    DUTIES. Executive shall serve as President
and Chief Executive Officer and shall report directly to the Company's Board of
Directors (the "BOARD OF DIRECTORS"). Executive shall have the authority and
perform the duties customarily associated with his title and office, together
with such additional duties of a senior executive nature and commensurate with
his title as may from time to time be assigned by the Board of Directors. During
the term of Executive's employment hereunder, Executive shall devote his full
working time and efforts to the performance of his duties and the furtherance of
the interests of the Company and shall not be otherwise be employed except for
permitted outside activities as set forth in Section 1.2.3.

                           1.2.2    BOARD OF DIRECTORS. It is the Company's
understanding that Executive will be appointed to the Board of Directors as a
Class III board member. If, at any time during Executive's service on the Board
of Directors, Executive is no longer the Chief Executive Officer or President of
the Company, regardless of the reason, Executive agrees to resign from the Board
of Directors immediately following such change of employment status.

                           1.2.3    PERMITTED OUTSIDE ACTIVITIES. Executive may
serve as a director or trustee of other organizations or engage in charitable,
civic and/or governmental activities, provided that such service and activities
do not prevent Executive from performing the duties required of Executive under
this Agreement, as determined in the judgment of the Company, and further
provided that Executive obtains written consent for all such activities from the
Company, which consent will not be unreasonably withheld. Executive also may
engage in personal activities, including, without limitation, personal
investments, provided that such activities do not, in the judgment of the
Company, impair or interfere with Executive's ability to perform the duties
required of Executive under this Agreement.

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                  1.3      TERM. The Company's promotion of Executive under this
Agreement shall commence on September 18, 2003 (the "PROMOTION DATE") and shall
continue on an "at-will" basis. Executive and the Company understand and agree
that the employment relationship between Executive and the Company is "at-will"
and may be terminated at any time, upon written notice to the other party, with
or without cause, at the option of either the Company or Executive and subject
to the provisions of the special severance benefit program set forth in that
certain letter agreement between the Company and Executive dated February 11,
2002 attached hereto as Exhibit A (the "SEVERANCE BENEFIT PLAN"). The time
period for which Executive is actually employed under this Agreement shall be
referred to herein as the "EMPLOYMENT TERM."

                  1.4      COMPENSATION AND BENEFITS.


                           1.4.1    BASE SALARY. In consideration of the
services rendered to the Company hereunder by Executive and Executive's
covenants hereunder and in the Company's Proprietary Information and Inventions
Agreement, the Company shall, during the Employment Term, pay Executive a base
salary in the amount of $20,833.33 per month ($250,000 annualized) (the "BASE
SALARY"), less statutory deductions and withholdings, payable in accordance with
the Company's regular payroll practices.

                           1.4.2    BENEFITS PACKAGE. In addition to the Base
Salary, during the Employment Term, Executive shall be eligible to receive such
employee benefits and holidays as may be in effect from time to time as are
afforded to other executives of the Company.

                           1.4.3    VACATION. Executive shall be eligible for
the Company's executive vacation plan.

                           1.4.4    EXPENSES. The Company shall, upon receipt
from Executive of supporting receipts to the extent required by applicable
income tax regulations and the Company's reimbursement policies, reimburse
Executive for all out-of-pocket business expenses reasonably incurred by
Executive in connection with his employment hereunder.

                  1.5      STOCK OPTION. Subject to approval by the Company's
Board of Directors, the Company shall grant to Executive, in accordance with the
terms of the Crossroads Systems, Inc. 1999 Stock Incentive Plan (the "PLAN"), an
option to purchase a total of 125,000 shares of the Company's common stock
("COMMON STOCK") at an exercise price equal to the fair market of the Common
Stock on September 30, 2003 (the "OPTION"). The Option shall vest over four (4)
years in accordance with the following vesting schedule: twenty-five percent
(25%) of the Option shall become exercisable upon Executive's completion of one
year as an Employee (defined below) of the Company measured from the Promotion
Date and the balance of the Option shall vest in twelve (12) successive equal
quarterly installments upon the completion of each additional quarter of
employment as an Employee of the Company during the three (3)-year period
following the first anniversary of the Promotion Date. For purposes of this
Agreement, "EMPLOYEE" shall mean an individual who is in the employ of the
Company (or any Parent or Subsidiary), subject to the control and direction of
the employer entity as to both the work to be performed and the manner and
method of performance.

                  1.6      BONUS PLAN. Executive will be eligible to participate
in the Company's bonus plans as may be in effect from time to time and as
afforded to other executives of the Company.

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                  1.7      TERMINATION AND SEVERANCE.

