Exhibit 10.5


 


Execution
Copy


 


SECURITY AGREEMENT


 


This Security Agreement (“Agreement”) is made
this 17th day of January, 2002 (the “Effective Date”), by and between Chaparral
Network Storage, Inc., a Delaware corporation (“Borrower”), and Xyratex
Technology Limited, a company organized under the laws of England and Wales
(“Lender”). Capitalized terms used herein without definition have the meaning
given to them in the Securities Purchase Agreement dated as of the Effective
Date, by and between Borrower and Lender (the “Securities Purchase Agreement”).


 


RECITALS


 


A.                                   This Agreement is entered into in connection
with Lender’s loan to Borrower of US$6,000,000 (the “Loan”) pursuant to a
Secured Convertible Promissory Note dated the Effective Date (the “Note”) and
the execution and delivery of the Securities Purchase Agreement and the
Commercial Agreements, dated as of the Effective Date, between Borrower and
Lender.


 


B.                                     Borrower and Lender intend to secure all of
the payment obligations of Borrower to Lender under the Transaction Documents
as provided in Section A.10.


 


Lender and Borrower agree as follows:


 


A.                                 Definitions.


 


1.                                       “Affiliate.” Affiliate means, as applied to
any Person, any other Person directly or indirectly controlling, controlled by,
or under common control with, that Person. 
For purposes of this definition, “control” as applied to any Person
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of that Person, whether through
the ownership of voting securities, by contract, or otherwise. 


 


2.                                       “Assignment Agreement.” Assignment Agreement means the Assignment
Agreement between Borrower and Lender, a form of which is attached as Exhibit
XI to the Master Alliance Agreement. 


 


3.                                       “Bankruptcy Code.” Bankruptcy Code means the United States
Bankruptcy Code, as amended and in effect at any relevant time.


 


4.                                       “Business Day.” Business Day means any day other than
Saturday, Sunday or a day on which banks are required to be closed in the State
of Colorado and/or London, England.


 

















 


5.                                       “Collateral.” The Collateral shall consist of:


 


(i)                                     All Intellectual Property now (or hereafter
at any time during the term of this Security Agreement) owned by Borrower and
which relates to or is used in (x) any member of the Family of FC-FC Integrated
Controllers (as defined in the Joint Development Agreement) developed pursuant
to the Joint Development Agreement between Borrower and Lender dated as of the
Effective Date, (y) any RIO Product (as defined in the Securities Purchase
Agreement) and (z) any Successor Products, excluding in each case any Adaptec
IP (as defined in the Master Alliance Agreement). The Collateral includes, but
is not limited to, the related Chaparral IP (as defined in the Master Alliance Agreement)
as the same may exist from time to time; and


 


(ii)                                  All such right, title and interest as
Borrower may now (or hereafter at any time during the term of this Security
Agreement) have in the Intellectual Property of third parties which relates to
or is used in (x) any member of the Family of FC-FC Integrated Controllers (as
defined in the Joint Development Agreement) developed pursuant to the Joint
Development Agreement between Borrower and Lender dated as of the Effective
Date, (y) any RIO Product (as defined in the Securities Purchase Agreement) and
(z) any Successor Products (excluding in each case any Adaptec IP (as defined
in the Master Alliance Agreement)) and which is capable of being secured,
encumbered or to which a security interest may attach without breach of any
obligation upon Borrower, including but not limited to all of Borrower’s right,
title and interest in and under the Technology Cross License Agreement.


 


6.                                       “Insolvency Event.”  “Insolvency
Event” means any of the following: (1) Borrower (a) commences a
voluntary case under Title 11 of the United States Code (“Bankruptcy Code”) or any other
applicable bankruptcy, insolvency or other similar law, (b) consents to the
entry of an order for relief in an involuntary case under any such law, (c)
consents to the appointment of with respect to, or taking possession of, the
Borrower, or any substantial part of its assets, by a receiver, liquidator,
assignee, trustee, custodian, or similar party, or (d) makes a general
assignment for the benefit of creditors, or (e) takes any action in furtherance
of any of the foregoing; (2) a proceeding shall have been instituted against
the Borrower (a) seeking an order for relief under the Bankruptcy Code or any
other applicable bankruptcy, insolvency or other similar law, (b) seeking the
appointment of with respect to, or taking possession of, the Borrower or any


 


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substantial
part of its assets a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar party), or (c) seeking the winding-up or liquidation
of the Borrower’s affairs, and such proceeding remains undismissed or unstayed
and in effect for a period of 30 days; or (3) the Borrower is adjudicated
pursuant to a judgment by any court of competent jurisdiction to be insolvent
or admits in writing its inability to generally pay its debts as they come due.


