Document:

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                                                                  EXECUTION COPY

                       FIRST AMENDMENT TO CREDIT AGREEMENT

                  This FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment"),
made and entered into as of January 8, 2003, is by and among PLATO Learning,
Inc., a Delaware corporation ("PLI"), PLATO, Inc., a Delaware corporation
("PI"), CyberEd, Inc., a Nevada corporation ("CyberEd"), TeachMaster
Technologies, Inc., a South Dakota corporation ("TeachMaster"), NetSchools
Corporation, a Delaware corporation ("NetSchools" and collectively with PLI, PI,
CyberEd and TeachMaster, the "Borrowers" and each, a "Borrower"), the banks at
any time party hereto (individually, a "Bank" and, collectively, the "Banks")
and Wells Fargo Bank, National Association, a national banking association
("Wells Fargo"), one of the Banks, as agent for the Banks (in such capacity, the
"Agent").

                                    RECITALS

         1. The Banks and the Borrowers entered into a Credit Agreement dated as
of December 20, 2001 (the "Credit Agreement"); and

         2. The Borrower desires to amend certain provisions of the Credit
Agreement, and the Banks have agreed to make such amendments, subject to the
terms and conditions set forth in this Amendment.

                                    AGREEMENT

         NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto hereby covenant
and agree to be bound as follows:

         SECTION 1. CAPITALIZED TERMS. Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to them in the Credit
Agreement, unless the context shall otherwise require.

         SECTION 2. AMENDMENTS. The Credit Agreement is hereby amended as
follows:

         2.1. DEFINITIONS. The definitions of "Debt Service Coverage Ratio",
"Maturity Date" and "Permitted Redemptions" contained in Section 1.1 of the
Credit Agreement are amended to read in their entireties as follows:

         "Debt Service Coverage Ratio" means

         (a) for the periods of four consecutive fiscal quarters ending on or
about January 31, 2003, April 30, 2003, and July 31, 2003, the ratio of:

              i. EBITDA for each period of twelve consecutive months plus Rent
                 Expense for such period minus any cash paid for federal, state,
                 local and/or foreign income taxes during such period minus any

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                 cash expenditures for purchase, redemption or retirement of any
                 stock of any class of the Borrower or cash dividends or any
                 other cash distributions made on account of any stock of any
                 class of the Borrower during such period (other than Permitted
                 Redemptions);

                 to

             ii. the sum of Interest Charges for such period plus Rent Expense
                 for such period plus scheduled principal payments on Debt
                 during such period;

         (b) for the periods of four consecutive fiscal quarters ending on or
about October 31, 2003, and each period of four consecutive fiscal quarters
ending thereafter, the ratio of:

             i.  EBITDA for each period of twelve consecutive months plus Rent
                 Expense for such period minus Capital Expenditures
                 during such period minus any cash paid for federal, state,
                 local and/or foreign income taxes during such period
                 minus any cash expenditures for purchase, redemptions or
                 retirement of any stock of any class of the Borrower or cash
                 dividends or any other cash distributions made on account of
                 any stock of any class of the Borrower during such period
                 (other than Permitted Redemptions);

                 to

             ii. the sum of Interest Charges for such period plus Rent Expenses
                 for such period plus scheduled principal payments on
                 Debt during such period.

         "Maturity Date" means July 1, 2004.

         "Permitted Redemptions" means repurchase and redemption of shares of
stock of PLI, provided that: (a) no Default or Event of Default has occurred and
continued at the time of such repurchase and redemption; (b) except as permitted
under (c) below, the number of repurchased and redeemed shares shall not exceed
the number of shares of PLI issued to employees and officers of PLI, and the
aggregate purchase price of all such shares repurchased or redeemed shall not
exceed $2,000,000 per fiscal year, and (c) aggregate purchase price of all
shares repurchased or redeemed may exceed $2,000,000 per fiscal year but shall
not exceed $3,500,000 in the aggregate after October 31, 2002, if (i) such
repurchase and redemption is conducted in accordance with the redemption program
approved by the Board of Directors of PLI; (ii) proceeds of the Advances
hereunder shall not be used to fund any of such repurchase and redemption; and
(iii) at the time of all such repurchases and redemptions, before and after
giving effect thereto PLI shall own assets consisting of cash, bank deposits,
certificates of deposit and other cash equivalent assets acceptable to the Agent
in amounts not less than $25,000,000.

                                      -2-
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         2.2. CAPITAL EXPENDITURES. Section 6.18 of the Credit Agreement is
amended to read in its entirety as follows:

         Section 6.18. Capital Expenditures. Make Capital Expenditures during
any fiscal year, in an aggregate amount in excess of $10,000,000.

         2.3. CONSOLIDATED TANGIBLE NET WORTH. Section 6.19 of the Credit
Agreement is amended to read in its entirety as follows:

         Section 6.19. Consolidated Tangible Net Worth. Permit its Consolidated
Tangible Net Worth at any time to be less than the sum of (a) $55,000,000, plus
(b) 90% of the aggregate amount of the consolidated net income of the Borrowers,
determined in accordance with GAAP, for each quarter ending on or after January
31, 2003, through the end of the most recently-ended fiscal quarter, without
giving effect to any net loss for any such fiscal quarter, and minus (c) the
amount of Permitted Redemptions actually made after October 31, 2002.

         2.4. DEBT SERVICE COVERAGE RATIO. Section 6.20 of the Credit Agreement
is amended to read in its entirety as follows:

         Section 6.20. Debt Service Coverage Ratio. Permit the Debt Service
Coverage Ratio, as of the end of each of the following periods, to be less than
the following amounts with respect to each such period:

         (a) 1.40 to 1.00 for the periods of four consecutive fiscal quarters
ending on or about January 31, 2003, and April 30, 2003;

         (b) 3.50 to 1.00 for the period of four consecutive fiscal quarters
ending on or about July 31, 2003; and

         (c) 2.00 to 1.00 for the period of four consecutive fiscal quarters
ending on or about October 31, 2003, and each period of four consecutive fiscal
quarters ending thereafter.

