Document:

Exhibit 10.4

 

CONFORMED COPY

 

Dated           August 2003

 

 

THE
MANAGERS

 

and

 

XTX HGCAPITAL JERSEY LIMITED

 

and

 

THE COMPANY

 

and

 

THE EXISTING SHAREHOLDERS

 

and

 

THE
ADDITIONAL WARRANTY COVENANTORS

 

 

INVESTMENT
AND SHAREHOLDERS

AGREEMENT RELATING TO

XYRATEX GROUP LIMITED

 

 

 

One Silk
Street

London EC2Y
8HQ

 

 

Telephone
(44-20) 7456 2000

Facsimile
(44-20) 7456 2222

 

Ref Richard
Youle

 

 

Table of Contents

 

	
  Clause

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  1

  	
  Interpretation

  	
   

  
	
   

  	
   

  	
   

  
	
  2

  	
  Conditions

  	
   

  
	
   

  	
   

  	
   

  
	
  3

  	
  Completion and subscription

  	
   

  
	
   

  	
   

  	
   

  
	
  4

  	
  Warranties

  	
   

  
	
   

  	
   

  	
   

  
	
  5

  	
  Limitation of
  Warrantors’ liability

  	
   

  
	
   

  	
   

  	
   

  
	
  6

  	
  Fraud and
  wilful misconduct or concealment

  	
   

  
	
   

  	
   

  	
   

  
	
  7

  	
  Mitigation of Losses

  	
   

  
	
   

  	
   

  	
   

  
	
  8

  	
  Claims
  by NewCo

  	
   

  
	
   

  	
   

  	
   

  
	
  9

  	
  Warranties
  and undertakings relating to NewCo

  	
   

  
	
   

  	
   

  	
   

  
	
  10

  	
  Covenants by the Managers

  	
   

  
	
   

  	
   

  	
   

  
	
  11

  	
  Covenants relating to
  the Company

  	
   

  
	
   

  	
   

  	
   

  
	
  12

  	
  Directors

  	
   

  
	
   

  	
   

  	
   

  
	
  13

  	
  Board
  meetings and committees of Directors

  	
   

  
	
   

  	
   

  	
   

  
	
  14

  	
  Reserved
  matters

  	
   

  
	
   

  	
   

  	
   

  
	
  15

  	
  Budgets and information

  	
   

  
	
   

  	
   

  	
   

  
	
  16

  	
  Confidentiality

  	
   

  
	
   

  	
   

  	
   

  
	
  17

  	
  Exit

  	
   

  
	
   

  	
   

  	
   

  
	
  18

  	
  Transfers and issue of
  Shares

  	
   

  
	
   

  	
   

  	
   

  
	
  19

  	
  Termination

  	
   

  
	
   

  	
   

  	
   

  
	
  20

  	
  Public announcements

  	
   

  
	
   

  	
   

  	
   

  
	
  21

  	
  Notices

  	
   

  

 

i

 

	
  22

  	
  Whole agreement and
  remedies

  	
   

  
	
   

  	
   

  	
   

  
	
  23

  	
  General

  	
   

  
	
   

  	
   

  	
   

  
	
  24

  	
  Governing
  law and submission to jurisdiction

  	
   

  
	
   

  	
   

  	
   

  
	
  25

  	
  Authority to Deliver

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule 1
  Part 1 The Managers

  	
   

  
	
   

  	
   

  
	
  Schedule 1 Part 2
  NewCo

  	
   

  
	
   

  	
   

  
	
  Schedule 1
  Part 3 Existing Shareholders

  	
   

  
	
   

  	
   

  
	
  Schedule 1
  Part 4 Additional Warranty Covenantors

  	
   

  
	
   

  	
   

  
	
  Schedule 2
  Part 1 Particulars of the Company pre-completion of this Agreement

  	
   

  
	
   

  	
   

  
	
  Schedule 2
  Part 2 Particulars of the Subsidiaries pre-completion of this Agreement

  	
   

  
	
   

  	
   

  
	
  Schedule 3 Warranties

  	
   

  
	
   

  	
   

  
	
  Schedule 4
  Part 1 Matters to be effected on or prior to signature of this Agreement

  	
   

  
	
   

  	
   

  
	
  Schedule 4
  Part 2 Matters to be effected on or prior to Completion of this Agreement

  	
   

  
	
   

  	
   

  
	
  Schedule 5 Deed
  of Adherence

  	
   

  
	
   

  	
   

  
	
  Schedule 6
  Existing Incentive Schemes

  	
   

  

 

ii

 

This Agreement is made
on                August 2003
between:

 

(1)          THE PERSONS
whose names and addresses are set out in Part 1 of Schedule 1 (the “Managers”
and each a “Manager”);

 

(2)          XTX HGCAPITAL JERSEY LIMITED, (registered no. 85828) whose registered office is at 22
Grenville Street, St Helier, Jersey JE4 8PX (the “NewCo”);

 

(3)          XYRATEX GROUP LIMITED, (registered no. 4057904) whose registered
office is at Langstone Road, Havant, Hampshire PO9 1SA (the “Company”); and

 

(4)          THE
PERSONS whose names and addresses are set out in
Part 3 of Schedule 1 (the “Existing
Shareholders”).

 

(5)          THE
ADDITIONAL WARRANTY COVENANTORS whose names and
addresses are set out in Part 4 of Schedule 1 (the “Additional Warranty Covenantors”)

 

Recitals:

 

(A)         The Company is a private
company limited by shares, brief particulars of which are set out in Part 1 of
Schedule 2.

 

(B)          The Managers are the legal
and beneficial owners of the Xyratex Shares set opposite their names in Part 1
of Schedule 1.

 

(C)          The Existing Shareholders
are the legal and beneficial owners of the Xyratex Shares set opposite their
names in Part 3 of Schedule 1.

 

(D)         The matters set out in Clause
2 have been or will be effected on or prior to Completion and on that basis,
NewCo will subscribe for the NewCo Shares.

 

(E)          Taking into account the
Share Repurchase, NewCo intends to acquire up to 60% of the fully diluted
issued share capital of the Company pursuant to the Offer.

 

(F)          The Additional Warranty
Covenantors have agreed to join in this agreement solely for the purpose of
giving the covenant set out in Clause 4.3.

 

It is agreed as follows:

 

1             Interpretation

 

In this Agreement (including the Recitals):

 

1.1         Definitions

 

“A
Shareholder” means a holder of A Shares;

 

“A Shares” means the A Preferred Ordinary
Shares of £0.01 each in the capital of the Company having the rights set out in
the Articles;

 

“A
Director” means the director to be appointed pursuant to Clause
12.3;

 

“Accountants’ Report” means the report on
the Company by PricewaterhouseCoopers dated 6 August 2003 in the agreed
form;

 

“Accounts”
means the consolidated audited accounts of the Group for the 12 month period
ending 30 November 2002;

 

“Act” means the Companies Act 1985 as
amended by the Companies Act 1989;

 

1

 

“acting
in concert” shall have the meaning set out in the Code, save that
the parties to this Agreement shall not be deemed to be acting in concert
solely by reason of their having executed and their acting in accordance with
this Agreement;

 

“agreed form” means a document in the form
agreed on behalf of the Managers, the Existing Shareholders and NewCo and
initialled on behalf of each of them for the purposes of identification only;

 

“Articles”  mean the new articles of
association of the Company in the agreed form to be adopted on Completion, as
amended from time to time;

 

“Auditors” mean PriceWaterhouseCoopers LLP
of The Quay, 30 Channel Way, Ocean Village, Southampton, SO14 3QG or such other
firm of Chartered Accountants appointed auditors of the Company from time to
time;

 

“B Director” means a director appointed by
the holders of a Majority of B Shares in accordance with Clause 12.1 and “B Directors”
shall be construed accordingly;

 

“B
Shareholder(s)” means a holder of B Shares;

 

“B Shares” means the B Preferred Ordinary
Shares of £0.01 each in the capital of the Company having the rights set out in
the Articles;

 

“Bank”
means HSBC Bank plc;

 

“Board” means the board of directors of the
Company or an authorised committee of the Board;

 

“Business”  means the business of the
Group, as more fully described in the Business Plan;

 

“Business Day” means a day which is not a
Saturday or Sunday or a bank or public holiday in England and Wales;

 

“Business Plan” means the business plan for
the Group prepared from time to time by the Managers and approved in accordance
with Clause 13.2;

 

“Business Prospects Warranties” means those
Warranties other than the Existing Business Warranties, and the Warranties at
paragraphs 7.2, 7.3, 7.5 and 7.6 of Schedule 3;

 

“C
Shareholder” means a holder of C Shares;

 

“C Shares” means the C Ordinary Shares of
£0.01 each in the capital of the Company having the rights set out in the
Articles;

 

“Code” means the City Code on Takeovers and
Mergers;

 

“Completion”  means completion of this
Agreement in accordance with Clause 3;

 

“connected
person” shall have the meaning given to that expression in
Section 839 of ICTA;

 

“Conditions”
means the conditions to Completion set out in Clause 2;

 

“Deed of Adherence” means a deed
substantially in the form set out in Schedule 5;

 

2

 

“Directors” means the directors for the time
being of the Company and “Director” means any one of them;

 

“Disclosure Documents” means the documents
listed in the Schedule to the Disclosure Letter;

 

“Disclosure Letter” means the letter dated
the same date as this Agreement from the Warrantors to NewCo in the agreed form
relating to the Warranties;

 

“EBT” means the Havant International Employee Benefits Trust;

 

“Effective
Date” shall mean in the case of the Existing Shareholders the date
of Completion and in the case of the Managers shall mean the date such Manager
ceases to be employed by a Group Company;

 

“Existing
Business Warranties” means those Warranties contained at paragraphs
1 to 6 (inclusive), 7.4, 7.8.1(i) and 7.8.2(i) of Schedule 3;

 

“Existing Incentive
Schemes” means the existing share option and
other share based incentive schemes operated by the Company at the date hereof
for the benefit of employees
of the Company and each other Group Company as listed in schedule 6;

 

“Existing
Incentive Shares” means all Shares in the authorised but unissued share capital of the
Company which are, at the date of this Agreement, the subject of option or
similar arrangements under the Existing Incentive Schemes and all Shares which
are registered in the name of the EBT at that time;

 

“Existing
Shareholder Irrevocable Undertakings” means the irrevocable
undertakings to be given by the Existing Shareholders in favour of NewCo to
accept the Offer in the agreed form;

 

“Existing
Shareholder Shares” means the A Shares held by the Existing
Shareholders after the exercise of any options and Completion of the Offer and
the Share Repurchase in accordance with their respective terms;

 

“Facility Documents” means the Loan
Agreement and Security Documents;

 

“Fee
Schedule” means the schedule of fees in the agreed form to be
paid pursuant to Clause 23.11;

 

“Finally
Determined” means a final decision of a court or tribunal of
competent jurisdiction;

 

“Golden
Share” the special rights share (such special rights are detailed in
the NewCo Articles) to be issued jointly to Mr Wilkie and Mr Barber by NewCo on
Completion in accordance with Clause 3.3;

 

“Group” means the Company and its
Subsidiaries and its subsidiary undertakings from time to time and “Group
Company” means any one of them;

 

“Hart
Scott Rodino Condition” means the condition set out at Part A (h) of
Appendix 1 of the Offer Document;

 

“HgCapital”
means Hg Investment Managers Limited, a company registered in England and Wales
under company no. 1579496 and whose registered office is at Third Floor,
Minerva House, 3-5 Montague Close, London SE1 9BB;

 

3

 

“ICTA”
means the Income and Corporation Taxes Act 1988;

 

“Initial
Business Plan” means the business plan dated 31 July 2003 in
the agreed form;

 

“Insurance
Report” means the report in the agreed form on the insurance of the
Group prepared by Marsh Ltd;

 

“Investment
Fund” means any person, company, trust, limited partnership or fund
holding shares for investment purposes connected or associated with HgCapital
and not being a member of the Company (including a unit trust or an investment
trust);

 

“Legal
Due Diligence Report” means the due diligence report in the agreed
form on the Company prepared by NewCo’s Solicitors;

 

“Liable
Party” means in relation to all claims under the Warranties each
Manager who is in breach thereof; and

 

(i)            in relation to claims
under the Existing Business Warranties, each Warranty Covenantor;  and

 

(ii)           in relation to claims under
the Business Prospects Warranties, Mr Wilkie;

 

“Listing” means the admission of any of the
Ordinary Share Capital or of the ordinary shares of a holding company of the
Company to the Official List in the United Kingdom and the trading of those
Shares on the London Stock Exchange becoming effective, or the granting of
permission for any of the Ordinary Share Capital to be dealt on another
recognised investment exchange (as defined by section 285(1)(a) of the
Financial Services and Markets Act 2000) or the Alternative Investment Market,
regulated by the London Stock Exchange PLC or the National Association of
Securities Dealers Automated Quotations and “Listed” shall be construed
accordingly;

 

“Loan Agreement” means the Loan Agreement in
the agreed form to be entered into between the Company and the Bank, as amended
from time to time, to finance the Share Repurchase;

 

“Losses” means all losses, liabilities,
damages, costs (including, without limitation, legal costs and experts’ and
consultants’ fees), charges, expenses, actions, proceedings, claims and
demands;

 

“Majority”
means as regards members of a class or classes of Shares, a majority by
reference to the number of Shares of such class or classes held and not by
reference to the number of members holding Shares of such class or classes;

 

“Management
Accounts” means the management accounts of the Group for the period
to 30
June 2003 in the agreed form;

 

“Managers’
Irrevocable Undertakings” means the irrevocable undertakings to be
given by the Managers in favour of NewCo to accept the Offer in the agreed
form;

 

“Managers’ Questionnaires” means the
questionnaires completed by each Manager in the agreed form;

 

“Market
Value” shall have the meaning given to it in Article 42.1 of
the Articles;

 

“Maximum
Liability Amount” means

 

4

 

(i)            in relation to the
Managers, the net amount of salary in the period 30 November 2002 to 30
November 2003 and the net amount of bonuses paid to each Manager in
respect of business performance for that period in each case by any Group
Company; and

 

(ii)           in relation to each
Warranty Covenantor in respect of all breaches of the Existing Business
Warranties 15% of the proceeds (before tax) received by that Warranty
Covenantor pursuant to the Offer or Optionholder Proposals; and

 

(iii)          in respect of all breaches
of the Business Prospects Warranties, nil in relation to each Warranty
Covenantor other than Mr Wilkie and, in relation to Mr Wilkie, the net amount
of salary and bonuses paid to Mr Wilkie by any Group Company in the period 30
November 2002 to 30 November 2003;

 

“Mr
Barber” means Stephen Barber, one of the Managers;

 

“Mr
Wilkie” means William Kennedy Wilkie, one of the Existing
Shareholders;

 

“NewCo
Shares” means the B Shares subscribed for by NewCo at Completion
pursuant to Clause 3;

 

“NewCo’s Solicitors” means Linklaters of One
Silk Street, London, EC2Y 8HQ;

 

