Document:

Exhibit 10.3

 

Exhibit 10.3

***Text Omitted and Filed Separately

with the Securities and Exchange Commission.

Confidential Treatment Requested

Under 17 C.F.R. Sections 200.80(b)(4)

and 240.24b-2.

AMENDED SETTLEMENT AND LICENSE AGREEMENT

This Amended Settlement and License Agreement (“Agreement”) sets forth the terms upon which
Crossroads Systems, Inc., a Delaware Corporation, and all its subsidiaries and affiliates
(“Crossroads”) and Dot Hill Systems Corp., a Delaware corporation, and all its subsidiaries and
affiliates (“Dot Hill”), agree to settle the litigation pending before the U.S. District Court of
the Western District of Texas, Austin Division (the “Court”), captioned Crossroads Systems,
(Texas), Inc., Plaintiff v. Dot Hill Systems Corporation, Defendant, Case No. A-03-CV-754-SS
(“Patent Litigation”). Crossroads and Dot Hill are individually referred to in this Agreement as a
“Party” and collectively as the “Parties.” This Agreement shall be effective as of June 27, 2006
(“Effective Date”). This Agreement replaces and supersedes the Settlement and License Agreement
executed by Crossroads and Dot Hill on or about June 27, 2006, which is hereinafter referred to as
the “Original Settlement Agreement.”

Background

Crossroads is the owner of the ‘972 Patent Family. Crossroads filed the Patent Litigation alleging
the Accused Products infringe U.S. Patent Nos. 5,941,972 and 6,425,035 and demanding judgment
against Dot Hill. It is now the desire and intention of Crossroads and Dot Hill to settle and
resolve all disputes, differences and claims which exist in the Patent Litigation.

In consideration of the mutual promises contained herein, and other good and valuable
consideration, the adequacy of which is hereby acknowledged, the Parties hereto agree as follows:

     1. Definitions.

          1.1 “’972 Patent Family” means U.S. Patent Nos. 5,941,972, 6,763,419, 6,738,854, 6,425,036,
and 6,425,035, and any other U.S. patents, U.S. patent applications or foreign counterparts which
claim priority to any of the foregoing patents or to any applications from which any of the
foregoing patents issued, including all reissues, reexaminations, divisional, continuations,
continuations-in-part, and extensions of any of the foregoing issued patents or pending patent
applications.

          1.2 “Accused Products” means the products accused by Crossroads of infringement in the Patent
Litigation as of June 5, 2006, that perform RAID including without limitation the following: SANnet
II FC, SANnet II SATA, SANnet II SATA Special Edition, SANnet I 7000 Series (including without
limitation SANnet I 7124 and SANnet I 7128), SANnet I 4000 Series (including without limitation
SANnet I 4300, SANnet I 4200, SANnet I 4210, and
SANnet I 4220), RIO (including without limitation RIO Xtreme Storage Server, RIO RAID eXp
R3200/RFF244 and RIO RAID eXp R3400/RFF288), RIVA (including without limitation RIVA I and RIVA FC
R2500), and the following products in the StratisRAID Series, StratisRAID SRF112, StratisRAID
SRF212, StratisRAID SRF116-01, StratisRAID SRF116-22, StratisRAID SRF216-01 and StratisRAID
SRF216-23.

          1.3 “Extraterratorial Products” means Dot Hill products, including Accused Products, Sold to a
Third Party located outside the United States that are (i)

 

 

manufactured by or on behalf of Dot Hill entirely outside of the United States, (ii) shipped to a
location outside the United States without entering the United States, (iii) at no time
subsequently imported, shipped or delivered into the United States, and (iv) are covered by the
‘972 Patent Family.

          1.4 “JBOD” has its ordinary meaning as understood in the storage industry, including “just a
bunch of disks.”

          1.5 “Licensed Product(s)” means any product manufactured by or for Dot Hill, based on designs
or specifications created by Dot Hill, and which is Sold by Dot Hill, that is covered by any claim
of any patent in the ‘972 Patent Family. A JBOD, in and of itself, is not a Licensed Product.
Accused Products, follow-on products based on those Accused Products, and Accused Products that
have undergone a name change shall be Licensed Products provided such products contain the same
functionality as the functionality in the Accused Products as of the Effective Date.

          1.6 “License” means the license grant from Crossroads described in Paragraph 4.1.

          1.7 “Net Sales” means the gross revenues received by Dot Hill from the Sale of Licensed
Products less sales and/or use taxes actually paid, import and/or export duties actually paid,
outbound transportation prepaid or allowed, other similar types of expenses typical in the storage
industry, rebates and cash discounts, and amounts allowed or credited due to returns (not to exceed
the original billing or invoice amount).

          1.8 “RAID” has its ordinary meaning as understood in the storage industry, including the
following RAID levels: RAID 0 (striping), RAID 1 (mirroring), RAID 2 (Error-Correcting Coding),
RAID 3 (Bit-Interleaved Parity), RAID 4 (Dedicated Parity Drive), RAID 5 (Block Interleaved
Distributed Parity), RAID 6 (Independent Disk With Double Parity), RAID 0+1 (Mirror of Stripes),
RAID 10 (Stripe of Mirrors), RAID 7 (Storage Computer Corporation proprietary), RAID S (EMC
proprietary) and to-be developed RAID levels.

          1.9 “Release” means the release by Crossroads as described in Paragraph 3.1.

          1.10 “Sale or Sold” means the transfer, distribution or disposition of a Licensed Product for
value to a Third Party.

          1.11 “Third Party” means any individual, group of individuals, corporation, partnership, joint
venture, trust, association, unincorporated organization, governmental body or any entity of any
kind or nature other than Dot Hill and Crossroads, provided, however, that a Party changing its
name shall remain a Party for purposes of this Agreement.

 

 

     2. Dismissal. Upon actual receipt by Crossroads of payment as set forth in Paragraph
5.1, Crossroads shall file with the Court a request for dismissal of all claims and counterclaims
in the Patent Litigation by filing the Stipulation and Order of Dismissal attached hereto as
Exhibit A. Each Party will appear in court, perform all acts, sign all necessary documents and
cooperate with one another as necessary to facilitate the dismissal of the claims. Upon receipt by
Crossroads of full payment by Dot Hill pursuant to Paragraph 5.1, Crossroads will dismiss, with
prejudice, the breach of contract lawsuit it filed against Dot Hill on or about July 24, 2006.

     3. Releases.

          3.1 Release of Dot Hill. Subject to actual receipt by Crossroads of payment as set forth in
Paragraph 5.1, Crossroads, with the intention of binding itself, its affiliates, successors and
assigns, does hereby irrevocably release, forever discharge, and agrees not to assert or assist any
third party in asserting any action, claim, liability or demand (“Crossroads Claims”) against Dot
Hill, and its affiliates, successors, directors, officers, employees, predecessors, successors,
customers (but only with respect to Licensed Products), and agents, from any and all Crossroads
Claims Crossroads had or may have had on or before the Effective Date arising out of or relating to
infringement of any of the ‘972 Patent Family based on the manufacture, having manufactured, use,
sale, marketing, offer for sale, lease, licensing, export, design, development, distribution,
importation, or other disposition of the Licensed Products, including all claims asserted by
Crossroads in the Patent Litigation. Such release shall pertain to Crossroads Claims whether now
known or unknown. Notwithstanding the foregoing and except as provided herein, the Release granted
in this Paragraph 3.1 shall not extend to any claims, damages and/or liability Crossroads has or
may have arising out of or relating to any products, processes, designs, methodologies or
technology acquired by Dot Hill, its affiliates or successors after the Effective Date, including
without limitation as part of the acquisition of a Third Party or the acquisition of any asset(s)
of a Third Party.

          3.2 Release of Crossroads. Dot Hill, with the intention of binding itself, its affiliates,
successors and assigns, does hereby irrevocably release and forever discharge and agrees not to
assert or assist any third party in asserting any action, claim, liability or demand (“Dot Hill
Claims”) against Crossroads, and its affiliates, successors, directors, officers, employees,
predecessors, successors, customers (only to the extent that such customers have used or sold
products purchased from Crossroads) and agents, from any and all Dot Hill Claims Dot Hill had or
may have had on or before the Effective Date arising out of or relating to the ‘972 Patent Family,
including all claims asserted by Dot Hill in the Patent Litigation. Such release shall pertain to
Dot Hill Claims whether now known or unknown.

          3.3 [...***...]

