Document:

Unassociated Document

Exhibit 4.3

CROSSROADS SYSTEMS, INC.

1999 STOCK INCENTIVE PLAN

AS AMENDED AND RESTATED EFFECTIVE FEBRUARY 13, 2002

ARTICLE ONE

GENERAL PROVISIONS

I.   PURPOSE OF THE PLAN

This 1999 Stock Incentive Plan is intended to promote the interests of Crossroads Systems, Inc., a Delaware corporation, by providing eligible persons with the opportunity to acquire a proprietary interest, or otherwise increase their proprietary interest, in the Corporation as an incentive for them to remain in the service of the Corporation.

Capitalized terms shall have the meanings assigned to such terms in the attached Appendix.

II.  STRUCTURE OF THE PLAN

A.           The Plan shall be divided into five separate equity programs:

(i)           the Discretionary Option Grant Program under which eligible persons may, at the discretion of the Plan Administrator, be granted options to purchase shares of Common Stock,

(ii)          the Salary Investment Option Grant Program under which eligible employees may elect to have a portion of their base salary invested each year in special options,

(iii)         the Stock Issuance Program under which eligible persons may, at the discretion of the Plan Administrator, be issued shares of Common Stock directly, either through the immediate purchase of such shares or as a bonus for services rendered the Corporation (or any Parent or Subsidiary),

(iv)         the Automatic Option Grant Program under which eligible non-employee Board members shall automatically receive options at periodic intervals to purchase shares of Common Stock; and

(v)          the Director Fee Option Grant Program under which non-employee Board members may elect to have all or any portion of their annual retainer fee otherwise payable in cash applied to a special option grant.

B.           The provisions of Articles One and Seven shall apply to all equity programs under the Plan and shall govern the interests of all persons under the Plan.

III. ADMINISTRATION OF THE PLAN

A.           Prior to the Section 12 Registration Date, the Discretionary Option Grant and Stock Issuance Programs shall be administered by the Board unless otherwise determined by the Board. Beginning with the Section 12 Registration Date, the following provisions shall govern the administration of the Plan:

(i)           The Board shall have the authority to administer the Discretionary Option Grant and Stock Issuance Programs with respect to Section 16 Insiders but may delegate such authority in whole or in part to the Primary Committee.

(ii)          Administration of the Discretionary Option Grant and Stock Issuance Programs with respect to all other persons eligible to participate in those programs may, at the Board's discretion, be vested in the Primary Committee or a Secondary Committee, or the Board may retain the power to administer those programs with respect to all such persons.

  

  

  

(iii)         Administration of the Automatic Option Grant Program shall be self-executing in accordance with the terms of that program.

B.           Each Plan Administrator shall, within the scope of its administrative jurisdiction under the Plan, have full power and authority subject to the provisions of the Plan:

(i)           to establish such rules as it may deem appropriate for proper administration of the Plan, to make all factual determinations, to construe and interpret the provisions of the Plan and the awards thereunder and to resolve any and all ambiguities thereunder;

(ii)          to determine, with respect to awards made under the Discretionary Option Grant and Stock Issuance Programs, which eligible persons are to receive such awards, the time or times when such awards are to be made, the number of shares to be covered by each such award, the vesting schedule (if any) applicable to the award, the status of a granted option as either an Incentive Option or a Non-Statutory Option and the maximum term for which the option is to remain outstanding;

(iii)         to amend, modify or cancel any outstanding award with the consent of the holder or accelerate the vesting of such award; and

(iv)         to take such other discretionary actions as permitted pursuant to the terms of the applicable program.  Decisions of each Plan Administrator within the scope of its administrative functions under the Plan shall be final and binding on all parties.

C.           Members of the Primary Committee or any Secondary Committee shall serve for such period of time as the Board may determine and may be removed by the Board at any time. The Board may also at any time terminate the functions of any Secondary Committee and reassume all powers and authority previously delegated to such committee.

D.           Service on the Primary Committee or the Secondary Committee shall constitute service as a Board member, and members of each such committee shall accordingly be entitled to full indemnification and reimbursement as Board members for their service on such committee. No member of the Primary Committee or the Secondary Committee shall be liable for any act or omission made in good faith with respect to the Plan or any options or stock issuances under the Plan.

IV.  ELIGIBILITY

A.           The persons eligible to participate in the Discretionary Option Grant and Stock Issuance Programs are as follows:

(i)           Employees,

(ii)          non-employee members of the Board or the board of directors of any Parent or Subsidiary, and

(iii)         consultants and other independent advisors who provide services to the Corporation (or any Parent or Subsidiary).

B.           Only Employees who are Section 16 Insiders or other highly compensated individuals shall be eligible to participate in the Salary Investment Option Grant Program.

C.           Only non-employee Board members shall be eligible to participate in the Automatic Option Grant and Director Fee Option Grant Programs.

  

  

  

V.   STOCK SUBJECT TO THE PLAN

    A.     The stock issuable under the Plan shall be shares of authorized but unissued or reacquired Common Stock, including shares repurchased by the Corporation on the open market. Subject to the increases in Paragraph B below, the maximum number of shares of Common Stock which may be issued over the term of the Plan shall not exceed Seven Million Three Hundred Sixty Eight Thousand Nine Hundred Twenty Three (7,368,923) shares. Such authorized share reserve consists of (i) 3,868,923 shares originally reserved under the Plan, including shares incorporated from the Predecessor Plans, (ii) 500,000 shares added to the Plan as a result of the January 2001 automatic annual increase, (iii) an increase of 1,000,000 shares authorized by the Board and approved by the stockholders at the 2001 Annual Stockholders Meeting, (iv) 1,000,000 shares added to the Plan as a result of the January 2002 automatic annual increase, plus (iii) an increase of One Million (1,000,000) shares authorized by the Board subject to stockholder approval at the 2002 Annual Stockholders Meeting.

    B.     The number of shares of Common Stock available for issuance under the Plan shall automatically increase on the first trading day of each calendar year during the term of the Plan, beginning with calendar year 2002, by an amount equal to four percent (4%) of the shares of Common Stock outstanding on the last trading day of the immediately preceding calendar year, but in no event shall such annual increase exceed one million (1,000,000) shares.

 

    C.     No one person participating in the Plan may receive options, separately exercisable stock appreciation rights and direct stock issuances for more than One Million (1,000,000) shares of Common Stock in the aggregate per calendar year, beginning with the 1999 calendar year, subject to stockholder approval at the 2002 Annual Stockholders Meeting.

D.           Shares of Common Stock subject to outstanding options (including options incorporated into this Plan from the Predecessor Plan) shall be available for subsequent issuance under the Plan to the extent those options expire, terminate or are cancelled for any reason prior to exercise in full. Unvested shares issued under the Plan and subsequently repurchased by the Corporation, at the original exercise or issue price paid per share, pursuant to the Corporation's repurchase rights under the Plan shall be added back to the number of shares of Common Stock reserved for issuance under the Plan and shall accordingly be available for reissuance through one or more subsequent options or direct stock issuances under the Plan. However, should the exercise price of an option under the Plan be paid with shares of Common Stock or should shares of Common Stock otherwise issuable under the Plan be withheld by the Corporation in satisfaction of the withholding taxes incurred in connection with the exercise of an option or the vesting of a stock issuance under the Plan, then the number of shares of Common Stock available for issuance under the Plan shall be reduced by the gross number of shares for which the option is exercised or which vest under the stock issuance, and not by the net number of shares of Common Stock issued to the holder of such option or stock issuance. Shares of Common Stock underlying one or more stock appreciation rights exercised under the Plan shall not be available for subsequent issuance.

E.           If any change is made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation's receipt of consideration, appropriate adjustments shall be made to (i) the maximum number and/or class of securities issuable under the Plan, (ii) the number and/or class of securities by which the share reserve is to increase each calendar year pursuant to the automatic share increase provisions of the Plan, (iii) the number and/or class of securities for which any one person may be granted options, separately exercisable stock appreciation rights and direct stock issuances under the Plan per calendar year, (iv) the number and/or class of securities for which grants are subsequently to be made under the Automatic Option Grant Program to new and continuing non-employee Board members, (v) the number and/or class of securities and the exercise price per share in effect under each outstanding option under the Plan and (vi) the number and/or class of securities and price per share in effect under each outstanding option incorporated into this Plan from the Predecessor Plan. Such adjustments to the outstanding options are to be effected in a manner which shall preclude the enlargement or dilution of rights and benefits under such options. The adjustments determined by the Plan Administrator shall be final, binding and conclusive.

  

  

  

ARTICLE TWO

DISCRETIONARY OPTION GRANT PROGRAM

I.   OPTION TERMS

Each option shall be evidenced by one or more documents in the form approved by the Plan Administrator; provided, however, that each such document shall comply with the terms specified below. Each document evidencing an Incentive Option shall, in addition, be subject to the provisions of the Plan applicable to such options.

A.          EXERCISE PRICE.

1.           The exercise price per share shall be fixed by the Plan Administrator at the time of the option grant and may be less than, equal to or greater than the Fair Market Value per share of Common Stock on the option grant date.

2.           The exercise price shall become immediately due upon exercise of the option and shall, subject to the provisions of Section II of Article Seven and the documents evidencing the option, be payable in one or more of the following forms:

(i)           in cash or check made payable to the Corporation;

(ii)          shares of Common Stock held for the requisite period necessary to avoid a charge to the Corporation's earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date, or

(iii)         to the extent the option is exercised for vested shares, through a special sale and remittance procedure pursuant to which the Optionee shall concurrently provide irrevocable instructions to (a) a Corporation-approved brokerage firm to effect the immediate sale of the purchased shares and remit to the Corporation, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased shares plus all applicable Federal, state and local income and employment taxes required to be withheld by the Corporation by reason of such exercise and (b) the Corporation to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the sale.

Except to the extent such sale and remittance procedure is utilized, payment of the exercise price for the purchased shares must be made on the Exercise Date.

B.           EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable at such time or times, during such period and for such number of shares as shall be determined by the Plan Administrator and set forth in the documents evidencing the option. However, no option shall have a term in excess of ten (10) years measured from the option grant date.

C.           CESSATION OF SERVICE.

1.           The following provisions shall govern the exercise of any options outstanding at the time of the Optionee's cessation of Service or death:

(i)           Any option outstanding at the time of the Optionee's cessation of Service for any reason shall remain exercisable for such period of time thereafter as shall be determined by the Plan Administrator and set forth in the documents evidencing the option, but no such option shall be exercisable after the expiration of the option term.