“New ISO
Plan” means the proposed incentive stock option plan in the agreed
form proposed to be adopted by the Company pursuant to the Resolutions;

 

“Offer”
means the offer to be made by NewCo to acquire up to 11,631,164 Xyratex Shares on the terms and subject to the conditions described
in the Offer Document, which expression shall include any revision or extension
of such offer or any offer made in substitution therefore;

 

“Offer
Document” means the document in the agreed form to be sent to the
shareholders of the Company containing the Offer;

 

“Official
List” means the list maintained by the competent authority (as
defined in Section 74 of the Financial Services and Markets Act 2000) for
the purpose of admitting securities to listing pursuant to Part VI of that Act;

 

“Optionholder
Proposals” means the proposals to be made to the holders of options
over shares in the capital of the Company on or about the date hereof in
connection with the Offer;

 

“Ordinary Share Capital” means the A Shares,
the B Shares and the C Shares;

 

“Press
Announcement” means the press announcement relating to the Offer and
this Agreement in the agreed form;

 

“Relevant Managers’
Percentage” means in relation to each
Manager who is a Liable Party the amount which the Maximum Liability Amount
applicable to that Manager represents as a percentage of the aggregate amount
of the Maximum Liability Amounts of all other Managers who are Liable Parties;

 

“Relevant
Warranty Covenantors’ Percentage” means in relation to each Warranty
Covenantor who is a Liable Party the amount which the Maximum Liability Amount
applicable to that Warranty Covenantor represents as a percentage of the
aggregate

 

5

 

amount of the Maximum Liability Amounts of
all Warranty Covenantors who are Liable Parties;

 

“Remuneration”
means the aggregate of salary, bonuses, payments in kind, ex gratia payments,
commissions, pension contributions, participation in share options, profit
sharing and incentive remuneration schemes and any other benefit flowing to a
person or anyone connected with him by reason of that person’s employment,
office or directorship in or of any member of the Group;

 

“Remuneration
Committee” means the remuneration committee as defined in Clause
12.2 below;

 

“Reports”
means the Accountants’ Report and the Legal Due Diligence Report;

 

“Resolutions” means the resolutions of the
Board and the Company in the agreed form;

 

“Sale” means the acquisition of Shares
representing not less than 50 per cent. of the Ordinary Share Capital by any
person and any other person:

 

(i)            who, in relation to him,
is a connected person; or

 

(ii)           with whom he is acting in
concert;

 

“Security Documents” means the documents
listed in schedule 7 to the Loan Agreement;

 

“Share
Repurchase” means the proposed purchase by the Company of all the
Xyratex Shares registered in the names of Ace LP, Murray Johnstone Private
Acquisitions Partnership I ‘A’ and Murray Johnstone Private Acquisitions
Partnership I ‘B’ and part of the Xyratex Shares registered in the joint names
of Ken Wilkie, Derek Holt and David Martin as trustees of a funded unapproved
retirement benefit scheme pursuant to the terms of the Share Repurchase
Agreements;

 

“Share
Repurchase Agreements” means the agreements to be entered into
between (i) the Company and Ace LP, Murray Johnstone Private Acquisitions
Partnership I ‘A’ and Murray Johnstone Private Acquisitions Partnership I ‘B’
and (ii) the Company and Ken Wilkie, Derek Holt and David Martin to effect the
Share Repurchase in the agreed form;

 

“Share
Repurchase Resolutions” shall have the meanings given thereto in the
Offer Document;

 

“Shareholders” means the holders of the
Shares;

 

“Shares” mean the A Shares, the B Shares and
the C Shares and (1) any shares issued in exchange for those shares or by way
of conversion or reclassification and (2) any shares representing or deriving
from those shares as a result of an increase in, reorganisation or variation of
the capital of the Company;

 

“Subsidiaries”
means those companies which are subsidiaries of the Company, brief details of
which are set out in Part 2 of Schedule 2 or, as the case may be, any
subsidiary of the Company from time to time;

 

“Warrantors”
means each of the Managers;

 

“Warranties” means the warranties set out in
Clause 4 and Schedule 3 and a “Warranty”
means any of them;

 

6

 

“Warranty Covenantors” means Mr Wilkie, Derek Holt, Michael Dinham and the Additional
Warranty Covenantors.

 

“Xyratex
Shares” shall have the meaning given to it in the Offer Document.

 

1.2         Interpretation Act 1978

 

The Interpretation Act 1978 shall apply to
this Agreement in the same way as it applies to an enactment.

 

1.3         Subordinate legislation

 

References to a statutory provision include
any subordinate legislation made from time to time under that provision.

 

1.4         Modification etc. of statutes

 

References to a statute or statutory
provision include that statute or provision as from time to time modified or
re-enacted or consolidated whether before or after the date of this Agreement
so far as such modification or re-enactment or consolidation applies or is
capable of applying to any transactions entered into in accordance with this
Agreement and (so far as liability thereunder may exist or can arise) shall
include also any past statute or statutory provision (as from time to time
modified or re-enacted or consolidated) which such provision has directly or
indirectly replaced provided that nothing in this Clause 1.4 shall operate to
increase the liability of any party beyond that which would have existed had
this Clause 1.4 been omitted.

 

1.5         Companies Act 1985

 

The expressions “holding company” and “subsidiary”
and “subsidiary
undertaking”
shall have the same meanings in this Agreement as their respective definitions
in the Act.

 

1.6         Clauses, Schedules etc.

 

References to this Agreement include any
Recitals and Schedules to it and this Agreement as from time to time amended
and references to Clauses and Schedules are to Clauses of and Schedules to this
Agreement. References to paragraphs are to paragraphs of the Schedules.

 

1.7         Headings

 

Headings shall be ignored in construing
this Agreement.

 

1.8         Time of day

 

References to time of day are to London
time.

 

1.9         Winding-up

 

References to the winding-up of a person
include the amalgamation, reconstruction, reorganisation, administration,
dissolution, liquidation, merger or consolidation of such person and any
equivalent or analogous procedure under the law of any jurisdiction in which
that person is incorporated, domiciled or resident or carries on business or
has assets.

 

7

 

1.10       Information

 

Any reference to books, records or other
information means books, records or other information in any form including
paper, electronically stored data, magnetic media, film and microfilm.

 

1.11       Definitions in Articles

 

Words and expressions defined in the
Articles have the same meanings in this Agreement unless the context otherwise
requires.

 

1.12       Representatives and persons

 

References to those of the parties that are
individuals include their respective legal personal representatives and
references to persons shall include bodies corporate, partnerships and
unincorporated associations.

 

1.13       Gender

 

References to the masculine or feminine
genders include the neuter and vice versa.

 

1.14       Alternate Directors

 

References to a B Director or an A Director
(as the case may be) shall include any alternate appointed to act in his place
from time to time.

 

1.15       NewCo Consents

 

In relation to NewCo except where otherwise
expressly provided in this Agreement;

 

1.15.1    consents,
approvals, agreements, actions and rights to be made or given by or that have
been granted to NewCo may be validly made or given or exercised by HgCapital
and/or a B Director (if appointed at the relevant time); and

 

1.15.2    notices,
information or documents to be given to NewCo shall also be given to HgCapital
and any one of the B Directors (if appointed at the relevant time).

 

1.16       A Directors

 

For so long as Mr Wilkie holds office as a
director of the Company references in this Agreement to ‘A Directors’ shall be
construed as references to Mr Wilkie unless some other person has been
appointed as the A Director pursuant to Clause 12.3.

 

2             Conditions

 

2.1         Conditions precedent

 

Completion of this Agreement is conditional
on:

 

2.1.1      the
Facility Documents becoming unconditional in all respects;

 

2.1.2      the Offer
becoming or (where permitted by the terms of the Offer) being declared
unconditional in all respects on or before 30 September 2003 (the “Long Stop Date”) provided always that if
the Offer cannot be declared unconditional in all respects due to the Hart
Scott Rodino Condition not being satisfied such Long Stop

 

8

 

Date shall automatically be extended to 30
October 2003 or, in each case, such later date as may be agreed by NewCo
and the Company; and

 

2.1.3      those
matters set out in Part 2 of Schedule 4 having been effected.

 

The parties hereto agree to use their
reasonable endeavours to procure that (i) the above conditions are satisfied by
the Long Stop Date or such other date as may be agreed by NewCo and (ii) within
5 Business Days of the date hereof, NewCo and the Company make valid and
binding filings, pay all relevant fees and take all such further action as is
reasonably required with the intention of ensuring that the Hart Scott Rodino
Condition is satisfied.

 

2.2         Responsibility of the Managers and Existing
Shareholders

 

2.2.1      Each
Manager and Existing Shareholder severally undertakes to NewCo subject always to
his fiduciary duties to the Company that prior to Completion or the Long Stop
Date whichever is the sooner he shall use his reasonable endeavours in his
capacity as a director or employee of the Company and its Subsidiaries (as
appropriate) to procure that each member of the Group shall:

 

(i)           conduct the Business in the
ordinary course and on an arm’s length basis;

 

(ii)          continue to pay its
creditors in the ordinary course of business or within the usual terms of
payment of such creditors;

 

(iii)         seek to maintain its trade
and trade connections and not deliberately by any action, omission, neglect or
default, damage or risk the same;

 

(iv)         maintain the insurances as
have been maintained prior to the date of this Agreement, as set out in
sections 5,6,7 and 8 of the Insurance Report.

 

2.2.2      The
Managers, Existing Shareholders and the Company agree not to vary the terms or
waive any of the conditions to or any rights under the Facility Documents
without the written consent of NewCo.

 

2.2.3      Each
Manager and Existing Shareholder hereby agrees to keep NewCo reasonably
informed from the date of this Agreement until such time as the Offer is
declared wholly unconditional in all respects as to their proposals for the
implementation of the provisions of Clause 3.7 including all discussions with
the Inland Revenue.

 

2.3         Responsibility of the Company

 

2.3.1      The Company
agrees to:

 

(i)           post the Offer Document to
each Shareholder of the Company who is entitled to receive the same in
accordance with the terms of the Offer; and

 

(ii)          post such letters as are
required to holders of options over shares in the capital of the Company to
implement the Optionholder Proposals; in each case within 3 Business Days of
the execution of this Agreement.

 

9

 

2.4         Non-satisfaction

 

If the Conditions are not satisfied or
waived on or before the Long Stop Date, this Agreement shall lapse and no party
shall have any claim against any other under it, save with respect to any
antecedent rights arising hereunder.

 

2.5         Restrictions

 

Each Manager and Existing Shareholder
severally undertakes to NewCo that prior to Completion he will:-

 

2.5.1      other than
pursuant to options granted to him prior to the date hereof in respect of
Xyratex Shares, not purchase or otherwise acquire any ordinary shares or other
securities in the Company or any interest therein or rights thereover;

 

2.5.2      not solicit
any other offer in respect of any or all of the issued share capital of the
Company; and

 

2.5.3      not enter
into any agreement, arrangement or obligation with any person whether
conditional or unconditional to do all or any of the acts referred to in this
Clause 2.5.

 

2.6         Undertakings as a Director or Employee

 

Each Manager and Existing Shareholder
severally undertakes to NewCo that, in his capacity as director or employee of
the Company and/or any of its Subsidiaries (as appropriate) but subject to his
fiduciary and other duties as a director or employee of the Company or any of
its Subsidiaries, he will:

 

2.6.1      at all times
prior to the Offer becoming or being declared wholly unconditional:

 

(i)           use
all his reasonable endeavours to procure in so far as he is able that no
announcement is made by or on behalf of him or the Company in connection with
the Offer or the Share Repurchase without prior consultation with NewCo;

 

(ii)          refrain
from taking any action or making any statement which he reasonably believes is
or may be prejudicial to the success of the Offer or the Share Repurchase;

 

(iii)         procure
so far as he is able that such meetings of the directors of the Company or
members of the Group (if so requested by NewCo) as may be necessary to propose
such resolutions as may be required to enable the Offer and/or the Share
Repurchase to be implemented will be convened;

 

(iv)         procure
as far as he is able that no dividend is recommended to the shareholders of the
Company without the consent of NewCo;

 

(v)          procure
as far as he is able that no allotment or grant of options over Shares is
effected (except pursuant to existing obligations or to the extent that such
allotment or grant has been approved or authorised in accordance with the
provisions of this agreement or to the extent previously agreed in writing by
NewCo) ;

 

10

 

(vi)         procure
so far as he is able that no issue of any debt or other securities convertible
into Shares takes place and no Agreement is entered into to do any of the
foregoing;

 

2.6.2      upon the
Offer having become or been declared unconditional in all respects so far as he
is able vote to approve the registration of all transfers of shares made
pursuant to or in connection with the Offer (subject to the same being duly
stamped) and vote in favour of the appointment of Nic Humphries and such other
person as is nominated by NewCo as directors of the Company; and

 

2.6.3      upon the
Offer being declared unconditional in all respects procure that the Company:

 

(i)           issues
a valid and binding and unconditional Utilisation Request to the Bank in
accordance with and as defined in the Loan Agreement; and

 

(ii)          completes
the Share Repurchase in accordance with the terms of the Share Repurchase
Agreements.

 

2.7         The parties hereto agree that in the event the board with such majority
as is detailed in Article 5.3.1 and having due regard to all relevant
factors including the principles set out in Article 7.1 reasonably
considers (i) that some or all of the profits of the Company available for
distribution should be so distributed and/or (ii) that a transaction or
transaction(s) are contemplated which is in the best interests of the Company
and may give rise to the creation of such available distributable reserves (for
example the disposal by the Company of a significant part of its business) then
to the extent that the board so resolves each party hereto undertakes to use
their reasonable endeavours to procure that such action as is required is taken
to reflect and implement such resolution.

 

3             Completion and subscription

 

3.1         Completion

 

3.1.1      Subject to
satisfaction or waiver of the Conditions, Completion shall take place at the
offices of NewCo’s Solicitors (or such other place as may be agreed between the
parties).

 

3.1.2      On
Completion, those matters detailed in Part 2 of Schedule 4 shall take
place in such order as NewCo may require.

 

3.2         NewCo Subscription

 

NewCo hereby applies for the issue and
allotment to it at Completion of 665,188  NewCo Shares at a price of 5
pence per B Share and the Company accepts such application.

 

3.3         Issue of Golden Share by NewCo

 

3.3.1      Mr Wilkie
and Mr Barber hereby jointly apply for the issue and allotment to them at
Completion of the Golden Share at a price of £1.

 

3.3.2      On
Completion NewCo shall issue to Mr Wilkie and Mr Barber (jointly) the Golden
Share credited as fully paid and enter their names in the register of members
of NewCo as the joint holders thereof and deliver to Mr Barber a certificate
for such Golden Share.

 

11

 

3.4         Registration

 

NewCo shall be entitled to direct that some
or all of the NewCo Shares may be issued and registered in the name of any
nominee or custodian holding such NewCo Shares on its behalf as bare nominee
and the provisions of Clauses 3.2 shall be interpreted accordingly. Subject to
the foregoing NewCo and each Manager agrees to accept the NewCo Shares and
Management Shares (as appropriate) for which it has subscribed subject to the
terms of the Articles and to the entry of its name, or the name of its nominee
or custodian in the register of members as the holder thereof.