3

***
Confidential Treatment Requested

 

[...***...]

          3.4 California Civil Code. Each party waives all rights under Section 1542 of the California
Civil Code as such rights may relate to any Claims. Each party acknowledges that it has consulted
with legal counsel regarding the import of Section 1542 of the California Civil Code, which
provides as follows:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN
BY HIM, MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

     4. License Grant.

          4.1 Crossroads License Grant. Subject to actual receipt by Crossroads of payment as set forth
in Paragraph 5 of this Agreement, Crossroads hereby grants to Dot Hill a non-exclusive, personal,
non-sublicensable, non-transferable, non-assignable (except as provided herein), indivisible,
worldwide, royalty-bearing license under the ‘972 Patent Family to make, have made (for Dot Hill
only), use, lease, license, design, develop, distribute, market, sell, offer for sale, export,
import and otherwise dispose of Licensed Products, as well as to make, use or perform any method or
process claimed in the ‘972 Patent Family after the Effective Date. Dot Hill acknowledges and
agrees that it has only the patent license rights granted in the License and that all other rights
are expressly reserved to Crossroads.

          4.2 After-Acquired Products. The License shall not apply to any products, processes, designs,
methodologies or technology acquired by Dot Hill, its affiliates and successors after the Effective
Date, including without limitation as part of the acquisition of a

4

***
Confidential Treatment Requested

 

Third Party or the acquisition of any asset(s) of a Third Party, covered by any claim of the ‘972
Patent Family that was made, used, sold, offered for sale or imported by the Third Party prior to
the date acquired by Dot Hill.

          4.3 Combinations. No license is granted under this Agreement by Crossroads, either directly
or by implication, estoppel or otherwise, to any Third Parties acquiring items from Dot Hill for
the combination of such acquired items with other item(s), where the use, manufacture, sale, offer
for sale or import of such combination infringes any claim of the ‘972 Patent Family based on the
other item. For purposes of clarity, if a Third Party combines a product from Dot Hill that is
covered by the License with another item, such combination is covered by the License as long as
such other item does not independently infringe the ‘972 Patent Family.

          4.4 No Challenges. For as long as the License remains in effect, Dot Hill agrees that it will
not challenge, participate in any challenge to, or aid any Third Party in challenging the validity
or enforceability of any patent in the ‘972 Patent Family, except as required by subpoena, by law,
or by any governmental or regulatory authority. If this license is terminated for any reason,
including, but not limited to those reasons set forth in paragraph 8.2 below, Dot Hill expressly
reserves the right to challenge the validity and enforceability of any of the patents in the ‘972
Patent Family.

          4.5 No Obligation to Enforce. Crossroads shall have no obligation hereunder to institute any
action or suit against any Third Party for infringement of any patent within the ‘972 Patent Family
or to defend any action or suit brought by a Third Party which challenges or concerns the validity
or enforceability of any such patent. In addition, Dot Hill shall have no right to institute any
action or suit against Third Parties for infringement of any patent in the ‘972 Patent Family.

          4.6 No Restriction. Dot Hill agrees that the License shall in no way restrict Crossroads’ use
of the ‘972 Patent Family, or Crossroads’ manufacture, use, sale, offering for sale or importation
of any product, service, process, or method covered by the claims of the ‘972 Patent Family, for
its own purposes or in collaboration with Third Parties.

          4.7 No Patent Laundering. Dot Hill agrees that the License is not intended to and does not
cover manufacturing activities that Dot Hill may undertake (either itself or by another under the
have made grant in Paragraph 4.1) on behalf of any Third Party for the purpose of providing such
Third Parties with coverage under the patent license granted by Crossroads to Dot Hill in this
Agreement. The provisions of this Paragraph 4.7 shall not limit Dot Hill’s ability to manufacture
products on behalf of its OEM customers, for the purpose of providing such OEM customers with
private-label versions of products primarily designed and manufactured by Dot Hill, and, subject to
all other duties and obligations of this Agreement, including without limitation Paragraph 4.3,
such manufacture or sales shall continue to be covered by the License if applicable.

     5. Fees.

5

 

          5.1 Up Front Payment. Dot Hill will pay Crossroads a non-refundable payment of ten million, five
hundred thousand United States dollars ($10,500,000). Dot Hill’s payment obligation under this
Paragraph 5.1 shall become due and payable within twenty (20) days of the Effective Date. Dot Hill
shall make this payment in full and shall not reduce the payment due to taxes, duties, fees or any
other tax-related obligations owed by Dot Hill or any other entity anywhere in the world. Because
Dot Hill did not make full payment of the Up Front Payment owed Crossroads pursuant to Section 5.1
of the Original Settlement Agreement, Dot Hill will, not later than Thursday, October 5, 2006,: (1)
pay Crossroads the remaining one million, four hundred thirty thousand United States dollars
($1,430,000) of the Up Front Payment owed to Crossroads, and (2) pay Crossroads an additional
forty-five thousand United States dollars ($45,000) as a late fee for Dot Hill’s failure to pay the
entire Up Front Payment within twenty (20) days of the Effective Date. If Dot Hill makes the
payments as set forth in this Paragraph 5.1 in full not later than October 5, 2006, Crossroads
hereby agrees not to use the aforementioned instance of not making full payment of the Up Front
Payment as grounds to terminate this Agreement.

          5.2 Royalty. For all Sales of Licensed Products after the Effective Date, Dot Hill shall pay
Crossroads a running royalty equal to two and one half percent (2.5%) of the Net Sales of the
Licensed Products Sold by Dot Hill. Should Dot Hill exchange Licensed Products for some value
other than monetary, the running royalties payable to Crossroads shall be two and one half percent
(2.5%) of such value received from Third Parties. Dot Hill shall pay each quarterly royalty
payment no later than forty-five (45) days following the end of each calendar quarter. Dot Hill
shall make these payments in full and shall not reduce these payments due to taxes, duties, fees or
any other tax-related obligations owed by Dot Hill or any other entity anywhere in the world.

               5.2.1 Non-Extraterritorial Products. The royalty payment of Paragraph 5.2 shall apply
immediately upon the Effective Date to all Licensed Products that are not Extraterritorial
Products.

               5.2.2 Extraterritorial Products. The License and royalty of Paragraph 5.2 shall apply to
Extraterritorial Products as of the date that Crossroads sends to Dot Hill notice of the issuance
of a patent within the ‘972 Patent Family having any claim covering such Extraterritorial Products
in any jurisdiction in which the Extraterritorial Products are made, used, sold, offered for sale,
or to which the Extraterritorial Product is shipped or imported. Such notice is provided by this
Agreement for the patents in the ‘972 Patent Family listed in Exhibit C. By way of example, if a
‘972 Patent Family patent issues subsequent to the Effective Date in Japan having a claim that
covers Extraterritorial Products shipped to customers of Dot Hill in Japan, the 2.5% royalty would
apply to those products as of the date that Crossroads notifies Dot Hill of the issuance of the
Japanese patent. After the Effective Date, Crossroads shall notify Dot Hill of the issuance of
additional non-US patents in the ‘972 Patent Family as those patents issue and, if such patent is
not in English, Crossroads shall provide to Dot Hill either a description of the technology covered
by such patent or an English translation of such patent. The Parties agree that if any of the
claims issuing for a ‘972 Patent Family patent issued in non-US jurisdictions are the same or
substantively the same as any claim in U.S. Patent No. 6,425,035, then all Extraterritorial
Products which would be covered by the ‘972 Patent Family in the United States shall be deemed
covered by the claims of such issued non-US patent.

6

 

               5.2.3 After-Acquired Products. The License and royalty of Paragraph 5.2 shall apply to products,
processes, designs, methodologies or technology acquired by Dot Hill, its affiliates and successors
after the Effective Date, including without limitation as part of the acquisition of a Third Party
or the acquisition of any asset(s) of a Third Party, that are covered by any claim of the ‘972
Patent Family that are made, have made (for Dot Hill only), licensed, leased, marketed, exported,
designed, developed, used, sold, offered for sale, imported or otherwise distributed by Dot Hill
(or any other Third Party) after the date acquired by Dot Hill. If Dot Hill acquires a Third Party
that already has a license agreement for the ‘972 Patent Family in place with Crossroads (the
“Third Party ‘972 Patent License”), and which Third Party ‘972 Patent License survives the
acquisition by Dot Hill pursuant to its terms, with respect to only those products acquired from
the Third Party that are sold after such acquisition by Dot Hill, Dot Hill shall have the option of
choosing to make, use, sell, license, lease, market, have made (for Dot Hill only), export, design,
develop, offer for sale, import and/or otherwise distribute such acquired products (and follow-on
products based primarily on those Accused Products) under either the royalty terms of this
Agreement or under the payment terms of such Third Party ‘972 Patent License.