         SECTION 3. EFFECTIVENESS OF AMENDMENTS. The amendments contained in
this Amendment shall become effective upon delivery by each Borrower of, and
compliance by each Borrower with, the following:

         3.1. This Amendment duly executed by each Borrower.

         3.2. A Joinder Agreement whereby NetSchools becomes a Borrower under
the Credit Agreement, in form and substance satisfactory to the Agent, duly
executed by NetSchools (the "Joinder Agreement").

                                      -3-
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         3.3. Certified copies of all documents evidencing any necessary
corporate action, consent or governmental or regulatory approval (if any) with
respect to this Amendment.

         3.4. A good standing certificate for each Borrower from the State of
its incorporation issued not more than 10 days prior to the date of this
Amendment.

         3.5. The Borrowers shall have paid the Agent an upfront fee in the
amount of $12,500.

         3.6. The Borrowers shall have satisfied such other conditions as
specified by the Agent, including payment of all unpaid legal fees and expenses
incurred by the Agent through the date of this Amendment in connection with the
Credit Agreement and the Amendment Documents.

         SECTION 4. CONDITION SUBSEQUENT.

         4.1. Each of PLI, PI, CyberEd and TeachMaster agrees to deliver to the
Agent, and agrees that any failure to do so within 30 days of the date of this
Amendment, shall constitute an Event of Default under the Credit Agreement, a
copy of the resolutions of the Board of Directors of each Borrower authorizing
the execution, delivery and performance of this Amendment certified as true and
accurate by its Secretary or Assistant Secretary, along with a certification by
such Secretary or Assistant Secretary (i) certifying that there has been no
amendment to the Certificate of Incorporation or Bylaws of such Borrower since
true and accurate copies of the same were delivered to the Agent with a
certificate of the Secretary of such Borrower dated December 19, 2001, and (ii)
identifying each officer of such Borrower authorized to execute this Amendment
and any other instrument or agreement executed by such Borrower in connection
with this Amendment (collectively, the "Amendment Documents"), and certifying as
to specimens of such officer's signature and such officer's incumbency in such
offices as such officer holds.

         4.2. NetSchools agrees to deliver the following documents to the Agent,
and agrees that any failure to do so within 30 days of this Amendment shall
constitute an Event of Default under the Credit Agreement.

         (a) A Security Agreement duly executed by NetSchools.

         (b) Current searches of appropriate filing offices showing that no
state or federal tax liens have been filed and remain in effect against
NetSchools, and that no financing statements or other notifications or filings
have been filed and remain in effect against NetSchools, other than those for
which the Agent has received an appropriate release, termination or satisfaction
or those permitted in accordance with Section 6.1.

                                      -4-
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         (c) A copy of the resolutions of the Board of Directors of NetSchools
authorizing the execution, delivery and performance of this Amendment and the
Joinder Agreement certified as true and accurate by its Secretary or Assistant
Secretary, along with a certification by such Secretary or Assistant Secretary
(i) certifying that the attached copies of the Certificate of Incorporation or
Bylaws of NetSchools are true and accurate copies of the same, and (ii)
identifying each officer of NetSchools authorized to execute this Amendment, the
Joinder Agreement and the Amendment Documents, and certifying as to specimens of
such officer's signature and such officer's incumbency in such offices as such
officer holds.

         (d) Certificates of the insurance required under the Security
Agreement, naming the Agent, as collateral agent for all Banks, as loss payee
thereunder, together with an acceptable lender's loss payable endorsement.

         SECTION 5. DEFAULTS AND WAIVERS.

         5.1. EVENTS OF DEFAULT.

         (a) Capital Expenditures. Under Section 6.18 of the Credit Agreement,
the Borrowers agreed not to make Capital Expenditures in an aggregate amount in
excess of $8,500,000 during the fiscal year ending on or about October 31, 2002.
The Borrowers have advised the Agent that, for the fiscal year ending on or
about October 31, 2002, it was not in compliance with this covenant.

         (b) Consolidated Tangible Net Worth. Under Section 6.19 of the Credit
Agreement, the Borrowers agreed not to permit its Consolidated Tangible Net
Worth at any time to be less than the sum of (a) $75,000,000, plus (b) 90% of
the aggregate amount of consolidated net income of the Borrowers, determined in
accordance with GAAP, for each quarter ending on or after January 31, 2002,
through the end of the most recently-ended fiscal quarter, without giving effect
to any net loss for any such fiscal quarter, and minus (c) the amount of
Permitted Redemptions actually made after the date of the Credit Agreement. The
Borrowers have advised the Agent that as of October 31, 2002 it was not in
compliance with this covenant.

         (c) Debt Service Coverage Ratio. Under Section 6.20 of the Credit
Agreement, the Borrowers agreed not to permit the Debt Service Coverage Ratio
for any period of four consecutive fiscal quarters to be less than 2.00 to 1.00.
The Borrowers have advised the Agent that for the period of four consecutive
fiscal quarters ending on October 31, 2002, it was not in compliance with this
covenant.