 

3.5         Application of moneys

 

The Company shall apply the moneys
subscribed by NewCo and all moneys lent to the Company pursuant to the Facility
Documents in the following manner and order:

 

3.5.1      in paying
amounts due under the terms of the Share Repurchase;

 

3.5.2      in paying
the costs and expenses associated with the transactions referred to in this
Agreement; and

 

3.5.3      for working
capital purposes in the furtherance of the Business in accordance with the
Business Plan.

 

3.6         Rights of pre-emption etc.

 

Each of the Managers and the Existing
Shareholders hereby irrevocably waives any and all rights or restrictions
(whether rights of pre-emption or otherwise) which may be conferred upon them
by the Articles or this Agreement or otherwise which would otherwise entitle
them to frustrate or impede the Share Repurchase and the Offer.

 

3.7         Employee option pool

 

3.7.1      The parties
hereby agree that up to 2,576,041 C Shares and up to 400,000A Shares (the “New Incentive Shares”) and any Existing
Incentive Shares which from time to time cease to be subject to option or other
arrangements pursuant to the Existing Incentive Schemes (whether by reason of
the termination of employment by the persons entitled thereto or otherwise
howsoever) (together the “Employee Option
Pool”), shall subject to Clauses 3.7.2 and 3.7.3 below be available
for issue after Completion to the Managers and other employees of the Group in
accordance with the rules of one or more of the Existing Incentive Schemes and/or any other employee share incentive or option plan which may be
adopted subject to the approval of the Board by resolution in respect of which
at least one B Director has voted in favour and NewCo, each Manager and the
Existing Shareholders shall procure that (and insofar as their own holdings of
Xyratex Shares are concerned, hereby waive irrevocably) any and all rights or
restrictions (whether rights of pre-emption or otherwise) which may be
contained in or conferred by the Articles or this Agreement or otherwise are
waived irrevocably by the persons entitled thereto to the extent necessary to
enable issues of shares to take place pursuant to the Existing Incentive
Schemes and/or any such plan.

 

3.7.2      The Shares
comprised in the Employee Option Pool shall be issued to such employees of the
Group as may from time to time be approved by the

 

12

 

Remuneration Committee, such approval to
include the positive vote of any one B Director.

 

3.7.3      Immediately
prior to an Exit, to the extent that any of the shares comprised in the
Employee Option Pool are not held by or under option to employees of the Group
pursuant to Clause 3.7.2 (such employees being the “Existing Optionholders”), the remainder of the Employee Option
Pool shall be issued to the Existing Optionholders and/or such other employees
of the Group in such amounts as the Chief Executive Offer of the Company and
any one B Director shall agree and in default of such agreement shall be issued
to the Existing Optionholders (other than the Chief Executive Officer of the
Company) on a basis pro rata to their respective holdings of C Shares and
options over C Shares at that time.

 

4             Warranties

 

4.1         Warrantors’ Warranties

 

4.1.1      Each of the
Warrantors severally warrants for himself alone to NewCo and its successors in
title that, each of the Warranties is true and accurate subject only to:

 

(i)           any matter which is fairly
disclosed in the Disclosure Letter; and

 

(ii)          any limitations, exceptions
or exclusions expressly provided for in Clause 4.

 

4.1.2      The
Warrantors confirm and agree that each of the Warranties shall be separate and
independent and shall not be limited by reference to any other Warranty or by
anything in this Agreement.

 

4.1.3      Any
Warranty qualified by the expression “so far as the Warrantor is aware”, “to
the Warrantors’ knowledge, information and belief”, “known to the Warrantor” or
any similar expression shall, unless otherwise stated, be deemed to be given to
the best of the actual knowledge, information and belief (without having made
enquiry of any other person) of the relevant Warrantor.

 

4.2         Several liability

 

The liability of each of the Warrantors
under or pursuant to any of the provisions of this Agreement shall be several
provided that no claim against any Warrantor made hereunder shall be validly
made unless at the same time as such claim is made a claim in respect of such
breach of Warranty is also made against each other Manager who is or who is
reasonably believed to be a Liable Party and the liability of each such party shall
not in whole or in part be released, compounded or compromised nor shall any
time or indulgence be given by NewCo in favour of such party unless the
release, compounding, compromise, time or indulgence is also granted to each
other Liable Party.

 

4.3         Warranty Covenantors

 

4.3.1      Each
Warranty Covenantor hereby irrevocably and unconditionally covenants that in
the event that it is Finally Determined that any Manager is liable to make any
payment under the Warranties then to the extent that the loss suffered by NewCo
in respect of the breach of Warranty giving rise to such liability exceeds the
amount recoverable hereunder from that Manager and any other Manager who is a
Liable Party (such excess being the “Excess
Liability”) that Warranty Covenantor shall

 

13

 

pay to NewCo an amount equal to his or her
Relevant Warranty Covenantors’ Percentage of such Excess Liability provided
that the aggregate liability of each Warranty Covenantor in respect of all
amounts payable by that Warranty Covenantor pursuant to this Clause 4 shall in
no event exceed an amount equal to his or her Maximum Liability Amount.

 

4.3.2      The
Managers shall be deemed not to be liable to make any payment under the
Warranties for the purpose of clause 4.3.1 unless such liability is Finally
Determined or they have entered into a binding compromise agreement with the
consent of each of the Warranty Covenantors.

 

4.4         Managers’ waiver of rights against Group
Companies etc.

 

Each of the Warrantors with effect from
Completion waives any rights, remedies or claims which they may have against
the Group in respect of any misrepresentation, inaccuracy or omission in or
from any information or advice supplied or given by any other Warrantors or by
any member of the Group or its directors, officers, employees or agents, in
connection with assisting the Warrantors in the making of any representation,
the giving of any Warranty or the preparation of the Disclosure Letter.

 

4.5         Effect of Completion

 

The Warranties and all other provisions of
this Agreement insofar as the same shall not have been performed at Completion
shall not be extinguished or affected by Completion, or by any other event or
matter whatsoever (including, without limitation, any satisfaction and/or
waiver of any Condition).

 

4.6         Information supplied

 

Any information supplied by any Group
Company or any of their agents, representatives or advisers to the Warrantors
or their agents, representatives or advisers in connection with, or which forms
the basis of, any of the Warranties or the Disclosure Letter or otherwise in
relation to the business and affairs of any Group Company (whether before or
after the date hereof) shall not be treated as a representation, warranty or
guarantee of the accuracy thereof by the relevant Group Company to the
Warrantors and shall not constitute a defence to any claim by the Investors
under the Warranties and each of the Warrantors hereby irrevocably waives any
and all claims against the relevant Group Company in respect thereof.

 

4.7         Payment by a third party

 

If, subsequent to any payment to NewCo by
the Warrantors in respect of any Warranty claim, any Group Company receives any
payment from any third party in respect of any Losses suffered by a Group
Company which resulted in the claim, NewCo shall reimburse to the Warrantors an
amount equal to the proportion of such payment which the amount paid by the
Warrantors to NewCo in respect of the matter giving rise to the claim bears to
such Losses.

 

5             Limitation of Warrantors’ liability

 

Notwithstanding the provisions of Clause 4,
the Warrantors shall not be liable for breach of Warranty:

 

14

 

5.1         Time limitation for claims

 

in respect of any claim unless written
notice of such claim is given by NewCo to the Warrantor(s) who is/are believed
by NewCo to be a Liable Party with a copy to Mr Wilkie and to the Company’s
Solicitors, DLA of 3 Noble Street, London, EC2V 7EE for the attention of Mark
Taylor, setting out such details as are available of the specific matter giving
rise to the claim including, if practicable, an estimate of the amount of
Losses which are, or are to be, the subject of the claim, including any Losses
which are contingent on the occurrence of any future event, on or prior to 31
July 2004:

 

5.2         Individual de minimis claims

 

in respect of any claim unless the amount
of such claim exceeds £100,000 (“Qualifying
Claim”).

 

5.3         Aggregate minimum claims

 

in respect of any claim unless the value of
the Company has been significantly impaired and the aggregate amount of all
Qualifying Claims exceeds £5,000,000, but if the value of
the Company having been significantly impaired, and the aggregate liability in
respect of all such Qualifying Claims exceeds that figure then all Qualifying
Claims shall accrue against and be recoverable from the Warrantors in full;

 

5.4         Maximum liability

 

in respect of any claim to the extent that
the amount of the liability of the Warrantor in respect of that claim exceeds
that Warrantor’s Relevant Managers’ Percentage of the liability arising
therefrom and in any event to the extent that the aggregate amount of the
liability of such Warrantor in respect of that claim and all previous claims
made for breach of Warranty would exceed that Warrantor’s Maximum Liability
Amount.

 

5.5         Calculation of damages

 

if the profits of any Group Company are
less than they would otherwise have been by virtue of a claim for breach of
Warranty then the loss suffered by NewCo shall be calculated in accordance with
the principles ordinarily applied but by reference only to the profits or
revenues in those particular years in which the loss arises without applying a
multiple of profits or revenues for that period.

 

5.6         Reduction of consideration

 

any amounts paid by the Managers and the
Warranty Covenantors pursuant to clause 5 shall be treated as a reduction in
the consideration paid to such persons pursuant to the Offer.

 

5.7         Contingent liabilities

 

in respect of any liability which is
contingent unless and until such contingent liability becomes an actual
liability and is due and payable but this Clause 5.4 shall not operate to avoid
a claim made in respect of a contingent liability within the time limit
specified in Clause 5.1 and in the manner specified in Clauses 5.1 and 8.1;

 

15

 

5.8         Provisions in the Accounts

 

in respect of any claim if and to the
extent that specific provision or reserve is made for the matter giving rise to
the claim in the Accounts (and is not subsequently released);

 

5.9         Voluntary acts, etc.

 

in respect of any matter, act, omission or
circumstance (or any combination thereof), including the aggravation of a
matter or circumstance to the extent that the same would not have occurred but
for:

 

5.9.1      any
voluntary act, omission or transaction of NewCo, or its directors, officers,
employees or agents or successors in title, after Completion done or omitted
otherwise than in the ordinary course of business of NewCo and in the knowledge
that such act, omission or transaction might give rise to, or increase the
extent of, a claim under this Agreement or in circumstances where such claim
was reasonably foreseeable as a result of such act, omission or transaction;

 

5.9.2      the passing
of, or any change in, after the date of this Agreement any law, rule,
regulation or administrative practice of any government, governmental
department, agency or regulatory body or any change of any generally accepted
interpretation or application of any of the same;

 

5.9.3      any change
in accounting bases or policies in accordance with which the Company values its
assets or calculates its liabilities or any other change in accounting practice
from the treatment or application of the same used in preparing the Accounts
(save to the extent that such changes are required to correct errors or because
relevant generally accepted accounting principles have not been complied with).

 

5.10       Insurance

 

in respect of any claim to the extent that
any Losses arising from such claim are covered by a policy of insurance in
force on the date of this Agreement and payment is made by the insurer or would
have been made if a claim had been submitted under such policy.

 

6             Fraud and wilful misconduct or concealment

 

None of the limitations contained in Clause
5 shall apply to any claim against a Warrantor which arises or is increased, or
to the extent to which it arises or is increased, as the consequence of, or
which is delayed as a result of, fraud or dishonest misconduct or dishonest
concealment by that Warrantor provided that the liability of the Warranty
Covenantors in such circumstances shall not be increased as a result of such
fraud or dishonest misconduct or dishonest concealment and shall be calculated
as if the provisions of Clause 5 still applied.

 

7             Mitigation
of Losses

 

NewCo shall procure that all reasonable
steps are taken and all reasonable assistance is given to avoid or mitigate any
Losses which in the absence of mitigation might give rise to a liability in
respect of any claim for breach of Warranty.

 

16

 

8             Claims
by NewCo

 

8.1         Admission of liability and settlement

 

If any matter comes to the notice of NewCo
in respect of which NewCo is aware any of the Warrantors may be or become
liable under any Warranty NewCo shall (insofar as it is able) procure that the
Company:

 

8.1.1      shall not
make any admission of liability, agreement or compromise to or with any person
in relation thereto without first consulting with the Warrantors and Mr Wilkie;
and

 

8.1.2      shall be
permitted a reasonable opportunity to avoid, dispute, resist, appeal or
compromise any claim in respect of which the Warrantors may be or become liable
under any Warranty subject to:

 

(i)           the Company being
indemnified by the Warrantors to the reasonable satisfaction of NewCo against
all costs and expenses which the Company may incur by reason of such action;
and

 

(ii)          the best interests of the
Business not being likely to be prejudiced by any such action.

 

8.2         Double claims

 

NewCo shall not be entitled to recover from
the Warrantors under this Agreement more than once in respect of the same
Losses suffered.

 

9             Warranties and undertakings relating to NewCo

 

9.1         Warranties

 

NewCo warrants that:

 

(i)           the
particulars relating to NewCo set out in Part 2 of Schedule 1 are true and
accurate in all respects; and

 

(ii)          NewCo
has the power and authority to enter into and perform this agreement.

 

9.2         Undertakings

 

NewCo undertakes that it will not register
the transfer of any of its shares (“NewCo
Shares”) by any holders of shares in NewCo (“NewCo Shareholder”) to any person other
than:

 

9.2.1      a Corporate
Permitted Transferee (as defined in the Articles) in relation to NewCo; or

 

9.2.2      an
Investment Fund (or its trustee, custodian or nominee) or any person which is:

 

(i)           any trustee, nominee or
custodian for such fund and vice versa;

 

(ii)          any unitholder, shareholder,
partner, participant, manager or adviser (or an employee of such manager or
adviser) in any such fund;

 

(iii)         any other Investment Fund or
its trustee, nominee or custodian, managed or advised by the same manager or
adviser as any such fund; or

 

17

 

9.2.3      a trustee,
nominee, custodian or Corporate Permitted Transferees thereof of any of the
persons referred to in sub-paragraph as (i), (ii) or (iii) of Clause 9.2.2.
above; or

 

9.2.4      any person
who manages or advises any or all of the assets for the time being of any of
the NewCo Shareholders or any of its Corporate Permitted Transferees;

 

unless they have first procured that the
proposed transferee has made an offer to the A Shareholders and the C
Shareholders to acquire the same proportion of their holdings of Shares as that
proposed to be transferred by the NewCo Shareholders on the same terms as those
offered to the NewCo Shareholders at the price specified in Article 41.