               5.2.4 Non-Manipulation. Dot Hill agrees that for the purposes of determining the running
royalty to be paid to Crossroads, Dot Hill will not artificially manipulate the selling of its
products to avoid or reduce the royalty payment otherwise due to Crossroads, including without
limitation selling a product in a manner so as to artificially remove it from the definition of a
Licensed Product.

                    5.2.4.1 By way of example, Dot Hill will not: (i) deconstruct a product that would otherwise
qualify as a Licensed Product (such as the SANnet II FC products) to remove the RAID controller
portion (that is covered by the ‘972 Patent Family) of the product; (ii) classify the deconstructed
Licensed Product as a JBOD that would not be subject to the royalty payment, and then; (iii) sell
the RAID controller portion separately, to be reconstructed by the customer or otherwise
reconstructed after the sale; the foregoing example shall apply equally regardless of whether the
entire RAID controller is removed, a chip is removed, a board is removed or any other component or
software is removed that would, upon reconstruction, render the equipment covered by the ‘972
Patent Family. In this example, all portions of the deconstructed Licensed Product would be subject
to the royalty payment of this Paragraph 5.

                    5.2.4.2 By further way of example, while Dot Hill will not be obligated to pay a royalty on a
demonstration product that Dot Hill provides to a Third Party for evaluation or testing purposes at
no cost, if Dot Hill provides to any Third Party demonstration products beyond numbers required in
the ordinary course of business for which Dot Hill does not receive its normal and customary
payment, such products shall be subject to the royalty payment of this Paragraph 5 at Dot Hill’s
list price.

                    5.2.4.3 By further way of example, Dot Hill will not attempt to reduce the royalty base
against which the running royalty is paid to Crossroads by selling a product at less than an
arms-length negotiated price to a Third Party (or to itself or an affiliate of itself) unless such
sale is in the normal course of business, at a level customary in the industry, such as a decreased
price for the sale of demonstration, evaluation or prototype units.

7

 

                    5.2.4.4 Notwithstanding any of the foregoing in this Paragraph 5.2.4, nothing herein shall
render a product subject to the running royalty if that product is legitimately altered so that it
is no longer covered by the ‘972 Patent Family. For example, if Dot Hill alters the RAID
controller portion of certain products (or even all of its products), so that such products are no
longer covered by the ‘972 Patent Family, such products shall not be subject to the running
royalty, and such alteration shall not be considered a manipulation under this Paragraph 5.2.

                    5.2.4.5 The parties agree that Dot Hill’s sale of JBODs in the same manner as Dot Hill had
sold JBODs generally in the ordinary course of Dot Hill’s business prior to March 1, 2006 shall not
constitute a “manipulation” under this Agreement. Dot Hill warrants that prior to March 1, 2006,
it has sold JBODs that were capable of connection to a Licensed Product and customers used such
JBOD as expansion units to Licensed Products. The parties agree that selling JBODs as expansion
units in conjunction with RAID systems that contain a fewer number of disks than would otherwise be
purchased, in an effort to specifically avoid selling disks as part of a RAID-capable Licensed
Product, would constitute a “manipulation” under this Agreement.

          5.3 Royalty Report. Dot Hill shall furnish Crossroads with a royalty statement (substantially
in the form of Exhibit D), within forty-five (45) days following the end of each calendar quarter,
setting forth the quantity and Net Sales of Licensed Products Sold or otherwise disposed of by Dot
Hill during the calendar quarter, and the royalty payment due. A Licensed Product shall be
considered Sold when Dot Hill ships, bills out or receives payment for the Licensed Product,
whichever occurs first. Crossroads shall treat such royalty report as confidential information of
Dot Hill, will protect it from unauthorized use, access or disclosure in the same manner as
Crossroads protects its own confidential or proprietary information of a similar nature and with no
less reasonable care, and will disclose it only to the employees or agents of Crossroads who have a
need to know such information for purposes of this Agreement and who are under a duty of
confidentiality no less restrictive than Crossroads’ duties hereunder (collectively referred to as
“Crossroads Confidentiality Obligations”); provided, however, that such royalty report (or any
portion thereof) shall not be confidential information of Dot Hill nor shall Crossroads have any
liability for the use or disclosure of any such royalty report information which: (a) is now, or
hereafter becomes generally known or available to the public; (b) is rightfully acquired by
Crossroads before receiving the information from Discloser and without restriction as to use or
disclosure; (c) is hereafter rightfully furnished to Crossroads, without restriction as to use or
disclosure; or (d) is generally made available by Dot Hill without restriction on disclosure and
furthermore, a disclosure by Crossroads in response to either a valid order by a court or other
governmental body, or as otherwise required by law, shall not be considered to be a breach of this
Agreement (collectively referred to as “Exceptions to Crossroads Confidentiality Obligations”).

          5.4 Payment Method. Payments by Dot Hill to Crossroads shall be made by electronic fund
transfer to the following account and shall be deemed made on the date credited:

          [...***...]

8

***
Confidential Treatment Requested

 

          [...***...]

          5.5 Late Payments. Any late payment by Dot Hill shall include interest, where such interest
shall be calculated commencing on the date such payment became due, using an annual rate
[...***...] than the prime interest rate as quoted by the head office of Citibank N.A. (or an
equivalent institution if Citibank N.A. ceases operation), at the close of banking on such date, or
on the first business day thereafter if such date falls on a non-business day. If such interest
rate exceeds the maximum legal rate in the jurisdiction where a claim therefore is being asserted,
the interest rate shall be reduced to such maximum legal rate.

          5.6 Records and Audits. Dot Hill agrees to maintain and retain all financial, sales and
shipping records reasonably relating to any sales or shipment of its products, including without
limitation all Licensed Products, for a period of five (5) years after the Sale or shipment of the
products to a Third Party. Dot Hill agrees to keep such records in sufficient detail to enable the
royalties due and payable under this Agreement to be readily determined. Crossroads shall have the
right to audit such records up to once per year, provided that Crossroads must provide Dot Hill
thirty (30) days written notice of such inspection and must conduct the inspection during Dot
Hill’s regular business hours. Dot Hill agrees to provide all reasonable cooperation to Crossroads
and to aid Crossroads as necessary in understanding the sales and shipments of Dot Hill products
during the audited period. Any information collected or learned during such an audit shall be
considered to be confidential, shall be subject to the Crossroads Confidentiality Obligations and
the Exceptions to Crossroads Confidentiality Obligations described in paragraph 5.3, and may only
be used for purposes reasonably related to ensure or obtain performance by Dot Hill of its royalty
payment obligations under this Agreement. The cost of such audit shall be borne by Crossroads,
provided, however, that should any such audit reveal that the royalty payments paid by Dot Hill
pursuant to this Agreement for any calendar year have been understated by more than five percent
(5%) of the amount actually owed to Crossroads, then the reasonable cost of such audit shall be
paid by Dot Hill to Crossroads along with associated late payments in accordance with Paragraph
5.5.

          5.7 Effectiveness. The Parties acknowledge and agree that the Release and the License shall
only become effective upon completion and acknowledgement of the payment of Paragraph 5.1. The
License shall only remain effective upon the continued payment of royalty obligations of Paragraph
5.2.

     6. Publicity. Each Party may issue its respective press release in Exhibit B
announcing the settlement of the Patent Litigation at any time after the Effective Date. The
Parties acknowledge and agree that any future press releases or public announcements shall not
contain any information that is inconsistent with this Agreement or the press releases in Exhibit
B.

9

***
Confidential Treatment Requested

 

     7. Representations and Warranties.

          7.1 Mutual Representations and Warranties. Each Party represents and warrants that it has
full right, power, and authority to enter into this Agreement, and to perform its obligations and
duties under this Agreement, that the performance of such obligations and duties does not and will
not conflict with or result in a breach of any other agreement of such Party or any judgment,
order, or decree by which such Party is bound, and that this Agreement places valid and binding
obligations on each Party. Crossroads further represents and warrants that it has full right,
power, and authority to grant the License and Release.