         5.2. WAIVER. Upon the date on which this Amendment becomes effective,
the Agent hereby waives the Borrowers' Defaults and Events of Default described
in the preceding Sections 4.1(a) through 4.1(c) (the "Existing Defaults"). The
waiver of the Existing Defaults set forth above is limited to the express terms
thereof, and nothing herein shall be deemed a waiver by the Agent of any other
term, condition, representation or covenant applicable to each Borrower under
the Credit Agreement (including but not limited to any future occurrence similar
to the Existing Defaults) or any of the other agreements, documents or
instruments executed and delivered in connection therewith, or

                                      -5-
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of the covenants described therein. The waivers set forth herein shall not
constitute a waiver by the Agent of any other Default or Event of Default, if
any, under the Credit Agreement, and shall not be, and shall not be deemed to
be, a course of action with respect thereto upon with any Borrower may rely in
the future, and each Borrower hereby expressly waives any claim to such effect.

         SECTION 6. REPRESENTATIONS, WARRANTIES, AUTHORITY, NO ADVERSE CLAIM.

         6.1. REASSERTION OF REPRESENTATIONS AND WARRANTIES, NO DEFAULT. Each
Borrower hereby represents that on and as of the date hereof and after giving
effect to this Amendment (a) all of the representations and warranties contained
in the Credit Agreement are true, correct and complete in all respects as of the
date hereof as though made on and as of such date, except for changes permitted
by the terms of the Credit Agreement, and (b) there will exist no Default or
Event of Default under the Credit Agreement as amended by this Amendment on such
date which has not been waived by the Agent.

         6.2. AUTHORITY, NO CONFLICT, NO CONSENT REQUIRED. Each Borrower
represents and warrants that such Borrower has the power and legal right and
authority to enter into the Amendment Documents and has duly authorized as
appropriate the execution and delivery of the Amendment Documents and other
agreements and documents executed and delivered by such Borrower in connection
herewith or therewith by proper corporate action, and none of the Amendment
Documents nor the agreements contained herein or therein contravenes or
constitutes a default under any agreement, instrument or indenture to which such
Borrower is a party or a signatory or a provision of such Borrower's Certificate
of Incorporation, Bylaws or any other agreement or requirement of law, or result
in the imposition of any lien on any of its property under any agreement binding
on or applicable to such Borrower or any of its property except, if any, in
favor of the Agent. Each Borrower represents and warrants that no consent,
approval or authorization of or registration or declaration with any Person,
including but not limited to any governmental authority, is required in
connection with the execution and delivery by such Borrower of the Amendment
Documents or other agreements and documents executed and delivered by the
Borrower in connection therewith or the performance of obligations of such
Borrower therein described, except for those which such Borrower has obtained or
provided and as to which such Borrower has delivered certified copies of
documents evidencing each such action to the Agent.

         6.3. NO ADVERSE CLAIM. Each Borrower warrants, acknowledges and agrees
that no events have been taken place and no circumstances exist at the date
hereof which would give such Borrower a basis to assert a defense, offset or
counterclaim to any claim of any Bank with respect to the Obligations.

                                      -6-
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         SECTION 7. AFFIRMATION OF CREDIT AGREEMENT, FURTHER REFERENCES,
AFFIRMATION OF SECURITY INTEREST. Each Bank and each Borrower acknowledges and
affirms that the Credit Agreement, as hereby amended, is hereby ratified and
confirmed in all respects and all terms, conditions and provisions of the Credit
Agreement, except as amended by this Amendment, shall remain unmodified and in
full force and effect. All references in any document or instrument to the
Credit Agreement are hereby amended and shall refer to the Credit Agreement as
amended by this Amendment. Each Borrower confirms to the Banks that the
Obligations are and continue to be secured by the security interest granted by
each Borrower in favor of the Banks under the Security Agreements dated as of
December 20, 2001, and all of the terms, conditions, provisions, agreements,
requirements, promises, obligations, duties, covenants and representations of
each Borrower under such documents and any and all other documents and
agreements entered into with respect to the obligations under the Credit
Agreement are incorporated herein by reference and are hereby ratified and
affirmed in all respects by each Borrower.

         SECTION 8. MERGER AND INTEGRATION, SUPERSEDING EFFECT. This Amendment,
from and after the date hereof, embodies the entire agreement and understanding
between the parties hereto and supersedes and has merged into this Amendment all
prior oral and written agreements on the same subjects by and between the
parties hereto with the effect that this Amendment shall control with respect to
the specific subjects hereof and thereof.

         SECTION 9. SEVERABILITY. Whenever possible, each provision of this
Amendment and the other Amendment Documents and any other statement, instrument
or transaction contemplated hereby or thereby or relating hereto or thereto
shall be interpreted in such manner as to be effective, valid and enforceable
under the applicable law of any jurisdiction, but, if any provision of this
Amendment, the other Amendment Documents or any other statement, instrument or
transaction contemplated hereby or thereby or relating hereto or thereto shall
be held to be prohibited, invalid or unenforceable under the applicable law,
such provision shall be ineffective in such jurisdiction only to the extent of
such prohibition, invalidity or unenforceability, without invalidating or
rendering unenforceable the remainder of such provision or the remaining
provisions of this Amendment, the other Amendment Documents or any other
statement, instrument or transaction contemplated hereby or thereby or relating
hereto or thereto in such jurisdiction, or affecting the effectiveness, validity
or enforceability of such provision in any other jurisdiction.

         SECTION 10. SUCCESSORS. The Amendment Documents shall be binding upon
each Borrower and each Bank and their respective successors and assigns, and
shall inure to the benefit of each Borrower and each Bank and the successors and
assigns of each Bank.

         SECTION 11. LEGAL EXPENSES. As provided in Section 9.4 of the Credit
Agreement, the Borrowers jointly and severally agree to reimburse the Agent,
upon execution of this Amendment, for all reasonable out-of-pocket expenses
(including attorney' fees and legal expenses of Dorsey & Whitney LLP, counsel
for the Agent) incurred in connection with the Credit Agreement, including in
connection with the negotiation, preparation and execution of the Amendment
Documents and all other documents negotiated, prepared and executed in
connection with the Amendment Documents, and in enforcing the obligations of
each Borrower under the Amendment Documents, and to pay and save the Banks
harmless from all liability for, any stamp or other taxes which may be payable
with respect to the execution or delivery of the Amendment Documents, which
obligations of each Borrower shall survive any termination of the Credit
Agreement.