 

10          Covenants by the Managers

 

10.1       Restrictions on the Managers and Existing
Shareholders

 

For the purposes of assuring to NewCo the
value of the Business and the full benefit of the goodwill of the Business,
each of the Managers and Existing Shareholders severally undertakes with NewCo
and the Company that, except with the written consent of NewCo:

 

10.1.1    he shall not,
except in the course of his or her duties as an employee (if applicable), use
or disclose to any person any Confidential Information and will use his
reasonable endeavours to prevent the use or disclosure of such Confidential
Information;

 

10.1.2    for 12 months
after the Effective Date, the Manager or Existing Shareholder (as the case may
be) shall not (on his or her own behalf or on behalf of any person) within a
territory in which any Group Company operates at the Effective Date, directly
or indirectly in competition with a business of any Group Company:

 

(i)           seek
to procure orders from or do business with any person who has been a customer
of any Group Company at any time during the year before the Effective Date; or

 

(ii)          engage,
employ, solicit or contact with a view to his or her engagement or employment
any person who is or has been employed by any Group Company at a salary in
excess of £40,000 (or the local currency equivalent) per annum at any time
during the year before the Effective Date; 
and

 

10.1.3    for 12 months
after the Effective Date, the Manager or Existing Shareholder (as the case may
be) shall not within a territory in which any Group Company operates at the
Effective Date either alone or jointly with or as manager, adviser, consultant,
agent or employee of any person directly or indirectly carry on or be engaged
in any business in competition with the business of any Group Company as
operated at the Effective Date.

 

10.2       Invalidity

 

10.2.1    Each of the
restrictions in this Clause 9 is an entirely separate and independent
restriction on each Manager and Existing Shareholder and the validity of one
restriction shall not be affected by the invalidity or unenforceability of
another.

 

10.2.2    Each Manager
and Existing Shareholder considers the restrictions in this Clause 9 to be
reasonable and necessary for the protection of the interests of the Company and
NewCo. If any such restriction shall be held to be void but would be valid if

 

18

 

deleted in part or reduced in application,
such restriction shall apply with such deletion or modification as may be
necessary to make it valid and enforceable.

 

11          Covenants relating to the Company

 

11.1       Company’s undertakings

 

The Company agrees and undertakes (and,
where relevant, agrees and undertakes to procure) and each of the Managers and
Existing Shareholders undertakes to procure (so far as they are reasonably able
so to do), that:

 

11.1.1    each Group
Company shall carry on its business in the manner contemplated by the Business
Plan;

 

11.1.2    the Company
will, if so requested in writing by NewCo, enforce its rights under or pursuant
to this Agreement, the Articles and the Facility Documents (including the
agreements made pursuant thereto);

 

11.1.3    all steps
necessary are taken to ensure performance of the terms of this Agreement;

 

11.1.4    the Company
will, if so requested by NewCo, enforce its rights under or pursuant to the
terms of employment of a Manager or any employee earning a base salary of at
least £40,000 (or local currency equivalent) per annum under his Service
Agreement in circumstances where the Company is permitted to do so; and

 

11.1.5    as soon as
reasonably possible after becoming aware of the same, NewCo is notified in
writing of any breach or threatened or impending breach of any of the
covenants, warranties or other terms of the Facility Documents and of any
material litigation by or against any Group Company or which affects the
Business or any dispute or other circumstances which are outside the ordinary
course of business and are likely to give rise to any such litigation.

 

12          Directors

 

12.1       B Directors

 

12.1.1    The B
Shareholder(s) (acting by Majority) shall have the right to appoint and
maintain in office (i) two persons as the B Shareholder(s) may from time to
time nominate as non-executive Directors (and each as a member of each and any
committee of the Board) and to remove any Directors so appointed and, upon his
or her removal, whether by the B Shareholder(s) or otherwise, to appoint
another Director in his place and (ii) whilst ever two B Directors are not so
appointed as set out above, to appoint a representative to attend as an
observer at each and any meeting of the Board and each and any committee of the
Board.

 

12.1.2    The Directors
appointed under Clause 12.1.1 shall each be a B Director. Nic Humphries will be
the first B Director.

 

12.1.3    Appointment
and removal of a B Director shall be by written notice to the Company from the
holders of a Majority of the B Shares which shall take effect on delivery at
the Company’s registered office or at any meeting of the Board or committee
thereof.

 

19

 

12.1.4    NewCo shall
indemnify and hold harmless the Company and each member of the Group in respect
of any costs claims, expenses or other liabilities which may be suffered or
incurred by the Company or any other member of the Group as a consequence of
the removal from office of any B Director whether pursuant to clause 12.3 or
otherwise other than amounts payable by the Company to such B Director in
respect of any accrued but unpaid director’s fees or expenses to which such B
Director is entitled.

 

12.1.5    The Company
shall pay to the B Shareholder(s) (or as it shall direct) in respect of the
provision of services a fee of £30,000 per annum per B Director in office
appointed pursuant to Clause 12.1.1 exclusive of VAT. Such fee shall accrue due
from day to day and be payable upon receipt of an invoice quarterly in arrears.

 

12.1.6    The fee
specified in Clause 12.1.5 shall not be increased for two years following the
date hereof but thereafter shall be increased on each anniversary of the date
of Completion by the lower of (i) a minimum percentage increase equal to the
annual percentage increase in the general index of retail prices for all items,
currently published by the Office for National Statistics or any equivalent
index if replaced during the 12 month period prior to the date of the most
recently published figure for such index; and (ii) the percentage equal to the
average percentage increase of basic salary for each executive director of the
Company in the relevant period.

 

12.1.7    The Company
will reimburse each B Director and any observer appointed pursuant to Clause
12.1 with the reasonable costs and out of pocket expenses incurred by him or
such observer in respect of attending meetings of the Company or carrying out
authorised business on behalf of the Company.

 

12.1.8    The B
Shareholder(s) may appoint another Director, or in exceptional circumstances
any other person, as an alternate director for each B Director appointed by it
by notice to the Company. An alternate director may attend speak and vote on
behalf of the B Director for whom he/she is appointed at any one or more
meetings of the Board at which such B Director is not present.

 

12.2       Reporting

 

The B Directors may report to NewCo and its
shareholders on the affairs of the Company and any Group Company and disclose
to such shareholders such information as he or she or it, in their absolute
discretion, think fit subject always to clause 15.3.

 

12.3       A Director

 

12.3.1    From and
after the date on which Mr Wilkie ceases to hold office as Chairman a simple
majority of the 5 largest A Shareholders (by reference to the number of A
Shares held by them at the relevant time) (“Principal
A Shareholders”) shall have the right by written notice to the
Company to appoint and maintain in office and remove from office one person
whom they shall from time to time nominate as a non-executive Director provided
always that such A Director:

 

(i)           is one of the Principal A
Shareholders; or

 

(ii)          is another A Shareholder
holding at least 75,000 A Shares provided that prior to such appointment the B
Directors are given a reasonable

 

20

 

opportunity
to consult as to the identity and suitability for appointment as an A Director
of such person; or

 

(iii)         is pre-agreed by a B
Director.

 

12.3.2    Appointment
and removal of the A Director shall be by written notice to the Company which
shall take effect on delivery at the Company’s registered office or at any
meeting of the Board or committee thereof.

 

12.3.3    If Mr Wilkie
is a Director, he shall be deemed for all purposes to be the A Director unless
he is no longer the Chairman and some other person has been nominated as the A
Director pursuant to Clause 12.3.1.

 

12.4       Chairman

 

12.4.1    The parties
hereto agree, insofar as is reasonably possible, to procure that at all times a
Chairman is appointed that satisfies the requirements of NASDAQ as to the
independence and qualifications of chairmen provided that this provision shall
not apply for so long as Mr Wilkie holds office as the Chairman of the Company.

 

12.4.2    The Chairman
shall be appointed and removed by resolution of the Board.

 

12.4.3    The first
chairman of the Company shall be Mr Wilkie who shall hold office as chairman
until such time as the Board shall resolve to the contrary.

 

12.4.4    In
circumstances where the parties anticipate a new Chairman will require to be
appointed they shall follow the following procedure:

 

(i)           the Board shall meet to
discuss and where possible agree on the identity of the proposed Chairman;

 

(ii)          if the proposed Chairman is
not agreed and appointed pursuant to paragraph (i) above, an independent firm
of recruitment consultants shall be instructed to produce a list of
appropriately qualified candidates; and

 

(iii)         the Board shall then meet to
discuss and agree in good faith following appropriate interviews and
referencing of such candidates, the proposed Chairman.

 

13          Board meetings and committees of Directors

 

13.1       Board meetings

 

13.1.1    The members
of the Board immediately following Completion shall be Steve Barber, Richard
Pearce, the B Directors, Mr Wilkie and a non executive director to be appointed
by the Board following Completion.

 

13.1.2    Board
meetings shall be held at least ten times a year and at not more than two
monthly intervals. At least five Business Days’ written notice shall be given
to each of the Directors of all Board meetings (except if there are exceptional
circumstances and one of the B Directors agrees to shorter notice).  If the notice is to be sent to an address
outside the United Kingdom it shall be sent by courier or facsimile
transmission.

 

21

 

13.1.3    At least two
Business Days prior to each Board meeting, the Company shall send to each
person entitled to receive notice of the Board meeting:

 

(i)           a reasonably detailed
agenda; and

 

(ii)          any relevant papers,
including (if not previously sent) the most recently prepared monthly
management accounts referred to in Clause 14.1.1 (v).

 

13.1.4    Any matter
which is not set out in the notice of meeting or the papers referred to in
Clause 13.1.3 above or, if the relevant papers do not arrive in the time period
detailed in Clause 13.1.3 above, shall not be discussed or resolved at that
meeting without the consent of a B Director and the A Director.

 

13.1.5    As soon as
practicable after each meeting of the Board (or committee of the Board) a copy
of the minutes thereof shall be sent by the Company to the Directors.

 

13.2       Committees of Directors

 

13.2.1    The Board may
constitute committees of Directors.

 

13.2.2    The quorum
for Board committee meetings shall be a B Director and the Chairman.

 

13.2.3    There shall
be an Audit Committee which shall comprise at least two directors including a B
Director and the A Director. The Audit Committee shall review the Audited
Accounts and discuss with the Auditors the accounting policies to be adopted.

 

13.2.4    There shall
be a Remuneration Committee which shall comprise at least two directors
including a B Director and the Chairman. The Remuneration Committee shall make
determinations on all matters concerning the Remuneration of all directors of
the Company other than the B Director(s), the appointment or dismissal of all
directors of the Company other than the B Director(s) and the A Director and
may agree variations to the terms of any Service Agreement from time to time.
For any resolution to be validly passed by the Remuneration Committee such
resolution must include the positive affirmative vote of a B Director

 

13.3       Enhancement of Voting rights of B Directors

 

13.3.1    In the event
that:

 

(i)           there
has been a material breach of this Agreement or the Articles by the Company,
the Managers, the Existing Shareholders or any person other than a holder of B
Shares who has, by the execution of a Deed of Adherence acceded to the terms of
this Agreement which has or might, in the reasonable opinion of HgCapital,
reasonably be considered likely to have a material and adverse effect on NewCo’s
investment in the Company and which (to the extent capable of remedy) the
defaulting party has failed to remedy within five Business Days of being
requested in writing to do so; or

 

(ii)          any
act, omission or event has occurred which constitutes or may constitute (with
the passage of time or the giving of notice) an Event of Default under the
Facility Documents in circumstances where as a result of such act, omission or
event the Bank has indicated that it may take action

 

22

 

to enforce its rights under the Facility
Documents or may materially vary the terms on which financial facilities are
provided to the Company or NewCo reasonably considers that the Bank may take
any such action; or

 

(iii)         if EBIT
(as defined in the Facility Documents) is, in respect of any two consecutive
quarters, negative and greater than $3,000,000 below the amount budgeted for
each of those two quarters in the relevant Business Plan or the EBIT (as
defined in the Facility Documents) is in any quarter both negative and
$10,000,000 or more below the amount budgeted therefor in the relevant Business
Plan(as amended and updated in accordance with Clause 14 and 15)

 

then, for so long as the circumstances
comprising such event continue to subsist and solely for the purpose of taking
such action as NewCo reasonably considers to be necessary for the purpose of
remedying such circumstances, on any matter tabled at a meeting of the Board or
a meeting of a committee of the Board, those B Directors present and voting at
such meetings shall, when voting, between them be deemed to exercise one vote
more than the total number of votes exercised by the other directors present
and voting at the same meeting provided always that NewCo will to the maximum
extent reasonably practicable in the circumstances first consult with the Board
as a whole prior to any exercise of its rights under this clause.

 

13.3.2    NewCo agrees
to procure that for so long as the circumstances detailed in Clause 13.3.1
continue to exist

 

(i)           the B Directors do not take
any action which is unfairly prejudicial to any other Shareholder; and

 

(ii)          to the extent that pursuant
to such enhanced voting powers the B Directors require a new issue of shares or
other securities convertible into shares in the capital of the Company each
Shareholder holding in excess of 0.5% of the Ordinary Share Capital shall be
offered a reasonable opportunity (being to the extent reasonable and practical
in all the circumstance on at least 5 days notice) to participate in such new
issue on a basis proportionate to the amount of the Company’s Ordinary Share
Capital held by him expressed as a percentage of the whole of the Company’s
issued Ordinary Share Capital on the same terms as are being offered to the B
Shareholders.

 

14          Reserved
matters

 

14.1       NewCo Consent

 

14.1.1    Each of the
parties hereto shall exercise all voting rights and powers of control available
to him in relation to the Company to procure that, save with the positive
affirmative vote of a B Director or, to the extent a B Director is not
appointed at the relevant time, the prior written consent of NewCo, the Company
shall not effect or propose any of the matters in Clause 14.2 or their nearest
equivalent in the case of a Group Company (“Reserved
Matters”).

 

14.1.2    As a separate
obligation, severable from the obligations in Clause 14.1.1, the Company agrees
that, save with the positive affirmative vote of a B Director or, to

 

23

 

the extent a B Director is not appointed at
the relevant time, the prior written consent of NewCo, it shall not effect or
propose any of the Reserved Matters.