                           1.7.1    TERMINATION. Executive's employment and this
Agreement may be terminated at any time, upon written notice to the other party,
with or without cause, at the option of either the Company or Executive subject
to the provisions set forth in the Severance Benefit Plan.

                           1.7.2    SEVERANCE BENEFITS. Executive shall be
entitled to the severance benefits set forth in the Severance Benefit Plan.

                           1.7.3    WARN ACT OFFSET. In the event that
Executive's Involuntary Termination (as defined in the Severance Benefit Plan)
is covered by the Worker Adjustment Retraining Notification Act ("WARN") at the
time of Executive's termination, or is deemed to be covered by WARN
retrospectively within 90 days after Executive's termination, the amount of any
severance benefit Executive is entitled to receive pursuant to the Severance
Benefit Plan shall be reduced by an amount equal to any payments the Company is
required to provide Executive under WARN or by the amount of pay Executive
receives during any portion of WARN's 60-day notice period where Executive does
not perform any work for the Company.

         2.       PROTECTION OF COMPANY'S PROPRIETARY INFORMATION AND
                  INVENTIONS.

                  Executive acknowledges that he has complied with the
provisions of the Company's Confidentiality, Proprietary Information and
Inventions Agreement signed by him (the "PROPRIETARY INFORMATION AGREEMENT").
Executive understands and agrees that he will continue to be bound by the
Proprietary Information Agreement and that the Proprietary Information Agreement
survives the termination of this Agreement, the Employment Term and/or the
Executive's employment with the Company. A copy of the Proprietary Information
Agreement is attached hereto as Exhibit B.

         3.       REPRESENTATIONS AND WARRANTIES BY EXECUTIVE

                  Executive represents and warrants to the Company that (i) this
Agreement is valid and binding upon and enforceable against him in accordance
with its terms, (ii) Executive is not bound by or subject to any contractual or
other obligation that would be violated by his execution or performance of this
Agreement, including, but not limited to, any non-competition agreement
presently in effect, and (iii) Executive is not subject to any pending or, to
Executive's knowledge, threatened claim, action, judgment, order, or
investigation that could adversely affect his ability to perform his obligations
under this Agreement or the business reputation of the Company. Executive has
not entered into, and agrees that he will not enter into, any agreement either
written or oral in conflict herewith.

         4.       MISCELLANEOUS

                  4.1      NOTICES. All notices, requests, and other
communications hereunder must be in writing and will be deemed to have been duly
given only if (i) delivered personally against written receipt, (ii) delivered
by facsimile transmission with answer back confirmation, (iii) mailed (postage
prepaid by certified or registered mail, return receipt requested), (iv)
delivered by overnight courier to the parties, or (v) delivered by electronic
communication (as set forth below) at the following addresses, facsimile
numbers, or electronic mail addresses:

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                  If to the Company, to:

                          Crossroads Systems, Inc.
                          8300 North MoPac Expressway
                          Austin, Texas 78759
                          Facsimile: 512-349-0304
                          Attn: Compensation Committee of the Board of Directors

All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section 4.1, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section 4.1, be deemed given upon receipt, and (iii) if
delivered by mail in the manner described above to the address as provided in
this Section 4.1, be deemed given upon receipt (in each case regardless of
whether such notice, request, or other communication is received by any other
person to whom a copy of such notice, request or other communication is to be
delivered pursuant to this Section). An electronic communication ("ELECTRONIC
NOTICE") shall be deemed written notice for purposes of this Section 4.1 if sent
with return receipt requested to the electronic mail address specified by the
receiving party, in a signed writing in a nonelectronic form. Electronic Notice
shall be deemed received at the time the party sending Electronic Notice
receives verification of receipt by the receiving party. Any party receiving
Electronic Notice may request and shall be entitled to receive the notice on
paper, in a nonelectronic form ("NONELECTRONIC NOTICE") which shall be sent to
the requesting party within ten (10) days of receipt of the written request for
Nonelectronic Notice. Any party from time to time may change its address,
facsimile number, electronic mail address, or other information for the purpose
of notices to that party by giving written notice specifying such change to the
other parties hereto.

                  4.2      AUTHORIZATION TO BE EMPLOYED. This Agreement, and
Executive's employment hereunder, is subject to Executive providing the Company
with legally required proof of Executive's authorization to be employed in the
United States of America.

                  4.3      ENTIRE AGREEMENT. This Agreement, and the attached
exhibits, supersede all prior discussions and agreements among the parties with
respect to the subject matter hereof and contain the sole and entire agreement
between the parties hereto with respect thereto.

