I want to upgrade from ubuntu 10.04 to 12.10 I have setup of close to 40 machines hence want to do it off line. I have ubuntu 12.10 installation CD, but when I run the setup using CD the upgrade option is disabled. Can somebody please help me in resolving this issue.
You can not upgrade an arbitrary version of Ubuntu to any other arbitrary version. For "normal" releases which are made every 6 months the upgrade procedure works only from release N to N+1 (e.q. from 10.04 to 10.10, from 10.10 to 11.04 and so on).
The Long Term Support (LTS) releases are made every 2 years and you also can upgrade one LTS release to the next LTS release. 10.04 was an LTS release, so you can directly upgrade it to 12.04, which is also an LTS.
Then you can either stay on 12.04 and upgrade it to 14.04 when it is released (in April 2014, supposedly), or to upgrade 12.04 to 12.10 now, but in this case you'll have to upgrade your machines every 6 month to stay on top.