 

14.2       NewCo Reserved Matters

 

The following Reserved Matters require the
consent of a resolution of the Board in respect of which at least one B
Director has voted in favour or, to the extent a B Director is not appointed,
the prior written consent of NewCo (save for those matters detailed in the
relevant Business Plan approved pursuant to Clause 14.2.18 below or which are
required to be effected pursuant to this agreement):

 

14.2.1    any change to
the Company’s memorandum and articles of association or the articles of
association of any Group Company;

 

14.2.2    any change of
name;

 

14.2.3    the
appointment and removal of the Auditors;

 

14.2.4    any change to
the accounting reference date or accounting policies, bases or methods from
those set out in the Audited Accounts and the Accountants’ Report (other than
as recommended by the Auditors);

 

14.2.5    the
presentation of any petition for winding-up or petition for an administration
order;

 

14.2.6    (save to the
extent contemplated by clause 3.7) any change in the share capital or the
creation, allotment or issue of any shares or of any other security or the
grant of any option or rights to subscribe for or to convert any instrument
into such shares or securities or the waiver of any right to receive payment in
respect of any of the Company’s shares that are issued partly paid;

 

14.2.7    any reduction
of the share capital or variation of the rights attaching to any class of
shares or any redemption, purchase or other acquisition of any shares or other
securities of the Company other than a conversion of shares by operation of
Article 8;

 

14.2.8    any
application by way of capitalisation of any sum in or towards paying up any
shares or of any other security or of any amount standing to the credit of the
share premium account or capital redemption reserve for any purpose;

 

14.2.9    the
appointment, removal and conditions of employment of the Company secretary or
any director of any Group Company (other than the appointment or removal of
Directors of the Company in accordance with this Agreement or the Articles);

 

14.2.10  the
appointment, discharge, Remuneration and conditions of employment of any
employee situated in the United Kingdom earning £80,000 or more each year or
any employee situated in the United States earning $170,000 or more each year;

 

14.2.11  the
adoption or variation of any bonus or profit-sharing scheme, any share option
or share incentive scheme or employee share trust or share ownership plan or
retirement benefit scheme save as detailed in this Agreement;

 

14.2.12  the
entry into of any joint venture, partnership, consortium or other similar
arrangement;

 

24

 

14.2.13  the
sale of any Group Company or any consolidation or amalgamation with any other
company;

 

14.2.14  the
acquisition or disposal (including the lease to a third party) in any financial
year, otherwise than in accordance with any relevant capital forecast in the
Business Plan of:

 

(i)           assets
having an aggregate book or market value greater than £500,000;

 

(ii)          the
whole or a significant part of its undertaking; or

 

(iii)         a
subsidiary undertaking;

 

14.2.15  capital
expenditure (including obligations under hire-purchase and leasing
arrangements) of any item or project of greater than £500,000 in aggregate in
any financial year which is not provided for in the Business Plan;

 

14.2.16  the
entering into of any lease, licence or similar obligation under which the
rental and all other payments exceed £500,000 a year which is not provided for
in the Business Plan;

 

14.2.17  the
cessation or any material change to the nature or geographical area of any
material business operation;

 

14.2.18  the
adoption of and any amendment to the Business Plan;

 

14.2.19  the
entry into, surrender or material variation of any unusual (being a contract
outside the ordinary course of business) or in the reasonable opinion of the
Board, unusually onerous contract;

 

14.2.20  the
entry into of any material transaction with a party to this Agreement or any of
its Associated Companies or his or her connected persons not in the ordinary
course of business or not on arm’s length commercial terms;

 

14.2.21  the
entry into, termination, variation, waiver or breach of any arrangement or any
contract with a Manager or a connected person of a Manager, including the
variation of remuneration or other benefits under such arrangement or contract
save to the extent contemplated by clause 3.7;

 

14.2.22  the
sale of any of its debts on a discounted basis to a third party or the
borrowing of amounts (or indebtedness in the nature of borrowings) exceeding
£1,000,000 in aggregate in any financial year other than pursuant to the Facility
Documents or the creation of or permitting the creation of or suffering to
subsist any charge, mortgage, lien (other than a lien arising by operation of
law) or other security over any of its assets or property other than pursuant
to the Facility Documents or in the ordinary course of trading;

 

14.2.23  the
giving of any guarantee or indemnity other than pursuant to the Facility
Documents or in the ordinary course of trading;

 

14.2.24  the
making of any loan or advance to any person, firm, body corporate or other
business, other than to a Group Company or otherwise than in the normal course
of business and on an arm’s length basis;

 

25

 

14.2.25  the
payment or declaration by any Group Company of any dividend or other
distribution (as defined under sections 209, 418 and 419 of ICTA) on account of
shares in its capital;

 

14.2.26  the
conduct of any litigation material to the Company, save for the collection of
debts arising in the ordinary course of the Business or any application for an
interim injunction or other application or action (including interim defence)
which is urgently required in the best interests of the Company in
circumstances in which it is not reasonably practicable to obtain prior
consent;

 

14.2.27  the
granting of any power of attorney or other delegation of directors’ powers
other than a valid delegation to a committee of the Board pursuant to Clause
13.2;

 

14.2.28  the
incorporation of a new subsidiary undertaking or the acquisition of any share
capital or other securities of any body corporate;

 

14.2.29  a
Sale or Listing;

 

14.2.30  dealing
in any way (including the acquisition or disposal, whether outright or by way
of licence or otherwise howsoever) with Intellectual Property other than in the
ordinary course of business;

 

14.2.31  establishing
any new branch, agency, trading establishment or business or closing any such
branch, agency, trading establishment or business; or

 

14.2.32  making
any change to its bankers.

 

14.3       A Director Reserved Matters

 

Each of
the parties hereto shall exercise all voting rights and powers of control
available to him in relation to the Company to procure that, save with the
consent of the Chairman, or if the Chairman is not Mr Wilkie, the A Director,
the Company shall not effect or propose any of the following matters or their
nearest equivalent in the case of a Group Company:

 

14.3.1    the entry
into, termination, variation, waiver or breach of any arrangement or any
contract with HgCapital, NewCo or any shareholders of NewCo save where

 

(i)           it is detailed in the
Business Plan; or

 

(ii)          the circumstances detailed
in Clause 13.3.1 exist and any such arrangement or contract is, in the
reasonable opinion of NewCo, required to avoid or to remedy an Event of Default
under the Facility Documents (provided that if such arrangement or contract so
required comprises a loan facility, guarantee or similar agreement or
arrangement for or in connection with the provision of a loan facility,
guarantee or other security or similar arrangement it shall be on reasonable
and usual commercial terms having regard to the current trading position of the
Group and the time frame within which such arrangement has to be provided).

 

14.3.2    (save to the
extent contemplated by clause 3.7) any issue of Shares or other securities
pursuant to any employee share scheme and which is not, by reason of its
nature, subject to the provisions of section 89 of the Act.

 

26

 

15          Budgets
and information

 

15.1       Financial Information

 

15.1.1    The Company
shall prepare and submit to NewCo the following information as soon as possible
and no later than the dates/times set out below:

 

(i)           the audited consolidated
accounts of the Group together with the related audit and management letters
and all material and relevant correspondence between the Company and the
auditors of the Company concerning such Audited Accounts completed and approved
by the Board for the previous financial year within four months of the end of
each financial year;

 

(ii)          the unaudited consolidated
results of the Company for the previous financial year within 25 Business Days
of the end of each financial year;

 

(iii)         if so requested by NewCo and
at NewCo’s cost, interim consolidated un-audited accounts of the Group for the
period 1 December 2003 to 31 May 2004 provided that (i) NewCo shall only
be entitled to make such request where if considers that any Warranty has been
breached and (ii) the preparation of such interim accounts shall be at the cost
of the Company if, having been requested so to do, it fails to prepare the same
on or prior to 20 June 2004;

 

(iv)         a detailed draft Business
Plan for the Group for the following financial year one month before the end of
each financial year (including estimated major items of revenue and capital
expenditure) in such form and detail as NewCo reasonably require. The Business
Plan shall be broken down on a monthly basis, shall contain a cash flow
forecast and a balance sheet showing the projected position of the Group as at
the end of the following financial year;

 

(v)          monthly unaudited management
accounts including (1) a profit and loss account, balance sheet and cash flow
statement and cash flow forecast for the next three months (2) an analysis of
other revenue and (3) a comparison of results with the Budget within 20
Business Days after the end of each month; and

 

(vi)         such further financial or
management information as NewCo may on reasonable notice reasonably require
from time to time relating to the Group.

 

Each of the Managers shall use his
reasonable endeavours (according to his position in the Group) to procure full
and prompt performance by the Company of its obligations under this Clause
15.1.

 

15.2       Failure to provide information

 

If the Company fails to provide any of the
information provided for in this Clause 15 within the time period specified,
NewCo shall be entitled to appoint a firm of accountants to produce such
financial information at the Company’s expense. The Managers and the Company
shall use reasonable endeavours to procure, so far as they are able, that the

 

27

 

Company provides all information and
assistance reasonably required by the accountants appointed pursuant to this
Clause 15.2.

 

15.3       Rights to information

 

15.3.1    NewCo and any
person designated by it may at all reasonable times discuss the affairs,
finances and Audited Accounts of the Company and the Group with its
Shareholders, officers and principal executives.

 

15.3.2    NewCo and a
firm of accountants nominated by NewCo at NewCo’s expense will be entitled to
examine the books and Audited Accounts of the Company upon reasonable notice
and, whether or not there is a B Director, the Company shall supply NewCo with
all information relating to the business affairs and financial position of the
Company as NewCo may on reasonable notice from time to time reasonably require.

 

15.4       Facility Documents

 

The Company shall deliver to NewCo at the same time as
it delivers the information to the Bank or its advisers, any information
(including any document) which is required to be given under the Facilities
Documents.

 

16          Confidentiality

 

16.1       Confidential Information

 

Subject to Clauses 11.2 and 16.4, the
parties shall use all reasonable endeavours to keep confidential and to ensure
that their respective officers, employees, agents and professional and other
advisers keep confidential any information (the “Confidential Information”):

 

16.1.1    relating to
the customers, business, assets or affairs of the Group which they may have or
acquire through ownership of an interest in the Company; or

 

16.1.2    relating to
the customers, business, assets or affairs of the other parties or any member
of their group which they may have or acquire through being a Shareholder or
making appointments to the Board or through the exercise of its rights or
performance of its obligations under this Agreement,

 

and no party may use for its own business
purposes or disclose to any third party any Confidential Information belonging
to another party without the consent of such other party.

 

16.2       Restrictions

 

This Clause 16 does not apply to:

 

16.2.1    information
which is or becomes publicly available (otherwise than as a result of a breach
of this Clause 16);

 

16.2.2    information
which is independently developed by the relevant party or acquired from a third
party, to the extent that it is acquired with the right to disclose it;

 

16.2.3    information
which was lawfully in the possession of the relevant party free of any
restriction on disclosure as can be shown by that party’s written records or
other reasonable evidence;

 

28

 

16.2.4    information
which following disclosure under this Clause 16, becomes available to the
relevant party (as can be demonstrated by that party’s written records or other
reasonable evidence) from a source which is not bound by any obligation of
confidentiality in relation to such information;

 

16.2.5    subject to
clause 16.3 the disclosure by a party of Confidential Information to its
directors or employees or to those of its Associated Companies who need to know
that confidential information in its reasonable opinion for purposes relating
to this Agreement but those directors and employees shall not use that
Confidential Information for any other purpose;

 

16.2.6    the
disclosure of information to the extent required to be disclosed by law or any
court of competent jurisdiction, any governmental official or regulatory
authority (including the Financial Services Authority, the London Stock
Exchange PLC and the Panel on Takeovers and Mergers) or any binding judgment,
order or requirement of any other competent authority;

 

16.2.7    the
disclosure of information to any tax authority to the extent reasonably
required for the purposes of the tax affairs of the party concerned or any
member of its group;

 

16.2.8    the
disclosure to a party’s professional advisers of information reasonably
required to be disclosed for purposes relating to this Agreement;

 

16.2.9    any
announcement, or circular made, or information provided in accordance with the
terms of Clause 20.

 

16.3       Restrictions on forwarding Confidential
Information

 

Each party shall inform any shareholder,
officer, employee or agent or any professional or other adviser advising it in
relation to matters relating to this Agreement, or to whom it provides
Confidential Information (each a “Permitted Recipient”), that such information
is confidential and shall instruct them:

 

16.3.1    to keep it
confidential; and

 

16.3.2    not to
disclose it to any third party (other than those persons to whom it has already
been or may be disclosed to in accordance with the terms of this Clause 16) and
such party shall remain liable for any breach of confidentiality by its
Permitted Recipients to the same extent as would be the case if such breach had
been committed by the disclosing party itself.

 

16.4       Damages not an adequate remedy

 

Without prejudice to any other rights or
remedies which a party may have, the parties acknowledge and agree that damages
would not be an adequate remedy for any breach of this Clause 16 and the
remedies of injunction, specific performance and other equitable relief are
appropriate for any threatened or actual breach of any such provision and no
proof of special damages shall be necessary for the enforcement of the rights
under this Clause 16.

 

29

 

16.5       Survival

 

16.5.1    A disclosing
party shall remain responsible for any breach of this Clause 16 by the person
to whom that Confidential Information is disclosed.

 

16.5.2    The
provisions of this Clause 16 shall survive the termination of this Agreement
for whatever cause.

 

17          Exit

 

17.1       Consultation

 

17.1.1    It is the
parties’ intention to effect a Sale or Listing within the period of two to five
years of the date of this Agreement. Except in respect of any matter where any
party could have a conflict of interest, the parties agree to keep one another
informed of all and any developments which might lead to any Sale or Listing.

 

17.1.2    If the
parties agree to seek an Exit, they shall co-operate fully with each other and
the Company and their respective financial and other advisers to achieve such a
Sale or a Listing in accordance with the rules and regulations of the
recognised investment exchange to which the application for Listing is made
(the “Exchange”)
and other applicable laws.

 

17.1.3    No Listing
shall be obtained unless all of the A, B and C Shares have either been
redeemed, are Shares of the class to be listed or are converted in accordance
with the Articles into Shares of the class to be Listed.

 

17.2       No Warranties

 

In relation to an Exit, NewCo will not give
any warranty or indemnity to any person (other than a warranty as to title to
any Shares of the Company to be sold by them at that time) nor any undertakings
in respect of the disposal of any of their Shares.

 

17.3       No restrictions on sale of Shares

 

Following Listing, NewCo and the Existing
Shareholders may deal freely in any Shares subject to any orderly marketing
undertakings which they may agree.

 

17.4       Information

 

NewCo shall be entitled to pass information
to third parties (subject to the third party agreeing to suitable
confidentiality restrictions) with a view to effecting or facilitating an Exit.

 

17.5       Managers undertaking on Exit

 

Each of the Managers acknowledges that to
assist in achieving a Sale or a Listing he may be requested:

 

17.5.1    to make
presentations and prepare information memoranda or a prospectus with a view to
effecting such Sale or Listing;

 

17.5.2    upon a Listing,
to undertake not to sell his shares or a proportion of his shares for a period
following the Listing, in the manner, to the extent and for such period as

 

30

 

shall be recommended by the Board and NewCo
subject to the advice of the sponsors of the Listing; and

 

17.5.3    upon a
Listing or Sale, to provide warranties to potential acquirers or underwriters,

 

provided that no Manager shall be obliged to give any
such undertaking or warranty and each Manager undertakes that he will not seek
any additional benefit from NewCo or the Company as consideration for his
agreement to give any such undertaking or warranty.

 

18          Transfers and issue of Shares

 

18.1       Transfer restrictions for Managers

 

Save in respect of transfers permitted by
the Articles each of the Managers undertakes to NewCo not to, nor to agree to,
do any of the following other than with the consent of the Board by resolution
in respect of which a B Director has voted in favour:

 

18.1.1    pledge,
mortgage, charge or otherwise encumber any of their Shares or any interest in
any of their Shares;

 

18.1.2    sell,
transfer or otherwise dispose of, or grant any option over, any of their Shares
or any interest in its Shares; or

 

18.1.3    enter into
any agreement in respect of the votes attached to any of their Shares.

 

18.2       Assumption of obligations

 

The parties shall procure that no person
other than an existing Shareholder acquires any Shares either (i) from a party
hereto or (ii) in excess of 5% of the Ordinary Shares Capital unless it enters
into a Deed of Adherence.

