Document:

SUBORDINATION AGREEMENT

 

THIS SUBORDINATION
AGREEMENT is dated as of July 31, 2013 (this “Agreement”), among BANK HAPOALIM B.M. (the “Lender”),
IM READY-MADE, LLC, a New York limited liability company (the “Holder”), XCEL BRANDS, INC., a Delaware corporation
(“XCel”) and IM BRANDS, LLC, a Delaware limited liability company (“IMB” and collectively with XCel,
the “Buyers”).

 

WITNESSETH:

 

WHEREAS, the Buyers
have acquired certain assets and assumed certain liabilities from the Holder pursuant to that certain Asset Purchase Agreement
dated as of May 19, 2011 among the Buyers, the Holder, Isaac Mizrahi, and Marisa Gardini as amended by First Amendment to Asset
Purchase Agreement dated July 28, 2011, Second Amendment to Asset Purchase Agreement dated as of September 15, 2011 Third Amendment
to Asset Purchase Agreement dated as of September 21, 2011 and Fourth Amendment to Asset Purchase Agreement dated as of September
29, 2011 (as further amended, supplemented or modified from time to time, the “Asset Purchase Agreement”);

 

WHEREAS, in connection
with the Asset Purchase Agreement, the Holder accepted that certain Promissory Note, in the original principal amount of Seven
Million Three Hundred Seventy-Seven Thousand Four Hundred Thirty-Two Dollars ($7,377,432) issued by the Buyers (the “Subordinated
Note”) as partial payment of the purchase price under the Asset Purchase Agreement;

 

WHEREAS, in connection
with the Asset Purchase Agreement, the Holder has a contingent right to receive the following earn-out payments (collectively,
the “Earn-Out Payments”): (i) additional XCel Shares (as defined in the Asset Purchase Agreement) with a value
based upon the Business (as defined in the Asset Purchase Agreement) achieving certain Net Royalty Income (as defined in the Asset
Purchase Agreement) targets, such earn-out values as enumerated in the Asset Purchase Agreement, and (ii) the QVC Earn-Out (as
defined in the Asset Purchase Agreement) payable in either cash or additional XCel Shares based upon revenues received from QVC
(as defined in the Asset Purchase Agreement), as enumerated in the Asset Purchase Agreement;

 

WHEREAS, pursuant to
that certain Promissory Note in the original principal amount of $13,500,000 dated as of the date hereof executed by IMB in favor
of Lender (as amended, modified, restated and supplemented from time to time, the “Lender Note”) and that letter
agreement dated the date hereof between IMB and Lender, Lender will be providing financial accommodations to IMB (as amended, modified
and supplemented from time to time, the “Line Letter”);

 

WHEREAS, XCel has guaranteed
the payment and performance of the obligations of IMB to Lender pursuant to the terms of the Guaranty dated as of the date hereof
(as amended, modified, restated and supplemented from time to time, the “Guaranty”); and

 

    	 

    	 

    

  

WHEREAS, the Holder
is willing to subordinate the Subordinated Obligations (as defined below) to the Lender Obligations (as defined below) on the terms
set forth herein.

 

NOW, THEREFORE, for
good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

section
1 

DEFINITIONS

 

(a)          As
used in this Agreement, the following terms shall have the following meanings:

 

“Collection
Action” means to initiate or participate with others in any suit, action or proceeding against any Buyer to (i) enforce
payment of or to collect the whole or any part of the Subordinated Obligations or (ii) commence judicial enforcement of any of
the rights and remedies under applicable law, the Subordinated Note, or any other documents evidencing, securing or otherwise related
to the Subordinated Obligations.

 

“Default Interest
Payments” means any payments with respect to interest accrued under the Subordinated Note due to the occurrence of an
Event of Default (as defined in the Subordinated Note).

 

“Indebtedness”
of any Person at any date, means, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all obligations
of such Person for the deferred purchase price of property or services (other than trade payables incurred in the ordinary course
of such Person’s business), (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments,
(d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default
are limited to repossession or sale of such property), (e) all obligations relating to leases required to be capitalized in accordance
with generally accepted accounting principles, (f) all obligations of such Person, contingent or otherwise, as an account party
or applicant under acceptance, letter of credit, surety bond or similar facilities, (g) all obligations of such Person, contingent
or otherwise, to purchase, redeem, retire or otherwise acquire for value any equity security of such Person, (h) all guarantee
obligations of such Person in respect of obligations of the kind referred to in clauses (a) through (g) above, (i) all obligations
of the kind referred to in clauses (a) through (h) above secured by (or for which the holder of such obligation has an existing
right, contingent or otherwise, to be secured by) any lien on property (including, without limitation, accounts and contract rights)
owned by such Person, whether or not such Person has assumed or become liable for the payment of such obligation and (j) all obligations
of such Person in respect of interest rate or currency forwards, options, swaps, caps or collar agreements, foreign exchange agreements,
commodity contracts or similar arrangements. The Indebtedness of any Person shall include, without duplication, the Indebtedness
of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor
as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms
of such Indebtedness expressly provide that such Person is not liable therefor

 

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“Lender Obligations”
means all Liabilities of the Buyers (whether as borrower or guarantor) owing to, or in favor or for the benefit of, or purporting
to be owing to, or in favor or for the benefit of the Lender under (a) the Line Letter, the Note, the Guaranty or any other Loan
Documents and (b) any amendment (including an increase in the principal amount or interest rate) of such Liabilities under any
Loan Document or any renewal, extension or refinancing of such Liabilities under any Loan Document; in each case (x) WHETHER NOW
EXISTING OR HEREAFTER ARISING OR ACQUIRED, AND (y) WHETHER OR NOT AN ALLOWABLE CLAIM AGAINST ANY BUYER UNDER THE BANKRUPTCY CODE
OR OTHERWISE ENFORCEABLE AGAINST ANY BUYER, AND INCLUDING, IN ANY EVENT, INTEREST AND OTHER LIABILITIES ACCRUING OR ARISING AFTER
THE FILING BY OR AGAINST ANY BUYER OF A PETITION UNDER THE UNITED STATES BANKRUPTCY CODE OR THAT WOULD HAVE SO ACCRUED OR ARISEN
BUT FOR THE FILING OF SUCH A PETITION; provided, that (i) Lender Obligations shall continue to constitute Lender Obligations for
all purposes of this Agreement, and this Agreement shall continue to apply to such Lender Obligations, whether or not such Lender
Obligations or any party thereof has been voided, disallowed or subordinated pursuant to Section 548 of the United States Bankruptcy
Code or any applicable state fraudulent conveyance laws, whether asserted directly or under Section 544 of the United States Bankruptcy
Code and (ii) if any payment on account of Lender Obligations shall be required to be returned as a preference or otherwise such
Lender Obligations shall for all purposes of this definition be deemed not to have been repaid in the amount so required to be
returned and to have at all times remained outstanding.