          7.2 Negation of Warranties. Nothing in this Agreement is or shall be construed as: (i) a
warranty or representation by Crossroads as to the validity or scope of any of the Licensed
Patents, (ii) a warranty or representation by Crossroads that anything made, used, offered for
sale, sold or otherwise disposed of under this Agreement is or will be free from infringement of
patents or other intellectual property rights of Third Parties, (iii) a requirement that Crossroads
file any patent application, secure any patent or maintain any patent in force, (iv) an obligation
of either Party to furnish any manufacturing or technical information, or any information
concerning pending patent applications to the other Party.

          7.3 EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, CROSSROADS MAKES NO REPRESENTATIONS AND
EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED. CROSSROADS EXPRESSLY DISCLAIMS ANY
EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND/OR
NON-INFRINGEMENT. CROSSROADS SHALL HAVE NO LIABILITY WHATSOEVER WITH RESPECT TO DOT HILL’S PRODUCTS
OR OWING TO THE DOT HILL’S OPERATION UNDER THE LICENSE GRANTED IN THIS AGREEMENT.

     8. Term and Termination.

          8.1 Term. Unless terminated earlier in accordance with this Paragraph this Agreement will
take effect on the Effective Date and will remain in effect until each patent within the ‘972
Patent Family has expired, been abandoned, or been ruled invalid or unenforceable in a final,
non-appealable decision by a court or tribunal of competent jurisdiction, including the United
States Patent and Trademark Office.

          8.2 Termination by Crossroads. Crossroads may terminate this Agreement if (i) Dot Hill
breaches its payment obligations under Paragraph 5 and fails to remedy such breach within fifteen
(15) days of written notice thereof or (ii) Dot Hill is in material breach of any provision in this
Agreement and fails to remedy any such breach within thirty (30) days after written notice thereof
by Crossroads. Notwithstanding the foregoing, a good faith dispute between the parties as to
whether a product is covered by the ‘972 Patent Family (and therefore whether royalty payments are
due based on the Sales of such products) cannot be used by Crossroads as a grounds for termination,
and the License will continue in effect for all other Licensed Products.

10

 

          8.3 Termination by Dot Hill. Dot Hill may terminate this Agreement if Crossroads is in
material breach of any provision in this Agreement and fails to remedy any such breach within
thirty (30) days after written notice thereof by Dot Hill.

     9. Survival. Paragraphs 1 (Definitions), 2 (Dismissal), 3 (Releases (provided, however, that
Paragraph 3 (Releases) shall not survive if this Agreement is terminated for a breach of Paragraph
5.1)), 5.1 and 5.7 (Fees), 7 (Representations and Warranties), 9 (Survival), 10 (Assignment) and 13
(General) will survive any termination or expiration of this Agreement.

     10. Assignment. Neither Party may assign or transfer any of its rights, or delegate
any of its obligations or duties, under this Agreement to a Third Party without the other Party’s
prior written consent and any attempted assignment or delegation without such consent will be null
and void. Notwithstanding the foregoing, either Party may assign this entire Agreement and its
rights and obligations hereunder, without the other Party’s consent, in connection with the sale of
all or substantially all of the assets or stock of the Party (an “Acquisition”) to a Third Party,
provided, however, that: (a) the License shall only extend to Dot Hill products, designs,
methodologies or technology in existence at the time of any such Acquisition of Dot Hill and their
natural, evolutionary follow-ons; (b) other than the Dot Hill products described in (a) of this
Paragraph, the License will not extend to any product, process, design, methodology or technology
of the acquiring entity; and (c) the License shall not extend to any product, process, design,
methodology or technology of the acquiring entity created by dividing or otherwise deconstructing
the acquired Party’s products, designs, methodologies or technologies and combining only a
resultant portion of the acquired Party’s products, designs, methodologies or technologies with
other products, designs, methodologies or technologies of the acquiring entity. This Agreement
will be binding upon and inure to the benefit of the Parties and permitted assigns. In the event
that either party is the acquired party in an Acquisition as permitted hereunder, the rights and
obligations under this Agreement shall survive such permitted Acquisition.

     11. Bankruptcy. The Parties acknowledge and agree that this Agreement is a contract
under which Crossroads as licensor is a licensor of intellectual property as provided in Section
365(n) of Title 11, United States Code (the “Bankruptcy Code”). In the event Crossroads declares
bankruptcy, Crossroads as licensor acknowledges that if a debtor in possession, or a trustee in
bankruptcy in a case under the Bankruptcy Code (the “Bankruptcy Trustee”) rejects this Agreement,
then Dot Hill as licensee may elect to retain its rights under this Agreement as provided in
Section 365(n) of the Bankruptcy Code. Upon the written request of Dot Hill to Crossroads or the
Bankruptcy Trustee, neither Crossroads nor such Bankruptcy Trustee will interfere with the rights
and obligations of Dot Hill as provided in this Agreement.

     12. Notices. All notices under this Agreement shall be personally delivered,
delivered by United States mail or sent by a nationally recognized overnight carrier, and shall be
deemed received on the date of delivery. With respect to notices sent in the United States mail,
such must be registered or certified.

     [...***...]

***Confidential Treatment Requested

11

 

     [...***...]

     Either Party may change its address upon written notice to the other Party.

     13. General.

          13.1 Binding Nature. Except as expressly provided herein, this Agreement is binding upon and
shall inure to the benefit of each Party hereto and its respective successors and permitted assigns

          13.2 Relationship of Parties. Nothing in this Agreement shall be construed as creating a
partnership, joint venture, or agency relationship between the Parties, or as authorizing either
Party to act as agent for the other.

          13.3 Entire Agreement; Modifications. This Agreement constitutes the entire agreement and
understanding between the Parties with respect to the subject matter hereof and supersedes all
prior negotiations and agreements, whether written or oral. This Agreement may not be altered or
amended except by an instrument in writing executed by both Parties. No waiver of or amendment to
any of the terms hereof subsequent to the execution hereof claimed to have been made by any
representative of either Party shall have force or effect unless in a writing signed by duly
authorized representatives of the parties.

          13.4 Governing Law; Venue. This Agreement will be construed in accordance with and governed
in all respects by the laws of the State of Delaware without regard to any conflicts of law
principles which would result in application of laws of any other jurisdiction. Any legal action
or other legal proceeding relating to this Agreement or the enforcement of any provision of this
Agreement must be brought or otherwise commenced in any state court located in either the County of
San Diego, California or the County of Travis, Texas or in any federal court located either in the
Southern District of California or the Western District of Texas. Each Party expressly and
irrevocably consents and submits to the jurisdiction of such state and federal courts (and each
appellate court located in such jurisdiction) in connection with any such legal proceeding and the
defendant or respondent in the legal proceeding will not seek a change of venue of the legal
proceeding.

          13.5 Remedies. The rights and remedies of the Parties will be cumulative (and not
alternative). If any legal action is brought to enforce this Agreement, the prevailing Party will
be entitled to receive its reasonable attorneys’ fees, court costs, and other collection expenses,
in addition to any other relief it may receive.

          13.6 Waiver. The failure of a Party to this Agreement to insist upon strict adherence to any
term hereof shall not be considered a waiver or deprive that Party of the right thereafter to
insist upon strict adherence to that term or any other term of this Agreement. All waivers must be
in writing and signed by an authorized representative of the Party waiving its

***Confidential Treatment Requested

12

 

rights. Any waiver or failure to enforce any provision of this Agreement will not be deemed a
waiver of any other provision or of such provision on any other occasion.

          13.7 Severability. If any provision of this Agreement is unenforceable, such provision will
be changed and interpreted to accomplish the objectives of such provision to the greatest extent
possible under applicable law and the remaining provisions will continue in full force and effect.

          13.8 Independent Contractors. This Agreement is not intended to establish any partnership,
joint venture, employment, or other relationship between the Parties except that of independent
contractors.

          13.9 Construction. The paragraph headings in this Agreement are for convenience of reference
only, will not be deemed to be a part of this Agreement, and will not be referred to in connection
with the construction or interpretation of this Agreement. Any rule of construction to the effect
that ambiguities are to be resolved against the drafting Party will not be applied in the
construction or interpretation of this Agreement.

          13.10 Counterparts. This Agreement may be executed in several counterparts, each of which
will constitute an original and all of which, when taken together, will constitute one agreement.

IN WITNESS WHEREOF, each Party has executed this Agreement as of the date indicated below by its
authorized representative.

Crossroads Systems, Inc.