                  4.4      SURVIVAL. The respective rights and obligations of
the parties, including but not limited to Sections 1.7.2, 1.7.3, 2, 4.1, and
4.5, 4.7, 4.9, 4.10, 4.12, 4.13, and 4.14 shall survive the termination of this
Agreement, the Employment Term and/or the Employee's employment with the
Company.

                  4.5      WAIVER. Any term or condition of this Agreement may
be waived at any time by the party that is entitled to the benefit thereof, but
no such waiver shall be effective unless set forth in a written instrument duly
executed by or on behalf of the party waiving such term or condition. No waiver
by any party hereto of any term or condition of this Agreement, in any one or
more instances, shall be deemed to be or construed as a waiver of the same or
any other term or condition of this Agreement on any future occasion. All
remedies, either under this Agreement or by law or otherwise afforded, will be
cumulative and not alternative.

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                  4.6      AMENDMENT. This Agreement may be amended,
supplemented, or modified only by a written instrument duly executed by or on
behalf of each party hereto.

                  4.7      RECOVERY OF ATTORNEY'S FEES. In the event of any
litigation arising from or relating to this Agreement, the prevailing party in
such litigation proceedings shall be entitled to recover, from the
non-prevailing party, the prevailing party's reasonable costs and attorney's
fees, in addition to all other legal or equitable remedies to which it may
otherwise be entitled.

                  4.8      TAX AND LEGAL ADVICE. Executive has had an
opportunity to consult with his legal counsel and tax and other advisors
regarding the preparation of this Agreement. Executive understands that
Ogletree, Deakins, Nash, Smoak & Stewart, P.C. and Andrews Kurth LLP have acted
solely as legal counsel for the Company with respect to the preparation of this
Agreement and have not acted as legal counsel for Executive.

                  4.9      NO THIRD PARTY BENEFICIARY. The terms and provisions
of this Agreement are intended solely for the benefit of each party hereto and
the Company's successors or assigns, and it is not the intention of the parties
to confer third-party beneficiary rights upon any other person.

                  4.10     NO ASSIGNMENT; BINDING EFFECT. This Agreement shall
inure to the benefit of any successors or assigns of the Company. Executive
shall not be entitled to assign his obligations under this Agreement.

                  4.11     HEADINGS. The headings used in this Agreement have
been inserted for convenience of reference only and do not define or limit the
provisions hereof.

                  4.12     SEVERABILITY. The Company and Executive intend all
provisions of this Agreement to be enforced to the fullest extent permitted by
law. Accordingly, if a court of competent jurisdiction determines that the scope
and/or operation of any provision of this Agreement is too broad to be enforced
as written, the Company and Executive intend that the court should reform such
provision to such narrower scope and/or operation as it determines to be
enforceable. If, however, any provision of this Agreement is held to be illegal,
invalid, or unenforceable under present or future law, and not subject to
reformation, then (i) such provision shall be fully severable, (ii) this
Agreement shall be construed and enforced as if such provision was never a part
of this Agreement, and (iii) the remaining provisions of this Agreement shall
remain in full force and effect and shall not be affected by illegal, invalid,
or unenforceable provisions or by their severance.

                  4.13     GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS APPLICABLE TO
CONTRACTS EXECUTED AND PERFORMED IN SUCH STATE WITHOUT GIVING EFFECT TO
CONFLICTS OF LAWS PRINCIPLES.

                  4.14     JURISDICTION. With respect to any suit, action, or
other proceeding arising from (or relating to) this Agreement, the Company and
Executive hereby irrevocably agree to the exclusive personal jurisdiction and
venue of the United States District Court for the Western District of Texas (and
any Texas State Court within Travis County, Texas).

                  4.15     COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by facsimile, each of which will be deemed an
original, but all of which together will constitute one and the same instrument.

                [SIGNATURE PAGE TO EMPLOYMENT AGREEMENT FOLLOWS]

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                  IN WITNESS WHEREOF, the parties hereto have caused this
Employment Agreement to be executed on the date first written above.

                                    "COMPANY"

                                    CROSSROADS SYSTEMS, INC.

                                    By: ________________________________________

                                    Name: ______________________________________

                                    Title: _____________________________________

                                    "EXECUTIVE"

                                    ROBERT SIMS

                                    ____________________________________________
                                    Executive's Signature

                                    ____________________________________________
                                    Address

                                    ____________________________________________
                                    Address

EXHIBIT A: Severance Benefit Plan
EXHIBIT B: Confidentiality, Proprietary Information and Inventions Agreement

                    [SIGNATURE PAGE TO EMPLOYMENT AGREEMENT]