 

“Liability”
of any Person means (in each case, whether with full or limited recourse) any indebtedness, liability, obligation, covenant or
duty of or binding upon, or any term or condition to be observed by or binding upon, such Person or any of its assets, of any kind,
nature or description, direct or indirect, absolute or contingent, due or not due, contractual or tortuous, liquidated or unliquidated,
whether arising under contract, applicable law, or otherwise, whether now existing or hereafter arising, and whether for the payment
of money or the performance or non-performance of any act.

 

“Note Scheduled
Payments” means the capitalization of accrued interest on the Subordinated Note at a rate not to exceed 15.0% per annum
not more frequently than on a quarterly basis.

 

“Person”
means any individual, partnership, corporation (including a business trust and a public benefit corporation), joint stock company,
estate association, firm, enterprise, trust, limited liability company, unincorporated association, joint venture and any other
entity or governmental authority.

 

“Permitted
Payments” means as long as no Event of Default has occurred or is continuing immediately prior to or after giving effect
thereto, one or more cash payments of principal in respect of the Subordinated Note in an aggregate principal amount not to exceed
$2,000,000.

 

“Subordinated
Obligations” means all Liabilities of any Buyer to the Holder, WHETHER NOW EXISTING OR HEREAFTER ARISING, under the Subordinated
Note and the Earn-Out Payment provided, that such Liabilities shall not include any payments to be made by the issuance of XCel
Shares.

 

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Capitalized terms used,
and not otherwise defined, herein shall have the meanings ascribed thereto in the Line Letter.

 

section
2 

SUBORDINATION

 

2.1          Subordination
of Payment.

 

(a)          The
Subordinated Obligations shall be subordinate and subject in right of payment to the prior payment in full of the Lender Obligations
and, except as hereinafter provided, the Holder will not take or receive from the Buyers, by set-off or in any other manner, payment
of the whole or any part of the Subordinated Obligations, or any security therefor, unless and until all of the Lender Obligations
shall have been paid in full. The Holder will not take any action to prevent the Buyers from making such prior payment to the Lender
in respect of the Lender Obligations.

 

(b)          Except
as permitted herein, the Buyers will not, and will not permit any of their Affiliates, to purchase or otherwise acquire or secure
or make any payments in respect of the Subordinated Obligations unless and until all of the Lender Obligations shall have been
fully paid.

 

(c)          In
the event that a Royalty Shortfall Payment (as defined in the Asset Purchase Agreement) shall be due to the Buyers pursuant to
the Asset Purchase Agreement, any such payment shall be made in immediately available funds to the Buyers and no Buyer shall satisfy
any Royalty Shortfall Payment by decreasing the principal balance of the Subordinated Note or offsetting such amount against any
other obligation of such Buyer to the Holder (including in respect of the Earn-Out Payments).

 

(d)          Unless
all of the Lender Obligations shall have been paid in full, the Holder agrees that any Earn-Out Payments due to the Holder shall
be paid solely in XCel Shares.

 

2.2          Payment
on Subordinated Note. Except as permitted in this Section 2.2, anything in this Agreement to the contrary notwithstanding,
the Buyers shall not pay to the Holder any payment on the Subordinated Note, or any other amounts due in respect of the Subordinated
Obligations; provided, however, that, the Buyers may make the Note Scheduled Payment in respect of the Subordinated Note and one
or more Permitted Payments. Notwithstanding anything to the contrary herein, the Buyers may, subject to Section 2.1(d), make the
Earn-Out Payments to the Holder when and to the extent due.

 

2.3          Implementation.
In furtherance of, and to make effective, the subordination effected by Section 2.1:

 

(a)          In
the event of any distribution, division or application, partial or complete, voluntary or involuntary, by operation of law or otherwise,
of all or any part of the assets of any Buyer, or the proceeds thereof, to creditors of any Buyer, or upon any indebtedness of
any Buyer, by reason of the liquidation, dissolution or other winding up of any Buyer or any Buyer’s business, or any sale,
receivership, insolvency or bankruptcy proceeding, or assignment for the benefit of creditors, or any proceeding by or against
any Buyer for any relief under any bankruptcy or insolvency law or laws relating to the relief of debtors, readjustment of indebtedness,
reorganizations, compositions or extensions (collectively, “Proceedings”), then and in any such event any payment
or distribution of any kind or character, either in cash, securities or other property, which but for Article 2 of this Agreement
would be payable or deliverable upon or with respect to any or all of the Subordinated Obligations shall instead be paid or delivered
directly to the Lender for application on the Lender Obligations, whether then due or not due, until the Lender Obligations shall
have first been fully paid and satisfied.

 

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(b)          In
connection with any Proceeding, the Holder hereby irrevocably authorizes and empowers the Lender to demand, sue for, collect and
receive every such payment or distribution and give acquittance therefor, and to file claims and take such other proceedings, in
the Lender’s own names or in the name of the Holder, or otherwise, as the Lender may deem reasonably necessary or advisable
for the enforcement of the provisions of this Agreement. The Holder agrees duly and promptly to take such action as may be reasonably
requested by the Lender to collect the Subordinated Obligations held by it for the account of the Lender and/or to file appropriate
proofs of claim in respect to the Subordinated Obligations, and to execute and deliver to the Lender on demand such powers of attorney,
proofs of claim, assignments of claim or proofs of claim, votes in favor of plans of reorganization and other instruments as may
be requested by the Lender in order to enable the Lender to enforce any and all claims upon or with respect to the Subordinated
Obligations, and to collect and receive any and all such payments or distributions which may be payable or deliverable at any time
upon or with respect to the Subordinated Obligations held by it. Notwithstanding the foregoing, (i) if the Lender fails to file
any proof of claim prior to ten (10) days before due, the Holder shall be entitled to file proof(s) of claims in any proceeding
provided such proof of claim is not inconsistent with the terns of this Agreement, and (ii) the Holder may file any necessary responsive
pleadings in opposition to any motion, adversary proceeding or other pleading made by any Person objecting to or seeking disallowance
of its claims and (iii) the Holder may vote in favor of any plan of reorganization which is not inconsistent with the terms of
this Agreement.

 

(c)          Should
any payment or distribution or security or proceeds of any security be received by the Holder upon or with respect to the Subordinated
Obligations or the Earn-Out Payment that is not permitted to be paid hereunder, the Holder will forthwith deliver the same to the
Lender in precisely the form received (except for the endorsement or assignment of the Holder where necessary) for application
on the Lender Obligations, and, until so delivered, the same shall be held in trust by the Holder as property of the Lender. In
the event of the failure of the Holder to make any such endorsement or assignment, the Lender, or any of its officers or employees,
is hereby irrevocably authorized to make the same.