(ii)          Any option exercisable in whole or in part by the Optionee at the time of death may be subsequently exercised by his or her Beneficiary.

(iii)         During the applicable post-Service exercise period, the option may not be exercised in the aggregate for more than the number of vested shares for which the option is exercisable on the date of the Optionee's cessation of Service. Upon the expiration of the applicable exercise period or (if earlier) upon the expiration of the option term, the option shall terminate and cease to be outstanding for any vested shares for which the option has not been exercised. However, the option shall, immediately upon the Optionee's cessation of Service, terminate and cease to be outstanding to the extent the option is not otherwise at that time exercisable for vested shares.

  

  

  

(iv)         Should the Optionee's Service be terminated for Misconduct or should the Optionee engage in Misconduct while his or her options are outstanding, then all such options shall terminate immediately and cease to be outstanding.

2.           The Plan Administrator shall have complete discretion, exercisable either at the time an option is granted or at any time while the option remains outstanding:

(i)           to extend the period of time for which the option is to remain exercisable following the Optionee's cessation of Service to such period of time as the Plan Administrator shall deem appropriate, but in no event beyond the expiration of the option term, and/or

(ii)          to permit the option to be exercised, during the applicable post-Service exercise period, for one or more additional installments in which the Optionee would have vested had the Optionee continued in Service.

D.           STOCKHOLDER RIGHTS. The holder of an option shall have no stockholder rights with respect to the shares subject to the option until such person shall have exercised the option, paid the exercise price and become a holder of record of the purchased shares.

E.           REPURCHASE RIGHTS. The Plan Administrator shall have the discretion to grant options which are exercisable for unvested shares of Common Stock. Should the Optionee cease Service while holding such unvested shares, the Corporation shall have the right to repurchase, at the exercise price paid per share, any or all of those unvested shares. The terms upon which such repurchase right shall be exercisable (including the period and procedure for exercise and the appropriate vesting schedule for the purchased shares) shall be established by the Plan Administrator and set forth in the document evidencing such repurchase right.

F.           LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the Optionee, Incentive Options shall be exercisable only by the Optionee and shall not be assignable or transferable other than by will or by the laws of descent and distribution following the Optionee's death. Non-Statutory Options shall be subject to the same restrictions, except that a Non-Statutory Option may, to the extent permitted by the Plan Administrator, be assigned in whole or in part during the Optionee's lifetime (i) as a gift to one or more members of the Optionee's immediate family, to a trust in which Optionee and/or one or more such family members hold more than fifty percent (50%) of the beneficial interest or to an entity in which more than fifty percent (50%) of the voting interests are owned by one or more such family members or (ii) pursuant to a domestic relations order. The terms applicable to the assigned portion shall be the same as those in effect for the option immediately prior to such assignment and shall be set forth in such documents issued to the assignee as the Plan Administrator may deem appropriate.

II.  INCENTIVE OPTIONS

The terms specified below shall be applicable to all Incentive Options. Except as modified by the provisions of this Section II, all the provisions of Articles One, Two and Six shall be applicable to Incentive Options. Options which are specifically designated as Non-Statutory Options when issued under the Plan shall not be subject to the terms of this Section II.

A.          ELIGIBILITY. Incentive Options may only be granted to Employees.

B.           EXERCISE PRICE. The exercise price per share shall not be less than one hundred percent (100%) of the Fair Market Value per share of Common Stock on the option grant date.

C.           DOLLAR LIMITATION. The aggregate Fair Market Value of the shares of Common Stock (determined as of the respective date or dates of grant) for which one or more options granted to any Employee under the Plan (or any other option plan of the Corporation or any Parent or Subsidiary) may for the first time become exercisable as Incentive Options during any one calendar year shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the Employee holds two (2) or more such options which become exercisable for the first time in the same calendar year, the foregoing limitation on the exercisability of such options as Incentive Options shall be applied on the basis of the order in which such options are granted.

  

  

  

D.           10% STOCKHOLDER. If any Employee to whom an Incentive Option is granted is a 10% Stockholder, then the exercise price per share shall not be less than one hundred ten percent (110%) of the Fair Market Value per share of Common Stock on the option grant date, and the option term shall not exceed five (5) years measured from the option grant date.

III. CHANGE IN CONTROL/HOSTILE TAKE-OVER

A.           Each option outstanding at the time of a Change in Control but not otherwise fully-vested shall automatically accelerate so that each such option shall, immediately prior to the effective date of the Change in Control, become exercisable for all of the shares of Common Stock at the time subject to that option and may be exercised for any or all of those shares as fully-vested shares of Common Stock. However, an outstanding option shall not so accelerate if and to the extent: (i) such option is, in connection with the Change in Control, assumed or otherwise continued in full force and effect by the successor corporation (or parent thereof) pursuant to the terms of the Change in Control, (ii) such option is replaced with a cash incentive program of the successor corporation which preserves the spread existing at the time of the Change in Control on the shares of Common Stock for which the option is not otherwise at that time exercisable and provides for subsequent payout in accordance with the same vesting schedule applicable to those option shares or (iii) the acceleration of such option is subject to other limitations imposed by the Plan Administrator at the time of the option grant. Each option outstanding at the time of the Change in Control shall terminate as provided in Section III.C. of this Article Two.

B.           All outstanding repurchase rights shall also terminate automatically, and the shares of Common Stock subject to those terminated rights shall immediately vest in full, in the event of any Change in Control, except to the extent: (i) those repurchase rights are assigned to the successor corporation (or parent thereof) or otherwise continue in full force and effect pursuant to the terms of the Change in Control or (ii) such accelerated vesting is precluded by other limitations imposed by the Plan Administrator at the time the repurchase right is issued.

C.           Immediately following the consummation of the Change in Control, all outstanding options shall terminate and cease to be outstanding, except to the extent assumed by the successor corporation (or parent thereof) or otherwise expressly continued in full force and effect pursuant to the terms of the Change in Control.

D.           Each option which is assumed in connection with a Change in Control shall be appropriately adjusted, immediately after such Change in Control, to apply to the number and class of securities which would have been issuable to the Optionee in consummation of such Change in Control had the option been exercised immediately prior to such Change in Control. Appropriate adjustments to reflect such Change in Control shall also be made to (i) the exercise price payable per share under each outstanding option, provided the aggregate exercise price payable for such securities shall remain the same, (ii) the maximum number and/or class of securities available for issuance over the remaining term of the Plan and (iii) the maximum number and/or class of securities for which any one person may be granted options, separately exercisable stock appreciation rights and direct stock issuances under the Plan per calendar year.

E.           The Plan Administrator may at any time provide that one or more options will automatically accelerate in connection with a Change in Control, whether or not those options are assumed or otherwise continued in full force and effect pursuant to the terms of the Change in Control. Any such option shall accordingly become exercisable, immediately prior to the effective date of such Change in Control, for all of the shares of Common Stock at the time subject to that option and may be exercised for any or all of those shares as fully-vested shares of Common Stock. In addition, the Plan Administrator may at any time provide that one or more of the Corporation's repurchase rights shall not be assignable in connection with such Change in Control and shall terminate upon the consummation of such Change in Control.

F.           The Plan Administrator may at any time provide that one or more options will automatically accelerate upon an Involuntary Termination of the Optionee's Service within a designated period (not to exceed eighteen (18) months) following the effective date of any Change in Control in which those options do not otherwise accelerate. Any options so accelerated shall remain exercisable for fully-vested shares until the earlier of (i) the expiration of the option term or (ii) the expiration of the one (1) year period measured from the effective date of the Involuntary Termination. In addition, the Plan Administrator may at any time provide that one or more of the Corporation's repurchase rights shall immediately terminate upon such Involuntary Termination.

  

  

  

G.           The Plan Administrator may at any time provide that one or more options will automatically accelerate in connection with a Hostile Take-Over. Any such option shall become exercisable, immediately prior to the effective date of such Hostile Take-Over, for all of the shares of Common Stock at the time subject to that option and may be exercised for any or all of those shares as fully-vested shares of Common Stock. In addition, the Plan Administrator may at any time provide that one or more of the Corporation's repurchase rights shall terminate automatically upon the consummation of such Hostile Take-Over. Alternatively, the Plan Administrator may condition such automatic acceleration and termination upon an Involuntary Termination of the Optionee's Service within a designated period (not to exceed eighteen (18) months) following the effective date of such Hostile Take-Over. Each option so accelerated shall remain exercisable for fully-vested shares until the expiration or sooner termination of the option term.

H.           The portion of any Incentive Option accelerated in connection with a Change in Control or Hostile Take Over shall remain exercisable as an Incentive Option only to the extent the applicable One Hundred Thousand Dollar ($100,000) limitation is not exceeded. To the extent such dollar limitation is exceeded, the accelerated portion of such option shall be exercisable as a Non-Statutory Option under the Federal tax laws.

IV.  STOCK APPRECIATION RIGHTS

The Plan Administrator may, subject to such conditions as it may determine, grant to selected Optionees stock appreciation rights which will allow the holders of those rights to elect between the exercise of the underlying option for shares of Common Stock and the surrender of that option in exchange for a distribution from the Corporation in an amount equal to the excess of (a) the Option Surrender Value of the number of shares for which the option is surrendered over (b) the aggregate exercise price payable for such shares. The distribution may be made in shares of Common Stock valued at Fair Market Value on the option surrender date, in cash, or partly in shares and partly in cash, as the Plan Administrator shall in its sole discretion deem appropriate.

ARTICLE THREE

SALARY INVESTMENT OPTION GRANT PROGRAM

I.   OPTION GRANTS

The Primary Committee may implement the Salary Investment Option Grant Program for one or more calendar years beginning after the Underwriting Date and select the Section 16 Insiders and other highly compensated Employees eligible to participate in the Salary Investment Option Grant Program for each such calendar year. Each selected individual who elects to participate in the Salary Investment Option Grant Program must, prior to the start of each calendar year of participation, file with the Plan Administrator (or its designate) an irrevocable authorization directing the Corporation to reduce his or her base salary for that calendar year by an amount not less than Five Thousand Dollars ($5,000.00) nor more than Fifty Thousand Dollars ($50,000.00). The Primary Committee shall have complete discretion to determine whether to approve the filed authorization in whole or in part. To the extent the Primary Committee approves the authorization, the individual who filed that authorization shall be granted an option under the Salary Investment Grant Program on the first trading day in January for the calendar year for which the salary reduction is to be in effect.

II.  OPTION TERMS

Each option shall be a Non-Statutory Option evidenced by one or more documents in the form approved by the Plan Administrator; provided, however, that each such document shall comply with the terms specified below.