 

19          Termination

 

19.1       If NewCo and / or it’s
Corporate Permitted Transferees and/or its Investment Funds have at the
relevant time received Cash Receipts equal to at least one and half times the
Investment Commitment, this agreement shall terminate forthwith in the event
that the Shares held by NewCo and its Corporate Permitted Transferees and its
Investment Funds (as defined in the Articles) shall at any time represent less
than 15 per cent of the issued share capital of the Company, such termination
to be without prejudice to the rights of the parties hereto in respect of any
antecedent breach of the terms of this Agreement.

 

19.2       This Agreement will
terminate forthwith upon the occurrence of a Conversion Event, such termination
to be without prejudice to the rights of the parties hereto in respect of any
antecedent breach of the terms of this Agreement.

 

20          Public
announcements

 

Save for the Press Announcement, no party
may make any public announcement or issue any circular relating to the Group or
this Agreement without the prior written approval of a B Director, the A
Director and another Director, such consent not to be unreasonably withheld.
This does not affect any announcement or circular required by law or any
regulatory body or the rules of any recognised stock exchange, but the party
with an

 

31

 

obligation to make an announcement or issue
a circular shall consult with the other party/parties so far as is reasonably
practicable before complying with such obligation.

 

21          Notices

 

21.1       Addresses

 

Any notice, claim or demand in connection
with this Agreement shall be in writing in English (each a “Notice”)
and shall be sufficiently given if delivered or sent to the recipient at its
fax number, telex number or address set out in Schedule 1 or any
other fax number, telex number or address notified to the sender by the
recipient for the purposes of this Agreement and marked “IMPORTANT LEGAL
NOTICE” and in the case of a notice to NewCo a copy shall be sent to NewCo’s
Solicitors marked for the attention of “Graham White” and to HgCapital marked
for the attention of “Nic Humphries”. 
In the case of a notice to the Company, a copy shall also be sent to the
Company’s Solicitors, DLA at 3 Noble Street, London, EC2V 7EE, marked for the
attention of Mark Taylor.  Where sent to
a recipient’s address it may be sent by messenger or prepaid post (first class
in the case of service in the United Kingdom and airmail in the case of
international service). Any Notice shall be deemed to have been received on the
next working day in the place to which it is sent, if sent by telex, fax or
messenger, or 48 hours from the time of posting, if sent by post.

 

21.2       Death

 

If any such person dies, until the party
giving a Notice has received notice in writing of the grant of probate of his
or her will or letters of administration of his or her estate (or equivalent)
any Notice so given shall be as effectual as if he or she were still living.

 

22          Whole agreement and remedies

 

22.1       Whole agreement

 

22.1.1    This
Agreement and any other documents referred to herein contain the whole
agreement between the parties relating to the subject matter of this Agreement
at the date hereof to the exclusion of any terms implied by law which may be
excluded by contract and supersedes any previous written or oral agreement
between the parties in relation to the matters dealt with in this Agreement.

 

22.1.2    The Managers
and the Existing Shareholders hereby confirm that there are no other agreements
between any of them or any of them and the Company other than this Agreement
and any agreements referred to in this Agreement.

 

22.2       No inducement

 

Each of the parties acknowledges that it
has not been induced to enter into this Agreement by any representation,
warranty or undertaking not expressly incorporated into it.

 

22.3       Legal advice

 

Each party to this Agreement confirms it
has received proper legal advice relating to all the matters provided for in
this Agreement, including the provisions of this Clause 22, and

 

32

agrees, having
considered the terms of this Clause 22 and the Agreement as a whole, that the
provisions of this Clause 22 are fair and reasonable.

 

23          General

 

23.1       Survival of rights, duties and obligations

 

Termination of
this Agreement for any cause shall not release a party from any liability which
at the time of termination has already accrued to another party or which
thereafter may accrue in respect of any act or omission prior to such
termination.

 

23.2       Conflict with the Articles

 

In the event
of any ambiguity, discrepancy or conflict between the provisions of this
Agreement and the Articles, it is intended that the provisions of this
Agreement shall prevail and accordingly the Managers, the Existing Shareholders
and NewCo shall exercise all voting and other rights and powers available to
them so as to give effect to the provisions of this Agreement and shall further
if necessary use reasonable endeavours to procure any required amendment to the
Articles. The Company is excluded from any obligation contained in this
Agreement to the extent that such obligation would constitute an unlawful
fetter on the Company’s statutory powers.

 

23.3       No partnership

 

Nothing in
this Agreement shall be deemed to constitute a partnership between the parties
nor constitute any party the agent of any other party for any purpose.

 

23.4       Release etc.

 

Any liability
to any party under this Agreement may in whole or in part be released,
compounded or compromised or time or indulgence given by that party in its
absolute discretion as regards any party under such liability without in any
way prejudicing or affecting its rights against any other party under the same
or a like liability, whether joint and several or otherwise.

 

23.5       Waiver

 

No failure of
any party to exercise, and no delay by it in exercising, any right, power or
remedy in connection with this Agreement (each a “Right”) shall operate as a
waiver of that Right, nor shall any single or partial exercise of any Right
preclude any other or further exercise of that Right or the exercise of any
other Right.

 

23.6       Variation

 

No variation
of this Agreement shall be effective unless in writing and signed by each of
the parties.

 

23.7       Successors and Assigns

 

23.7.1    The parties hereto agree that the benefit of every provision in this
Agreement is given to NewCo for itself and its successors in title.
Accordingly, NewCo (and its successors in title) may, without the consent of
the other parties hereto, assign to the beneficial owner for the time being of
the B Shares the benefit of all or any of

 

33

 

the Managers’ and Existing Shareholders’ obligations
under this Agreement, and/or any benefit arising under or out of this
Agreement.

 

23.7.2    This Agreement shall not be capable of being assigned without the
consent of the parties hereto.

 

23.8       Further assurance

 

At any time
after the date of this Agreement the parties shall, and shall use all
reasonable endeavours to procure that any necessary third party shall, at the
cost of the relevant party execute such documents and do such acts and things
as that party may reasonably require for the purpose of giving to that party
the full benefit of all the provisions of this Agreement.

 

23.9       Invalidity

 

If any
provision in this Agreement shall be held to be illegal, invalid or
unenforceable, in whole or in part, under any enactment or rule of law, such
provision or part shall to that extent be deemed not to form part of this
Agreement but under the law of any jurisdiction, the legality, validity or
enforceability of such provision or part under the law of any other
jurisdiction and the legality, validity and enforceability of the remainder of
this Agreement shall not be affected.

 

23.10     Counterparts

 

This Agreement
may be entered into in any number of counterparts (whether original or
facsimile counterparts), all of which taken together shall constitute one and
the same instrument. Any party may enter into this Agreement by executing any
such counterpart.

 

23.11     Costs

 

The Company shall pay:

 

23.11.1  all the fees set out in the Fee Schedule; and

 

23.11.2  the annual costs incurred by NewCo in relation to its ongoing
administration and audit such amount not to exceed £12,000 plus disbursements
per annum.

 

23.11.3  upon the occurrence of a Conversion Event, provided that immediately
after the Conversion Event the B Shares shall have received the Acquisition
Price in full on each B Share, a fee to NewCo of:

 

(i)           £250,000 if the Investment Commitment at Completion is less than
£44,000,000; or

 

(ii)          £400,000 if the Investment Commitment at Completion is more than
£44,000,000.

 

23.12     Contracts (Rights of Third Parties) Act
1999

 

A person who
is not a party to this Agreement has no right under the Contracts (Rights of
Third Parties) Act 1999 to enforce any term of this Agreement.

 

34

 

24          Governing law and submission to jurisdiction

 

24.1       Governing law

 

This Agreement
and the documents to be entered into pursuant to it, save as expressly referred
to therein shall be governed by and construed in accordance with English law.

 

24.2       Jurisdiction

 

All the
parties irrevocably agree that the courts of England are to have exclusive
jurisdiction to settle any dispute which may arise out of or in connection with
this Agreement and the documents to be entered into pursuant to it and
accordingly any proceedings arising out of or in connection with this Agreement
shall be brought in such courts.

 

24.3       Submission and Waiver

 

All the
parties irrevocably submit to the jurisdiction of such courts and waive any
objection to proceedings in any such court on the ground of venue or on the
ground that the proceedings have been brought in an inconvenient forum.

 

25          Authority
to Deliver

 

The signature
or sealing of this Agreement by or on behalf of a party shall constitute an
authority to the solicitors, or an agent or employee of the solicitors, acting
for that party in connection with this Agreement to deliver it as a deed on
behalf of that party.

 

35

 

Schedule 1

Part 1

The Managers

 

	
  Name

  	
   

  	
  Address

  	
   

  	
  Number of
  Ordinary

  Shares held

  
	
  Stephen Ian Lee Barber

  	
   

  	
  Little Robertson

  Sleepers Hill

  Winchester

  Hampshire  S022 4NA

  	
   

  	
  304,250 C Shares

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Richard Charles Pearce

  	
   

  	
  18 Idsworth Close

  Horndean

  Hampshire  PO8 0DW

  	
   

  	
  58,501 C Shares

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Stephen Thompson

  	
   

  	
  23 Hazel Grove

  Clanfield

  Hampshire  PO8 0LE

  	
   

  	
  120,000 A Shares

  75,000 C Shares

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Paul William Hannah

  	
   

  	
  10 Avon Castle Drive

  Ringwood

  Hampshire  BH24 2BA

  	
   

  	
  1 A Share

  131,049 C Shares

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Paul Anthony Holmes

  	
   

  	
  The Woodpeckers

  54 The Avenue

  Fareham

  Hampshire  PO14 1NZ

  	
   

  	
  120,000 A shares

  81,400 C shares

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Anthony William Leonard

  	
   

  	
  20 College Close

  Rowlands Castle

  Hampshire  PO9 6AJ

  	
   

  	
  25,200 C Shares

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Matthew Cornell

  	
   

  	
  36 Parkstone Avenue

  Southsea

  Hampshire  PO4 0QZ

  	
   

  	
  65,817 C Shares

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Adam Peter Wray

  	
   

  	
  21 Beacon Square

  Emsworth

  Hampshire  PO10 7HU

  	
   

  	
  18,334 C Shares

  

 

36

 

Schedule 1

Part 2

NewCo

 

	
  Name:

  	
   

  	
  XTX
  HgCapital Jersey Limited

  
	
   

  	
   

  	
   

  
	
  Registered Number:

  	
   

  	
  85828

  
	
   

  	
   

  	
   

  
	
  Registered Office:

  	
   

  	
  22 Grenville
  Street, St Helier, Jersey JE4 8PX

  
	
   

  	
   

  	
   

  
	
  Directors:

  	
   

  	
  Nic
  Humphries

  Gareth Essex-Cater

  Helen Grant

  
	
   

  	
   

  	
   

  
	
  Authorised Share Capital:

  	
   

  	
  £56,000,000
  divided into 56,000,000 ordinary shares of £1 each

  
	
   

  	
   

  	
   

  
	
  Issued Share Capital:

  	
   

  	
  £2

  
	
   

  	
   

  	
   

  
	
  Shareholders:

  	
   

  	
  Rowan
  Nominees Limited A/C RR 1 x £1 Ordinary Share

  Rowan Nominees Limited 1 x £1 Ordinary Share

  

 

37

 

Schedule 1

Part 3

Existing Shareholders

 

	
  Name

  	
   

  	
  Address

  	
   

  	
  Number of
  Ordinary Shares held

  
	
  William Kennedy Wilkie

  	
   

  	
  Cranmere House

  East Lavant

  Chichester

  West Sussex  PO18 0AD

  	
   

  	
  1,624,774 A Shares

  145,987 C Shares

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Derek Holt

  	
   

  	
  Marley Wood

  Chilworth Road

  Chilworth

  Southampton  SO16 7LA

  	
   

  	
  790,226 A Shares

  94,453 C Shares

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Michael John Dinham

  	
   

  	
  Westfield House

  St Andrews Park

  Burnetts Lane

  Horton Heath  SO50 7DG

  	
   

  	
  1,050,000 A Shares

  55,200 C Shares

  

 

38

 

Schedule 1

Part 4

Additional Warranty Covenantors

 

	
  Name

  	
   

  	
  Address

  
	
  Alison Griffiths

  	
   

  	
  Greenmount Cottage

  Shaldon

  Alton

  Hampshire  GU34 4DU

  
	
   

  	
   

  	
   

  
	
  David Martin

  	
   

  	
  4 Chilbolton Mews

  19 Chilbolton Avenue

  Winchester

  Hampshire  SO22 5HU

  
	
   

  	
   

  	
   

  
	
  Piotr Nahajski

  	
   

  	
  9 Christchurch Road

  Winchester

  Hampshire  SO23 9SR

  

 

39

 

Schedule 2

Part 1

Particulars of the Company pre-completion of this Agreement

 

	
  Registered
  Number:

  	
   

  	
  4057904

  
	
   

  	
   

  	
   

  
	
  Registered
  Office:

  	
   

  	
  Langstone
  Road, Havant, Hampshire PO9 1SA

  
	
   

  	
   

  	
   

  
	
  Date and
  place of incorporation:

  	
   

  	
  22 August 2002,
  UK

  
	
   

  	
   

  	
   

  
	
  Directors:

  	
   

  	
  Stephen Ian
  Lee Barber

  Michael John Dinham

  Derek Holt

  David Hugh Martin

  Piotr Jan Nahajski

  William Kennedy Wilkie

  
	
   

  	
   

  	
   

  
	
  Secretary:

  	
   

  	
  Derek Holt

  
	
   

  	
   

  	
   

  
	
  Accounting
  reference date:

  	
   

  	
  30/11

  
	
   

  	
   

  	
   

  
	
  Auditors:

  	
   

  	
  PricewaterhouseCoopers
  LLP

  
	
   

  	
   

  	
   

  
	
  Authorised
  Share Capital:

  	
   

  	
  £450,000
  divided into:

  

  7,458,734 A Ordinary Shares of 1 pence each;

  1,856,250 B Ordinary Shares of 1 pence each and

  35,685,016 C Ordinary Shares of 1 pence each

  
	
   

  	
   

  	
   

  
	
  Charges:

  	
   

  	
  Debenture -
  HSBC Bank PLC

  

 

40

 

Schedule 2

Part 2

Particulars of the Subsidiaries pre-completion of this Agreement

 

	
  Company
  Name:

  	
   

  	
  Xynet
  Limited

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Registered
  Number:

  	
   

  	
  2857525

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Registered
  Office

  	
   

  	
  Langstone
  Road, Havant,

  Hampshire

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date and
  place of incorporation:

  	
   

  	
  28/09/1993,
  UK

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Directors:

  	
   

  	
  Michael John
  Dinham

  Derek Holt

  William Kennedy Wilkie

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Secretary:

  	
   

  	
  Derek Holt

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Accounting
  reference date:

  	
   

  	
  30/11

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Auditors:

  	
   

  	
  no auditors

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Authorised
  Share Capital:

  	
   

  	
  £10,000,000
  divided into £1 shares

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Issued and
  fully paid-up Share Capital:

  	
   

  	
  Registered
  Member

  	
   

  	
  Beneficial
  Owner

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  6,000,000

  Xyratex Technology Limited

  	
   

  	
  Xyratex
  Technology Limited

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Charges:

  	
   

  	
  (1)  Fixed and floating charge - HSBC Bank PLC

  

  (2)  Fixed and floating charge -
  Murray Johnstone Limited as trustee for the noteholders.