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         SECTION 12. HEADINGS. The headings of various sections of this
Amendment have been inserted for reference only and shall not be deemed to be a
part of this Amendment.

         SECTION 13. COUNTERPARTS. The Amendment Documents may be executed in
several counterparts as deemed necessary or convenient, each of which, when so
executed, shall be deemed an original, provided that all such counterparts shall
be regarded as one and the same document, and either party to the Amendment
Documents may execute any such agreement by executing a counterpart of such
agreement.

         SECTION 14. GOVERNING LAW. THE AMENDMENT DOCUMENTS SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF MINNESOTA, EXCEPT
TO THE EXTENT THE LAW OF ANY OTHER JURISDICTION APPLIES AS TO THE PERFECTION OR
ENFORCEMENT OF ANY SECURITY INTEREST IN ANY COLLATERAL AND EXCEPT TO THE EXTENT
EXPRESSLY PROVIDED TO THE CONTRARY IN ANY AMENDMENT DOCUMENT.

                  [Remainder of page intentionally left blank]

                                      -8-
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                  IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed as of the date and year first above written.

                    PLATO LEARNING, INC.

                    By:  ______________________________
                    Title: _____________________________

                    PLATO, INC.

                    By:  ______________________________
                    Title: _____________________________

                    CYBERED, INC.

                    By:  ______________________________
                    Title: _____________________________

                    TEACHMASTER TECHNOLOGIES, INC.

                    By:  ______________________________
                    Title: _____________________________

                    NETSCHOOLS CORPORATION

                    By:  ______________________________
                    Title: _____________________________

                    WELLS FARGO BANK, NATIONAL ASSOCIATION,
                    as Bank and as Agent

                    By:  _______________________________
                    Title: ______________________________

                                      S-1<PAGE>
                                                                    EXHIBIT 10.5

                            (CROSSROADS LETTERHEAD)

December 18, 2002

Ms. Andrea Wenholz
9001 Glenlake Drive
Austin, Texas 78730

                  RE:  Severance Benefit Plan
Dear Ms. Wenholz:

         We are pleased to inform you that the Company's Board of Directors has
approved a special severance benefit program for you. The purpose of this letter
agreement is to set forth the terms and conditions of your severance benefits
and to explain the limitations that will govern their overall value.

         Your severance package will become payable should your employment
terminate under certain circumstances including certain terminations following a
substantial change in ownership or control of the Company. To understand the
full scope of your benefits, you should familiarize yourself with the
definitional provisions of Part One of this letter agreement. The benefits
comprising your severance package are detailed in Part Two, and the dollar
limitations on the overall value of your benefit package and other applicable
restrictions are specified in Parts Three and Four, respectively. Part Five
deals with ancillary matters affecting your severance arrangement.

Part One -- DEFINITIONS

         For purposes of this letter agreement, the following definitions will
be in effect:

         BASE SALARY means the monthly rate of base salary in effect for you at
the time of your Involuntary Termination. In the event of your Involuntary
Termination following a Change in Control, Base Salary means the greater of your
monthly base salary immediately prior to the Change in Control or the monthly
rate of base salary in effect at the time of your Involuntary Termination.

         BOARD means the Company's Board of Directors.

         CHANGE IN CONTROL means a change in the ownership or control of the
Company effected through any of the following transactions:

<PAGE>

                  (i) a merger, consolidation or reorganization approved by the
         Company's stockholders, unless securities representing more than fifty
         percent (50%) of the total combined voting power of the voting
         securities of the successor corporation are immediately thereafter
         beneficially owned, directly or indirectly and in substantially the
         same proportion, by the persons who beneficially owned the Company's
         outstanding voting securities immediately prior to such transaction,

                  (ii) any stockholder-approved sale, transfer or other
         disposition of all or substantially all of the Company's assets,

                  (iii) the acquisition, directly or indirectly, by any person
         or related group of persons (other than the Company or a person that
         directly or indirectly controls, is controlled by or is under common
         control with, the Company) of beneficial ownership (within the meaning
         of Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of
         securities possessing more than fifty percent (50%) of the total
         combined voting power of the Company's outstanding securities pursuant
         to a tender or exchange offer made directly to the Company's
         stockholders; or (iv) a change in the composition of the Board over a
         period of thirty-six (36) consecutive months or less such that a
         majority of the Board members ceases, by reason of one or more
         contested elections for Board membership, to be comprised of
         individuals who either (A) have been Board members continuously since
         the beginning of such period or (B) have been elected or nominated for
         election as Board members during such period by at least a majority of
         the Board members described in clause (A) who were still in office at
         the time the Board approved such election or nomination.

         CODE means the Internal Revenue Code of 1986, as amended.

         COMMON STOCK means the Company's common stock.

         COMPANY means Crossroads Systems, Inc., a Delaware corporation, or any
successor corporation, whether or not resulting from a Change in Control.

         DISABILITY means your inability to perform the normal and usual duties
of your position with the Company by reason of any physical or medical
impairment which is expected to result in death or continue for a period of
twelve (12) consecutive months or more.

<PAGE>

         FAIR MARKET VALUE means, with respect to the shares of Common Stock
subject to any of your Options, the closing selling price per share of Common
Stock on the date in question, as such price is reported by the National
Association of Securities Dealers on the Nasdaq National Market and published in
The Wall Street Journal. If there is no closing selling price reported for the
Common Stock on the date in question, then the Fair Market Value will be the
closing selling price on the last preceding date for which such report exists.