 

(d)          If
requested by the Lender, the Holder will mark and maintain in its books of accounts notations and shall cause its financial statements
to reflect the rights and priorities of the Lender hereunder. Promptly following the date hereof, the Holder will at all times
cause the following legend to be conspicuously marked on each document or instrument evidencing the Subordinated Obligations (other
than the Asset Purchase Agreement): “THE RIGHTS OF THE HOLDER HEREUNDER ARE SUBJECT TO THE TERMS AND CONDITIONS OF THE SUBORDINATION
AGREEMENT DATED AS OF JULY 31, 2013 AMONG BANK HAPOALIM B.M., THE HOLDER PARTY THEREIN, XCEL BRANDS, INC. AND IM BRANDS, LLC (AS
AMENDED, SUPPLEMENTED OR MODIFIED FROM TIME TO TIME, THE “SUBORDINATION AGREEMENT”) AND PAYMENT OF ANY AMOUNT
TO THE HOLDER HEREUNDER IS EXPRESSLY SUBORDINATE TO THE PRIOR PAYMENT OF THE LENDER OBLIGATIONS (AS DEFINED IN THE SUBORDINATION
AGREEMENT).”

 

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(e)          The
Holder shall not permit the Subordinated Obligations to be subordinated to any other Liability pursuant to any subordination or
similar agreement.

 

(f)          The
Holder shall not accelerate any Subordinated Obligations or enforce any mandatory prepayment or repurchase thereof and the Holder
shall not commence any action or proceeding against the Buyers or take any other action to recover all or any part of the Subordinated
Obligations, including any Collection Action. Without limiting the foregoing, the Holder shall not join with any creditor, unless
requested by the Lender, in bringing any proceedings against any Buyer under any bankruptcy, reorganization, readjustment of debt,
arrangement of debt, receivership, liquidation or insolvency law or statute of the Federal or any state government unless and until
the Lender Obligations shall be paid in full.

 

(g)          Notwithstanding
the terms and conditions of the Asset Purchase Agreement or the Subordinated Note or any UCC financing statement, the Holder acknowledges
and agrees that it does not have and shall not acquire any right, title or interest in or to any of the collateral, whether now
owned or hereafter acquired as security for any of the Subordinated Obligations.

 

2.4          Subrogation.
The Holder hereby agrees not to assert any rights of subrogation in respect of payments or distributions of assets of any Buyer
made to, retained by or remitted to the Lender until such time as the Lender Obligations have been paid in full. The Holder shall
execute and deliver such further documents or instruments as the Lender may reasonably request in order to give effect to the provisions
of this Agreement.

 

2.5          Subordination
Not Affected. The Lender may, at any time and from time to time, without the consent of, or notice to, the Holder, without
incurring liability to the Holder, and without impairing or releasing the obligations of the Holder under this Agreement, change
the manner, place or terms of payment or change the time of payment of, or extend, increase, renew, alter, waive, release or compromise
the Lender Obligations or any security therefor, or amend or modify in any manner any agreement, note, guaranty or other instrument
evidencing or securing or otherwise relating to any Lender Obligations. All rights and interests of the Lender hereunder, and all
agreements and obligations of the Holder and the Buyers under this Agreement shall remain in full force and effect irrespective
of (i) any lack of validity or enforceability of any Lender Obligations or the Line Letter, the Note, the Guaranty or any other
Loan Document, (ii) any change, restructuring or termination of the corporate structure or existence of any Buyer, (iii) any amendment
or modification of or supplement to the Line Letter, the Note, the Guaranty or any Loan Document, (iv) the release, exchange, sale
or surrender, in whole or in part, of any collateral security hereafter existing for any Lender Obligations, (v) any exercise or
non-exercise of any right, power or remedy under or in respect of the Lender Obligations, (vi) any waiver, consent, release, indulgence
or other action with respect to Lender Obligations, or (vii) any other circumstance which might otherwise constitute a defense
available to, or a discharge of, the Buyers or the Holder. This Agreement shall continue to be effective or be reinstated, as the
case may be, if at any time any payment of any of the Lender Obligations is rescinded or must otherwise be returned by the Lender
upon the insolvency, bankruptcy or reorganization of any Buyer or otherwise, all as though such payment had not been made.

 

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section
3 

REPRESENTATIONS AND WARRANTIES; COVENANTS

 

3.1          Representations
and Warranties. The Holder represents and warrants that:

 

(a)          it
has full legal capacity and authorization to execute and deliver and has duly executed and delivered this Agreement;

 

(b)          this
Agreement constitutes a legal, valid and binding obligation of the Holder enforceable in accordance with its terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’
rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law);

 

(c)          the
execution, delivery and performance by the Holder of this Agreement does not and will not violate any applicable provision of law
or regulation or of any judgment, order or decree of any court, arbitrator or governmental authority, or of any agreement of any
nature whatsoever, binding upon such Holder or its assets;

 

(d)          all
consents, approvals and exemptions required on the part of the Holder in connection with the execution, delivery, performance,
validity or enforceability of this Agreement have been obtained and are in full force and effect; and

 

(e)          other
than as contemplated by the Subordinated Note and the Asset Purchase Agreement and any Related Agreements (as defined in the Asset
Purchase Agreement) and the QVC Agreement (as defined in the Asset Purchase Agreement), neither Buyer has any Indebtedness or other
Liabilities outstanding in favor of the Holder.

 

3.2          Additional
Covenants of the Holder.

 

(a)          Without
the prior written consent of the Lender, the Holder shall not amend, modify or supplement any of the terms or conditions of any
Subordinated Obligations, including but not limited to, the terms of the Subordinated Note and Sections 3.3(iii), 3.4 and 3.6 of
the Asset Purchase Agreement; provided that the Holder shall be permitted to amend (1) the Subordinated Note to (i) modify the
manner, calculations or mechanics by which amounts under the Subordinated Note are payable in XCel Shares and (ii) extend the maturity
of all or any portion of the indebtedness evidenced thereby and (2) the Asset Purchase Agreement to modify the manner, calculations
or mechanics by which Earn-Put Payments are payable in XCel Shares.

 

(b)          The
Holder shall not sell, assign or otherwise transfer, in whole or in part, any Subordinated Obligations or any interest therein,
including any right to receive any Earn-Out Payment unless the transferee or assignee thereof shall execute such documents as the
Lender may reasonably request to evidence their assumption of all obligations arising under this Agreement, including a joinder
substantially in the form of Exhibit A.

 

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section
4 

MISCELLANEOUS

 

4.1          Waivers
by the Holder. All Lender Obligations shall be deemed to have been made or incurred in reliance upon this Agreement. The Holder
expressly waives all notice of the acceptance by the Lender of the subordination and other provisions of this Agreement, and expressly
waives proof of reliance by the Lender upon the subordination and other agreements herein set forth. The Lender shall have no liability
to the Holder for the failure to deliver any notice or other communication to the Holder, or for any and all actions which the
Lender, in good faith and without willful misconduct, take or omit to take with respect to the agreements or instruments creating,
evidencing or securing Lender Obligations or the collection of the Lender Obligations.

 

4.2          Continuing
Agreement; Assignments Under the Line Letter. This Agreement is a continuing agreement and shall (i) remain in full force and
effect until the payment in full of the Lender Obligations, (ii) be binding upon the Holder, the Buyers and their respective successors
and assigns, and (iii) inure to the benefit of and be enforceable by, the Lender and its respective successors, transferees and
assigns.