	 	 	 	 	 
	By:

	 	/s/ Brian Bianchi	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	Name: Brian Bianchi	 	 
	 
	 	 	 	 
	Its: Vice President, Engineering Development	 	 
	 
	 	 	 	 
	Date: October 5, 2006	 	 
	 
	 	 	 	 
	Dot Hill Systems Corporation	 	 
	 
	 	 	 	 
	By:

	 	/s/ Dana Kammersgard	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	Name: Dana Kammersgard	 	 
	 
	 	 	 	 
	Its: President & CEO	 	 
	 
	 	 	 	 
	Date: October 5, 2006	 	 

13

 

Exhibit A

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF TEXAS

AUSTIN DIVISION

	 	 	 	 	 	 	 	 
	 	 	 	 	 	 
	 	CROSSROADS SYSTEMS (TEXAS), INC.,	 	 	 	 
	 	a Texas corporation,	 	 	 	 
	 	 

	 	Plaintiff and Counter-Defendant,	 	 	 	 
	 	 
	 	 	 	 	CASE NO. A-03-CV-754 SS	 
	 	 

	 	v.	 	 	 	 
	 	 
	 	 	 	 	 	 
	 	DOT HILL SYSTEMS CORPORATION,	 	 	 	 
	 	a Delaware corporation,	 	 	 	 
	 	 

	 	Defendant and Counter-Plaintiff	 	 	 	 
	 	 	 	 	 	 

STIPULATION OF DISMISSAL OF CLAIMS BETWEEN

CROSSROADS SYSTEMS (TEXAS), INC. AND DOT HILL SYSTEMS CORPORATION

     IT IS HEREBY STIPULATED AND AGREED by and among Crossroads Systems (Texas), Inc.
(“Crossroads”) and Dot Hill Systems Corporation (“Dot Hill”), by their undersigned attorneys, that
pursuant to Federal Rule of Civil Procedure 41(a)(2), Crossroads’ claims against Dot Hill and Dot
Hill’s counterclaims against Crossroads in the above-referenced action be, and hereby are,
dismissed with prejudice. Each party shall bear its own costs and attorneys’ fees.

14

 

	 	 	 	 	 	 	 
	 

	 	Respectfully submitted,	 	 
	 
	Dated: October ___, 2006

	 	By:	 	 	 	 
	 

	 	 	 	 

John M. Guaragna (Bar No. 24043308)
	 	 
	 

	 	 	 	Raymond W. Mort III (Bar No. 00791308)	 	 
	 

	 	 	 	Jennifer A. Lloyd (Bar No. 24013050)	 	 
	 

	 	 	 	Meghan Paulk Ingle (Bar No. 24036821)	 	 
	 

	 	 	 	DLA Piper US LLP	 	 
	 

	 	 	 	1221 South MoPac Expressway, Suite 400	 	 
	 

	 	 	 	Austin, TX 78746-6875	 	 
	 

	 	 	 	Tel: 512-457-7000	 	 
	 

	 	 	 	Fax: 512-457-7001	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	John Allcock (Pro Hac Vice)	 	 
	 

	 	 	 	Sean C. Cunningham (Pro Hac Vice)	 	 
	 

	 	 	 	DLA Piper US LLP	 	 
	 

	 	 	 	401 B Street, Suite 2000	 	 
	 

	 	 	 	San Diego, CA 92101-4240	 	 
	 

	 	 	 	Tel: 619-699-2828	 	 
	 

	 	 	 	Fax: 619-699-2701	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Darius C. Gambino (Pro Hac Vice)	 	 
	 

	 	 	 	DLA Piper Rudnick Gray Cary US LLP	 	 
	 

	 	 	 	1650 Market Street, Suite 4900	 	 
	 

	 	 	 	Philadelphia, PA 19103	 	 
	 

	 	 	 	Tel: 215-656-3309	 	 
	 

	 	 	 	Fax: 215-656-3301	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Steven Robert Sprinkle	 	 
	 

	 	 	 	SPRINKLE IP LAW GROUP	 	 
	 

	 	 	 	1301 W. 25th Street, Suite 408	 	 
	 

	 	 	 	Austin, TX 78705	 	 
	 

	 	 	 	Tel: 512-637-9223	 	 
	 

	 	 	 	Fax: 512-371-9088	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Attorneys for Plaintiff and Counter-Defendant	 	 
	 

	 	 	 	CROSSROADS SYSTEMS (TEXAS), INC.	 	 

15

 

	 	 	 	 	 	 	 
	 

	 	Respectfully submitted,	 	 
	 
	Dated: October ___, 2006

	 	By:	 	 	 	 
	 

	 	 	 	 

Richard F. Cauley (Pro Hac Vice)
	 	 
	 

	 	 	 	Franklin E. Gibbs (Pro Hac Vice)	 	 
	 

	 	 	 	Michelle M. McCliman (Pro Hac Vice)	 	 
	 

	 	 	 	Peter O. Huang (Pro Hac Vice)	 	 
	 

	 	 	 	Larry Severin (Pro Hac Vice)	 	 
	 

	 	 	 	WANG, HARTMANN & GIBBS, P.C.	 	 
	 

	 	 	 	1301 Dove Street, Suite 1050	 	 
	 

	 	 	 	Newport Beach, CA 92660	 	 
	 

	 	 	 	(949) 833-8483	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	John F. Sweeney (Pro Hac Vice)	 	 
	 

	 	 	 	William S. Feiler (Pro Hac Vice)	 	 
	 

	 	 	 	MORGAN & FINNEGAN, L.L.P.	 	 
	 

	 	 	 	3 World Financial Center	 	 
	 

	 	 	 	New York, New York 10281	 	 
	 

	 	 	 	(212) 415-8700	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Valerie W. Greenberg (Pro Hac Vice)	 	 
	 

	 	 	 	THE GREENBERG LAW FIRM	 	 
	 

	 	 	 	121 Brite Ave.	 	 
	 

	 	 	 	Scarsdale, NY 10583	 	 
	 

	 	 	 	Telephone: (914) 722-9111	 	 
	 

	 	 	 	Facsimile: (914) 722-6866	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Patton C. Lochridge (Bar No. 12458500)	 	 
	 

	 	 	 	Travis C. Barton (Bar No. 7902276)	 	 
	 

	 	 	 	MCGINNIS, LOCHRIDGE & KILGORE, LLP	 	 
	 

	 	 	 	1300 Capitol Center	 	 
	 

	 	 	 	919 Congress Avenue	 	 
	 

	 	 	 	Austin, TX 78701	 	 
	 

	 	 	 	Telephone: (512) 495-6000	 	 
	 

	 	 	 	Facsimile: (512) 495-6093	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Attorneys for Defendant and Counter-Plaintiff	 	 
	 

	 	 	 	DOT HILL SYSTEMS CORPORATION	 	 

16

 

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF TEXAS

AUSTIN DIVISION

	 	 	 	 	 	 	 	 
	 	 	 	 	 	 
	 	CROSSROADS SYSTEMS (TEXAS), INC.,	 	 	 	 
	 	a Texas corporation,	 	 	 	 
	 	 

	 	Plaintiff and Counter-Defendant,	 	 	 	 
	 	 
	 	 	 	 	CASE NO. A-03-CV-754 SS	 
	 	 

	 	v.	 	 	 	 
	 	 
	 	 	 	 	 	 
	 	DOT HILL SYSTEMS CORPORATION,	 	 	 	 
	 	a Delaware corporation,	 	 	 	 
	 	 

	 	Defendant and Counter-Plaintiff	 	 	 	 
	 	 	 	 	 	 

ORDER GRANTING STIPULATION OF DISMISSAL OF CLAIMS 

     Pursuant to the Parties’ Stipulation and good cause appearing therefore, it is hereby ordered
that Crossroads Systems (Texas), Inc.’s (“Crossroads”) claims against Dot Hill Systems Corporation
(“Dot Hill”) and Dot Hill’s counterclaims against Crossroads in the above-referenced action are
hereby DISMISSED WITH PREJUDICE. Each party shall bear its own costs and attorneys’ fees.

     IT IS SO ORDERED.