         HEALTH CARE COVERAGE means the continued coverage to which you and your
eligible dependents may become entitled under the Company's health care plans
pursuant to the severance benefit provisions of Part Two of this letter
agreement.

         INCENTIVE STOCK OPTION means an option which satisfies the requirements
of Code Section 422.

         INVOLUNTARY TERMINATION means (i) the involuntary termination of your
employment with the Company other than a Termination for Cause or (ii) your
voluntary resignation within six (6) months following (A) a change in your
position with the Company which materially reduces your duties and
responsibilities or the level of management to which you report, (B) a reduction
in your level of compensation (including Base Salary, fringe benefits and target
bonus under any corporate-performance based bonus or incentive programs) by more
than fifteen percent (15%) with the exception of compensation reductions that
are applied to all executive officers of the Company or (C) a relocation of your
principal place of employment by more than fifty (50) miles.

         An Involuntary Termination will not be deemed to occur in the event
your employment terminates by reason of your death or Disability or a
Termination for Cause.

         OPTION means any outstanding option you hold under the Plan at the time
of your Involuntary Termination. For purposes of this Agreement, your Options
will be divided into two (2) separate categories as follows:

         Acquisition-Accelerated Options: any outstanding Option (or installment
thereof) which automatically accelerates, pursuant to the acceleration
provisions of the agreement evidencing that Option, upon a Change in Control.

         Severance-Accelerated Options: any outstanding Option (or installment
thereof) which, pursuant to Part Two of this letter agreement, accelerates upon
an Involuntary Termination.

         OPTION PARACHUTE PAYMENT means, with respect to any
Acquisition-Accelerated Option or any Severance-Accelerated Option, the portion
of that Option deemed to be a parachute payment under Code Section 280G and the
Treasury Regulations issued thereunder. The portion of such Option which is
categorized as an

<PAGE>

Option Parachute Payment will be calculated in accordance with the valuation
provisions established under Code Section 280G and the applicable Treasury
Regulations and will include an appropriate dollar adjustment to reflect the
lapse of your obligation to remain in the Company's employ as a condition to the
vesting of the accelerated installment. In no event, however, will the Option
Parachute Payment attributable to any Acquisition-Accelerated Option or
Severance-Accelerated Option (or accelerated installment) exceed the spread (the
excess of the Fair Market Value of the accelerated option shares over the option
exercise price payable for those shares) existing at the time of acceleration.

         OTHER PARACHUTE PAYMENT means any payment in the nature of compensation
(other than the benefits to which you become entitled under Part Two of this
letter agreement) which are made to you in connection with the Change in Control
and which accordingly qualify as parachute payments within the meaning of Code
Section 280G(b)(2) and the Treasury Regulations issued thereunder. Your Other
Parachute Payment will include (without limitation) the Present Value, measured
as of the Change in Control, of the Stock Bonus Parachute Payment and the
aggregate Option Parachute Payment attributable to your Acquisition-Accelerated
Options (if any).

         PARACHUTE PAYMENT means any payment or benefit provided you under Part
Two of this letter agreement (other than the Option Parachute Payment
attributable to your Severance-Accelerated Options) which is deemed to
constitute a parachute payment within the meaning of Code Section 280G(b)(2) and
the Treasury Regulations issued thereunder.

         PLAN means (i) the Company's 1996 Stock Option/Stock Issuance Plan,
(ii) the Company's 1999 Stock Incentive Plan, as amended or restated from time
to time, and (ii) any successor stock incentive plan subsequently implemented by
the Company.

         PRESENT VALUE means the value, determined as of the date of the Change
in Control, of any payment in the nature of compensation to which you become
entitled in connection with the Change in Control or your subsequent Involuntary
Termination, including (without limitation) the Option Parachute Payment
attributable to your Severance-Acceleration Options, the additional benefits to
which you become entitled under Part Two of this letter agreement, the Stock
Bonus Parachute Payment attributable to your Stock Bonus and the Option
Parachute Payment attributable to your Acquisition-Accelerated Options. The
Present Value of each such payment will be determined in accordance with the
provisions of Code Section 280G(d)(4), utilizing a discount rate equal to one
hundred twenty percent (120%) of the applicable Federal rate in effect at the
time of such determination, compounded semi-annually to the effective date of
the Change in Control.

<PAGE>

         SEVERANCE PERIOD means the number of months for which you will receive
severance payments pursuant to Paragraph A.2 of Part Two of this letter
agreement.

         STOCK BONUS means the stock bonus payment you become entitled to upon a
Change in Control as described in Paragraph B of Part Two of this letter
agreement.

         STOCK BONUS PARACHUTE PAYMENT means, with respect to the Stock Bonus
payment, the portion of those shares deemed to be a parachute payment under Code
Section 280G and the Treasury Regulations issued thereunder. The amount of such
parachute payment will be calculated in accordance with the valuation provisions
established under Code Section 280G and the applicable Treasury Regulations and
will include an appropriate dollar adjustment to reflect the lapse of your
obligation to remain in the Company's employ as a condition to the vesting of
the stock.

         TERMINATION FOR CAUSE means the Company's termination of your
employment for any of the following reasons: (i) your commission of any act of
fraud, embezzlement or dishonesty, (ii) your unauthorized use or disclosure of
any confidential information or trade secrets of the Company, (iii) any
intentional misconduct by you, whether by omission or commission, which has an
adverse effect upon the Company's business or affairs as determined in the sole
discretion of the Company's Board of Directors, (iv) your breach of that certain
Employment Agreement between you and the Company effective January 6, 2003; (v)
your breach of the Company's Confidentiality, Proprietary Information and
Inventions Agreement, (vi) your continued failure to perform the major duties,
functions and responsibilities of your position after written notice from the
Company identifying the deficiencies in your performance and a reasonable cure
period of not less than thirty (30) days or (vii) a material breach of your
fiduciary duties as an officer of the Company.