  	
   

  	
   

  

 

41

 

	
  Company
  Name:

  	
   

  	
  Xyratex
  Technology Limited

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Registered
  Number:

  	
   

  	
  3134912

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Registered Office

  	
   

  	
  Langstone
  Road

  Havant, Hampshire

  PO9 1SA

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date and
  place of incorporation:

  	
   

  	
  6/12/1995,
  UK

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Directors:

  	
   

  	
  Derek Holt

  Michael John Dinham

  William Kennedy Wilkie

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Secretary:

  	
   

  	
  Derek Holt

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Accounting
  reference date:

  	
   

  	
  31/11

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Auditors:

  	
   

  	
  PricewaterhouseCoopers

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Authorised
  Share Capital:

  	
   

  	
  £1,000
  divided into £1 shares

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Issued and
  fully paid-up Share Capital

  	
   

  	
  Registered
  Member

  	
   

  	
  Beneficial
  Owner

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  1 ordinary
  share

  Xyratex Group Limited

  	
   

  	
  Xyratex
  Group Limited

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Charges

  	
   

  	
  Fixed and floating charge - HSBC Bank PLC

  	
   

  	
   

  

 

42

 

	
  Company
  Name:

  	
   

  	
  Xyratex
  International Limited

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Registered
  Number:

  	
   

  	
  3078508

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Registered
  Office

  	
   

  	
  Langstone
  Road

  Havant, Hampshire

  PO9 1SA

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date and
  place of incorporation:

  	
   

  	
  6/7/1995, UK

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Directors:

  	
   

  	
  Derek Holt

  Michael John Dinham

  William Kennedy Wilkie

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Secretary:

  	
   

  	
  Derek Holt

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Accounting
  reference date:

  	
   

  	
  30/11

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Auditors:

  	
   

  	
  PricewaterhouseCoopers

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Authorised
  Share Capital:

  	
   

  	
  £100 divided
  into £1 shares

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Issued and
  fully paid-up Share Capital

  	
   

  	
  Registered
  Member

  	
   

  	
  Beneficial
  Owner

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2 ordinary
  shares

  Xyratex Technology Limited

  	
   

  	
  Xyratex
  Technology Limited

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Charges

  	
   

  	
  Fixed and Floating charge - HSBC Bank PLC

  	
   

  	
   

  

 

43

 

	
  Company
  Name:

  	
   

  	
  Xyratex
  Trustees Limited

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Registered
  Number:

  	
   

  	
  4057598

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Registered
  Office

  	
   

  	
  Langstone
  Road

  Havant, Hampshire

  PO9 1SA

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date and
  place of incorporation:

  	
   

  	
  22/8/2000,
  UK

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Directors:

  	
   

  	
  Derek Holt

  William Kennedy Wilkie

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Secretary:

  	
   

  	
  Derek Holt

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Accounting
  reference date:

  	
   

  	
  30/11

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Auditors:

  	
   

  	
  no auditors

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Authorised
  Share Capital:

  	
   

  	
  £1,000 divided
  into £1 shares

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Issued and
  fully paid-up Share Capital

  	
   

  	
  Registered
  Member

  	
   

  	
  Beneficial
  Owner

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2 ordinary
  shares

  Xyratex Technology Limited

  	
   

  	
  Xyratex
  Technology Limited

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Charges

  	
   

  	
  none

  	
   

  	
   

  

 

44

 

	
  Company
  Name:

  	
   

  	
  Xyratex
  Holdings (UK) Limited

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Registered
  Number:

  	
   

  	
  3175681

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Registered
  Office

  	
   

  	
  Langstone
  Road

  Havant, Hampshire

  PO9 1SA

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date and
  place of incorporation:

  	
   

  	
  20/3/96, UK

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Directors:

  	
   

  	
  Derek Holt

  William Kennedy Wilkie

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Secretary:

  	
   

  	
  Derek Holt

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Accounting
  reference date:

  	
   

  	
  30/11

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Auditors:

  	
   

  	
  PricewaterhouseCoopers

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Authorised
  Share Capital:

  	
   

  	
  £5,000,000
  divided into £1 shares

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Issued and
  fully paid-up Share Capital

  	
   

  	
  Registered
  Member

  	
   

  	
  Beneficial
  Owner

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  4,380,000
  ordinary shares

  Xyratex Technology Limited

  	
   

  	
  Xyratex
  Technology Limited

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Charges

  	
   

  	
  Debenture - HSBC Bank PLC

  	
   

  	
   

  

 

45

 

	
  Company
  Name:

  	
   

  	
  Xyratex
  (Singapore) Limited

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Registered
  Number:

  	
   

  	
  02857496

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Registered
  Office

  	
   

  	
  Langstone
  Road

  Havant, Hampshire

  PO9 1SA

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date and
  place of incorporation:

  	
   

  	
  28/9/1993 UK

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Directors:

  	
   

  	
  Derek Holt

  Michael John Dinham

  William Kennedy Wilkie

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Secretary:

  	
   

  	
  Derek Holt

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Accounting
  reference date:

  	
   

  	
  30/11

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Auditors:

  	
   

  	
  PricewaterhouseCoopers

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Authorised
  Share Capital:

  	
   

  	
  £1,000
  divided into £1 shares

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Issued and
  fully paid-up Share Capital

  	
   

  	
  Registered
  Member

  	
   

  	
  Beneficial
  Owner

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2 ordinary
  shares

  Xyratex Technology Limited

  	
   

  	
  Xyratex
  Technology Limited

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Charges

  	
   

  	
  none

  	
   

  	
   

  

 

46

 

	
  Company
  Name:

  	
   

  	
  Xyratex Integrated Systems Limited

  
	
   

  	
   

  	
   

  
	
  Registered
  Number:

  	
   

  	
  01926146

  
	
   

  	
   

  	
   

  
	
  Registered
  Office

  	
   

  	
  Langstone
  Road, Havant, Hampshire, PO9 1SA

  
	
   

  	
   

  	
   

  
	
  Date and
  Place of Incorporation:

  	
   

  	
  26
  June 1985, England & Wales

  
	
   

  	
   

  	
   

  
	
  Directors:

  	
   

  	
  Stephen
  Barber

  
	
   

  	
   

  	
  Paul Anthony
  Holmes

  
	
   

  	
   

  	
  Anthony
  William Leonard

  
	
   

  	
   

  	
   

  
	
  Secretary:

  	
   

  	
  Paul Anthony
  Holmes

  
	
   

  	
   

  	
   

  
	
  Accounting
  Reference Date:

  	
   

  	
  30 November

  
	
   

  	
   

  	
   

  
	
  Auditors:

  	
   

  	
  PricewaterhouseCoopers

  
	
   

  	
   

  	
   

  
	
  Authorised
  Share Capital:

  	
   

  	
  £4,000
  divided into 4,000,000 ordinary shares of £0.001 pence each

  
	
   

  	
   

  	
   

  
	
  Issued Share
  Capital:

  	
   

  	
  £4,000
  divided into 4,000,000 ordinary shares of £0.001 pence each

  
	
   

  	
   

  	
   

  
	
  Registered
  Member:

  	
   

  	
  Xyratex
  Technology Limited

  
	
   

  	
   

  	
   

  
	
  Charges:

  	
   

  	
  None

  

 

47

 

	
  Company
  Name:

  	
   

  	
  Xyratex Holdings Inc

  
	
   

  	
   

  	
   

  
	
  Registered
  Number:

  	
   

  	
  3122528

  
	
   

  	
   

  	
   

  
	
  Registered
  Office:

  	
   

  	
  2031
  Concourse Drive, San Jose, California 95131, USA.

  
	
   

  	
   

  	
   

  
	
  Date and
  Place of Incorporation:

  	
   

  	
  22
  November 1999, State of Delaware, USA.

  
	
   

  	
   

  	
   

  
	
  Directors:

  	
   

  	
  Stephen
  Barber

  
	
   

  	
   

  	
  Mark Samson

  
	
   

  	
   

  	
  Chris
  Sharman

  
	
   

  	
   

  	
   

  
	
  Secretary:

  	
   

  	
  N/A

  
	
   

  	
   

  	
   

  
	
  Accounting
  Reference Date:

  	
   

  	
  30th
  November

  
	
   

  	
   

  	
   

  
	
  Authorised
  Share Capital:

  	
   

  	
  6,000,000
  stock at US$0.01 per unit of stock

  
	
   

  	
   

  	
   

  
	
  Issued Share
  Capital:

  	
   

  	
  3,000,000
  stock at US$0.01 per unit of stock

  
	
   

  	
   

  	
   

  
	
  Registered
  Member:

  	
   

  	
  Xyratex
  Group Limited

  
	
   

  	
   

  	
   

  
	
  Charges:

  	
   

  	
  None

  

 

48

 

	
  Company Name

  	
   

  	
  Xyratex International Inc

  
	
   

  	
   

  	
   

  
	
  Registered
  Number:

  	
   

  	
  C1394516

  
	
   

  	
   

  	
   

  
	
  Registered
  Office

  	
   

  	
  2031
  Concourse Drive, San Jose, California 95131, USA.

  
	
   

  	
   

  	
   

  
	
  Date and
  Place of Incorporation:

  	
   

  	
  18
  December 1986, State of California USA

  
	
   

  	
   

  	
   

  
	
  Directors:

  	
   

  	
  Stephen
  Barber

  
	
   

  	
   

  	
  Mark Samson

  
	
   

  	
   

  	
  Chris
  Sharman

  
	
   

  	
   

  	
   

  
	
  Secretary:

  	
   

  	
  N/A

  
	
   

  	
   

  	
   

  
	
  Accounting
  Reference Date:

  	
   

  	
  30th
  November

  
	
   

  	
   

  	
   

  
	
  Authorised
  Share Capital:

  	
   

  	
  20,000,000
  units of stock

  
	
   

  	
   

  	
   

  
	
  Issued Share
  Capital:

  	
   

  	
  9,600,000
  units of stock

  
	
   

  	
   

  	
   

  
	
  Registered
  Member:

  	
   

  	
  Xyratex
  Holdings Inc

  
	
   

  	
   

  	
   

  
	
  Charges:

  	
   

  	
  None

  

 

49

 

	
  Company
  Name:

  	
   

  	
  Xyratex Holdings (Netherlands) BV

  
	
   

  	
   

  	
   

  
	
  Registered
  Number:

  	
   

  	
  BV 563.396

  
	
   

  	
   

  	
   

  
	
  Registered
  Office

  	
   

  	
  Herengracht
  469, 1017 BS, Amsterdam.

  
	
   

  	
   

  	
   

  
	
  Date and
  Place of Incorporation:

  	
   

  	
  3rd
  June 1996, Netherlands.

  
	
   

  	
   

  	
   

  
	
  Director

  	
   

  	
  Stephen
  Barber

  
	
   

  	
   

  	
  Derek Holt

  
	
   

  	
   

  	
   

  
	
  Secretarial
  Agents:

  	
   

  	
  First
  Alliance Trust NV

  
	
   

  	
   

  	
   

  
	
  Accounting
  Reference Date:

  	
   

  	
  30th
  November

  
	
   

  	
   

  	
   

  
	
  Authorised
  Share Capital:

  	
   

  	
  NLG200,000
  divided into 200 shares of NLG 1,000 each.

  
	
   

  	
   

  	
   

  
	
  Issued Share
  Capital:

  	
   

  	
  180 shares
  of NLG 1,000 each.

  
	
   

  	
   

  	
   

  
	
  Registered
  Member:

  	
   

  	
  Xyratex
  Holdings (UK) Limited

  
	
   

  	
   

  	
   

  
	
  Charges:

  	
   

  	
  None

  

 

50

 

	
  Registered
  Name:

  	
   

  	
  Bigbyte Europe BV

  
	
   

  	
   

  	
   

  
	
  Registered
  Number:

  	
   

  	
  BV 517.924

  
	
   

  	
   

  	
   

  
	
  Registered
  Office

  	
   

  	
  Herengracht
  469, 1017 BS, Amsterdam.

  
	
   

  	
   

  	
   

  
	
  Date and
  Place of Incorporation:

  	
   

  	
  28th
  April 1995, Netherlands.

  
	
   

  	
   

  	
   

  
	
  Directors:

  	
   

  	
  Stephen
  Barber

  
	
   

  	
   

  	
  First
  Alliance Trust NV

  
	
   

  	
   

  	
   

  
	
  Secretarial
  Agents:

  	
   

  	
  First
  Alliance Trust NV

  
	
   

  	
   

  	
   

  
	
  Accounting
  Reference Date:

  	
   

  	
  30th
  November

  
	
   

  	
   

  	
   

  
	
  Authorised
  Share Capital:

  	
   

  	
  NLG200,000
  divided into 100 shares of NLG2,000 each

  
	
   

  	
   

  	
   

  
	
  Issued Share
  Capital:

  	
   

  	
  NLG40,000
  divided into 400 shares of NLG100 each

  
	
   

  	
   

  	
   

  
	
  Registered
  Member:

  	
   

  	
  Xyratex
  Holdings (Netherlands) BV

  
	
   

  	
   

  	
   

  
	
  Charges:

  	
   

  	
  None

  

 

51

 

	
  Company
  Name:

  	
   

  	
  Xyratex (Malaysia) Sdn Bhd

  
	
   

  	
   

  	
   

  
	
  Registered
  Number:

  	
   

  	
  450236-W

  
	
   

  	
   

  	
   

  
	
  Registered
  Office

  	
   

  	
  22nd
  Floor, Wisma Cyclecarri, 288 Jalan Raja Laut, 50350, Kuala Lumpur.

  
	
   

  	
   

  	
   

  
	
  Date and
  Place of Incorporation:

  	
   

  	
  16th
  October 1997, Malaysia

  
	
   

  	
   

  	
   

  
	
  Directors:

  	
   

  	
  Stephen
  Barber

  
	
   

  	
   

  	
  Neil Watson

  
	
   

  	
   

  	
  Yeow Seng
  Lee (known as YS Lee)

  
	
   

  	
   

  	
   

  
	
  Secretarial
  Agents:

  	
   

  	
  See Siew
  Cheng and Leong Shiak Wan.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Evatthouse
  Corporate Services Private Limited (an affiliate of PricewaterhouseCoopers),
  8 Cross Street, #11-00, PWC Building, Singapore, 048424.