 


7.                                       “Intellectual Property.” Intellectual Property means (1) all patents
and patent applications, domestic or foreign, all licenses relating to any of
the foregoing and all income and royalties with respect to any licenses
(including such patents and patent applications as described in Schedule A),
all rights to sue for past, present or future infringement thereof, all rights
arising therefrom and pertaining thereto and all reissues, divisions,
continuations, certificates of invention, renewals, reexaminations, extensions
and continuations-in-part thereof; (2) trademarks, service marks, logos, mask
works, trade names, and corporate names and applications for registration
thereof, whether domestic or foreign; (3) computer software (in both source
code and object code form), data, database rights and documentation, other than
“off-the-shelf,” click to accept and/or shrink-wrap software generally
available to the public; (4) trade secrets and information, whether or not
patentable and whether or not reduced to practice, know-how, manufacturing and
production processes and techniques; and (5) any other proprietary rights and
processes.


 


8.                                       “License Agreement.” License Agreement means the Manufacturing
and Chaparral IP License Agreement dated as of the Effective Date, between
Borrower and Lender.


 


9.                                       “Master Alliance Agreement.” Master Alliance Agreement means the Master
Alliance Agreement dated as of the Effective Date, between Borrower and Lender.


 


10.                                 “Obligations.” This Agreement secures the following:


 


(i)                                     Borrower’s obligations under the Note;


 


(ii)                                  Borrower’s obligations to make payments to
Lender pursuant to the Transaction Documents;


 


(iii)                               any other or future advances or extensions of
credit that Lender may make to Borrower after the Effective Date, whether or
not the instrument evidencing such advance or extension of credit expressly
refers to this Agreement;


 


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(iv)                              any other amount that Borrower may become
obligated to pay to Lender whether for payment of goods or services or
otherwise;


 


(v)                                 the repayment of (a) any amounts that Lender
may advance or spend for the maintenance or preservation of the Collateral, and
(b) any other expenditures that Lender may make under the provisions of this
Agreement or for the benefit of Borrower; and


 


(vi)                              all amounts owed under any modifications,
renewals or extensions of any of the foregoing obligations;


 


in all instances whether before or after any Insolvency Event of
Borrower.  For avoidance of doubt,
Borrower’s failure to make payments, if any, under those of the Transaction
Documents which are Commercial Agreements (except to the extent such failure is
an Event of Default as defined in Section 9.1.7 and 9.1.8 of the Securities
Purchase Agreement) and under Section 10 (iii) or (iv) above shall not be
deemed to be an Event of Default under the Securities Purchase Agreement.


 


11.                                 “Person.” Person means and includes natural persons,
corporations, limited liability companies, limited partnerships, general
partnerships, joint ventures, trusts, land trusts, business trusts, or other
organizations, irrespective of whether they are legal entities, and governments
and agencies and political subdivisions thereof.


 


12.                                 “PTO.” PTO means the United States Patent and
Trademark Office


 


13.                                 “Successor Product” shall mean and include any product developed
by the Borrower (either alone or with others) that uses or incorporates any
Intellectual Property used or incorporated in any Family of the FC-FC
Integrated Controllers (as defined in the Joint Development Agreement)
developed pursuant to the Joint Development Agreement and/or any RIO Product
(as defined in the Securities Purchase Agreement) which existed at any time
during the term of the Joint Development Agreement.


 


14.                                 “Technology Cross License
Agreement.” Technology Cross
License Agreement means the Technology Cross License Agreement between Adaptec,
Inc. and Borrower dated November 25, 1998, as amended, and specifically without
limitation, Amendment No. 2 to the Technology Cross License Agreement dated
December 5, 2001.


 


15.                                 “UCC.” Any term used in the California Uniform
Commercial Code (“UCC”) and not defined in this Agreement has the meaning given
to the term in the UCC.


 


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B.                                     Grant and Continuation of
Security Interest.