  

  

  

A.           EXERCISE PRICE.

1.           The exercise price per share shall be thirty-three and one-third percent (33-1/3%) of the Fair Market Value per share of Common Stock on the option grant date.

2.           The exercise price shall become immediately due upon exercise of the option and shall be payable in one or more of the alternative forms authorized under the Discretionary Option Grant Program. Except to the extent the sale and remittance procedure specified thereunder is utilized, payment of the exercise price for the purchased shares must be made on the Exercise Date.

B.           NUMBER OF OPTION SHARES. The number of shares of Common Stock subject to the option shall be determined pursuant to the following formula (rounded down to the nearest whole number):

X = A divided by (B x 66-2/3%), where

X is the number of option shares, A is the dollar amount of the approved reduction in the Optionee's base salary for the calendar year, and B is the Fair Market Value per share of Common Stock on the option grant date.

C.           EXERCISE AND TERM OF OPTIONS. The option shall become exercisable in a series of twelve (12) successive equal monthly installments upon the Optionee's completion of each calendar month of Service in the calendar year for which the salary reduction is in effect. Each option shall have a maximum term of ten (10) years measured from the option grant date.

D.           CESSATION OF SERVICE. Each option outstanding at the time of the Optionee's cessation of Service shall remain exercisable, for any or all of the shares for which the option is exercisable at the time of such cessation of Service, until the earlier of (i) the expiration of the option term or (ii) the expiration of the three (3)-year period following the Optionee's cessation of Service. To the extent the option is held by the Optionee at the time of his or her death, the option may be exercised by his or her Beneficiary. However, the option shall, immediately upon the Optionee's cessation of Service, terminate and cease to remain outstanding with respect to any and all shares of Common Stock for which the option is not otherwise at that time exercisable.

III. CHANGE IN CONTROL/HOSTILE TAKE-OVER

A.           In the event of any Change in Control or Hostile Take-Over while the Optionee remains in Service, each outstanding option shall automatically accelerate so that each such option shall, immediately prior to the effective date of the Change in Control or Hostile Take-Over, become fully exercisable with respect to the total number of shares of Common Stock at the time subject to such option and may be exercised for any or all of those shares as fully-vested shares of Common Stock. Each such option accelerated in connection with a Change in Control shall terminate upon the Change in Control, except to the extent assumed by the successor corporation (or parent thereof) or otherwise continued in full force and effect pursuant to the terms of the Change in Control. Each such option accelerated in connection with a Hostile Take-Over shall remain exercisable until the expiration or sooner termination of the option term.

B.           Each option which is assumed in connection with a Change in Control shall be appropriately adjusted to apply to the number and class of securities which would have been issuable to the Optionee in consummation of such Change in Control had the option been exercised immediately prior to such Change in Control. Appropriate adjustments shall also be made to the exercise price payable per share under each outstanding option, provided the aggregate exercise price payable for such securities shall remain the same.

C.           Upon the occurrence of a Hostile Take-Over, the Optionee shall have a thirty (30)-day period in which to surrender to the Corporation each of his or her outstanding options. The Optionee shall in return be entitled to a cash distribution from the Corporation in an amount equal to the excess of (i) the Option Surrender Value of the shares of Common Stock at the time subject to each surrendered option (whether or not the Optionee is otherwise at the time vested in those shares) over (ii) the aggregate exercise price payable for such shares. Such cash distribution shall be paid within five (5) days following the surrender of the option to the Corporation.

  

  

  

IV.  REMAINING TERMS

The remaining terms of each option granted under the Salary Investment Option Grant Program shall be the same as the terms in effect for options made under the Discretionary Option Grant Program.

ARTICLE FOUR

STOCK ISSUANCE PROGRAM

I.   STOCK ISSUANCE TERMS

Shares of Common Stock may be issued under the Stock Issuance Program through direct and immediate issuances without any intervening options. Shares of Common Stock may also be issued under the Stock Issuance Program pursuant to share right awards which entitle the recipients to receive those shares upon the attainment of designated performance goals or Service requirements. Each such award shall be evidenced by one or more documents which comply with the terms specified below.

A.           PURCHASE PRICE.

1.           The purchase price per share of Common Stock subject to direct issuance shall be fixed by the Plan Administrator and may be less than, equal to or greater than the Fair Market Value per share of Common Stock on the issue date.

2.           Subject to the provisions of Section II of Article Seven, shares of Common Stock may be issued under the Stock Issuance Program for any of the following items of consideration which the Plan Administrator may deem appropriate in each individual instance:

(i)           cash or check made payable to the Corporation, or

(ii)          past services rendered to the Corporation (or any Parent or Subsidiary).

B.           VESTING/ISSUANCE PROVISIONS.

1.           The Plan Administrator may issue shares of Common Stock which are fully and immediately vested upon issuance or which are to vest in one or more installments over the Participant's period of Service or upon attainment of specified performance objectives. Alternatively, the Plan Administrator may issue share right awards which shall entitle the recipient to receive a specified number of vested shares of Common Stock upon the attainment of one or more performance goals or Service requirements established by the Plan Administrator.

2.           Any new, substituted or additional securities or other property (including money paid other than as a regular cash dividend) which the Participant may have the right to receive with respect to his or her unvested shares of Common Stock by reason of any stock dividend, stock split, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation's receipt of consideration shall be issued subject to (i) the same vesting requirements applicable to the Participant's unvested shares of Common Stock and (ii) such escrow arrangements as the Plan Administrator shall deem appropriate.

3.           The Participant shall have full stockholder rights with respect to the issued shares of Common Stock, whether or not the Participant's interest in those shares is vested. Accordingly, the Participant shall have the right to vote such shares and to receive any regular cash dividends paid on such shares.

4.           Should the Participant cease to remain in Service while holding one or more unvested shares of Common Stock, or should the performance objectives not be attained with respect to one or more such unvested shares of Common Stock, then those shares shall be immediately surrendered to the Corporation for cancellation, and the Participant shall have no further stockholder rights with respect to those shares. To the extent the surrendered shares were previously issued to the Participant for consideration paid in cash or cash equivalent (including the Participant's purchase-money indebtedness), the Corporation shall repay to the Participant the cash consideration paid for the surrendered shares and shall cancel the unpaid principal balance of any outstanding purchase-money note of the Participant attributable to the surrendered shares.

  

  

  

5.           The Plan Administrator may waive the surrender and cancellation of one or more unvested shares of Common Stock (or other assets attributable thereto) which would otherwise occur upon the cessation of the Participant's Service or the non-attainment of the performance objectives applicable to those shares. Such waiver shall result in the immediate vesting of the Participant's interest in the shares of Common Stock as to which the waiver applies. Such waiver may be effected at any time, whether before or after the Participant's cessation of Service or the attainment or non-attainment of the applicable performance objectives.

6.           Outstanding share right awards shall automatically terminate, and no shares of Common Stock shall actually be issued in satisfaction of those awards, if the performance goals or Service requirements established for such awards are not attained. The Plan Administrator, however, shall have the authority to issue shares of Common Stock in satisfaction of one or more outstanding share right awards as to which the designated performance goals or Service requirements are not attained.

II.  CHANGE IN CONTROL/HOSTILE TAKE-OVER

A.           All of the Corporation's outstanding repurchase rights shall terminate automatically, and all the shares of Common Stock subject to those terminated rights shall immediately vest in full, in the event of any Change in Control, except to the extent (i) those repurchase rights are assigned to the successor corporation (or parent thereof) or otherwise continue in full force and effect pursuant to the terms of the Change in Control or (ii) such accelerated vesting is precluded by other limitations imposed by the Plan Administrator at the time the repurchase right is issued.

B.           The Plan Administrator may at any time provide for the automatic termination of one or more of those outstanding repurchase rights and the immediate vesting of the shares of Common Stock subject to those terminated rights upon (i) a Change in Control or Hostile Take-Over or (ii) an Involuntary Termination of the Participant's Service within a designated period (not to exceed eighteen (18) months) following the effective date of any Change in Control or Hostile Take-Over in which those repurchase rights are assigned to the successor corporation (or parent thereof) or otherwise continue in full force and effect.

III. SHARE ESCROW/LEGENDS

Unvested shares may, in the Plan Administrator's discretion, be held in escrow by the Corporation until the Participant's interest in such shares vests or may be issued directly to the Participant with restrictive legends on the certificates evidencing those unvested shares.

ARTICLE FIVE

AUTOMATIC OPTION GRANT PROGRAM

I.   OPTION TERMS

A.           GRANT DATES. Options shall be made on the dates specified below:

1.           Each individual who is first elected or appointed as a non-employee Board member at any time after the Underwriting Date shall automatically be granted, on the date of such initial election or appointment, a Non-Statutory Option to purchase Fifteen Thousand (15,000) shares of Common Stock, provided that individual has not previously been in the employ of the Corporation (or any Parent or Subsidiary).

2.           On the date of each Annual Stockholders Meeting beginning with the 2000 Annual Stockholder Meeting, each individual who is to continue to serve as a non-employee Board member shall automatically be granted a Non-Statutory Option to purchase Five Thousand (5,000) shares of Common Stock.

  

  

  

B.           EXERCISE PRICE.

1.           The exercise price per share shall be equal to one hundred percent (100%) of the Fair Market Value per share of Common Stock on the option grant date.

2.           The exercise price shall be payable in one or more of the alternative forms authorized under the Discretionary Option Grant Program. Except to the extent the sale and remittance procedure specified thereunder is utilized, payment of the exercise price for the purchased shares must be made on the Exercise Date.

C.           OPTION TERM. Each option shall have a term of ten (10) years measured from the option grant date.

D.           EXERCISE AND VESTING OF OPTIONS. Each option shall be immediately exercisable for any or all of the option shares. However, any shares purchased under the option shall be subject to repurchase by the Corporation, at the exercise price paid per share, upon the Optionee's cessation of Board service prior to vesting in those shares. Each initial 15,000-share option shall vest, and the Corporation's repurchase right shall lapse, in a series of four (4) successive equal annual installments over the Optionee's period of continued service as a Board member, with the first such installment to vest upon the Optionee's completion of one (1) year of Board service measured from the option grant date. Each annual 5,000-share option shall vest, and the Corporation's repurchase right shall lapse, upon the Optionee's completion of one (1) year of Board service measured from the option grant date.

E.           CESSATION OF BOARD SERVICE. The following provisions shall govern the exercise of any options outstanding at the time of the Optionee's cessation of Board service:

(i)           Any option outstanding at the time of the Optionee's cessation of Board service for any reason shall remain exercisable for a twelve (12)-month period following the date of such cessation of Board service, but in no event shall such option be exercisable after the expiration of the option term.