 

4.3          Notices.
All notices, demands, requests, consents, approvals and other communications required or permitted hereunder will be in writing
and will be conclusively deemed to have been received by a party hereto and to be effective if delivered personally to such party,
or sent by telecopy or by overnight courier service, or by certified or registered mail, return receipt requested, postage prepaid,
addressed to such party at the address set forth below or to such other address as any party may give to the other in writing for
such purpose:

 

	To Lender:	Bank Hapoalim B.M.

1177 Avenue of the Americas

New York, New York 10036

Attn:  Mitchell Barnett 

Telecopy: (212) 782-2345

Telephone: (212 ) 782-2131
	 	 
	With a copy to:	Loeb & Loeb LLP

345 Park Avenue

New York, New York 10154

Attn: Miriam L. Cohen, Esq. 

Telecopy: (212) 401-4717

Telephone: (212) 407-4103
	 	 
	To Holder:	1M Ready-Made, LLC

475 Tenth Avenue, 4th Floor 

New York, New York 10018 

Attn: President

Telecopy: (347) 727-2479 

Telephone: (347) 727-2474

 

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	With a copy to:	Robinson & Cole, LLP

1055 Washington Blvd.

Stanford, Connecticut 06901 

Attn.: Eric J. Dale, Esq. 

Telecopy: (203) 462-7599 

Telephone: (203) 462-7568
	 	 
	To Buyers:	IM Brands, LLC

475 Tenth Avenue, 4th Floor

New York, New York 10018

Attn: Chief Executive Officer and Chief Financial Officer

Telecopy: (347) 727-2479

Telephone: (347) 727-2474
	 	 
	 	Xcel Brands, Inc.

475 Tenth Avenue, 4th Floor

New York, New York 10018

Attn: Chief Executive Officer and Chief Financial Officer

Telecopy: (347) 727-2479

Telephone: (347) 727-2474
	 	 
	With a copy to:	Blank Rome LLP

The Chrysler Building

405 Lexington Avenue

New York, New York 10174 

Attn: Robert J. Mittman, Esq. 

Telecopy: (212) 885-5000 

Telephone: (212) 885-5555

 

All such communications, if personally
delivered, will be conclusively deemed to have been received by a party hereto and to be effective when so delivered, or if sent
by telecopy on the day on which transmitted, or if sent by overnight courier service, on the day after deposit thereof with such
service, or if sent by certified or registered mail, on the third business day after the day on which deposited in the mail.

 

4.4          Buyers
Consent. Each Buyer acknowledges and consents to the terms and conditions of this Agreement and agrees to comply with the terms
and conditions hereof. In furtherance of the foregoing, the Buyers will not make any payments in respect of the Subordinated Obligations
other than in compliance with the terms and conditions hereof.

 

4.5          Governing
Law. This Agreement and the rights and obligations of the parties under this Agreement shall be governed by, and construed
and interpreted in accordance with, the laws of the State of New York.

 

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4.6          Jurisdiction.
EACH OF THE PARTIES HERETO IRREVOCABLY AGREES AND SUBMITS TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE
OF NEW YORK, THE COURTS OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF AND WAIVES
ANY OBJECTION BASED ON FORUM NON CONVENIENS AND ANY OBJECTION TO VENUE OF ANY SUCH ACTION OR PROCEEDING.

 

4.7          Waiver
of Jury Trial. THE PARTIES HERETO EACH WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT,
THE SUBORDINATED OBLIGATIONS, THE LENDER OBLIGATIONS OR ANY ACTUAL OR PROPOSED TRANSACTION OR OTHER MATTER CONTEMPLATED IN OR RELATING
TO ANY OF THE FOREGOING.

 

[Signature Pages to Subordination Agreement
Follows]

 

    	 

    	 

    

  

IN WITNESS WHEREOF,
this Agreement has been executed by the parties hereto as of the day and year first above written.

 

	 	LENDER:
	 	 
	 	BANK HAPOALIM B.M.
	 	 	 
	 	By:	/s/ Mitchell Barnett
	 	 	Name:  Mitchell Barnett
	 	 	Title:  Senior Vice President
	 	 	 
	 	By:	/s/ Lavea Eisenberg
	 	 	Name:  Lavea Eisenberg Barnett
	 	 	Title:  First Vice President

 

SIGNATURE PAGE TO

SUBORDINATION AGREEMENT

    	 

    	 

    

  

	 	HOLDER:
	 	 
	 	IM READY-MADE, LLC
	 	 	 
	 	By:	/s/ Marisa Gardini
	 	 	Name:  Marisa Gardini
	 	 	Title:  Member

 

SIGNATURE PAGE TO

SUBORDINATION AGREEMENT

 

    	 

    	 

    

  

	 	BUYERS:
	 	 
	 	XCEL BRANDS, INC.
	 	 	 
	 	By:	/s/ James F. Haran
	 	 	Name: James F. Haran
	 	 	Title: Chief Financial Officer
	 	 
	 	IM BRANDS, LLC
	 	 	 
	 	By:	/s/ James F. Haran
	 	 	Name: James F. Haran
	 	 	Title: Chief Financial Officer

 

SIGNATURE PAGE TO

SUBORDINATION AGREEMENT

 

    	 

    	 

    

  

Exhibit A

 

Joinder to the Subordination Agreement

 

Reference is hereby made to the Subordination
Agreement (as amended, restated, supplemented or otherwise modified from time to time, the “Agreement”), dated
as of July 31, 2013, among Bank Hapoalim B.M., IM Ready-Made, LLC, a New York limited liability company, XCel Brands, Inc., a Delaware
corporation and IM Brands, LLC, a Delaware limited liability company. Capitalized terms used herein and not defined herein shall
have the meanings given to them in the Agreement. The undersigned, [NAME OF NEW HOLDER], a [ ] [corporation/limited liability company/limited
partnership/ individual] (the “New Holder”) has acquired an interest in all or a portion of [the Subordinated
Obligations] [the Earn-Out Payments]. By its execution below, the New Holder agrees to become, and does hereby become, a Holder
under the Agreement and agrees to be bound by the Agreement and to comply with all obligations thereunder as if originally a party
thereto. By its execution below, the New Holder represents and warrants that (a) it has received a copy of the Agreement and made
such review of the Agreement as it has determined is necessary and (b) as to itself, all of the representations and warranties
of the Holder contained in the Agreement are true and correct in all respects as of the date hereof.

 

IN WITNESS WHEREOF, the New Holder has
executed and delivered this Joinder to the Subordination Agreement as of this ____________ day of ___________, 20__.

 

	 	[NAME OF NEW HOLDER]
	 	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

This
Employment Agreement (this “Agreement”) is made as of the Effective Date between Crossroads Systems
Inc., a Delaware corporation (the “Company”), and Richard K. Coleman, Jr., an individual currently
residing at 43 Glenmoor Drive, Cherry Hills Village, CO 80113 (“Employee”).