 


1.                                       Grant of Security
Interest.  As security for the payment and performance
of the Obligations, Borrower hereby assigns, transfers and conveys to Lender,
and grants to Lender a security interest in and mortgage to, all of Borrower’s
right, title and interest in, to and under the Collateral.


 


2.                                       Continuing Security
Interest. Borrower agrees
that this Agreement shall create a continuing security interest in the
Collateral which shall remain in effect until terminated in accordance with
Section D.1.


 


C.                                     Perfection of Security
Interests and Further Acts.


 


1.                                       Filing of Financing
Statement.  On a continuing basis, Borrower shall make,
execute, acknowledge and deliver, and file and record in the proper filing and
recording places, all such instruments and documents, and take all such action
as may be necessary or advisable or may be requested by Lender to carry out the
intent and purposes of this Agreement, or for assuring, confirming or
protecting the grant or perfection of the security interest granted or
purported to be granted hereby, to ensure Borrower’s compliance with this
Agreement or to enable Lender to exercise and enforce its rights and remedies
hereunder with respect to the Collateral, including any documents for filing
with the PTO or any applicable state office. 
Lender may record this Agreement, an abstract thereof, or any other
document describing Lender’s interest in the Collateral with the PTO, at the
expense of Borrower. In addition, Borrower authorizes Lender to file financing
statements describing the Collateral in any UCC filing office deemed
appropriate by Lender. If Borrower shall at any time hold or acquire a
commercial tort claim arising with respect to the Collateral, the Borrower
shall immediately notify Lender in a writing signed by the Borrower of the
brief details thereof and Borrower acknowledges that the proceeds of such tort claim
(net of reasonable attorney’s fees and costs) are proceeds of the Collateral
and as such are subject to the security interest granted to Lender herein.


 


D.                                    Term of Agreement.


 


1.                                       Term.  This Agreement shall become effective upon the Effective Date, and
shall continue in full force and effect until the full payment, conversion or
other satisfaction of all Principal and Interest under the Note, each in
accordance with the terms of the Securities Purchase Agreement.


 


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2.                                       Effect of Termination. Upon payment in full of all Principal and
Interest under the Note, the security interests created by this Agreement shall
terminate and Lender (at Borrower’s expense) shall promptly execute and deliver
to Borrower such documents and instruments reasonably requested by Borrower as
shall be necessary to evidence termination of all such security interests given
by Borrower to Lender hereunder, including cancellation of this Agreement by
written notice from Lender to the PTO.


 


E.                                      Covenants and Rights
Concerning the Collateral.


 


1.                                       Personal Property. The Collateral shall remain personal property
at all times.


 


2.                                       Limitations on Obligations
Concerning Maintenance of Collateral. 


 


(i)                                     Risk of Loss. Borrower has the risk of loss of the
Collateral.


 


(ii)                                  No Collection Obligation. Lender has no duty to collect any income
accruing on the Collateral or to preserve any rights relating to the
Collateral.


 


3.                                       No Disposition of
Collateral. Lender does not
authorize, and Borrower may not:


 


(i)                                     sell any of the Collateral other than a sale
to the Lender;


 


(ii)                                  transfer or grant any rights in the
Collateral other than to the Lender except in connection with arms-length
commercial transactions (including joint development agreements) occurring in
the Borrower’s normal course of business consistent with past practice of which
Lender has been notified; or


 


(iii)                               grant a security interest in any of the
Collateral to any party other than Lender other than a security interest which
is subordinated to Lender’s security interest, subject to prior written
approval by Lender of any subordination, inter-creditor or similar agreement
that the Lender may deem desirable and/or necessary, in its sole and absolute
discretion.


 


F.                                      Borrower’s Representations and
Warranties.


 


Borrower
warrants and represents that except as set forth in the Disclosure Schedule:


 


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1.                                       Title to and transfer of
Collateral. It has rights in
or the power to transfer the Collateral and its title to the Collateral is free
of all adverse claims, liens, security interests and restrictions on transfer
or pledge except as created by this Agreement. 


 


2.                                       Patents and Patent
Applications. A true and
correct list of all of the existing Collateral consisting of patents and patent
applications or registrations owned by Borrower, in whole or in part, is set
forth in Schedule A.