(ii)          Any option exercisable in whole or in part by the Optionee at the time of death may be subsequently exercised by his or her Beneficiary.

(iii)         Following the Optionee's cessation of Board service, the option may not be exercised in the aggregate for more than the number of shares for which the option was exercisable on the date of such cessation of Board service. Upon the expiration of the applicable exercise period or (if earlier) upon the expiration of the option term, the option shall terminate and cease to be outstanding for any vested shares for which the option has not been exercised. However, the option shall, immediately upon the Optionee's cessation of Board service, terminate and cease to be outstanding for any and all shares for which the option is not otherwise at that time exercisable.

(iv)         However, should the Optionee cease to serve as a Board member by reason of death or Permanent Disability, then all shares at the time subject to the option shall immediately vest so that such option may, during the twelve (12)-month exercise period following such cessation of Board service, be exercised for all or any portion of those shares as fully-vested shares of Common Stock.

II.  CHANGE IN CONTROL/HOSTILE TAKE-OVER

A.           In the event of any Change in Control or Hostile Take-Over, the shares of Common Stock at the time subject to each outstanding option but not otherwise vested shall automatically vest in full so that each such option may, immediately prior to the effective date of such Change in Control or Hostile Take-Over, became fully exercisable for all of the shares of Common Stock at the time subject to such option and maybe exercised for all or any of those shares as fully-vested shares of Common Stock. Each such option accelerated in connection with a Change in Control shall terminate upon the Change in Control, except to the extent assumed by the successor corporation (or parent thereof) or otherwise continued in full force and effect pursuant to the terms of the Change in Control. Each such option accelerated in connection with a Hostile Take-Over shall remain exercisable until the expiration or sooner termination of the option term.

  

  

  

B.           All outstanding repurchase rights shall automatically terminate and the shares of Common Stock subject to those terminated rights shall immediately vest in full, in the event of any Change in Control or Hostile Take-Over.

C.           Upon the occurrence of a Hostile Take-Over, the Optionee shall have a thirty (30)-day period in which to surrender to the Corporation each of his or her outstanding options. The Optionee shall in return be entitled to a cash distribution from the Corporation in an amount equal to the excess of (i) the Option Surrender Value of the shares of Common Stock at the time subject to each surrendered option (whether or not the option is otherwise at the time exercisable for those shares) over (ii) the aggregate exercise price payable for such shares. Such cash distribution shall be paid within five (5) days following the surrender of the option to the Corporation.

D.           Each option which is assumed in connection with a Change in Control shall be appropriately adjusted to apply to the number and class of securities which would have been issuable to the Optionee in consummation of such Change in Control had the option been exercised immediately prior to such Change in Control. Appropriate adjustments shall also be made to the exercise price payable per share under each outstanding option, provided the aggregate exercise price payable for such securities shall remain the same.

III. REMAINING TERMS

The remaining terms of each option granted under the Automatic Option Grant Program shall be the same as the terms in effect for options made under the Discretionary Option Grant Program.

ARTICLE SIX

DIRECTOR FEE OPTION GRANT PROGRAM

I.   OPTION GRANTS

The Board may implement the Director Fee Option Grant Program as of the first day of any calendar year beginning after the Underwriting Date. Upon such implementation of the Program, each non-employee Board member may elect to apply all or any portion of the annual retainer fee otherwise payable in cash for his or her service on the Board to the acquisition of a special option grant under this Director Fee Option Grant Program. Such election must be filed with the Corporation's Chief Financial Officer prior to the first day of the calendar year for which the election is to be in effect. Each non-employee Board member who files such a timely election with respect to the annul retainer fee shall automatically be granted an option under this Director Fee Option Grant Program on the first trading day in January in the calendar year for which that fee would otherwise be payable.

II.  OPTION TERMS

Each option shall be a Non-Statutory Option governed by the terms and conditions specified below.

A.           EXERCISE PRICE.

1.           The exercise price per share shall be thirty-three and one-third percent (33-1/3%) of the Fair Market Value per share of Common Stock on the option grant date.

2.           The exercise price shall become immediately due upon exercise of the option and shall be payable in one or more of the alternative forms authorized under the Discretionary Option Grant Program. Except to the extent the sale and remittance procedure specified thereunder is utilized, payment of the exercise price for the purchased shares must be made on the Exercise Date.

B.           NUMBER OF OPTION SHARES. The number of shares of Common Stock subject to the option shall be determined pursuant to the following formula (rounded down to the nearest whole number):

X = A divided by (B x 66-2/3%), where

  

  

  

X is the number of option shares, A is the portion of the annual retainer fee subject to the non-employee Board member's election, and B is the Fair Market Value per share of Common Stock on the option grant date.

C.           EXERCISE AND TERM OF OPTIONS. The option shall become exercisable in a series of twelve (12) successive equal monthly installments upon the Optionee's completion of each month of Board service during the calendar year in which the option is granted. Each option shall have a maximum term of ten (10) years measured from the option grant date.

D.           CESSATION OF BOARD SERVICE. Should the Optionee cease Board service for any reason (other than death or Permanent Disability) while holding one or more options, then each such option shall remain exercisable, for any or all of the shares for which the option is exercisable at the time of such cessation of Board service, until the earlier of (i) the expiration of the ten (10)-year option term or (ii) the expiration of the three (3)-year period measured from the date of such cessation of Board service. However, each option held by the Optionee at the time of such cessation of Board service shall immediately terminate and cease to remain outstanding with respect to any and all shares of Common Stock for which the option is not otherwise at that time exercisable.

E.           DEATH OR PERMANENT DISABILITY. Should the Optionee's service as a Board member cease by reason of death or Permanent Disability, then each option held by such Optionee shall immediately become exercisable for all the shares of Common Stock at the time subject to that option, and the option may be exercised for any or all of those shares as fully-vested shares until the earlier of (i) the expiration of the ten (10)-year option term or (ii) the expiration of the three (3)-year period measured from the date of such cessation of Board service.

Should the Optionee die after cessation of Board service but while holding one or more options, then each such option may be exercised, for any or all of the shares for which the option is exercisable at the time of the Optionee's cessation of Board service (less any shares subsequently purchased by Optionee prior to death), by the Optionee's Beneficiary. Such right of exercise shall lapse, and the option shall terminate, upon the earlier of (i) the expiration of the ten (10)-year option term or (ii) the three (3)-year period measured from the date of the Optionee's cessation of Board service.

III. CHANGE IN CONTROL/HOSTILE TAKE-OVER

A.           In the event of any Change in Control or Hostile Take-Over while the Optionee remains in Board service, each outstanding option held by such Optionee shall automatically accelerate so that each such option shall, immediately prior to the effective date of the Change in Control or Hostile Take-Over, become fully exercisable with respect to the total number of shares of Common Stock at the time subject to such option and may be exercised for any or all of those shares as fully-vested shares of Common Stock. Each such option accelerated in connection with a Change in Control shall terminate upon the Change in Control, except to the extent assumed by the successor corporation (or parent thereof) or otherwise expressly continued in full force and effect pursuant to the terms of the Change in Control. Each such option accelerated in connection with a Hostile Take-Over shall remain exercisable until the expiration or sooner termination of the option term.

B.           Upon the occurrence of a Hostile Take-Over, the Optionee shall have a thirty (30)-day period in which to surrender to the Corporation options. The Optionee shall in return be entitled to a cash distribution from the Corporation in an amount equal to the excess of (i) the Option Surrender Value of the shares of Common Stock at the time subject to each surrendered option (whether or not the Optionee is otherwise at the time vested in those shares) over (ii) the aggregate exercise price payable for such shares. Such cash distribution shall be paid within five (5) days following the surrender of the option to the Corporation.

IV.  REMAINING TERMS

The remaining terms of each option granted under this Director Fee Option Grant Program shall be the same as the terms in effect for options made under the Discretionary Option Grant Program.

  

  

  

ARTICLE SEVEN

MISCELLANEOUS

 I.   NO IMPAIRMENT OF AUTHORITY

Outstanding awards shall in no way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

II.  FINANCING

The Plan Administrator may permit any Optionee or Participant to pay the option exercise price under the Discretionary Option Grant Program or the purchase price of shares issued under the Stock Issuance Program by delivering a full-recourse, interest bearing promissory note payable in one or more installments. The terms of any such promissory note (including the interest rate and the terms of repayment) shall be established by the Plan Administrator in its sole discretion. In no event may the maximum credit available to the Optionee or Participant exceed the sum of (i) the aggregate option exercise price or purchase price payable for the purchased shares plus (ii) any Federal, state and local income and employment tax liability incurred by the Optionee or the Participant in connection with the option exercise or share purchase.

III. TAX WITHHOLDING

A.           The Corporation's obligation to deliver shares of Common Stock upon the exercise of options or the issuance or vesting of such shares under the Plan shall be subject to the satisfaction of all applicable Federal, state and local income and employment tax withholding requirements.

B.           The Plan Administrator may, in its discretion, provide any or all holders of Non-Statutory Options or unvested shares of Common Stock under the Plan with the right to use shares of Common Stock in satisfaction of all or part of the Withholding Taxes incurred by such holders in connection with the exercise of their options or the vesting of their shares. Such right may be provided to any such holder in either or both of the following formats:

Stock Withholding: The election to have the Corporation withhold, from the shares of Common Stock otherwise issuable upon the exercise of such Non-Statutory Option or the vesting of such shares, a portion of those shares with an aggregate Fair Market Value equal to the percentage of the Withholding Taxes (not to exceed one hundred percent (100%)) designated by the holder.

Stock Delivery: The election to deliver to the Corporation, at the time the Non-Statutory Option is exercised or the shares vest, one or more shares of Common Stock previously acquired by such holder (other than in connection with the option exercise or share vesting triggering the Withholding Taxes) with an aggregate Fair Market Value equal to the percentage of the Taxes (not to exceed one hundred percent (100%)) designated by the holder.

IV.  EFFECTIVE DATE AND TERM OF THE PLAN

A.           The Plan became effective immediately on the Section 12 Registration Date. However, the Salary Investment Option Grant and Director Fee Option Grant Programs shall not be implemented until such time as the Primary Committee or the Board may deem appropriate. Options may be granted under the Discretionary Option Grant Program at any time on or after the Section 12 Registration Date. 