 

PART ONE - DEFINITIONS

 

Definitions. For
purposes of this Agreement, the following definitions will be in effect:

 

“Affiliates”
means all persons and entities directly or indirectly controlling, controlled by or under common control with the entity specified,
where control may be by management authority, contract or equity interest.

 

“Board”
means the Board of Directors of the Company.

 

“Change
of Control” shall be deemed to take place if hereafter (i) the Company is not the surviving entity in any merger,
share exchange, or consolidation (or survives only as a subsidiary of an entity), (ii) the Company sells, leases, or exchanges,
or agrees to sell, lease, or exchange, all or substantially all of its assets to any other person or entity, (iii) any person or
entity, including a “group” as contemplated by Section 13(d)(3) of the Securities Exchange Act of 1934 (the “Exchange
Act”), acquires or gains ownership or control (including, without limitation, power to vote) of more than 50% of
the outstanding shares of the Company’s voting stock (based upon voting power), or (iv), as a result of or in connection
with a contested election of directors, the persons who were directors of the Company before such election will cease to constitute
a majority of the Board; provided, however, that a Change of Control will not include (A) any reorganization, merger,
consolidation, sale, lease, exchange, or similar transaction, which involves solely the Company and one or more entities wholly-owned,
directly or indirectly, by the Company immediately prior to such event or (B) the consummation of any transaction or series of
integrated transactions immediately following which the record holders of the voting stock of the Company immediately prior to
such transaction or series of transactions continue to hold 50% or more of the voting stock (based upon voting power) of (1) any
entity that owns, directly or indirectly, the stock of the Company, (2) any entity with which the Company has merged, or (3) any
entity that owns an entity with which the Company has merged.

 

“Code”
means the Internal Revenue Code of 1986, as amended from time to time, and the Treasury regulations and administrative guidance
promulgated thereunder.

 

“Company”
means Crossroads Systems Inc., a Delaware corporation and all of its subsidiaries.

 

“Compensation
Committee” means the Compensation Committee of the Board.

 

“Effective
Date” shall mean May 8, 2013.

 

“Employee”
means Richard K. Coleman, Jr.

 

    	

    	 

    

 

“Employment
Period” means the period beginning on the Effective Date and ending on the last day of the last Term pursuant to
Section 4.

 

“Termination
for Cause” shall mean the Company’s termination of Employee’s employment
for any of the following reasons: (i) Employee’s commission of any act of fraud, embezzlement or dishonesty, (ii) Employee’s
unauthorized use or disclosure of any confidential information or trade secrets of the Company, (iii) any intentional misconduct
by Employee, whether by omission or commission, which has an adverse effect upon the Company’s business or affairs as determined
in the sole discretion of the Company’s Board of Directors, (iv) Employee’s breach of Employee’s Confidentiality,
Proprietary Information and Inventions Agreement (the “PIIA”) with
the Company, or (v) Employee’s continued failure to perform the major duties, functions and responsibilities of Employee’s
position after written notice from the Company identifying the deficiencies in Employee’s performance and a reasonable cure
period of not less than thirty (30) days.

 

PART TWO - TERMS AND CONDITIONS OF EMPLOYMENT

 

The following terms
and conditions will govern Employee's employment with the Company throughout the Employment Period and will also, to the extent
expressly indicated below, remain in effect following Employee's cessation of employment with the Company.

 

1.Employment
and Duties. During the Employment Period, Employee will serve on an interim basis as the President and Chief Executive Officer
of the Company and will report to the Board. Employee will have such duties and responsibilities as are commensurate with such
position and such other duties and responsibilities commensurate with such position as are from time to time assigned to Employee
by the Board (or a committee thereof). Employee’s duties and responsibilities will include without limitation the authority
to hire and fire employees. During the Employment Period, Employee will devote his full business time, energy and skill to the
performance of his duties and responsibilities hereunder, provided the foregoing will not prevent Employee from (a) serving as
a non-executive director on the board of directors of non-profit organizations and other companies, (b) participating in charitable,
civic, educational, professional, community or industry affairs or (c) managing his and his family’s personal investments;
provided such activities individually or in the aggregate do not interfere or conflict with Employee’s duties and responsibilities
hereunder, violate applicable law, or create a potential business or fiduciary conflict. Employee’s principal place of business
will be at the Company’s offices in Austin, Texas, with Employee working remotely as business permits.

 

2.Terms of Employment.
The Company hereby employs the Employee, and the Employee hereby accepts employment by the Company, upon the terms and conditions
set forth in this Agreement.

 

3.Service as
Director. As of the Effective Date, Employee is serving as a member of the Board. For as long as Employee shall continue to
serve as a member of the Board, he shall stand for re-election to such position at each annual meeting of the Company’s stockholders.
Employee’s failure to be re-elected to the Board, in and of itself, shall not constitute a termination of this Agreement,
nor shall it entitle Employee to any severance benefits. Pursuant to the Company’s policies, for the duration
of this Agreement, Employee will fulfill his duties as a director without additional compensation. This Agreement shall not in
any way be construed or interpreted so as to affect adversely or otherwise impair the right of the Company or the stockholders
to remove the Employee from the Board at any time in accordance with the provisions of applicable law.

 

    	- 2 -

    	 

    

4.Term.
The term of this Agreement shall run for a period of from the Effective Date through January 31, 2014 (such period, the “Initial
Term”), and may be terminated earlier as contemplated by Section 9A. Thereafter, this Agreement shall renew for successive
one-month terms (each, a “Term”) unless the Board or Employee provides thirty days’ advance notice
of an intent not to renew this Agreement.

 

5.Compensation;
Performance Bonus.

 

A.Employee's base
salary will be paid at the rate of $22,916.67 monthly ($275,000 annualized) for the Initial Term and for any subsequent
Term under Section 4. Employee's base salary may be increased by the Compensation Committee and/or Board in their sole discretion,
but shall not be decreased without Employee’s consent.

 

B.Employee's base
salary will be paid at periodic intervals in accordance with the Company's normal payroll practices for salaried employees.