	 	 	 	 	 
	 

	 	 

THE HONORABLE SAM SPARKS
	 	 
	 

	 	UNITED STATES DISTRICT JUDGE	 	 

17

 

Exhibit B

Crossroads Press Release

PRESS RELEASE

	 	 	 
	Press Contact:

	 	Company Contact:
	Aron Christian

	 	Anyck Turgeon
	Zintel Public Relations

	 	Crossroads Systems
	317.569.8888

	 	512.928.7006
	aron.christian@zintelpr.com

	 	aturgeon@crossroads.com

Crossroads Systems Announces Settlement of Patent

Infringement Lawsuit Against Dot Hill

Agreement includes $10.5 million payment to Crossroads,

2.5 percent ongoing royalty for certain products

AUSTIN, Texas – June XX, 2006 – Crossroads Systems, Inc. (OTC Pink Sheets: CRDS.PK), a leading
provider of Business Information Assurance solutions for guaranteed access, resiliency and security
of enterprise information, today announced it has settled its outstanding patent litigation
with Carlsbad, California-based Dot Hill Systems Corp. (NASDAQ: HILL), a provider of storage
networking solutions. In the settlement, Crossroads will receive a one-time $10.5 million cash
payment and a 2.5 percent ongoing royalty on net sales of products utilizing Crossroads patented
access controls technology.

Originally filed October 17, 2003, the lawsuit claimed that Dot Hill sold solutions that violated
U.S. patent Nos. 5,941,972 and 6,425,035 which cover the ability to control access between hosts
and storage devices in a networked storage environment. Crossroads is the exclusive owner of these
patents. In exchange for the one-time cash payment and running royalty, Crossroads granted Dot Hill
a nonexclusive license to these patents and the parties settled all claims arising out of the
litigation.

“Our settlement with Dot Hill is significant for Crossroads, as it demonstrates our commitment to
protecting our extensive portfolio of intellectual property,” said Rob Sims, President and CEO of
Crossroads Systems. “We are pleased to announce this settlement has been reached so we can now
focus on the successful deployment of our Business Information Assurance (BIA) solutions.”

About Crossroads Systems, Inc.

With headquarters in Austin, Texas, Crossroads Systems is a leading provider of Business
Information Assurance solutions. Crossroads solves today’s growing data storage, business
continuity, disaster recovery and information security markets needs. Crossroads’ solutions are
designed to help companies store, manage and ensure the security, resiliency and accessibility of
their data. Crossroads products are sold as part of packaged offerings from companies such as EMC,
HP, Quantum and SUN, and are distributed through partners such as ACAL, Bell Micro, Info-X, and
Promark. Crossroads (CRDS.PK) is currently traded on the Over The Counter (“OTC”) Bulletin Board.
Crossroads is a member of the Storage Networking Industry Association (SNIA). For more information
about Crossroads Systems, please visit www.crossroads.com or call 800-BUY-CRDS / 800.643.7148.

18

 

Forward-Looking Statements

This release may include forward-looking statements. The words “believe,” “expect,” “intend,”
“plan,” “project,” “will” and similar phrases as they relate to Crossroads are intended to identify
such forward-looking statements. These statements reflect the current views and assumptions of
Crossroads, and are subject to various risks and uncertainties that could cause actual results to
differ materially from expectations.

© 2006 Crossroads Systems, Inc. Crossroads and Crossroads Systems are registered trademarks of
Crossroads Systems, Inc. SecurDB and SPIE are trademarks of Crossroads Systems, Inc. All
specifications are subject to change without notice.

19

 

Dot Hill Press Release

	 	 	 
	DRAFT	 	V.4
	 
	Contacts:
	 	 
	Shad Burke

	 	Kirsten Garvin
	Interim Chief Financial Officer

	 	Director of Investor Relations
	Tel: 760-931-5500

	 	Tel: 760-476-3811
	Email: investors@dothill.com

	 	Email: kirsten.garvin@dothill.com

Dot Hill Systems Settles Patent Infringement Lawsuit with Crossroads Systems

CARLSBAD, Calif. – June XX, 2006 – Dot Hill Systems Corp. (NASDAQ:HILL) today announced that it has
entered into an agreement that settles the outstanding patent action brought by Crossroads Systems
against Dot Hill and licenses to Dot Hill the family of patents from which the lawsuit stemmed.

Under the terms of the settlement, Dot Hill will pay $3.35 million for alleged past damages and
Crossroads will dismiss, with prejudice, all patent claims against Dot Hill. A third party will pay
Crossroads an additional $7.15 million. Going forward, Crossroads will receive a running royalty of
2.5% based on a percentage of net sales of RAID products sold by Dot Hill, but only those with
functionality that is covered by US Patents No. 5,941,972 and No. 6,425,035 and other patents in
the patent family. For RAID products that use a controller sourced by a third party, Dot Hill will
pay 0.8125% of the 2.5% royalty, and a third party will be responsible for the remainder. For RAID
products that use Dot Hill’s proprietary controller, Dot Hill alone will be paying the 2.5% running
royalty.

No royalty payments will be required with respect to the sale of storage systems that do not
contain RAID controllers, known as JBOD systems, or systems that use only the SCSI protocol
end-to-end, even those that perform RAID. Further, royalty payments with respect to the sale of any
products that are made, used and sold outside of the United States will only be required if and
when Crossroads is issued patents that cover the products and that are issued by countries in which
the products are manufactured, used or sold.

“In the interest of ensuring a stable and continued flow of product to our customers, we have
decided to settle all of our outstanding claims with Crossroads,” said Dana Kammersgard, Dot Hill’s
president and chief executive officer. “We are pleased to put the lawsuit behind us so we can
continue our focus on delivering innovative products to our customers and executing on the
corporate goals we have put in place.”

About Dot Hill

Dot Hill is the market leader in providing flexible storage offerings and responsive service and
support to OEMs and system integrators, from engagement through end-of-life. Founded in 1984, Dot
Hill has more than two decades of expertise in developing high-quality, competitively

20

 

priced storage products. Focused on delivering global 24 X 7 X 365 technical support, the company
has more than 100,000 systems in use worldwide and numerous OEM and indirect partners. With its
patented technology and award-winning SANnet II® and RIO XtremeTM families of storage and its Dot
Hill Storage Services, Dot Hill makes storage easy. Headquartered in Carlsbad, Calif., Dot Hill has
offices in China, Germany, Israel, Japan, Netherlands, United Kingdom and the United States. More
information is available at www.dothill.com.

Dot Hill, the Dot Hill logo, SANnet, SANpath, SANscape, RIVA and RIO Xtreme are trademarks of Dot
Hill Systems Corp. All other products and names mentioned herein are trademarks or registered
trademarks of their respective owners.

Statements contained in this press release regarding matters that are not historical facts are
“forward-looking statements” within the meaning of the Private Securities Litigation Reform Act.
Because such statements are subject to risks and uncertainties, actual results may differ
materially from those expressed or implied by such forward-looking statements. Such statements
include statements regarding the continued licensing of Crossroads ‘972 family of patents, whether
or not Dot Hill will become the subject of other patent infringement claims in the future and any
positive impact that this license will have on future financial results or stock price. The risks
that contribute to the uncertain nature of the forward-looking statements include, among other
things: the fact that the license is terminable by Crossroads under certain scenarios and
unforeseen technological, intellectual property, personnel or engineering issues; and the
additional risks set forth in the forms 8-K, 10-K and 10-Q most recently filed by Dot Hill. All
forward-looking statements contained in this press release speak only as of the date on which they
were made. Dot Hill undertakes no obligation to update such statements to reflect events that occur
or circumstances that exist after the date on which they were made.

###

21

 

Exhibit C

Non-US Issued/Granted Patents in the ‘972 Patent Family

	 	 	 	 	 	 	 	 	 	 	 
	Title	 	Country	 	Serial No.	 	Grant No.	 	Grant Date
	Storage Router and
Method for
Providing Virtual
Local Storage
	 	Canada	 	2,315,199	 	2,315,199	 	21-Jan-2003
	 
	 	 	 	 	 	 	 	 	 	 
	Storage Router and
Method for
Providing Virtual
Local Storage
	 	Germany	 	98966104.6	 	69832818.3	 	14-Dec-2005
	 
	 	 	 	 	 	 	 	 	 	 
	Storage Router and
Method for
Providing Virtual
Local Storage
	 	France	 	98966104.6	 	1044414	 	14-Dec-2005
	 
	 	 	 	 	 	 	 	 	 	 
	Storage Router and
Method for
Providing Virtual
Local Storage
	 	United Kingdom	 	98966104.6	 	1044414	 	14-Dec-2005

22

 

Exhibit D

[...***...]

***
Confidential Treatment Requested

23Exhibit 10.4

 

Exhibit 10.4

	 	 	 
	Confidential

	 	***Text Omitted and Filed Separately
	 

	 	with the Securities and Exchange Commission.
	 