B.           The Plan shall serve as the successor to the Predecessor Plan, and no further options or direct stock issuances shall be made under the Predecessor Plan after the Section 12 Registration Date. All options outstanding under the Predecessor Plan on the Section 12 Registration Date shall be incorporated into the Plan at that time and shall be treated as outstanding options under the Plan. However, each outstanding option so incorporated shall continue to be governed solely by the terms of the documents evidencing such option, and no provision of the Plan shall be deemed to affect or otherwise modify the rights or obligations of the holders of such incorporated options with respect to their acquisition of shares of Common Stock.

    C.    The Plan was amended by the Board on January 12, 2001, and approved by the stockholders at the 2001 Annual Stockholders Meeting, in order to (i) increase the number of shares of the Company's Common Stock reserved for issuance under the Plan by an additional 1,000,000 shares; and (ii) increase the number of shares by which the share reserve under the Plan will automatically increase on the first trading day of each calendar year, beginning with calendar year 2002, from two percent (2%) of the shares of Common Stock outstanding on the last trading day of the immediately preceding calendar year (subject to a maximum annual increase of 500,000 shares) to four percent (4%) of such outstanding shares (subject to a maximum annual increase of 1,000,000 shares).

D.    The Plan was amended by the Board on January ___, 2002, subject to stockholder approval at the 2002 Annual Stockholders Meeting, in order to (i) increase the number of shares of the Company's Common Stock reserved for issuance under the Plan by an additional 1,000,000 shares; and (ii) increase the maximum number of shares any one participant may receive pursuant to option grants, separately exercisable stock appreciation rights or direct stock issuances from 500,000 shares of common stock in the aggregate per calendar year to 1,000,000 shares of common stock in the aggregate per calendar year.

  

  

  

E.           One or more provisions of the Plan, including (without limitation) the option/vesting acceleration provisions of Article Two relating to Changes in Control, may, in the Plan Administrator's discretion, be extended to one or more options incorporated from the Predecessor Plan which do not otherwise contain such provisions.

F.           The Plan shall terminate upon the earliest of (i) September 30, 2009, (ii) the date on which all shares available for issuance under the Plan shall have been issued as fully-vested shares or (iii) the termination of all outstanding options in connection with a Change in Control. Upon such plan termination, all outstanding options and unvested stock issuances shall thereafter continue to have force and effect in accordance with the provisions of the documents evidencing such grants or issuances.

V.   AMENDMENT OF THE PLAN

A.           The Board shall have complete and exclusive power and authority to amend or modify the Plan in any or all respects. However, no such amendment or modification shall adversely affect the rights and obligations with respect to stock options or unvested stock issuances at the time outstanding under the Plan unless the Optionee or the Participant consents to such amendment or modification. In addition, certain amendments may require stockholder approval pursuant to applicable laws or regulations.

B.           Options to purchase shares of Common Stock may be granted under the Discretionary Option Grant and Salary Investment Option Grant Programs and shares of Common Stock may be issued under the Stock Issuance Program that are in each instance in excess of the number of shares then available for issuance under the Plan, provided any excess shares actually issued under those programs shall be held in escrow until there is obtained stockholder approval of an amendment sufficiently increasing the number of shares of Common Stock available for issuance under the Plan. If such stockholder approval is not obtained within twelve (12) months after the date the first such excess issuances are made, then (i) any unexercised options granted on the basis of such excess shares shall terminate and cease to be outstanding and (ii) the Corporation shall promptly refund to the Optionees and the Participants the exercise or purchase price paid for any excess shares issued under the Plan and held in escrow, together with interest (at the applicable Short Term Federal Rate) for the period the shares were held in escrow, and such shares shall thereupon be automatically cancelled and cease to be outstanding.

VI.   USE OF PROCEEDS

Any cash proceeds received by the Corporation from the sale of shares of Common Stock under the Plan shall be used for general corporate purposes.

VII.  REGULATORY APPROVALS

A.           The implementation of the Plan, the granting of any stock option under the Plan and the issuance of any shares of Common Stock (i) upon the exercise of any granted option or (ii) under the Stock Issuance Program shall be subject to the Corporation's procurement of all approvals and permits required by regulatory authorities having jurisdiction over the Plan, the stock options granted under it and the shares of Common Stock issued pursuant to it.

B.           No shares of Common Stock or other assets shall be issued or delivered under the Plan unless and until there shall have been compliance with all applicable requirements of Federal and state securities laws, including the filing and effectiveness of the Form S-8 registration statement for the shares of Common Stock issuable under the Plan, and all applicable listing requirements of any stock exchange (or the Nasdaq National Market, if applicable) on which Common Stock is then listed for trading.

  

  

  

VIII. NO EMPLOYMENT/SERVICE RIGHTS

           Nothing in the Plan shall confer upon the Optionee or the Participant any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Corporation (or any Parent or Subsidiary employing or retaining such person) or of the Optionee or the Participant, which rights are hereby expressly reserved by each, to terminate such person's Service at any time for any reason, with or without cause.

  

  

  

APPENDIX

The following definitions shall be in effect under the Plan:

A.           AUTOMATIC OPTION GRANT PROGRAM shall mean the automatic option grant program in effect under the Plan.

B.           BENEFICIARY shall mean, in the event the Plan Administrator implements a beneficiary designation procedure, the person designated by an Optionee or Participant, pursuant to such procedure, to succeed to such person's rights under any outstanding awards held by him or her at the time of death. In the absence of such designation or procedure, the Beneficiary shall be the personal representative of the estate of the Optionee or Participant or the person or persons to whom the award is transferred by will or the laws of descent and distribution.

C.           BOARD shall mean the Corporation's Board of Directors.

D.           CHANGE IN CONTROL shall mean a change in ownership or control of the Corporation effected through any of the following transactions:

(i)          a merger, consolidation or reorganization approved by the Corporation'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 Corporation's outstanding voting securities immediately prior to such transaction,

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

(iii)         the acquisition, directly or indirectly by any person or related group of persons (other than the Corporation or a person that directly or indirectly controls, is controlled by, or is under common control with, the Corporation), of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation's outstanding securities pursuant to a tender or exchange offer made directly to the Corporation's stockholders which the Board recommends such stockholders accept.

E.           CODE shall mean the Internal Revenue Code of 1986, as amended.

F.           COMMON STOCK shall mean the Corporation's common stock.

G.           CORPORATION shall mean Crossroads Systems, Inc., a Delaware corporation, and any corporate successor to all or substantially all of the assets or voting stock of Crossroads Systems, Inc. which shall by appropriate action adopt the Plan.

H.           DIRECTOR FEE OPTION GRANT PROGRAM shall mean the director fee option grant program in effect under the Plan.

I.            DISCRETIONARY OPTION GRANT PROGRAM shall mean the discretionary option grant program in effect under the Plan.

J.            EMPLOYEE shall mean an individual who is in the employ of the Corporation (or any Parent or Subsidiary), subject to the control and direction of the employer entity as to both the work to be performed and the manner and method of performance.

K.           EXERCISE DATE shall mean the date on which the Corporation shall have received written notice of the option exercise.

  

  

  

L.           FAIR MARKET VALUE per share of Common Stock on any relevant date shall be determined in accordance with the following provisions:

(i)          If the Common Stock is at the time traded on the Nasdaq National Market, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question, as such price is reported on the Nasdaq National Market or any successor system. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists.

(ii)         If the Common Stock is at the time listed on any Stock Exchange, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question on the Stock Exchange determined by the Plan Administrator to be the primary market for the Common Stock, as such price is officially quoted in the composite tape of transactions on such exchange. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists.

(iii)        For purposes of any option grants made on the Underwriting Date, the Fair Market Value shall be deemed to be equal to the price per share at which the Common Stock is to be sold in the initial public offering pursuant to the Underwriting Agreement.

(iv)        For purposes of any options made prior to the Underwriting Date, the Fair Market Value shall be determined by the Plan Administrator, after taking into account such factors as it deems appropriate.

M.           HOSTILE TAKE-OVER shall mean:

(i)          the acquisition, directly or indirectly, by any person or related group of persons (other than the Corporation or a person that directly or indirectly controls, is controlled by, or is under common control with, the Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation's outstanding securities pursuant to a tender or exchange offer made directly to the Corporation's stockholders which the Board does not recommend such stockholders to accept, or

(ii)         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.

N.           INCENTIVE OPTION shall mean an option which satisfies the requirements of Code Section 422.

O.           INVOLUNTARY TERMINATION shall mean the termination of the Service of any individual which occurs by reason of:

(i)          such individual's involuntary dismissal or discharge by the Corporation for reasons other than Misconduct, or

(ii)         such individual's voluntary resignation following (A) a change in his or her position with the Corporation or Parent or Subsidiary employing the individual which materially reduces his or her duties and responsibilities or the level of management to which he or she reports, (B) a reduction in his or her level of compensation (including base salary, fringe benefits and target bonus under any performance based bonus or incentive programs) by more than fifteen percent (15%) or (C) a relocation of such individual's place of employment by more than fifty (50) miles, provided and only if such change, reduction or relocation is effected by the Corporation without the individual's consent.

  

  

  

P.           MISCONDUCT shall mean the commission of any act of fraud, embezzlement or dishonesty by the Optionee or Participant, any unauthorized use or disclosure by such person of confidential information or trade secrets of the Corporation (or any Parent or Subsidiary), or any intentional wrongdoing by such person, whether by omission or commission, which adversely affects the business or affairs of the Corporation (or any Parent or Subsidiary) in a material manner. This shall not limit the grounds for the dismissal or discharge of any person in the Service of the Corporation (or any Parent or Subsidiary).

Q.          1934 ACT shall mean the Securities Exchange Act of 1934, as amended.

R.           NON-STATUTORY OPTION shall mean an option not intended to satisfy the requirements of Code Section 422.

S.           OPTION SURRENDER VALUE shall mean the Fair Market Value per share of Common Stock on the date the option is surrendered to the Corporation or, in the event of a Hostile Take-Over, effected through a tender offer, the highest reported price per share of Common Stock paid by the tender offeror in effecting such Hostile Take-Over, if greater. However, if the surrendered option is an Incentive Option, the Option Surrender Value shall not exceed the Fair Market Value per share.

T.           OPTIONEE shall mean any person to whom an option is granted under the Discretionary Option Grant, Salary Investment Option Grant, Automatic Option Grant or Director Fee Option Grant Program.