 

C.Employee will be
eligible for a quarterly performance bonus at the end of each fiscal quarter during the Initial Term and each subsequent Term,
under Section 4, with a target value of $50,000.00 per fiscal quarter, a maximum of $75,000.00 per fiscal quarter and a minimum
of $25,000.00 per fiscal quarter, which bonus is to be based upon satisfaction of certain performance objectives. The performance
objectives for this quarterly performance bonus will be developed promptly for the fiscal quarters in the Initial Term, and periodically
by the Compensation Committee for any subsequent Terms; and the Compensation Committee (or its Chairman) will meet and consult
with the Employee regarding the performance objectives by which the incentive bonus will be measured (which objectives will be
finally determined by the Compensation Committee in its discretion). The performance objectives for the quarterly performance bonuses
payable for fiscal quarters in the Initial Term are expected to be based upon objectives such as (i) monetization of various parts
of the Company’s intellectual property portfolio over specified time frames, (ii) cash position and/or cash flow and/or (iii)
net income, profit or other earnings and operating performance measures. In the event that the Compensation Committee, in its sole
discretion, determines that the performance bonus criteria have not been satisfied in full for a fiscal quarter in the Initial
Term or for any subsequent Term, the performance bonus can be earned on a partial basis as determined by the Compensation Committee
in its sole discretion, subject to the above-referenced minimum amounts. Except as contemplated by the following sentence, Employee
must be employed by the Company on the last day of a fiscal quarter in order to be eligible to receive a performance bonus for
such quarter. In the event of a Change of Control, (i) the performance criteria for the performance bonus the fiscal quarter in
which such Change of Control occurs will be deemed to have been achieved at the target value of the performance bonus for that
fiscal quarter and (ii) the performance bonus for the fiscal quarter in which such Change of Control occurs will be paid on the
date of the closing of the transaction that gives rise to the Change of Control. Following each fiscal quarter, the Compensation
Committee will use good faith efforts to make each quarterly bonus determination promptly after the information relevant to such
quarterly bonus (such as Company financial results, if relevant to the determination of bonus amounts) becomes available to the
Compensation Committee, which shall in any event be within sixty (60) days of the end of such fiscal quarter. All bonuses payable
to Employee hereunder will be paid on the next regular payroll date following the determination by the Compensation Committee of
the level of achievement of the bonus objectives (provided, that if such determination is made with two business days of a regular
payroll date, then such bonus will be paid on the following regular payment date). All bonuses pursuant to this paragraph are subject
to final approval by the Compensation Committee. Notwithstanding the foregoing, any performance bonus for the Company’s fiscal
quarter ended July 31, 2013 will be pro-rated to reflect the fact that Employee was employed as Interim President and Chief Executive
Officer for eighty-three (83) days of such fiscal quarter.

 

    	- 3 -

    	 

    

D.The Company will
deduct and withhold, from the compensation payable and benefits provided to Employee hereunder, any and all applicable federal,
state, local and other taxes and any other amounts required to be deducted or withheld by the Company under applicable statute
or regulation.

 

E.To the extent that
any compensation paid or payable pursuant to this Agreement is considered “incentive-based compensation” within the
meaning and subject to the requirements of Section 10D of the Exchange Act, such compensation shall be subject to potential forfeiture
or recovery by the Company in accordance with any compensation recovery policy adopted by the Board or any committee thereof in
response to the requirements of Section 10D of the Exchange Act and any implementing rules and regulations thereunder adopted by
the Securities and Exchange Commission or any national securities exchange on which the Company’s common stock is then listed.  This
Agreement may be unilaterally amended by the Company to comply with any such compensation recovery policy. In addition, cash amounts
paid and Company securities issued pursuant to this Agreement as “incentive-based compensation” are subject to reduction,
cancellation, forfeiture or recoupment upon the occurrence of fraud; misconduct; breach of the agreements to which Employee is
currently or hereafter becomes a party; or other conduct by Employee that the Board determines is detrimental to the business or
reputation of the Company and its subsidiaries, including facts and circumstances discovered after termination of employment.

 

6.Equity Compensation.

 

A.Promptly upon the
first day of the Company’s open trading window following the end of each fiscal quarter following the Effective Date or on
such date following the end of a fiscal quarter that shall be in accordance with any equity award policy adopted by the Board or
the Compensation Committee, the Company will grant Employee stock options under its 2010 Stock Incentive Plan (the “2010
Stock Plan”) to purchase a total of 75,000 shares of the Company’s common stock in the Company at an exercise
price equal to the fair market value of the Company’s common stock as determined in accordance with the 2010 Stock Plan (the
“Quarterly Options”). Each option grant will vest immediately and become immediately exercisable. The
Quarterly Options shall expire on, and shall not be exercisable after, a date that is not later than the tenth anniversary of the
date of grant (the “Final Exercise Date”). Notwithstanding the foregoing, Employee’s grant of Quarterly
Options for the Company’s fiscal quarter ended July 31, 2013 will consist of options to purchase 68,407 shares of common
stock of the Company (which amount is pro-rated to reflect the fact that Employee was employed as Interim President and Chief Executive
Officer for eighty-three (83) days of such fiscal quarter).

 

    	- 4 -

    	 

    

B.Employee will be
eligible for additional option grants as determined by the Board or the Compensation Committee in their sole discretion.

 

C.Notwithstanding
anything in this Agreement to the contrary, the Quarterly Options and the grants and terms thereof shall be subject in all respects
to the terms of the 2010 Stock Plan, as it may be amended from time to time, and this Agreement shall not amend or be deemed to
amend the Company’s 2010 Stock Plan.

 

7.Expense Reimbursement;
Fringe Benefits; Paid Time Off (PTO).

 

A.Employee will be
entitled to reimbursement from the Company for (i) all reasonable temporary living expenses associated with his residence in or
around Austin, TX, (ii) Employee’s regular travel between Austin, TX and his place of residence in the USA, (iii) car rental
and associated expenses, including fuel, or mileage while in Austin, TX, and (iv) customary, ordinary and necessary business expenses
incurred by Employee in the performance of Employee's duties hereunder, provided that Employee’s entitlement to such reimbursements
shall be conditioned upon Employee’s provision to the Company of vouchers, receipts and other substantiation of such expenses
in accordance with Company policies.

 

B.During the Employment
Period, Employee will be eligible to participate in any group life insurance plan, group medical and/or dental insurance plan,
accidental death and dismemberment plan, short-term disability program and other employee benefit plans, including profit sharing
plans, cafeteria benefit programs and stock purchase and option plans, which are made available to executives of the Company and
for which Employee qualifies under the terms of such plan or plans. If Employee so elects, he may be paid the cash equivalent of
Company paid family medical benefits in lieu of participating in Company’s defined benefit plan. Payment will be made monthly
and submitted on Employee’s expense report.

 

C.Employee will accrue
paid time off (“PTO”) benefits at a rate of 6.15 hours per pay period during the Initial Term and any
subsequent Term of the Employment Period in accordance with and subject to Company policy in effect for executive officers. In
the event of the renewal of the term of this Agreement, any unused PTO shall roll over to the next Term.

 

8.Employee
Covenants.

 

A.Moonlighting.
During the Employment Period, except as permitted by Section 1, Employee will not directly or indirectly, whether for Employee's
own account or as an employee, director, consultant or advisor, provide services to any business enterprise other than the Company,
unless otherwise authorized by the Board in writing.