 


3.                                       Location and Name of
Borrower. Borrower’s:


 


(i)                                     state of incorporation is the state of
Delaware; and


 


(ii)                                  exact legal name is as set forth in the first
paragraph of this Agreement.


 


4.                                       Authority. Borrower has the authority to enter into and
perform the Transaction Documents and to execute all documents and perform all
other acts as may be necessary to perform all of Borrower’s obligations under
the Transaction Documents.


 


5.                                       Valid and Binding
Obligation. Each of the
Transaction Documents is a valid and binding obligation of Borrower enforceable
in accordance with its respective terms.


 


6.                                       No Approvals or Consents. No approval or consent by any Person or
entity is necessary in connection with the execution of the Transaction
Documents by Borrower or the performance of Borrower’s obligations under the
Transaction Documents. The consummation of the transactions contemplated by the
Transaction Documents does not and will not violate any statute, law, ordinance
or regulation.


 


7.                                       No Violation of Other
Obligations. Neither the
Transaction Documents nor anything provided to be done under the Transaction
Documents violates or shall violate, or shall cause the acceleration of any
debt or obligation of Borrower under, any contract, document, understanding,
agreement or instrument to which Borrower is a party or by which it may be
bound.


 


G.                                     Events of Default.


 


The
occurrence of any of the events of default set forth in Section 9.1 of the
Securities Purchase Agreement shall constitute an event of default (each, an
“Event of Default”) under this Agreement.


 


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H.                                Default Costs.


 


Should
an Event of Default occur, Borrower will pay to Lender all costs reasonably
incurred by the Lender for the purpose of enforcing its rights hereunder,
including:


 


1.                                       costs of foreclosure;


 


2.                                       costs of obtaining money damages; and


 


3.                                       a reasonable fee for the services of an
attorney employed by Lender for any purpose related to this Agreement or the
Obligations, including consultation, drafting documents, sending notices or
instituting, prosecuting or defending litigation or arbitration and including,
without limitation, such costs and expenses incurred by Lender in pursuing
recovery and protecting any of its rights or interests, in any bankruptcy or
other insolvency proceeding in which Borrower is the debtor.


 


I.                                         Remedies Upon Default.


 


1.                                       General. Upon any Event of Default, all Obligations
shall immediately become due and payable without notice or demand. In addition,
Lender may pursue any remedy available at law (including those available under
the provisions of the UCC), or in equity to collect, enforce, or satisfy any
Obligations then owing, whether by acceleration or otherwise.


 


2.                                       Exceptions for Loan
Collection.  If Borrower fails to repay the Principal and
Interest when due pursuant to Section 9.2.1 of the Securities Purchase
Agreement, then Lender may, at its sole election, with at least 30 Business
Days’ written notice elect as a remedy that (a) the license granted by Borrower
to Lender under Section 4 of the License Agreement shall come into full force
and effect, (b) the Assignment Agreement shall come into full force and effect
so that in particular but without limitation Lender shall enjoy the full
benefit of the license of the Chaparral IP (as defined in the Master Alliance
Agreement) in accordance with the terms set forth in Section 4 of the License Agreement
and the full benefit of the Technology Cross License Agreement and the Adaptec IP
(as  defined in the Master Alliance Agreement) in
accordance with the terms thereof and (c) Lender shall sub-license, and shall
be deemed to have sub-licensed in accordance with the Assignment Agreement, to
Borrower the rights provided in the Technology Cross License Agreement solely
for the purpose of enabling Borrower to continue with its business operations.
So long as the License


 


8

















 


Agreement
and the Assignment Agreement come into full force and effect as contemplated by
Section 4 of the License Agreement and at that time Borrower is not in
“liquidation” (as that expression is defined in the Master Alliance Agreement)
and for so long as each of the License Agreement and the Assignment Agreement
remain in full force and effect as aforesaid, Lender shall not seek to recover
the Principal and accrued Interest thereon due and payable pursuant to Section
9.2.1 of the Securities Purchase Agreement and Interest shall not continue to
accrue on the Principal; provided, however that if Lender has not
received a claim that the License Agreement and/or the Assignment Agreement is
not in full force and effect within 12 months of the Principal and Interest
becoming due as aforesaid or if Lender has received such claim then when such
claim has been withdrawn or adjudicated by a court of final appeal and the
result of that adjudication is that the aforesaid full benefit of the license of
the Chaparral IP (as defined in the Master Alliance Agreement) and the
Technology Cross License Agreement and Adaptec IP (as defined in the Master
Alliance Agreement) remains available to Lender, then Borrower shall no longer
be obligated to repay the Principal and Interest nor shall the Lender seek
damages solely with respect to the Borrower’s failure to repay Principal and
Interest as aforesaid, except for an amount equal to the reasonable costs and
expenses of litigating, arbitrating and/or settling such claim, all of which
shall be recoverable from Borrower by Lender and, upon such recovery, the
Lender shall return the Note to the Borrower in accordance with Section 7.3.3
of the Securities Purchase Agreement.