         PART TWO - TERMINATION/CHANGE IN CONTROL BENEFITS

         Your benefits under this Part Two will in all events be subject to the
benefit limitations of Part Three and the restrictive covenants of Part Four of
this letter agreement and will be in lieu of all other severance benefits to
which you might otherwise be entitled upon termination of your employment.

         A. SEVERANCE BENEFITS UPON AN INVOLUNTARY TERMINATION PRIOR TO A CHANGE
IN CONTROL.

         Should your employment with the Company terminate by reason of an
Involuntary Termination at any time prior to and not in connection with a Change
in Control, you will become entitled to receive the following severance
benefits, provided you execute and deliver to the Company, at the time of such
Involuntary Termination, a General Release in substantially the form of attached
Exhibit 1:

<PAGE>

         1. ACCELERATED VESTING OF OUTSTANDING OPTIONS UPON AN INVOLUNTARY
TERMINATION.

         Each outstanding Option which you hold at the time of your Involuntary
Termination, to the extent not otherwise exercisable for all the shares of
Common Stock subject to that Option as fully vested shares, will immediately
vest and become exercisable for the number of additional shares in which you
would have vested had you remained in the Company's employ for a period of
twelve (12) months following the Involuntary Termination. Each such accelerated
Option will remain exercisable until the earlier of (x) the expiration of the
option term or (y) the end of the six (6)-month period following the date of
your Involuntary Termination. Any Options not exercised prior to the expiration
of the applicable post-service exercise period will lapse and cease to remain
exercisable. As a result of the extension of the post-termination exercise
periods for Options outstanding on the date of this agreement, those Options, to
the extent designated as Incentive Options, will no longer be treated as
Incentive Options for Federal tax purposes; instead, such Options will be
treated as Non-Statutory Options for Federal tax purposes and accordingly you
will recognize ordinary income upon exercise of such Options. All such income
will be subject to applicable income and employment withholding taxes.

         2. SEVERANCE PAYMENT.

         Following your Involuntary Termination, you will receive severance
payments from the Company equal to your monthly rate of Base Salary [for a
period of one (1) month plus an additional month for each completed quarter of
service to the Company measured from January 6, 2003 (the date of your hire) up
to a maximum of twelve (12) months]. The salary continuation payments shall be
paid to you in equal installments following your Involuntary Termination in
accordance with the Company's normal payroll practices and subject to all
applicable withholding taxes. The payments will immediately terminate in the
event you fail to abide by the restrictive covenants set forth in Part Four of
this letter agreement.

         3. HEALTH CARE COVERAGE.

         The Company will, at its expense, continue to provide you and your
eligible dependents with the Company's paid portion of health care coverage
under the Company's medical/dental plan until the earlier of (i) the expiration
of that number of months equal to the Severance Period measured from the first
day of the first month following the effective date of your Involuntary
Termination or (ii) the first date that you are covered under another employer's
health benefit program which provides substantially the same level of benefits
without exclusion for pre-existing medical conditions. Such Health Care Coverage
will be in lieu of any other

<PAGE>

continued health care coverage to which you or your dependents would otherwise
be entitled at your own cost under Code Section 4980B by reason of your
termination of employment.

         B. ACCELERATED VESTING OF STOCK BONUS UPON A CHANGE IN CONTROL

         In accordance with the terms of the 2003 Stock Bonus Plan specified in
the letter dated January 6, 2003 (the "Stock Bonus Letter"), immediately
following the effective date of a Change in Control (as such term is defined in
the Stock Bonus Letter), you will be entitled to receive the shares of Common
Stock under your stock bonus grant. This payment will be made provided you
remain an employee of the Company through the effective date of such Change in
Control. Upon the Change in Control, you will recognize taxable income equal to
the fair market value of the shares which vest at such time; all such income
will be subject to the applicable income and employment withholding taxes.

         C. ACCELERATED VESTING OF OUTSTANDING OPTIONS UPON AN INVOLUNTARY
TERMINATION IN CONNECTION WITH A CHANGE IN CONTROL.

         Should your employment with the Company terminate by reason of an
Involuntary Termination (i) immediately prior to and in connection with, (ii)
upon or (iii) within the twelve (12) months following a Change in Control,
provided you execute and deliver to the Company, at the time of such Involuntary
Termination, a General Release in substantially the form of attached Exhibit 1,
each outstanding Option which you hold upon the effective date of your
Involuntary Termination, to the extent not otherwise exercisable for all the
shares of Common Stock subject to that Option as fully vested shares, will
immediately vest in full and become exercisable. Each such accelerated Option
will remain exercisable until the earlier of (x) the expiration of the option
term or (y) the end of the six (6)-month period following the date of your
Involuntary Termination. Any Options not exercised prior to the expiration of
the applicable post-service exercise period will lapse and cease to remain
exercisable. As a result of the extension of the post-termination exercise
periods for Options outstanding on the date of this agreement, those Options, to
the extent designated as Incentive Options, will no longer be treated as
Incentive Options for Federal tax purposes; instead, such Options will be
treated as Non-Statutory Options for Federal tax purposes and accordingly you
will recognize ordinary income upon exercise of such Options. All such income
will be subject to applicable income and employment withholding taxes.