 

B.Transition
and Other Assistance. During the 30 days following the termination of the Employment Period, Employee will take all actions
the Company may reasonably request to maintain the Company’s business, goodwill and business relationships and to assist
with transition matters, all at Company expense. In addition, upon the receipt of notice from the Company (including outside counsel),
during the Employment Period and thereafter, Employee will respond and provide information with regard to matters in which he has
knowledge as a result of his employment with the Company, and will provide assistance to the Company and its representatives in
the defense or prosecution of any claims that may be made by or against the Company, to the extent that such claims may relate
to the period of Employee’s employment with the Company, all at Company expense. During the Employment Period and thereafter,
Employee shall promptly inform the Company if he becomes aware of any lawsuits involving such claims that may be filed or threatened
against the Company. During the Employment Period and thereafter, Employee shall also promptly inform the Company (to the extent
he is legally permitted to do so) if he is asked to assist in any investigation of the Company (or its actions), regardless of
whether a lawsuit or other proceeding has then been filed against the Company with respect to such investigation, and will not
do so unless legally required. The Company will pay Employee at a rate of $350 per hour, plus reasonable expenses, in connection
with any actions requested by the Company under this paragraph following any termination of Employee’s employment, with such
amounts being paid to Employee at periodic intervals in accordance with the Company's normal payroll practices for salaried employees.
Employee’s obligations under this paragraph shall be subject to the Company's reasonable cooperation in scheduling in light
of Employee’s other obligations.

 

    	- 5 -

    	 

    

C.Other
Agreements Between Employee and Company. Nothing herein shall be deemed to modify or waive the Company’s and Employee’s
rights and obligations under Employee’s PIIA or Employee’s Indemnity Agreement, each signed by Employee and each incorporated
herein by this reference

 

D.Survival
of Provisions. The obligations contained in this Section 8 will survive the termination of Employee’s employment with
the Company and will be fully enforceable thereafter.

  

9. Termination of Employment. 

 

A.General.
Employee’s employment with the Company is “at-will” and may be terminated at any time by either Employee or the
Company for any reason (or no reason) in accordance with this Agreement, which will also result in the Term ending, by the party
seeking to terminate Employee’s employment providing written notice of such termination to the other party; provided,
however, that in the event that Employee gives notice of termination to the Company, the Company may, in its sole discretion,
make such termination effective earlier than any notice date.

  

B.Death and Permanent
Disability. Upon Employee’s death or permanent disability during the Employment Period, the employment relationship
created pursuant to this Agreement will immediately terminate, the Term will end and amounts will only be payable under this Agreement
as specified in this Section 9. Should Employee's employment with the Company terminate by reason of Employee's death or permanent
disability during the Employment Period, only the unpaid base salary earned by Employee pursuant to Section 5A for services rendered
through the date of Employee's death or permanent disability, as applicable, the accrued but unused and unpaid PTO earned under
Section 7C through the date of Employee’s death or permanent disability, and the limited death, disability, and/or income
continuation benefits provided under Section 7B, if any, will be payable in accordance with the terms of the plans pursuant to
which such limited death or disability benefits are provided. No portion of the performance bonus for the fiscal quarter in which
Employee’s death or permanent disability occurs shall be paid. For purposes of this Agreement, Employee will be deemed “permanently
disabled” if Employee is so characterized pursuant to the terms of the Company's disability policies or programs applicable
to Employee from time to time, or if no such policy is applicable, if the Compensation Committee determines, in its sole discretion,
that Employee is unable to perform the essential functions of Employee's duties for physical or mental reasons for thirty (30)
consecutive days.

 

    	- 6 -

    	 

    

C.Termination
for Cause. The Company may at any time during the Employment Period, upon written notice summarizing with reasonable specificity
the basis for the Termination for Cause, terminate Employee's employment hereunder for any act qualifying as a Termination for
Cause. Such termination will be effective immediately upon such notice.

 

D.Resignations
from Other Positions. Upon any termination of Employee’s employment, Employee
will immediately resign from (1) all officer or other positions of the Company and (2) all fiduciary positions (including as trustee)
Employee then holds with respect to any employee benefit plans or trusts established, maintainted or sponsored by the Company or
by any of its Affiliates.

 

E.Payment
of Accrued Amounts. Upon any termination of Employee’s employment for any reason (or no reason), including Employee’s
resignation from his position or upon the expiration of the Term, the Company will have no obligations to Employee under this Agreement
other than to pay or provide, to the extent not theretofore paid or provided, (1) any accrued and unpaid base salary earned through
the date of Employee’s termination of employment, payable in accordance with the Company’s normal payroll practices,
(2) except in the event of a Termination for Cause, any accrued but unpaid quarterly performance bonus pursuant to Section 5C,
provided that Employee was employed by the Company on the last day of the fiscal quarter to which such bonus relates as specified
in Section 5C, (3) except in the event of a Termination for Cause, any Quarterly Option grant pursuant to 6A that has not yet been
granted to Employee, provided that Employee was employed by the Company on the last day of the fiscal quarter to which such Quarterly
Option grant relates as specified in Section 6A, (4) any accrued but unused and unpaid PTO under Section 7C in accordance with
Company policy, (5) reimbursement for any unreimbursed business and entertainment expenses incurred through the date of Employee’s
termination of employment in accordance with Company policy, and (6) any other amounts and benefits to which Employee is entitled
to receive under law or under any employee benefit plan or program, or equity plan or grant payable or otherwise provided in accordance
with the terms and provisions of such plans, programs, equity plan and grants.

 

F.Options Upon
Termination. Upon termination of Employee’s employment for any reason and subject to the terms of the Company’s
2010 Stock Incentive Plan, as it may be amended from time to time, including by reason of Employee’s death or permanent disability,
any portion of any options held by the Employee that are not then vested will immediately be forfeited and expire for no consideration
and the remainder of such options will remain exercisable for twelve months thereafter (with the understanding that any options
that are intended to be incentive stock options shall thereupon be disqualified from such treatment); provided, that any
portion of the options held by Employee immediately prior to Employee’s death, to the extent then exercisable, will remain
exercisable for one year following Employee’s death; and further provided, that in no event shall any portion of the
options be exercisable after the Final Exercise Date.

 

    	- 7 -

    	 

    

10.Section 409A
of the Code.  

 

A.General.
This Agreement shall be interpreted and applied in all circumstances in a manner that is consistent with the intent of the parties
that, to the extent applicable, amounts earned and payable pursuant to this Agreement shall constitute short-term deferrals exempt
from the application of Section 409A of the Code and, if not exempt, that amounts earned and payable pursuant to this Agreement
shall not be subject to the premature income recognition or adverse tax provisions of Section 409A of the Code.

 

B.Specified
Employee. In the event any one or more amounts payable under this Agreement constitute a “deferral
of compensation” and become payable on account of the “separation from service”
(as determined pursuant to Section 409A of the Code) of Employee and if as such date Employee is a “specified employee”
(as determined pursuant to Section 409A of the Code), such amounts shall not be paid to Employee before the earlier of (i) the
first day of the seventh calendar month beginning after the date of Employee’s “separation from service” or (ii)
the date of Employee’s death following such “separation from service.” Where there is more than one such amount,
each shall be considered a separate payment and all such amounts that would otherwise be payable prior to the date specified in
the preceding sentence shall be accumulated (without interest) and paid together on the date specified in the preceding sentence.