U.           PARENT shall mean any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation, provided each corporation in the unbroken chain (other than the Corporation) owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

V.           PARTICIPANT shall mean any person who is issued shares of Common Stock under the Stock Issuance Program.

W.         PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the inability of the Optionee or the Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment expected to result in death or to be of continuous duration of twelve (12) months or more. However, solely for purposes of the Automatic Option Grant and Director Fee Option Grant Programs, Permanent Disability or Permanently Disabled shall mean the inability of the non-employee Board member to perform his or her usual duties as a Board member by reason of any medically determinable physical or mental impairment expected to result in death or to be of continuous duration of twelve (12) months or more.

X.          PLAN shall mean the Corporation's 1999 Stock Incentive Plan, as set forth in this document.

Y.           PLAN ADMINISTRATOR shall mean the particular entity, whether the Primary Committee, the Board or the Secondary Committee, which is authorized to administer the Discretionary Option Grant, Salary Investment Option Grant and Stock Issuance Programs with respect to one or more classes of eligible persons, to the extent such entity is carrying out its administrative functions under those programs with respect to the persons under its jurisdiction.  However, the Primary Committee shall have the plenary authority to make all factual determinations and to construe and interpret any and all ambiguities under the Plan to the extent such authority is not otherwise expressly delegated to any other Plan Administrator.

Z.           PREDECESSOR PLAN shall mean the Corporation's pre-existing 1996 Stock Option/Stock Issuance Plan in effect immediately prior to the Plan Effective Date hereunder.

AA.       PRIMARY COMMITTEE shall mean the committee of two (2) or more non-employee Board members appointed by the Board to administer the Discretionary Option Grant and Stock Issuance Programs with respect to Section 16 Insiders and to administer the Salary Investment Option Grant Program with respect to all eligible individuals.

  

  

  

BB.        SALARY INVESTMENT OPTION GRANT PROGRAM shall mean the salary investment grant program in effect under the Plan.

CC.        SECONDARY COMMITTEE shall mean a committee of one (1) or more Board members appointed by the Board to administer the Discretionary Option Grant and Stock Issuance Programs with respect to eligible persons other than Section 16 Insiders.

DD.       SECTION 12 REGISTRATION DATE shall mean the date on which the Common Stock is first registered under Section 12(g) of the 1934 Act.

EE.         SECTION 16 INSIDER shall mean an officer or director of the Corporation subject to the short-swing profit liabilities of Section 16 of the 1934 Act.

FF.         SERVICE shall mean the performance of services for the Corporation (or any Parent or Subsidiary) by a person in the capacity of an Employee, a non-employee member of the board of directors or a consultant or independent advisor, except to the extent otherwise specifically provided in the documents evidencing the option grant or stock issuance.

GG.        STOCK EXCHANGE shall mean either the American Stock Exchange or the New York Stock Exchange.

HH.       STOCK ISSUANCE PROGRAM shall mean the stock issuance program in effect under the Plan.

II.           SUBSIDIARY shall mean any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation, provided each corporation (other than the last corporation) in the unbroken chain owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

JJ.          10% STOCKHOLDER shall mean the owner of stock (as determined under Code Section 424(d)) possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Corporation (or any Parent or Subsidiary).

KK.       UNDERWRITING AGREEMENT shall mean the agreement between the Corporation and the underwriter or underwriters managing the initial public offering of the Common Stock.

LL.         UNDERWRITING DATE shall mean the date on which the Underwriting Agreement is executed and priced in connection with an initial public offering of the Common Stock.

MM.     WITHHOLDING TAXES shall mean the Federal, state and local income and employment withholding tax liabilities to which the holder of Non-Statutory Options or unvested shares of Common Stock may become subject in connection with the exercise of those options or the vesting of those shares.Exhibit 10.1

                   AGREEMENT FOR THE PURCHASE OF COMMON STOCK

THIS PURCHASE  AGREEMENT,  (this  "Agreement")  made this 22st day of September,
2011,  by and between  DANIEL C.  MASTERS,  ATTORNEY AT LAW,  ("MASTERS"),  1752
Castellana Road, La Jolla, CA 92037, representing certain selling share holders,
("SELLERS"),  and TRIG CAPITAL GROUP,  LLC, 300 S. Pine Island Road,  Suite 305,
Fort Lauderdale,  FL 33324,  representing  certain  purchasers,  ("Purchasers"),
setting  forth  the  terms  and  conditions  upon  which  Sellers  will  sell to
Purchasers and Purchasers will buy from Sellers Ten Million  (10,000,000) shares
of Organic Spice Imports,  Inc.  ("ORSI")  common stock,  par value $0.0001 (the
"SHARES" or the "SECURITIES").

     In  consideration of the mutual promises,  covenants,  and  representations
contained herein, THE PARTIES HERETO AGREE AS FOLLOWS:

WITNESSETH:

     WHEREAS, the Sellers have appointed, Daniel C. Masters, Attorney at Law, to
represent each of them and to receive and hold all  consideration  received from
Purchasers for the Shares described above.

     WHEREAS,  the Sellers have appointed ANSLOW & JACLIN LLP, Attorneys At Law,
to act as the Escrow Agent ("ESCROW  AGENT") for this transaction and to receive
and hold from the  Sellers  the  Securities  and all stock  certificates,  stock
powers (in blank),  resignations  of officers and  directors,  and all corporate
records of ORSI (collectively,  the "DOCUMENTS") in trust until final payment is
made by Purchasers at which time all Documents held in trust will be released to
Purchasers.

     WHEREAS,  the  Purchasers,  Sellers  and Escrow  Agent,  will enter into an
ESCROW AGREEMENT.

     NOW  THEREFORE,  in  consideration  of the mutual  promises,  covenants and
representations contained herein, the parties hereto agree as follows:

                                    ARTICLE I
                               SALE OF SECURITIES

     1.01  Subject to the terms and  conditions  of this  Agreement  the Sellers
agree to sell the  Securities,  consisting  of the Shares,  for a total of Three
Hundred Forty Thousand Dollars (U.S.) ($340,000.00) (the "PURCHASE PRICE"). This
is a private transaction between the Seller and Purchasers.

     1.02 The  Sellers  have  appointed  Masters  to  represent  them  with full
authority.

     1.03 The Sellers hereby appoint  Masters to receive for them and distribute
to them the Funds received for the sale of the Securities.

                                       1
<PAGE>
     1.04 The Purchasers  hereby appoint Anslow & Jaclin LLP,  Attorneys at Law,
to receive for them and distribute to them the  Securities  and other  documents
set forth above.

     1.05  Payment.  The  Parties  agree that the full  Purchase  Price of Three
Hundred Forty Thousand Dollars  ($340,000) will be wired to Masters in three (3)
payments as set forth below,  that these payments are  non-refundable,  and that
the payments may be released to Sellers upon  receipt.  The schedule of payments
is as follows: 1) the first payment in the amount of $50,000 must be received on
or before October 12, 2011; 2) the second payment in the amount of $150,000 must
be received on or before  November 12, 2011;  3) the third and final  payment in
the amount of  $140,000  must be received on or before  January  12,  2012.  The
failure of Purchasers to make any one of the three payments on or before its due
date as set forth above will constitute a default and Sellers may terminate this
Agreement.  If this Agreement is terminated due to the failure of the Purchasers
to provide the second payment on or before its due date of November 12, 2011, as
specified in this Section 1.05,  then Fifty Thousand  Dollars  ($50,000) paid by
the  Purchasers  in the  first  payment  shall be  retained  by the  Sellers  as
liquidated  damages.  If this  Agreement is terminated due to the failure of the
Purchasers to provide the third payment on or before its due date of January 12,
2012, as specified in this Section 1.05, then Sellers shall retain as liquidated
damages a sum greater than Fifty  Thousand  Dollars  ($50,000),  but not greater
than One Hundred Thousand Dollars  ($100,000),  such sum to be $50,000 plus $555
per day after November 12, 2011 until the date of termination.

        1.06  Management.  In order to  facilitate  the purchase and sale of the
Securities,  A. J.  Cervantes  shall be  appointed  the  President  of ORSI upon
receipt by Sellers of the second payment as set forth above under Section 1.05.

                                   ARTICLE II
                         REPRESENTATIONS AND WARRANTIES

     The Sellers hereby represent and warrant to the Purchasers the following:

     2.01 Organization.  ORSI is a Delaware corporation duly organized,  validly
existing,  and in good standing under the laws of that state,  has all necessary
corporate  powers  to own  properties  and  carry  on a  business,  and is  duly
qualified  to do business  and is in good  standing in the state of Delaware and
elsewhere. All actions taken by the incorporators, directors and/or shareholders
of ORSI  have  been  valid  and in  accordance  with  the  laws of the  state of
Delaware. The Company is a fully reporting, public company and has been assigned
the trading symbol of ORSI. After the Purchase, the Purchasers of the Securities
shall file the appropriate  filing  disclosing the acquisition of the Securities
by the Purchasers ("DISCLOSURE DOCUMENT").

       The Company was  created by order of a U.S.  Bankruptcy  Court as part of
the Chapter 11  reorganization  of its former  parent.  The Court  ordered  this
subsidiary/affiliate to be newly incorporated and ordered it to issue stock free
of all restrictions.

       2.02  Capital.   The  authorized   capital  stock  of  ORSI  consists  of
100,000,000 shares of Common Stock,  $0.0001 par value, and 20,000,000 shares of
Preferred Stock, $0.0001 par value, of which approximately  11,180,000 shares of
Common Stock and no shares of Preferred  Stock are issued and  outstanding.  All
outstanding   shares  are  fully  paid  and   non-assessable,   free  of  liens,
encumbrances,  options, restrictions and legal or equitable rights of others not

                                       2
<PAGE>
a party to this Agreement. In addition there are 5,000,000 warrants outstanding,
each to purchase one share of Common  Stock.  The warrants  are  denominated  as
follows:  1,000,000  "A"  warrants  exercisable  at $3.00  each;  1,000,000  "B"
warrants  exercisable at $4.00 each; 1,000,000 "C" warrants exercisable at $5.00
each;  1,000,000 "D" warrants  exercisable at $6.00 each; 1,000,000 "E" warrants
exercisable  at  $7.00  each.  At the  Closing,  there  will  be no  outstanding
subscriptions,  options,  rights,  warrants,  convertible  securities,  or other
agreements or commitments  obligating ORSI to issue or to transfer from treasury
any  additional  shares of its capital  stock other than the warrants  described
above.  There are  approximately  50 shareholders of record of ORSI. All of such
shareholders  have valid title to such  Shares and  acquired  their  Shares in a
lawful  transaction  and in  accordance  with  Delaware  corporate  law  and the
applicable securities laws and bankruptcy laws of the United States.