<PAGE>

                      Part Three -- LIMITATION ON BENEFITS

         1. BENEFIT LIMIT.

         The aggregate Present Value (measured as of the Change in Control) of
the benefits to which you become entitled under Part Two at the time of your
Involuntary Termination, namely, the salary continuation payments, the Option
Parachute Payment attributable to your Severance-Accelerated Options and your
Health-Care Coverage, will in no event exceed in amount the dollar amount (the
"Benefit Limit") which yields you the greatest after-tax amount of benefits
under Part Two of this letter agreement after taking into account any excise tax
imposed under Code Section 4999 on the payments and benefits which are provided
you under Part Two or which constitute Other Parachute Payments.

         The Stock Bonus Parachute Payment and the Option Parachute Payment
attributable to the accelerated vesting of your Acquisition-Accelerated Options
(if any) at the time of the Change in Control shall also be subject to the
Benefit Limit.

         For purposes of applying the Benefit Limit to your benefits under Part
Two, the value of your non-competition covenant under Part Four of this letter
agreement shall be determined through independent appraisal by a
nationally-recognized independent accounting firm acceptable to both you and the
Company and obtained solely at the Company's cost, and a portion of your Part
Two benefits shall, to the extent of such appraised value, be specifically
allocated as reasonable compensation for your non-competition covenant.

         2. RESOLUTION PROCEDURE.

         In the event there is any disagreement between you and the Company as
to whether one or more payments to which you become entitled in connection with
either the Change in Control or your subsequent Involuntary Termination
constitute Parachute Payments, Option Parachute Payments or Other Parachute
Payments or as to the determination of the Present Value of any of those
payments, such dispute will be resolved as follows:

                  (i) In the event temporary, proposed or final Treasury
         Regulations in effect at the time under Code Section 280G (or
         applicable judicial decisions) specifically address the status of any
         such payment or the method of valuation therefor, the characterization
         afforded to such payment by the Regulations (or such decisions) will,
         together with the applicable valuation methodology, be controlling.

<PAGE>
                  (ii) In the event Treasury Regulations (or applicable judicial
         decisions) do not address the status of any payment in dispute, the
         matter will be submitted for resolution to independent tax counsel
         mutually acceptable to you and the Company ("Independent Counsel"). The
         resolution reached by Independent Counsel will be final and
         controlling; provided, however, that if in the judgment of Independent
         Counsel the status of the payment in dispute can be resolved through
         the obtainment of a private letter ruling from the Internal Revenue
         Service, a formal and proper request for such ruling will be prepared
         and submitted by Independent Counsel, and the determination made by the
         Internal Revenue Service in the issued ruling will be controlling. All
         expenses incurred in connection with the retention of Independent
         Counsel and (if applicable) the preparation and submission of the
         ruling request will be shared equally by you and the Company.

                  (iii) In the event Treasury Regulations (or applicable
         judicial decisions) do not address the appropriate valuation
         methodology for any payment in dispute, the Present Value thereof will,
         at the Independent Counsel's election, be determined through an
         independent third-party appraisal, and the expenses incurred in
         obtaining such appraisal will be shared equally by you and the Company.

         3. STATUS OF BENEFITS.

                  A. No benefits shall be provided you under Part Two of this
         letter agreement (including the accelerated vesting of your outstanding
         Options, the salary continuation payments and the Company-paid Health
         Care Coverage) until the Present Value of the Option Parachute Payment
         attributable to both your Severance-Accelerated Options and your
         Acquisition-Accelerated Options and the Stock Bonus Payment has been
         determined and the status of any payments in dispute under Paragraph 2
         above has been resolved in accordance therewith. The post-service
         exercise period in effect for your Options shall be stayed and shall
         not run until the resolution process hereunder is completed.

                  B. Once the requisite determinations under Paragraph 2 have
         been made, then to the extent the aggregate Present Value, measured as
         of the Change in Control, of (i) the Option Parachute Payment
         attributable to your Severance-Accelerated Options (or installments
         thereof) plus (ii) the Parachute Payment attributable to your other
         benefit entitlements under Part Two of this letter agreement would,
         when added to the Present Value of all your Other Parachute Payments
         (including the Stock Bonus Parachute Payment and the Option Parachute
         Payment attributable to your Acquisition-Accelerated Options), exceed
         the Benefit Limit, first your salary continuation payments will be
         reduced and then the period of your Company-paid Health Care Coverage
         will be shortened, to the extent necessary to assure that such Benefit
         Limit is not exceeded. To the extent such Benefit

<PAGE>

         Limit is still exceeded following such reductions, then the number of
         shares for which your Options are to vest on an accelerated basis
         pursuant to Part Two (based on the amount of the Option Parachute
         Payment attributable to each Option) shall be reduced to the extent
         necessary to eliminate such excess.

                   PART FOUR -- SPECIAL RESTRICTIVE COVENANTS

         1. CESSATION OF BENEFITS.

         Your entitlement to your salary continuation payments and Company-paid
Health Care Coverage under this letter agreement will immediately cease, should
you:

                  (a) render, anywhere in the United States, any services or
         provide any advice or assistance to any Competing Business, whether as
         an employee, consultant, partner, principal, agent, representative,
         equity holder or in any other capacity, without the express prior
         written consent of the Company. However, nothing in Part Four, subpart
         1(a) will limit your making any passive investment representing an
         interest of less than two percent (2%) of an outstanding class of
         publicly-traded securities of any corporation or other enterprise;

                  (b) solicit customers, clients, suppliers, agents or other
         persons or entities under contract or otherwise associated or doing
         business with the Company and/or its controlled affiliates to reduce or
         alter any such association or business with the Company and/or its
         controlled affiliates on behalf of any Competing Business; and/or

                  (c) solicit any employee or contractor of the Company and/or
         its controlled affiliates to (i) alter or reduce such relationship with
         the Company, and/or (ii) accept employment, or enter into any
         consulting arrangement, with any person other than Company and/or its
         controlled affiliates.