 

C.Separate
Payments. For purposes of Section 409A of the Code, each payment or amount due
under this Agreement shall be considered a separate payment, and Employee’s entitlement to a series of payments under this
Plan is to be treated as an entitlement to a series of separate payments. 

 

D.Reimbursements.
Any reimbursement to which Employee is entitled pursuant to this Agreement that would constitute nonqualified deferred compensation
subject to Section 409A of the Code shall be subject to the following additional rules:  (i) no reimbursement of any
such expense shall affect Employee’s right to reimbursement of any other such expense in any other taxable year; (ii) reimbursement
of the expense shall be made, if at all, not later than the end of the calendar year following the calendar year in which the expense
was incurred; (iii) the right to reimbursement shall not be subject to liquidation or exchange for any other benefit; and (iv)
the right to reimbursement of expenses incurred kind shall terminate one year after the end of the Employment Period. 

 

11.No Guarantee
of Tax Consequences. The Board, the Compensation Committee, the Company and its Affiliates, officers and employees make no
commitment or guarantee to Employee that any federal, state, local or other tax treatment will apply or be available to Employee
or any other person eligible for compensation or benefits under this Agreement and assume no liability whatsoever for the tax consequences
to Employee or to any other person eligible for compensation or benefits under this Agreement.

 

    	- 8 -

    	 

    

12.Choice of
Law. The provisions of this Agreement will be construed and interpreted under the laws of the State of Delaware, excluding
such jurisdiction’s conflict of laws principles.

 

13.Entire Agreement;
Severability; Amendments. This Agreement and the agreements referenced herein contain the entire agreement of the parties relating
to the subject matter hereof, and supercede in their entirety any and all prior agreements, understandings or representations relating
to the subject matter hereof. No agreements or representations, oral or otherwise, express or implied, with respect to the subject
matter hereof have been made by either party which are not expressly set forth in this Agreement. The provisions of this Agreement
shall be deemed severable and, if any provision is found to be illegal, invalid or unenforceable for any reason, (a) the provision
will be amended automatically to the minimum extent necessary to cure the illegality or invalidity and permit enforcement and (b)
the illegality, invalidity or unenforceability will not affect the legality, validity or enforceability of the other provisions
hereof. No amendments, alterations or modifications of this Agreement will be valid unless made in writing and signed by Employee
and the Chairman of the Board, the Chairman of the Compensation Committee, or another director authorized by the Compensation Committee.

 

14.Waiver.
The rights and remedies of the parties to this Agreement are cumulative and not alternative. Neither the failure nor any delay
by either party in exercising any right, power, or privilege under this Agreement will operate as a waiver of such right, power,
or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise
of such right, power, or privilege or the exercise of any other right, power, or privilege. To the maximum extent permitted by
applicable law, (a) no claim or right arising out of this Agreement can be discharged by one party, in whole or in part, by a waiver
or renunciation of the claim or right unless in writing signed by the other party; (b) no waiver that may be given by a party will
be applicable except in the specific instance for which it is given; and (c) no notice to or demand on one party will be deemed
to be a waiver of any obligation of such party or of the right of the party giving such notice or demand to take further action
without notice or demand as provided in this Agreement.

 

15.Representations
and Warranties by Employee. Employee represents and warrants to the Company that: (a) Employee has the legal right to
enter into this Agreement and to perform all of the obligations on Employee’s part to be performed hereunder in accordance
with its terms; (b) Employee is not a party to any contract, agreement or understanding, written or oral, which could prevent
Employee from entering into this Agreement or performing all of his duties and responsibilities hereunder; and (c) Employee
is not a party to any agreement containing any non-competition, non-solicitation, confidentiality or other restrictions on Employee’s
activities. Employee further represents and warrants to the Company that, to the best of his knowledge, information and belief,
Employee is not aware of any action taken by Employee (or any failure to act) that could form the basis for a breach of fiduciary
duty or related claim against Employee by any current or former employer.

 

16.Assignment.
Notwithstanding anything else herein, this Agreement is personal to Employee and neither this Agreement nor any rights hereunder
may be assigned by Employee. The Company may assign this Agreement to an affiliate or to any acquiror of all or substantially all
of the business and/or assets of the Company, in which case the term “Company” will mean such affiliate or acquiror.
This Agreement will inure to the benefit of and be binding upon the personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees, legatees and permitted assignees of the parties.

 

    	- 9 -

    	 

    

17.Arbitration.
Employee agrees that all disagreements, disputes and controversies between Employee and the Company arising under or in connection
with this Agreement will be settled by arbitration conducted before a single arbitrator mutually agreed to by the Company and Employee,
sitting in Austin, Texas or such other location agreed to by Employee and the Company, in accordance with the Commercial Arbitration
Rules of the American Arbitration Association then in effect; provided, however, that if the Company and Employee are unable
to agree on a single arbitrator within 30 days of the demand by another party for arbitration, an arbitrator will be designated
by the Texas Office of the American Arbitration Association. The determination of the arbitrator will set forth in writing findings
of fact and conclusions of law upon which the determination was based, and will be final and binding on Employee and the Company.
Each party waives right to trial by jury and further review or appeal of the arbitrator’s ruling. Judgment may be entered
on the award of the arbitrator in any court having proper jurisdiction. The arbitrator will, in its award, allocate between the
parties the costs of arbitration, including the arbitrator’s fees and expenses, in such proportions as the arbitrator deems
just. Each party shall pay its own attorneys' fees and expenses in connection with any such arbitration.

 

18.Counterparts,
Facsimile. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy
of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. To the maximum
extent permitted by applicable law, this Agreement may be executed via facsimile.

 

19.Notices.
Any notice required to be given under this Agreement shall be deemed sufficient, if in writing, and sent by certified mail,
return receipt requested, via overnight courier, or hand delivered to the Company at 11000 North MoPac Expressway, Austin, Texas
78759, Attn: Chairman of the Compensation Committee and Chief Financial Officer, and to Employee at the most recent address reflected
in the Company's permanent records.

 

20.Legal Costs.
The Company shall bear all legal costs and expenses incurred in the event the Company should contest or dispute the characterization
of any amounts paid pursuant to this Agreement as being nondeductible under Section 280G of the Code or subject to imposition of
an excise tax under Section 4999 of the Code.

 

Signature page follows.

 

    	- 10 -

    	 

    

IN WITNESS WHEREOF, the Company and Employee have executed this
Agreement on August 2, 2013, but effective as of the Effective Date.

 

 

	CROSSROADS SYSTEMS, INC.	 	Richard K. Coleman, Jr.
	 	 	 
	By: /s/ Jeffrey E. Eberwein	 	/s/ Richard K. Coleman, Jr.
	 	 	 
	Name:  Jeffrey E. Eberwein	 	 
	 	 	 
	Title: Chairman of the Board of Directors	 	 

  

    	- 11 -

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