 


3.                                       Concurrent Remedies. Upon an Event of Default, subject to the
election of remedies by Lender set forth in Section I.2 above, Lender shall
have the right to pursue any of the following remedies separately,
successively, or simultaneously:


 


(i)                                     File suit and obtain judgment, and, in
conjunction with any action, Lender may seek any ancillary remedies provided by
law, including levy of attachment and garnishment.


 


(ii)                                  Take possession of and use any Collateral if
not already in its possession without demand and without legal process.


 


(iii)                               Sell or otherwise dispose of the Collateral
at public or private sale in accordance with the UCC.


 


9

















 


J.                                        Foreclosure Procedures.


 


1.                                       No Waiver. No delay or omission by the Lender to
exercise any right or remedy accruing upon any Event of Default shall (a)
impair any right or remedy, (b) waive any default or operate as an acquiescence
to the Event of Default, or (c) affect any subsequent default of the same or of
a different nature.


 


2.                                       Notices. Lender shall give Borrower such notice of any
private or public sale as may be required by the UCC.


 


3.                                       No Obligation to Pursue
Others. Lender has no
obligation to attempt to satisfy the Obligations by collecting them from any
other Person liable for them and Lender may release, modify or waive any
collateral provided by any other Person to secure any of the Obligations, all
without affecting Lender’s rights against Borrower. Borrower waives any right
it may have to require Lender to pursue any third person for any of the Obligations.


 


4.                                       Compliance With Laws. Lender may comply with any applicable state
or federal law requirements in connection with a disposition of the Collateral
and compliance will not be considered to adversely affect the commercial
reasonableness of any sale of the Collateral.


 


5.                                       Warranties. Lender may sell the Collateral without giving
any warranties as to the Collateral. Lender may specifically disclaim any
warranties of title or the like. This procedure will not be considered
adversely to affect the commercial reasonableness of any sale of the
Collateral.


 


6.                                       No Marshaling. Lender has no obligation to marshal any
assets in favor of Borrower, or against or in payment of:


 


(i)                                     the Note,


 


(ii)                                  any of the other Obligations, or


 


(iii)                               any other obligation owed to Lender by
Borrower or any other Person.


 


K.                                    Miscellaneous.


 


1.                                       Assignment.


 


(i)                                     Binds Assignees. This Agreement shall bind and shall inure to
the benefit of the heirs, legatees, executors, administrators, successors, and
assigns of Lender and shall bind all Persons who become bound as a Borrower to
this Agreement.


 


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(ii)                                  Assignments. Except as otherwise set forth herein, no
party hereto shall transfer or assign any of its rights or obligations
hereunder without the prior written consent of each of the other parties
hereto, except (A) in the event of an assignment by operation of law, or (B) by
the Lender in connection with (X) a reorganization of its business, (Y)
transfer of the Lender’s RAID Controller or storage business in a sale or in
demerger, a “spin-off” or similar transaction or (Z) in a capital financing
transaction or providing security to a financing source for the Lender’s
business or the business of another member of the same group as the Lender.


 


2.                                       Severability. Should any provision of this Agreement be
found to be void, invalid or unenforceable by a court or panel of arbitrators
of competent jurisdiction, that finding shall only affect the provisions found
to be void, invalid or unenforceable and shall not affect the remaining
provisions of this Agreement.