         A COMPETING BUSINESS shall mean the five (5) companies designated by
the Company on the list attached hereto as Exhibit 2. The Company may revise
Exhibit 2 at any time by adding names to, or subtracting names from, such list;
provided, however, that the Company must comply with the following requirements
in making any changes to Exhibit 2: 1) absent your express written consent, any
such change to Exhibit 2 must be made at least ninety days before termination of
your employment for any reason; 2) any change must be made in writing and either
personally delivered to you or sent to your last known address by certified mail
return receipt requested; and 3) the Company can never include more than five
(5) company names on Exhibit 2. (Thus, if

<PAGE>

Exhibit 2 contains five (5) company names and the Company adds one or more
company names to Exhibit 2, then it must delete a like number. If the Company
publishes a version of Exhibit 2 with more than five (5) names, then such list
will not be binding and the last version of Exhibit 2 with five (5) Company
names will be binding.)

                           PART FIVE -- MISCELLANEOUS

         1. AMENDMENT AND TERMINATION.

         This letter agreement may only be amended by written instrument signed
by you and an authorized officer of the Company. This letter agreement shall
remain in effect through December 31, 2003 or any earlier termination of your
employment with the Company. Provided you continue in the Company's employ, this
letter agreement shall automatically be renewed for successive one (1)-year
terms, beginning January 1, 2004, unless the Company provides you with written
notice of termination of this letter agreement at least thirty (30) days prior
to the start of any such one (1)-year renewal period. Once a Change in Control
occurs, this letter agreement may not be terminated at any time prior to the
expiration of the twelve (12)-month period following the effective date of that
Change of Control, and no subsequent termination of this letter agreement shall
adversely affect your right to receive any benefits to which you may have
previously become entitled hereunder in connection with your Involuntary
Termination following that Change in Control.

         2. TERMINATION FOR CAUSE.

         Should your employment cease by reason of a Termination for Cause, then
the Company will only be required to pay you (i) any unpaid compensation earned
for services previously rendered through the date of such termination and (ii)
any accrued but unpaid vacation benefits or sick days, and no benefits will be
payable to you under Part Two of this letter agreement.

         3. DEATH.

         Should you die before receipt of one or more salary continuation
payments to which you become entitled under this letter agreement, then those
payments will be made to the executors or administrators of your estate. Should
you die before you exercise all your outstanding Options as accelerated
hereunder, then such Options may be exercised, within twelve (12) months after
your death, by the executors or administrators of your estate or by persons to
whom the Options are transferred pursuant to your will or in accordance with the
laws of inheritance. In no event, however, may any such Option be exercised
after the specified expiration date of the option term.

<PAGE>

         4. INDEMNIFICATION.

         The indemnification provisions for Officers and Directors under the
Company By-Laws will (to the maximum extent permitted by law) be extended to
you, during the period following your Involuntary Termination, with respect to
any and all matters, events or transactions occurring or effected during your
period of employment with the Company.

         5. MISCELLANEOUS.

         This letter agreement will be binding upon the Company, its successors
and assigns (including, without limitation, the surviving entity in any Change
in Control) and is to be construed and interpreted under the laws of the State
of Texas. This letter agreement supersedes all prior agreements between you and
the Company relating to the subject of severance benefits payable upon an
Involuntary Termination, and you will not be entitled to any other severance
benefits upon such a termination other than those that are provided in this
letter agreement. If any provision of this letter agreement as applied to you or
the Company or to any circumstance should be adjudged by a court of competent
jurisdiction to be void or unenforceable for any reason, the invalidity of that
provision will in no way affect (to the maximum extent permissible by law) the
application of such provision under circumstances different from those
adjudicated by the court, the application of any other provision of this letter
agreement, or the enforceability or invalidity of this letter agreement as a
whole. Should any provision of this letter agreement become or be deemed
invalid, illegal or unenforceable in any jurisdiction by reason of the scope,
extent or duration of its coverage, then such provision will be deemed amended
to the extent necessary to conform to applicable law so as to be valid and
enforceable or, if such provision cannot be so amended without materially
altering the intention of the parties, then such provision will be stricken and
the remainder of this letter agreement will continue in full force and effect.

         6. GENERAL CREDITOR STATUS.

         All cash payments to which you become entitled hereunder will be paid,
when due, from the general assets of the Company, and no trust fund, escrow
arrangement or other segregated account will be established as a funding vehicle
for such payment. Accordingly, your right (or the right of the personal
representatives or beneficiaries of your estate) to receive such cash payments
hereunder will at all times be that of a general creditor of the Company and
will have no priority over the claims of other general creditors.

<PAGE>

         7. AT WILL EMPLOYMENT.

         Nothing in this letter agreement is intended to provide you with any
right to continue in the employ of the Company (or any subsidiary) for any
period of specific duration or interfere with or otherwise restrict in any way
your rights or the rights of the Company (or any subsidiary), which rights are
hereby expressly reserved by each, to terminate your employment at any time and
for any reason, with or without cause.

                            [SIGNATURE PAGE FOLLOWS]

         Please indicate your agreement with the foregoing terms and conditions
of your severance package (including, without limitation, the conversion of any
Incentive Options into Non-Statutory Options) by signing the Acceptance section
of the enclosed copy of this letter and returning it to the Company.

                                              Very truly yours,

                                              CROSSROADS SYSTEMS, INC.

                                    By:
                                       ----------------------------------------

                                    Title:
                                          -------------------------------------

<PAGE>

                                   ACCEPTANCE

         I hereby agree to all the terms and provisions of the foregoing letter
agreement governing the special benefits to which I may become entitled in the
event my employment should terminate under certain prescribed circumstances
including certain terminations following a substantial change in control or
ownership of the Company.

                       Signature:
                                 ----------------------------------------------

                       Dated:
                             --------------------------------------------------

                       Address

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