     2.03 Financial  Statements.  The Company has provided the Purchasers copies
of the  Company's  audited  financial  statements,  and  more  recent  unaudited
financial  statements,  found on the  EDGAR  system in the  Company's  quarterly
report  on Form 10-Q for the  period  ended  June 30,  2011,  and the  Company's
Registration  Statement  on Form 10 declared  effective  by the  Securities  and
Exchange Commission (the "SEC") on May 27, 2011.

     2.04  Filings with  Government  Agencies.  As of the date  hereof,  ORSI is
required  to file  annual  and  quarterly  reports  pursuant  to the  Securities
Exchange  Act of 1934,  with the SEC.  The  Company  recently  filed a quarterly
report on Form 10Q with the SEC with unaudited financial statements covering the
period ended June 30, 2011. ORSI has made all filings with the state of Delaware
that might be required.  Upon the purchase of the Securities by the  Purchasers,
those  Purchasers  will  have the full  responsibility  for  filing  any and all
documents required by the Securities and Exchange Commission, and/or required by
any other  government  agency.  The Sellers will supply the Purchasers  with all
information  that  is  currently  available  for  the  Company.  The  Purchasers
understand  that the  Sellers  will have no  responsibility  whatsoever  for any
filings  made by the  Company  after it has  filed  with  the SEC its  quarterly
statement on Form 10Q for the quarter ending September 30, 2011.

     2.05  Liabilities.  It is  understood  and agreed that the  purchase of the
Common Stock is predicated on ORSI not having any  liabilities  at Closing,  and
the Company will not, as of Closing, have any debt, liability,  or obligation of
any nature, whether accrued, absolute, contingent, or otherwise that will not be
paid at  Closing.  The  Selling  Shareholders  are  not  aware  of any  pending,
threatened or asserted claims,  lawsuits or contingencies  involving the Company
or its Shares.  To the best of knowledge of the Sellers,  there is no dispute of
any kind between ORSI and any third party, and no such dispute will exist at the
Closing of this  transaction and at the Closing,  ORSI will be free from any and
all  liabilities,  liens,  claims  and/or  commitments.  The  Sellers  agree  to
indemnify the Purchasers against any past liabilities  pertaining to its conduct
of business that should arise within 3 months of closing.

     2.06 Tax  Returns.  ORSI has had no  business  activity  and has not  filed
either  federal  income tax returns or state income tax returns,  but is current
with the State of Delaware  Franchise tax. As of closing,  the Company shall not
have taxes of any kind due or owing.

     2.07 Ability to Carry Out Obligations.  The Sellers have the right,  power,
and authority to enter into, and perform their obligations under this Agreement.
The execution and delivery of this Agreement by the Sellers and the  performance
by the Sellers of their  obligations  hereunder will not cause,  constitute,  or
conflict with or result in (a) any breach or violation of any of the  provisions

                                       3
<PAGE>
of or  constitute a default  under any license,  indenture,  mortgage,  charter,
instrument,  articles of incorporation,  bylaw, or other agreement or instrument
to which ORSI the officers,  directors or Sellers are a party,  or by which they
may be bound,  nor will any consents or  authorizations  of any party other than
those hereto be required, (b) an event that would cause ORSI (and/or assigns) to
be liable to any party,  or (c) an event that would  result in the  creation  or
imposition of any lien,  charge, or encumbrance on any asset of ORSI or upon the
shares of ORSI to be acquired by the Purchasers.

     2.8  Contracts,  Leases and  Assets.  To the best of the  knowledge  of the
Sellers, ORSI is not a party to any contract,  agreement or lease other than its
agreement  with its stock  transfer  agent.  No person holds a power of attorney
from  ORSI  or the  Sellers.  At the  Closing,  ORSI  will  have  no  assets  or
liabilities.

     2.9 Compliance with Laws. To the best of knowledge of the Sellers, ORSI has
complied  in all  material  respects,  with,  and is not in  violation  of  any,
federal, state, or local statute, law, and/or regulation pertaining. To the best
of the  knowledge of the Sellers,  ORSI has complied  with all federal and state
securities  laws in  connection  with the offer,  sale and  distribution  of its
securities.  At the time that ORSI sold Shares to the  Sellers,  the Company was
entitled to use the exemptions provided by the Securities Act of 1933 and/or the
exemption  provided by Section 1145 of the Bankruptcy  Code relative to the sale
of its  Shares.  The  Shares  being  sold  herein  are  being  sold in a private
transaction  between  the Sellers and the  Purchasers,  and the Sellers  make no
representation  as to whether  the Shares  are  subject to trading  restrictions
under the Securities Act of 1933, as amended and rules thereunder.

     2.10 Litigation. To the best of the knowledge of the Sellers, ORSI is not a
party to any  suit,  action,  arbitration,  or legal,  administrative,  or other
proceeding, or pending governmental investigation.  To the best knowledge of the
Sellers,  there is no basis for any such action or proceeding and no such action
or proceeding is threatened  against ORSI.  ORSI is not a party to or in default
with respect to any order, writ,  injunction,  or decree of any federal,  state,
local, or foreign court, department, agency, or instrumentality.

     2.11 Conduct of  Business.  Prior to the  Closing,  ORSI shall  conduct its
business in the normal course, and shall not (without the prior written approval
of  Purchasers)  (i)  sell,  pledge,  or  assign  any  assets,  (ii)  amend  its
Certificate of Incorporation or Bylaws, (iii) declare dividends,  redeem or sell
stock or other  securities  (iv)  incur any  liabilities,  except in the  normal
course of  business,  (v)  acquire  or  dispose  of any  assets,  enter into any
contract, guarantee obligations of any third party, or (vi) enter into any other
transaction.

     2.12 Closing Documents.  All articles,  bylaws, minutes,  consents or other
documents  pertaining  to ORSI to be delivered at the Closing shall be valid and
in accordance with the laws of Delaware.

     2.13 Title. The Sellers have good and marketable title to all of the Shares
being sold by them to the Purchasers pursuant to this Agreement.  The Securities
will be,  at the  Closing,  free and  clear of all  liens,  security  interests,
pledges, charges, claims,  encumbrances and restrictions of any kind, except for
restrictions on transfer  imposed by federal and state  securities laws. None of
the  securities  are or will be  subject to any voting  trust or  agreement.  No
person  holds or has the right to receive any proxy or similar  instrument  with
respect to such  securities.  Except as provided in this Agreement,  the Sellers
are not a party to any agreement  which offers or grants to any person the right

                                       4
<PAGE>
to purchase  or acquire any of the  securities.  There is no  applicable  local,
state or federal law, rule,  regulation,  or decree which would,  as a result of
the purchase of the securities by purchasers  (and/or assigns) impair,  restrict
or delay voting rights with respect to the securities.

     2.14  Transfer of Shares.  The  Sellers  will have the  responsibility  for
sending all certificates representing the Shares being purchased, along with the
proper Stock Powers with Bank Signature Guarantees and assignments acceptable to
the  Escrow  Agent  for  delivery  to  the  Purchasers,   or  shall  make  other
arrangements for delivery acceptable to Buyers.

     The Purchasers will have the  responsibility  of sending the  certificates,
along  with  stock  powers to the  Transfer  Agent for the  Company  to have the
certificates  changed  into their  respective  names and  denominations  and the
Purchasers  shall be  responsible  for all costs involved in such changes and in
mailing new certificates to all shareholders.

     2.15  Representations.  All representations shall be true as of the Closing
and all such representations shall survive the Closing.

                                   ARTICLE III
                                     CLOSING

     3.01 Closing for the Purchase of Common Stock.  The closing (the "CLOSING")
of this  transaction  for the Shares of Common Stock being  purchased will occur
when all of the documents and  consideration  described in 3.02 below, have been
delivered, or other arrangements made and agreed thereto.

     3.02  Documents and Payments to be Delivered at Closing of the Common Stock
Purchase.  As  part  of the  Closing  of the  purchase  of the  Securities,  the
following  documents,  in form reasonably  acceptable to counsel to the parties,
shall be delivered:

     (a)  By the Sellers:

          (i)  Certificate of Incorporation and all amendments thereto;

          (ii) Bylaws and all amendments thereto;

          (iii) Minutes and Consents of Shareholders;

          (iv) Minutes and Consents of the board of directors;

          (v)  List of officers and directors;

          (vi) Evidence  of  Good  Standing  with  the  Secretary  of  State  of
               Delaware;

          (vii) Current Shareholder list from the Transfer Agent;

          (viii) True and correct copies of all of the business records of ORSI,
               including but not limited to correspondence  files and agreements
               and contracts;

                                       5
<PAGE>
          (ix) Stock   certificates  along  with  stock  powers  with  signature
               guarantees   acceptable  to  the  transfer  agent,   representing
               10,000,000 of the Sellers  shares,  endorsed in favor of the name
               or names as designated by Purchasers or left blank;

          (x)  The  appointment of a new  President,  Secretary and Treasurer of
               the Company as designated by Purchasers,  and the  resignation of
               all current officers of ORSI;

          (xi) The  appointment  of new  directors of ORSI as  designated by the
               Purchasers and the resignation of all of its current directors;

          (xii)Such other  documents  of ORSI as may be  reasonably  required by
               Purchasers, if available.

          (xiii) Seller's executed copy of this Agreement.

     (b)  By Purchasers:

          (i)  Wire  transfers  to the  trust  account  of  Daniel  C.  Masters,
               Attorney At Law, in the total  amount of  $340,000,  representing
               the total Purchase Price for the securities being purchased; and

          (ii) Purchaser's executed copy of this Agreement

WIRE TRANSFER INSTRUCTIONS

Union Bank
7807 Girard Avenue
La Jolla, CA 92037
800-238-4486
ABA#122000496

For the account of:

Daniel C. Masters
Attorney at Law
1752 Castellana Road
La Jolla, CA 92037
Account #__________

                                   ARTICLE IV
                                INVESTMENT INTENT

     4.01 Transfer  Restrictions.  Purchasers  (and/or  assigns) agrees that the
securities  being  acquired  pursuant to this  Agreement  may be sold,  pledged,
assigned,  hypothecated or otherwise transferred,  with or without consideration

                                       6
<PAGE>
("Transfer")  only  pursuant to an effective  registration  statement  under the
Securities Act of 1933, as amended (the "Act"), or pursuant to an exemption from
registration under the Act.

     4.02.  Investment Intent. The Purchasers are acquiring the Shares for their
own account for investment, and not with a view toward distribution thereof.

     4.03. No  Advertisement.  The Purchasers  acknowledges that the Shares have
been offered to them in direct  communication  between them and Sellers, and not
through any advertisement of any kind.