 


3.                                       Notices. Any notices required by this Agreement
and/or the Note shall be deemed to be delivered when (a) if to Lender,
deposited in any United States postal box and if to Borrower, deposited in any
United Kingdom post box, airmail postage prepaid, and the notice properly
addressed to the appropriate recipient, three Business Days after such deposit,
(b) received by telecopy if received during the recipient’s normal business
hours or other wise at the opening of the next Business Day after such receipt,
(c) received through the Internet and such receipt is confirmed by the
recipient, and (d) when personally delivered.


 


If
to Borrower:


 


Chaparral
Network Storage, Inc.

7420 East Dry Creek Parkway

Longmont, Colorado 80503

Attn: Victor Perez, President

Telephone: (303) 845-3200

Facsimile: (303) 845-3636


 


with
a copy to (which copy shall not constitute notice):


 


Davis
Graham & Stubbs LLP

Suite 500

1550 Seventeenth Street

Denver, Colorado 80202


 


11

















 


Attn:
Ron Levine, Esq.

Telephone: (303) 892-9400

Facsimile: (303) 893-1379


 


If
to Lender:


 


Xyratex
Technology Limited

Langstone Road

Havant

PO9 1SA

United Kingdom

Attn: David Bradley

Telephone: 023 92 496000

Facsimile: 023 92 453654


 


with
a copy to (which copy shall not constitute notice):


 


Heller
Ehrman White & McAuliffe LLP

601 S. Figueroa St., 40th Floor

Los Angeles, California 90017

Attn: Stephen E. Newton, Esq.

Telephone: (213) 689-0200

Facsimile: (213) 614-1868


 


4.                                       Headings. Section headings used in this Agreement are
for convenience only. They are not a part of this Agreement and shall not be
used in construing it.


 


5.                                       Governing Law. This Agreement shall be construed and
enforced in accordance with the laws of California except to the extent that
the UCC provides for the application of the law of any other state.


 


6.                                       Venue, Jurisdiction; Waiver
of Trial by Jury. EXCEPT TO
THE EXTENT THAT THE UCC PROVIDES OTHERWISE, THE PARTIES AGREE THAT ALL ACTIONS
OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT SHALL BE TRIED AND
LITIGATED ONLY IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF
CALIFORNIA. EACH OF BORROWER AND LENDER WAIVES, TO THE EXTENT PERMITTED UNDER
APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
CONVENIENS OR TO


 


12

















 


OBJECT
TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION
K.6. BORROWER AND LENDER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THE
AGREEMENT OR THE NOTE OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. BORROWER AND LENDER REPRESENT THAT EACH HAS
REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL
RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A
COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.


 


7.                                       Rules of Construction.


 


a.                                       Except as otherwise expressly provided in
this Agreement, no reference to “proceeds” in this Agreement authorizes any
sale, transfer, or other disposition of the Collateral by the Borrower.


 


b.                                      “Includes” and “including” are not limiting.


 


c.                                       “Or” is not exclusive.


 


d.                                      “All” includes “any” and “any” includes
“all.”


 


8.                                       Integration and
Modifications.


 


(i)                                     The Transaction Documents, together with the
Exhibits and Schedules hereto and thereto, constitutes the entire agreement of
the Borrower and Lender concerning the subject matter hereof and supersedes all
prior drafts and communications relating to such subject matter.


 


(ii)                                  Any modification to this Agreement must be
made in writing and signed by the party adversely affected.


 


9.                                       Waiver. Any party to this Agreement may waive in a
signed writing the enforcement of any provision to the extent the provision is
for its benefit.


 


10.                                 Further Assurances. Borrower agrees to execute any further
documents, and to take any further actions, reasonably requested by Lender to
evidence or perfect the security interest granted herein, to maintain the first
priority of the security interests, or to effectuate the rights granted to
Lender herein


 


13

















 


11.                                 Attorneys’ Fees. In any dispute, contest, suit, action, or
proceeding by a party to this Agreement to enforce its rights under this
Agreement (whether arising in contract, tort, or both), or seeking a
declaration of any rights or obligations under this Agreement, against any
other party to this Agreement, including any litigation, arbitration,
mediation, contested matter, dispute, suit, action, or adversary proceeding,
and any appeal or review thereof, in connection with a case, action, or
proceeding commenced in any state or federal court or agency, or before an
arbitration panel or mediator, or under the Bankruptcy Code, or any other
applicable federal, state, or foreign bankruptcy or other similar law, the
prevailing party shall be awarded its reasonable attorneys’ fees, together with
any costs and expenses (including the cost of employing expert witnesses). The
Borrower and Lender intend that the preceding sentence be severable from the
other provisions of this Agreement, survive any judgment and, to the maximum
extent permitted by law, not be deemed merged into such judgment.