	 	Confidential Treatment Requested
	 

	 	Under 17 C.F.R. Sections 200.80(b)(4)
	 

	 	and 240.24b-2.

AGREEMENT BETWEEN DOT HILL SYSTEMS AND INFORTREND RE

SETTLEMENT OF CROSSROADS LAWSUIT

This Agreement (the “Agreement”) is made and entered into on June 27, 2006 (“Effective
Date”) by and between Dot Hill Systems Corp., and all its affiliates and subsidiaries,
having a place of business at 2200 Faraday Avenue, Suite 100, Carlsbad, California 92008
(hereinafter “Dot Hill”), and Infortrend Technology Inc., and all its affiliates and
subsidiaries, having a place of business at 8F, No-102 Chung-Shan Rd., Sec. 3, Chung-Ho City,
Taipei Hsien, Taiwan, Republic of China (hereinafter “Infortrend”).

RECITALS

Whereas, Dot Hill and Infortrend wish to resolve the issues between them relating to
Infortrend’s indemnification obligations under the various contracts between the parties [***]
(“OEM Agreements”) with respect to defense fees, defense expenses, the settlement and going-forward
royalty payments which stem from the litigation pending before the U.S. District Court of the
Western District of Texas, Austin Division captioned Crossroads Systems, (Texas), Inc., Plaintiff
(“Crossroads”) v. Dot Hill Systems Corporation, Defendant, Case No. A-03-CV-754-SS (“Crossroads
Litigation”);

Whereas the terms of the settlement of the Crossroads Litigation and requirement for
going-forward royalty payments are further described in the settlement and license agreement
between Dot Hill and Crossroads (“Crossroads Settlement Agreement”), a copy of which is attached
hereto as Exhibit A and made a part hereof by reference.

Now Therefore, in consideration of the promises and the covenants set forth herein and
intending to be legally bound, the parties hereby agree as follows:

	1.	 	Prior Agreements to Arbitrate. Any and all prior agreements between the parties to arbitrate
any matters relating to the Crossroads Litigation are superseded by this Agreement and are not
to be arbitrated, except as specifically provided herein.
	 
	2.	 	Payment for Past Damages

     a. With regard to the $10.5 million cash payment to Crossroads as provided for in the
Crossroads Settlement Agreement, [***] Thus, in total, Infortrend shall pay $7,150,000 of the
cash payment directly to Crossroads and Dot Hill shall pay $3,350,000.

     b. Payment of such amounts shall be made by each party directly to Crossroads within 20 days
after execution of the Crossroads Settlement Agreement as reasonably directed by Crossroads.
Presently, paragraph 5.4 of the Crossroads

***Confidential Treatment Requested

1

 

Confidential

Settlement Agreement requires payment to be made by electronic fund transfer to the following
account and shall be deemed made on the date credited:

               [***]

	3.	 	Going-Forward Royalty Payments

     a. With regard to the 2.5% running royalty to be paid to Crossroads on the Net Sales of
the gross revenues received from the sale of Licensed Products as those terms are defined, and
as provided for in, the Crossroads Settlement Agreement, for products subject to that agreement
which contain an Infortrend RAID controller performing the technology covered by ‘972 Patent
Family, as set forth in the Crossroads Settlement Agreement, the royalty shall be allocated as
follows: [***] Thus, in total, for all products on which the royalty is to be allocated,
Infortrend shall pay 1.6875% and Dot Hill shall pay 0.8125%.

     b. Infortrend shall reimburse Dot Hill for any such royalty payments actually paid to
Crossroads within ten (10) days of Dot Hill’s transfer of such monies to Crossroads.
Infortrend shall make such payments in a manner reasonably requested by Dot Hill. Infortrend
is hereby informed that the Crossroads Settlement Agreement requires Dot Hill to make such
payments within forty-five (45) days of the end of each calendar quarter. At least seven (7)
days before sending royalty payments to Crossroads, Dot Hill shall furnish Infortrend with
those sections of the royalty report that it intends to send to Crossroads which pertain to the
payments with respect to which Infortrend must contribute, together with the royalty statement
from Dot Hill for the royalty payable by Infortrend to Dot Hill. So that Infortrend can verify
the accuracy of Dot Hill’s royalty statement. Dot Hill shall provide to Infortrend, along with
each such royalty statement, the following information relating to Dot Hill’s sales of products
containing Infortrend controllers: (1) quantity shipped; (2) price charged for each product;
(3) revenue received. If there is any discrepancy, miscalculation, or refund / rebate /credit
back or return of the royalty paid by Dot Hill to Crossroads, Dot Hill shall be obligated to
notify Infortrend in writing. If Dot Hill has paid too little to Crossroads and Crossroads
demands additional payments, both Infortrend and Dot Hill will work to pay the required amounts
pursuant to the allocations set forth herein. If Dot Hill has paid too much and Crossroads
issues a

***Confidential Treatment Requested

2

 

Confidential

     credit to Dot Hill, Dot Hill will credit Infortrend pursuant to the allocations set forth
herein.

	 	i.	 	Dot Hill shall represent and warrant the accuracy of the
royalty reports, and keep the records for 5 years (or the same term as provided
in the Settlement Agreement with Crossroads). Infortrend shall have the right
to audit such reports and Dot Hill’s sales of the products that use Infortrend
products in the same manner and under the same conditions as Crossroads’ audit
rights as set forth in the Settlement Agreement.
	 
	 	ii.	 	Dot Hill shall not set off any payments otherwise owed to
Infortrend with the royalty reimbursement payments referred to above if the
parties are in dispute as to the proper amount of the royalty reimbursement
payments or the amounts owed by Dot Hill to Infortrend against which Dot Hill
would otherwise set off. Otherwise, there shall be a right of set off with
respect to undisputed amounts. Dot Hill shall give written notice to Infortrend
of any setoffs, including, but not limited, detailing, contemporaneously with
making payments to Infortrend reduced by such setoffs, the amount and source of
any such setoffs. Dot Hill shall, in no event, set off any payments otherwise
owed to Infortrend with the royalty reimbursement payments referred to above
unless ten (10) days have passed from the date Dot Hill transferred royalty
payments to Crossroads and Dot Hill has not yet received its royalty
reimbursement payment from Infortrend.

	4.	 	Royalty Payments on Extraterritorial Product Sales

     a. Infortrend shall not be obligated to reimburse Dot Hill for any royalty payments with
respect to sales of any “Extraterritorial Product” as that term is defined in the Crossroads
Settlement Agreement until Dot Hill is required to make such royalty payments as per the terms
of the Crossroads Settlement Agreement and Infortrend receives a formal written notice from Dot
Hill of the issuance of such patents.

     b. Once royalty payments upon Extraterritorial Products are required, Infortrend and Dot
Hill will allocate the payments [***], provided however that if either party, in its absolute
discretion, so chooses, either party may arbitrate such issue and request a different
allocation of the royalty payments from the arbitrator. Both parties agree to resolve the
allocation issue within sixty (60) days of either party’s sending written notice of its desire
to arbitrate the issue. If arbitration is necessary, the parties agree not to disclose to the
arbitrator the previously agreed-upon allocation for royalty payments relating to US sales, so
that the arbitrator is not influenced thereby.

	5.	 	Division of Legal Expenses and Defense Costs

***Confidential Treatment Requested

3

 

Confidential

     a. Except as specifically set forth herein, Dot Hill will pay all attorneys fees and
expenses (such as copying expenses, mailing expenses and other expenses typically billed
internally by a law firm) directly billed by Morgan & Finnegan (“M&F”) and the Greenberg Law
Firm (“GLF”) and Infortrend will pay all attorneys fees and expenses (as defined above)
directly billed by Wang, Hartmann & Gibbs (“WHG”).

     b. All attorneys fees and expenses (as defined in section 5(a) billed by the McGinnis,
Lochridge firm shall be allocated equally (split 50/50) between Dot Hill and Infortrend. The
parties also agree to allocate equally any other third party expenses, such as mediator fees
and expenses, experts fees and expenses, deposition and transcripts fees , graphics and outside
IT services, videographer expenses and expenses related to third party witnesses, without
regard to the appearance of such charges on either firms’ invoices. Each party will pay its
half of the bills directly to the entity issuing the invoices. Each party agrees that it will
not dispute its obligation to pay half of these invoices.

     c. Expenses related to the use of the Omni hotel during trial and trial preparation shall
be allocated equally between Dot Hill and Infortrend except for rooms and personal meal
expenses directly incurred by the employees of GLF, M&F and WHG (which will be paid as per
paragraph 5(a), above). The cost of the conference rooms and the food provided in the
conference rooms by the hotel shall be allocated equally between Dot Hill and Infortrend. Each
party will pay its half of the bills directly to the entity issuing the invoices. Each party
agrees that it will not dispute its obligation to pay half of these invoices.