     4.04.  Knowledge and Experience.  (a) The Purchasers  acknowledge that they
have been  encouraged  to seek their own legal and  financial  counsel to assist
them in evaluating this purchase.  The Purchasers  acknowledge that Sellers have
given them and all of their  counselors  access to all  information  relating to
ORSI's  business  that they or any one of them have  requested.  The  Purchasers
acknowledge  that they have sufficient  business and financial  experience,  and
knowledge  concerning the affairs and conditions of ORSI so that they can make a
reasoned  decision  as to  this  purchase  of the  Shares  and  are  capable  of
evaluating the merits and risks of this purchase.

     4.05.  Restrictions  on  Transferability.  The  Purchasers are aware of the
restrictions on  transferability of the 10,000,000 Shares and further understand
the certificates representing these shares shall bear the following legend.

          (a) THIS  SECURITY HAS NOT BEEN  REGISTERED  WITH THE  SECURITIES  AND
          EXCHANGE  COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
          "ACT"), IN RELIANCE UPON THE EXEMPTION FROM  REGISTRATION  PROVIDED IN
          SECTIONS  4(1) AND 4(2) AND  REGULATION D UNDER THE ACT. AS SUCH,  THE
          PURCHASE OF THIS SECURITY WAS MADE WITH THE INTENT OF  INVESTMENT  AND
          NOT WITH A VIEW FOR DISTRIBUTION.  THEREFORE,  ANY SUBSEQUENT TRANSFER
          OF THIS SECURITY OR ANY INTEREST THEREIN WILL BE UNLAWFUL UNLESS IT IS
          REGISTERED  UNDER THE ACT OR UNLESS AN EXEMPTION FROM  REGISTRATION IS
          AVAILABLE.

          (b) The Purchasers  understand  that these Shares may only be disposed
     of pursuant to either (i) an  effective  registration  statement  under the
     Act, or (ii) an exemption from the registration requirements of the Act.

          (c)  ORSI  and/or  Sellers  has  neither  filed  such  a  registration
     statement  with the SEC or any state  authorities  nor agreed to do so, nor
     contemplates  doing  so in  the  future,  and  in  the  absence  of  such a
     registration  statement or exemption,  the  Purchasers may have to hold the
     Shares  indefinitely  and may be  unable  to  liquidate  them in case of an
     emergency.

                                       7
<PAGE>
                                    ARTICLE V
                                    REMEDIES

     5.01 Arbitration.  Any controversy or claim arising out of, or relating to,
this Agreement, or the making,  performance, or interpretation thereof, shall be
settled by  arbitration  in California in accordance  with the Rules of the U.S.
Arbitration Association then existing, and judgment on the arbitration award may
be entered  in any court  having  jurisdiction  over the  subject  matter of the
controversy.

     5.02 Termination.  In addition to any other remedies, either the Sellers or
the  Purchasers  may  terminate  this  Agreement  prior to the Closing or at the
Closing if the other party has failed to comply with all material  terms of this
Agreement,  or has failed to  disclose  any  material  facts  which could have a
substantial effect on any part of this transaction.

     If this  Agreement  is  terminated  due to the  failure  of the  Sellers to
provide the documents  specified in Section 3.02 above,  then all  consideration
paid by the Purchasers shall be returned to the Purchasers.

     If this  Agreement is  terminated  due to the failure of the  Purchasers to
provide the second  payment on or before its due date of November 12,  2011,  as
specified in Section 1.05 above,  then Fifty Thousand Dollars  ($50,000) paid by
the  Purchasers  in the  first  payment  shall be  retained  by the  Sellers  as
liquidated  damages.  If this  Agreement is terminated due to the failure of the
Purchasers to provide the third payment on or before its due date of January 12,
2012,  as  specified  in  Section  1.05  above,  then  Sellers  shall  retain as
liquidated damages a sum greater than Fifty Thousand Dollars ($50,000),  but not
greater than One Hundred  Thousand  Dollars  ($100,000),  such sum to be $50,000
plus $555 per day after November 12, 2011 until the date of termination.

     5.03 Indemnification.  From and after the Closing, the Parties, jointly and
severally,  agree to indemnify the other against all actual losses,  damages and
expenses  caused by (i) any  material  breach of this  Agreement  by them or any
material  misrepresentation  contained  herein,  or (ii) any  misstatement  of a
material  fact or omission to state a material fact required to be stated herein
or necessary to make the statements herein not misleading.

     5.04 Indemnification Non-Exclusive. The foregoing indemnification provision
is in addition to, and not derogation of any statutory,  equitable or common law
remedy any party may have for breach of  representation,  warranty,  covenant or
agreement.

                                   ARTICLE VI
                                  MISCELLANEOUS

     6.01 Captions and Headings.  The article and paragraph headings  throughout
this Agreement are for  convenience  and reference  only, and shall in no way be
deemed  to  define,  limit,  or add to the  meaning  of any  provision  of  this
Agreement.

     6.02 No Oral Change.  This Agreement and any provision  hereof,  may not be
waived,  changed,  modified, or discharged,  orally, but only by an agreement in

                                       8
<PAGE>
writing  signed by the party  against whom  enforcement  of any waiver,  change,
modification, or discharge is sought.

     6.03 Non Waiver.  Except as otherwise  expressly provided herein, no waiver
of any covenant,  condition,  or provision of this Agreement  shall be deemed to
have been made unless  expressly in writing and signed by the party against whom
such waiver is charged; and (i) the failure of any party to insist in any one or
more  cases  upon  the  performance  of  any of the  provisions,  covenants,  or
conditions of this  Agreement or to exercise any option herein  contained  shall
not be  construed  as a waiver  or  relinquishment  for the  future  of any such
provisions,  covenants,  or  conditions,  (ii) the  acceptance of performance of
anything required by this Agreement to be performed with knowledge of the breach
or failure of a covenant,  condition,  or provision hereof shall not be deemed a
waiver of such breach or failure, and (iii) no waiver by any party of one breach
by another  party shall be  construed  as a waiver with  respect to any other or
subsequent breach.

     6.04 Time of Essence.  Time is of the essence of this Agreement and of each
and every provision hereof.

     6.05 Entire  Agreement.  This Agreement,  including any and all attachments
hereto,  if any,  contain the entire  Agreement  and  understanding  between the
parties hereto, and supersede all prior agreements and understandings.

     6.06 Significant  Changes.  The Sellers understand that significant changes
may be made in the capitalization  and/or stock ownership of ORSI, which changes
could involve a forward or reverse stock split and/or the issuance of additional
shares,  thus possibly  having a dramatic  negative  effect on the percentage of
ownership and/or number of shares owned by present shareholders of ORSI.

     6.07 Counterparts.  This Agreement may be executed simultaneously in one or
more counterparts,  each of which shall be deemed an original,  but all of which
together  shall  constitute  one  and the  same  instrument.  Facsimile  and PDF
signatures will be acceptable to all parties.

     6.08 Notices.  All notices,  requests,  demands,  and other  communications
under this  Agreement  shall be in writing and shall be deemed to have been duly
given on the date of service if served personally on the party to whom notice is
to be given,  or on the third day after  mailing  if mailed to the party to whom
notice is to be given,  by first class mail,  registered or  certified,  postage
prepaid,  or on the  second day if faxed,  and  properly  addressed  or faxed as
follows:

If to the Sellers:

Daniel C. Masters
1752 Castellana Road
La Jolla, California 92037
Phone - 858-459-1133
Fax - 858-459-1103
Email - dmasters@san.rr.com

                                       9
<PAGE>
If to the Purchasers:

A.J. Cervantes
TRIG Capital Group, LLC
300 South Pine Island Road
Suite 305
Plantation, FL 33324
P 800.330.1860
F 954-337-4610
aj@trig-capital.com

     6.09 Binding Effect.  This Agreement shall inure to and be binding upon the
heirs, executors,  personal  representatives,  successors and assigns of each of
the parties to this Agreement.

     6.10 Effect of Closing. All  representations,  warranties,  covenants,  and
agreements of the parties  contained in this  Agreement,  or in any  instrument,
certificate,  opinion,  or other  writing  provided for in it, shall be true and
correct as of the Closing and shall survive the Closing of this Agreement.

     6.11 Mutual Cooperation. The parties hereto shall cooperate with each other
to achieve  the  purpose of this  Agreement,  and shall  execute  such other and
further documents and take such other and further actions as may be necessary or
convenient to effect the transaction described herein.

     6.12 Preparation of Agreement. Each Party acknowledges and agrees that: (i)
such Party had the advice of, or sufficient opportunity to obtain the advice of,
legal  counsel  separate and  independent  of legal counsel for any other Party;
(ii) the terms of the  transactions  contemplated by this Agreement are fair and
reasonable to such Party; and (iii) such Party has voluntarily  entered into the
transaction  contemplated by this Agreement without duress or coercion; and (iv)
no  conflict,  omission or ambiguity in this  Agreement,  or the  interpretation
thereof,  shall be presumed,  implied or otherwise  construed  against the other
Party on the basis  that such Party  and/or  its  counsel  was  responsible  for
drafting this Agreement.

     6.13  Severability.  It is the desire and  intent of the  Parties  that the
provisions of this Agreement be enforced to the fullest extent permissible under
the law and public policies applied in each jurisdiction in which enforcement is
sought.  Accordingly, in the event that any provision of this Agreement would be
held in any  jurisdiction  to be invalid,  prohibited or  unenforceable  for any
reason, such provision, as to such jurisdiction,  shall be ineffective,  without
invalidating  the  remaining  provisions  of this  Agreement  or  affecting  the
validity   or   enforceability   of   such   provision   in  any   jurisdiction.
Notwithstanding the foregoing, if such provision could be more narrowly drawn so
as not to be invalid,  prohibited  or  unenforceable  in such  jurisdiction,  it
shall, as to such jurisdiction,  be so narrowly drawn,  without invalidating the
remaining   provisions   of  this   Agreement  or  affecting   the  validity  or
enforceability of such provision in any other jurisdiction.

                                       10
<PAGE>
     In witness  whereof,  this  Agreement has been duly executed by the parties
hereto as of the date first above written.

<TABLE>
<CAPTION>
<S>                                               <C>
Daniel C. Masters - Representing Sellers           TRIG Capital Group - Representing Purchasers

By: /s/ Daniel C. Masters                          By: /s/ A. J. Cervantes
   -------------------------------------              -------------------------------------
   Daniel C. Masters                                  A. J. Cervantes, Managing Member
</TABLE>

                                       11

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