 


12.                                 Counterparts. This Agreement may be executed in one or
more counterparts all of which together shall constitute one instrument.


 


[Remainder of page intentionally left blank]


 


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IN
WITNESS WHEREOF, the Borrower and Lender have executed this
Agreement as of the date first above written.


 


 


	
   

  	
  Borrower:

  	
   

  
	
   

  	
   

  	
  CHAPARRAL NETWORK STORAGE, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Victor M. Perez

  
	
   

  	
  Name:

  	
  Victor M. Perez

  
	
   

  	
  Title:

  	
  Chief Executive Officer and President

  
	
   

  
	
   

  
	
   

  	
  Lender:

  	
   

  
	
   

  	
  XYRATEX TECHNOLOGY LIMITED

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Paul W Hannah

  
	
   

  	
  Name:

  	
  PAUL W HANNAH

  
	
   

  	
  Title:

  	
  EXEC VP OPERATIONS

  
					



 


 


[SIGNATURE
PAGE TO SECURITY AGREEMENT]


 












 








 


SCHEDULE A (1 of 3)


to the Security Agreement


 


Issued U.S. Patents owned
by Borrower


 


 


	
  Patent No.

  	
   

  	
  Issue Date

  	
   

  	
  Title

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  None.

  	
   

  	
   

  	
   

  	
   

  	
   

  



 

















 


SCHEDULE A (2 of 3)


 


Pending U.S. Patent
Applications or Registrations of Borrower


 


 


	
  Docket No.

  	
   

  	
  Serial No.

  	
   

  	
  Filing

  Date

  	
   

  	
  Title

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  USA 4430-22

  	
   

  	
  09751090

  	
   

  	
  12/31/00

  	
   

  	
  Recovering Data from
  Arrays of Storage Devices after certain failures

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  USA 4430-23

  	
   

  	
  09799480

  	
   

  	
  3/5/01

  	
   

  	
  Utilizing Parity Caching
  and Parity Logging while closing the RAID 5 Write Hole

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  USA 4430-24

  	
   

  	
  09852858

  	
   

  	
  5/9/01

  	
   

  	
  Mirroring between
  Controllers in an Active-Active Controller pair

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  USA 4430-26

  	
   

  	
  09942391

  	
   

  	
  8/29/01

  	
   

  	
  Initialization of a
  Storage System

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  USA 4430-27

  	
   

  	
  09861308

  	
   

  	
  5/17/01

  	
   

  	
  Method for Automatically
  detecting and correcting duplicate controller SCSI Ids

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  USA 4430-28

  	
   

  	
  09967027

  	
   

  	
  9/28/01

  	
   

  	
  Bus Zoning in a Channel
  Independent Controller Architecture

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  USA 4430-29

  	
   

  	
  09967126

  	
   

  	
  9/28/01

  	
   

  	
  Controller Data Sharing
  using a Modular DMA Architecture

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  USA 4430-30

  	
   

  	
  —

  	
   

  	
  11/8/01

  	
   

  	
  Obtaining Information to
  facilitate System Usage

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  USA 4430-32

  	
   

  	
  09967194

  	
   

  	
  9/28/01

  	
   

  	
  Modular Architecture for a
  Network Storage Controller

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  USA 4430-34

  	
   

  	
  —

  	
   

  	
  10/29/01

  	
   

  	
  Data Mirroring between
  Controllers in an Active-Active Controller pair

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  USA 4430-35

  	
   

  	
  —

  	
   

  	
  11/8/01

  	
   

  	
  Data Mirroring using
  Shared Buses

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  USA 4430-38

  	
   

  	
  —

  	
   

  	
  11/9/01

  	
   

  	
  Method and Apparatus for
  transferring data using Direct Memory Access

  	
   

  



 

















 


SCHEDULE A (3 of 3)


 


Patent Cooperation Treaty
Application


 


Title of invention:  Recovering
Data From Arrays of Storage Devices After


Certain Failures.


Priority Date Claim-12-29-2000


Number us application-9/751.090


Date of filing international-12-21-01