	6.	 	Disclosure of Infortrend’s Obligations. Dot Hill will use its best efforts to avoid
disclosing in any press release the identity of Infortrend as the contributor of any monies to
either the cash payment to Crossroads or with regard to the running royalty payments.
However, if Dot Hill’s attorneys advise it that, to comply with its obligations under Federal
or State securities regulations, it must disclose such information, Dot Hill may do so, with
prior notice to Infortrend.
	 
	7.	 	Raising Prices. Infortrend agrees that it will not artificially raise its prices on products
sold to Dot Hill for the purpose of recovering its share of the running royalty to be paid to
Crossroads
	 
	8.	 	[***]
	 
	9.	 	Governing Law and Venue.

***Confidential Treatment Requested

4

 

Confidential

     a. This Agreement shall be governed by and construed under the laws and regulations of the
State of California, United States of America, without reference to its conflicts of laws
principles that would result in the application of the laws of a different state. The United
Nations Convention on Contracts for the International Sale of Goods does not apply to this
Agreement. The official text of the Agreement shall be in English.

     b. If either party breaches this Agreement, or for another reason there is a dispute that
arises under this Agreement, either party may, in its discretion, choose to arbitrate the
dispute pursuant to the arbitration terms set forth in the OEM Agreements or bring an action in
any state court located in the County of San Diego or the County of Orange, or any Federal
court located in the Southern or Central District of California. Dot Hill and Infortrend agree
to meet and confer in good faith as to whether such dispute should be heard in arbitration or
in court and, if in court, whether the action should be brought in State or Federal court. If
an agreement cannot be reached as to the appropriate forum, each party reserves the right to
seek a change in venue.

	10.	 	Term and Termination.

     a. This Agreement shall take effect on the Effective Date and shall remain in effect
until: (i) each patent within the ‘972 Patent Family has expired, been abandoned, or been ruled
invalid, or unenforceable in a final, non-appealable decision by a court or tribunal of
competent jurisdiction, including the United States Patent and Trademark Office; or (ii) the
Crossroads Settlement Agreement has expired. Termination of the Crossroads Settlement
Agreement shall not be grounds to terminate this Agreement and shall not give either party the
right to litigate or arbitrate the allocation of royalties to be paid to Crossroads as set
forth herein.

     b. [***]

11. Late Payments, Failure to Make Payment or Breach

     a. If Infortrend has not made the royalty reimbursement payment to Dot Hill required by
Paragraph 3(b) within ten (10) days after Dot Hill has made its royalty payment to Crossroads
and Dot Hill has not set off the entire amount owing pursuant to Paragraph 3(b)(ii), then the
balance of the amounts still owing shall be considered

***Confidential Treatment Requested

5

 

Confidential

“late.” In the event that any particular payment is “late,” Dot Hill shall provide written
notice thereof to Infortrend pursuant to the notice provisions set forth in Paragraph 13.
Such notice of late payment shall be sent to the following two addresses or to any other
addresses which Infortrend requests by sending to Dot Hill written notice of such request:

	 	(i)	 	Infortrend Corporation

[***]

And

	 	(ii)	 	Infortrend Technology Inc.,

[***]

     The Notice must state the following: “If Infortrend fails to make the payment required by
the royalty statement dated [ ] within 30 days of receiving this notice, the contract
entitled ‘AGREEMENT BETWEEN DOT HILL SYSTEMS AND INFORTREND RE SETTLEMENT OF CROSSROADS
LAWSUIT’ may be terminated by Dot Hill.”

     b. Any late payment by either party shall include interest, where such interest shall be
calculated commencing on the date such payment became due, using an annual rate [***] than the
prime interest rate as quoted by the head office of Citibank N.A. (or an equivalent institution
if Citibank N.A. ceases operation), at the close of banking on such date, or on the first
business day thereafter if such date falls on a non-business day. If such interest rate
exceeds the maximum legal rate in the jurisdiction where a claim therefore is being asserted,
the interest rate shall be reduced to such maximum legal rate.

     c. If Infortrend fails to make a payment (including applicable interest) within thirty
(30) days of receiving a written notice from Dot Hill, made pursuant to paragraph 13, of such
failure (as referred to in Paragraph 11(a), above), or either party breaches this Agreement and
fails to remedy such breach within thirty (30) days of receiving written notice made pursuant
to paragraph 13 from the non-defaulting party of such breach, then the non-defaulting party
may, at its option: (i) bring an action in arbitration or court to enforce this Agreement
pursuant to the terms set forth in paragraph 9(b), above, or; (ii) terminate this Agreement and
seek relief (including indemnification) under any applicable agreements that exist between the
parties, including the OEM Agreements.

12. Assignment. Neither Infortrend nor Dot Hill may assign or transfer any of its rights or
delegate any of its obligations or duties under this Agreement to a third party without the other
party’s prior written consent, and any attempted assignment or delegation

***Confidential Treatment Requested

6

 

Confidential

without such consent will be null and void. Notwithstanding the foregoing, Infortrend and Dot Hill
may assign this Agreement and its rights and obligations hereunder in connection with the sale of
all or substantially all of the assets or stock of the company to a third party provided that the
third party agrees, in a writing delivered to the other party, to be bound by this Agreement.

	13.	 	Notices

     a. Whenever it is provided herein that notice (including, but not limited to demands, requests
or other types of communication) shall or may be given to either party by the other party, and
whenever either of the parties wants to give notice to the other party, each such notice shall be
in writing, and shall be delivered to the parties at the following addresses:

	 	(i)	 	If given to Dot Hill:
	 
	 	 	 	[***]
	 
	 	(ii)	 	If given to Infortrend:
	 
	 	 	 	[***]

or at such other address (other than a post office address) as either party may from time to time
designate by notice given to the other pursuant to this Article.

     b. If the address(es) for Infortrend under this Paragraph 13 are different from the addresses
set forth in Paragraph 11, then, when providing notices regarding late payment, Dot Hill shall also
send such notice to the addresses set forth in Paragraph 11.

     c. Any notice shall be served by registered or certified mail, postage prepaid, return
receipt requested, by personal delivery, or by nationally recognized overnight courier services
(such as Federal Express). Every notice shall be deemed to have been given on the date of receipt
as shown on the return receipt or the courier service’s records (in the case of service by
certified or registered mail or overnight courier service as aforesaid, or on the date acceptance
of receipt was rejected or refused) or on the date of the actual receipt thereof (in the case of
personal delivery).

	14.	 	Miscellaneous

     a. This Agreement states the entire agreement between the parties with respect to the subject
matter hereof and shall supersede and replace all previous and

***Confidential Treatment Requested

7

 

Confidential

contemporaneous proposals, negotiations, representations, commitments, writings, agreements,
and other communications, both oral and written, between the parties.

     b. This Agreement may not be released, discharged, changed, or modified except by an
instrument in writing signed by a duly authorized representative of each of the parties.

     c. Each party hereby represents and warrants to the other party that such party has full
power and authority to execute, deliver and perform this Agreement and the execution, delivery
and performance of this Agreement has been approved by all requisite action on the part of such
Party.

     d. It is understood and agreed by the parties that this Agreement shall be binding upon
and inure to the benefit of any successors of each respective party.

     e. This Agreement may be executed in a number of identical counterparts and by facsimile,
each of which shall be deemed an original for all purposes and all of which together shall
constitute one and the same instrument.

	 	 	 	 	 	 	 	 	 	 	 
	Infortrend:	 	 	 	Dot Hill:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Infortrend Technology Inc.	 	 	 	Dot Hill Systems Corporation	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Tony Chu
 

	 	 
	 	By:
	 	/s/ Dana Kammersgard
 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Name: Tony Chu	 	 	 	Name: Dana Kammersgard	 	 
	Title: President	 	 	 	Title: President and CEO	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Date: June 28, 2006	 	 	 	Date: June 28, 2006	 	 

8

 

Confidential

EXHIBIT A

Crossroads Settlement Agreement

9

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00111-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00111-of-00352.parquet"}]]