  
	
   

  	
   

  	
   

  
	
  Accounting
  Reference Date:

  	
   

  	
  30th
  November

  
	
   

  	
   

  	
   

  
	
  Auditors:

  	
   

  	
  PricewaterhouseCoopers

  
	
   

  	
   

  	
   

  
	
  Authorised
  Share Capital:

  	
   

  	
  RM
  25,000,000 divided into 25,000,000 shares of RM1.00 each

  
	
   

  	
   

  	
   

  
	
  Issued Share
  Capital:

  	
   

  	
  RM
  15,000,000 divided into 15,000,000 shares of RM1.00 each

  
	
   

  	
   

  	
   

  
	
  Registered
  Member:

  	
   

  	
  Xyratex
  Technology Limited

  
	
   

  	
   

  	
   

  
	
  Charges:

  	
   

  	
  None

  

 

52

 

Schedule 3

Warranties

 

1             Accounts and
Management Accounts

 

(i)            The
Accounts have been prepared in accordance with applicable law and on a basis
consistent with that adopted in the preparation of the audited accounts of the
Company for the previous financial year of the Company and in accordance with
all Financial Reporting Standards and Statements of Standard Accounting
Practice in force at the date hereof as made or adopted by the Accounting
Standards Board and all generally accepted accounting principles and practices
in the United Kingdom and give a true and fair view of the assets and
liabilities and state of affairs of the Group as at 30 November 2002 and
its profits and losses for the relevant period ended on the 30
November 2002.

 

(ii)           The
Management Accounts have been carefully prepared on a basis consistent with the
previous monthly management accounts of the Group and in accordance with the
accounting policies applied to the Accounts and each Manager is not aware of
any material inaccuracy in those management accounts.

 

2             Material Litigation

 

So far as the Warrantor is aware otherwise than as
claimant in the routine collection of debts arising in the ordinary course of
business for amounts not exceeding £200,000,

 

(i)            no Group Company is a claimant, defendant or otherwise a party to
any litigation which is in progress against or concerning the relevant Group
Company and pursuant to which damages in excess of £200,000 are claimed; and

 

(ii)           there are no circumstances which are likely to give rise to any such
litigation.

 

3             Material customers

 

So far as the
Warrantor is aware, no material customer of any Group Company has given notice
to the Company of its intention to cease to do business with such Group Company
and the Warrantor is not otherwise aware that any such material customer
intends to cease to do business or materially vary the terms on which such
customer does business with the relevant Group Company.

 

4             Assets

 

So far
as the Warrantor is aware, all of the material assets of the Group which are
described and included in the Accounts and/or the Management Accounts are:

 

(i)            legally and beneficially owned by a member of the Group; and

 

(ii)           are so owned free from all encumbrances; and

 

(iii)          there are no agreements or commitments to give or create, and no
claim has been made by any person entitled to any encumbrance over such assets;

 

5             Material contracts

 

So far
as the Warrantor is aware, no Group Company is in default in relation to any
material contract which would or is reasonably likely to have a material and
adverse effect

 

53

 

on the
financial or trading position of any member of the Group and so far as the
Warrantor is aware, all such contracts are valid and binding obligations on the
parties thereto.

 

6             Warranties in relation to the Company

 

The particulars of the Company and the Subsidiaries
set out in Schedule 2 are correct.

 

7             Warranties in relation to the Managers

 

7.1         Managers free to become Directors
etc.

 

The Warrantor
is free to be or become or continue to be an employee, director and shareholder
of the Company and to devote the whole of his time and attention to the
business and affairs of the Company and he is not bound by any restriction,
covenant or other obligation or commitment which would in any way impair his
ability so to do.

 

7.2         The Managers

 

Save as
disclosed by the Warrantor in his Managers’ Questionnaires:

 

7.2.1      there are no existing contracts or arrangements to which the Company
or any Subsidiary is a party and in which he and/or any person who is a
connected person with him is interested;

 

7.2.2      he is neither alone or jointly with or as manager, adviser,
consultant, agent or employee of any person directly or indirectly engaged in
any business other than that of the Company and its Subsidiaries;

 

7.2.3      he is not concerned or interested in any way in any business
competing with that carried on by the Company or any Subsidiary or the business
of any supplier or customer of the Company or any Subsidiary; and

 

7.2.4      he has never been charged with or convicted of any criminal offence
other than a road traffic offence (except one for which a custodial sentence,
whether suspended or not, was imposed) nor have bankruptcy or any analogous
proceedings been brought or threatened in respect of him, and he is not aware
of any facts or matters which they believe might give rise to any such criminal
or bankruptcy proceedings.

 

7.3         Managers’ Questionnaires

 

The answers
given by him in his Manager’s Questionnaire are true and accurate save for the
statement as to the his net assets which is materially accurate.

 

7.4         Brokerage or Commissions

 

There is no
agreement or arrangements under which he or any of his connected persons is to
receive from any person and, so far as he is aware, no person (other than SSSB
is entitled to receive from any Group Company, any finders’ or other fee,
brokerage or commission in connection with this Agreement or any of the matters
contemplated or referred to in those agreements.

 

7.5         Statutory Declaration under
Section 155

 

He is, and
knows of no reason why he will not remain, of the opinion required by
section 156(2) of the Act in relation to the granting by the Company (and
each or any of its Subsidiary) of security for the secured facilities under the
Facility Documents so as to be

 

54

 

able to give
the statutory declaration for at least the three months following the date of
this Agreement.

 

7.6         General

 

This Agreement
constitutes a legal, valid and binding obligation on him enforceable in
accordance with its terms.

 

7.7         Initial Business Plan

 

7.7.1      All factual information contained in the Initial Business Plan was
when given and is at the date of this Agreement true and accurate in all
material respects. The financial forecasts, projections and estimates contained
in the Initial Business Plan have been diligently prepared have been carefully
considered by the Warrantor and are believed to be fair and reasonable having
regard to the information available and the market conditions prevailing at the
time of their preparation and are not in need of any amendment.

 

7.7.2      All material assumptions on which the Initial Business Plan has been
based have been carefully considered by him and are honestly believed to be
reasonable or made on reasonable grounds having regard to the information
available and the market conditions prevailing at the time of their preparation
and are not in need of any amendment, modification or other alteration;

 

7.8         Reports

 

7.8.1      He has read the Accountants Report and he:

 

(i)           is not
aware of any material inaccuracy as to the factual matters in the Accountants’
Report;

 

(ii)          believes
the assumptions upon which the forecasts and projections in respect of the
three years ending 30 November 2005 are based, to be reasonable at the
present time in all material respects to the extent that they are consistent
with those set out in the Initial Business Plan;

 

(iii)         does not
believe the Accountants’ Report taken as a whole to be misleading in any
material respect.

 

7.8.2      He has read the Legal Due Diligence Report and:

 

(i)           he confirms that so far as he is aware all statements of fact
therein are true and accurate in all material respects;

 

(ii)          with the exception of those matters which are specifically excluded
from the scope of the Legal Due Diligence Report, confirms that he is not aware
of any material facts or matters relating to the Business not stated in the
Legal Due Diligence Report, the omission of which makes any statements
contained therein misleading in any material respect;

 

(iii)         does not materially disagree with any of the expressions of opinion
stated therein;

 

provided
always that for the purposes of this warranty the Legal Due Diligence Report
shall be deemed to only include:-

 

55

 

(i)           the
Executive Summary;

 

(ii)          the
Group Structure Chart contained at Annex 5;

 

(iii)         Annex 6;

 

(iv)         Annex 7;

 

(v)          the
list of properties currently occupied by the Group as contained on pages 1 and
2 of Annex 10;

 

(vi)         paragraph
1.2 and Schedule 1 of Annex 11;

 

(vii)        Annex 12;

 

(viii)       Annex 13;
and

 

(ix)          Annex
15.

 

56

 

Schedule 4

Part 1

Matters to be effected on or prior to signature of this Agreement

 

1             the delivery to NewCo of the Reports and the Business Plan;

 

2             the delivery to NewCo of the Manager’ Questionnaires;

 

3             the receipt by NewCo of references satisfactory to NewCo in respect
of each Manager;

 

4             the delivery to NewCo of the Disclosure Letter;

 

5             the delivery to NewCo of the Existing Shareholder Irrevocable
Undertakings and the Managers Irrevocable Undertakings and the Additional
Warranty Covenantors Irrevocable Undertakings;

 

6             the delivery to NewCo of duly executed Share Repurchase Agreements
signed by the Selling Shareholder;

 

7             the delivery to the Company of an opinion letter from Mourants
confirming that NewCo is duly incorporated and has the required capacity to
enter into this Agreement and that the execution by NewCo of this Agreement has
been duly authorised.

 

57

 

Schedule 4

Part 2

Matters to be effected on or prior to Completion of this Agreement

 

1             The passing of directors’ and shareholders’ resolutions in the
agreed form at a duly convened Board meeting and an extraordinary general
meeting convened at short notice inter alia to:

 

(a)           authorise the allotment of the NewCo Shares;

 

(b)          adopt the New Articles;

 

(c)           approve the Share Repurchase and the transfer of the shares pursuant
to the Offer;

 

(d)          issue the NewCo Shares credited as fully paid to NewCo and enter its
name in the register of members in respect thereof;

 

(e)          deliver
to NewCo certificates for the Shares subscribed by them;

 

(f)           appoint
Nic Humphries and such
other person as nominated by NewCo (if any) as
directors of the Company;

 

(g)          decrease
the authorised share capital of the Company to £300,000;

 

(h)          adopt
the Xyratex Group Limited 2003 Stock Option Plan.

 

2             NewCo shall pay to the Company the sum due from it/them pursuant to
Clause 3.2 by telegraphic transfer to the bank account of the Company or as it
shall direct.

 

3             The Articles of Association of NewCo shall be altered so as to
incorporate the amendments set out in the attached draft.

 

58

 

Schedule 5

Deed of Adherence

 

THIS DEED is made the [•] day of
[•] by [•]

 

WHEREAS

 

(A)         By a [transfer]/[subscription for shares] dated [of even date
herewith] [•] [(the “Transferor”)
transferred to [•] (the “Transferee”)]
[(the “Subscriber”) subscribed
for] [•] Shares of [•] each in the capital of [•]
(the “Company”) (the “Shares”).

 

(B)          This Agreement is entered into in compliance with the terms of
Clause 18.2 of an Agreement dated [•] made between (1) the Managers (2)
NewCo; (3) the Company; (4) the Existing Shareholders; and (5) the Additional
Warranty Covenantors (all such terms as are therein defined) (the “Subscription Agreement”).

 

It is hereby agreed as follows:

 

1             The [Transferee] [Subscriber] hereby agrees to assume the benefit of
the rights [of the Transferor] under the Subscription Agreement in respect of
the Shares and (subject to Clause [4] below) hereby agrees to assume and
assumes the burden of the [Transferor’s] obligations under the Subscription
Agreement to be performed after the date hereof in respect of the Shares.

 

2             The [Transferee] [Subscriber] hereby agrees to be bound by the
Subscription Agreement in all respects as if it were a party to the
Subscription Agreement as [an Investor] [a Manager] and to perform[:

 

2.1         all the obligations of the Transferor in that capacity thereunder;
and

 

2.2         all the obligations expressed to be imposed on such a party to the
Subscription Agreement

 

[in both
cases], to be performed or on or after the date hereof and subject always to
Clause [4].

 

3             This Agreement is made for the benefit of:

 

3.1         the parties to the Subscription Agreement; and

 

3.2         any other person or persons who may after the date of the
Subscription Agreement (and whether or not prior to or after the date hereof)
assume any rights or obligations under the Subscription Agreement and be
permitted to do so by the terms thereof,

 

and this
Agreement shall be irrevocable for so long as the [Transferee] [Subscriber]
holds any Ordinary Shares in the capital of the Company without the consent of
the Investors.

 

4             [For the avoidance of doubt:

 

4.1         no transferee who acquires shares from a Manager shall be liable
under any of the Warranties (as defined in the Subscription Agreement)
liability for which shall remain with the Manager; and

 

59

 

4.2         nothing in this Deed shall release the Transferor from any liability
in respect of any obligations under the Subscription Agreement due to be
performed prior to the date hereof.]

 

5             Each party to the Subscription Agreement does not:

 

5.1         make any representation or warranty or assumes any responsibility
with respect to the legality, validity, effectiveness, adequacy or
enforceability of the Subscription Agreement (or any agreement entered into
pursuant thereto); or

 

5.2         make any representation or warranty or assumes any responsibility
with respect to the content of any information regarding the Company [or any
member of the group] or which otherwise relates to the
[acquisition]/[subscription] of shares in the Company; or

 

5.3         assume any responsibility for the financial condition of the company
[or any member of the Group] or any other party to the Agreement or any other
document or for the performance and observance of the Agreement by the Company
or any other party to the Agreement (save as expressly provided therein),

 

and any and
all conditions and warranties, whether express or implied by law or otherwise,
are excluded save for the representations, warranties and undertakings
contained in the Warranties.

 

6             This Agreement shall be governed by and construed in accordance with
the laws of England and Wales.

 

In witness whereof this Deed of Adherence has been duly executed as a deed.

 

60

 

Schedule 6

Existing Incentive Schemes

 

(i)            Xyratex
plc Unapproved Company Share Option Plan

 

(ii)           Xyratex
plc 2001 Approved Company Share Option Plan (No.2)

 

(iii)          Unapproved
Schedule to the Xyratex plc 2001 Approved Company Share Option Plan (No.2)

 

(iv)          NSO
Plan (Stock Option Plan for Employees of Xyratex Limited)

 

(v)           Ex-Employee
Plan (Stock Option Plan for Non-Employees of Xyratex plc)

 

(vi)          ISO
Plan (Xyratex plc 2000 Stock Option Plan)

 

(vii)         Xyratex
Group Limited 2002 Employee Stock Purchase Plan

 

(viii)        Xyratex
plc Phantom Share Plan (adopted 14 November 2001)

 

61

 

ATTESTATIONS

 

 

In witness whereof this
Agreement has been duly executed as a deed.

 

 

	
  SIGNED as a
  DEED by STEPHEN IAN LEE BARBER in
  the presence of:

  	
   

  	
  }

  	
   

  	
  STEPHEN IAN
  LEE BARBER

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SIGNED as a
  DEED by RICHARD CHARLES PEARCE in
  the presence of:

  	
   

  	
  }

  	
   

  	
  RICHARD
  CHARLES PEARCE

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SIGNED as a
  DEED by STEPHEN THOMPSON in the
  presence of:

  	
   

  	
  }

  	
   

  	
  RICHARD
  CHARLES PEARCE

  
	
   

  	
   

  	
   

  	
   

  	
  AS ATTORNEY
  FOR AND ON BEHALF OF STEPHEN THOMPSON

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SIGNED as a
  DEED by PAUL WILLIAM HANNAH in
  the presence of:

  	
   

  	
  }

  	
   

  	
  RICHARD
  CHARLES PEARCE

  
	
   

  	
   

  	
   

  	
   

  	
  AS ATTORNEY
  FOR PAUL HANNAH

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SIGNED as a
  DEED by PAUL ANTHONY HOLMES in
  the presence of:

  	
   

  	
  }

  	
   

  	
  PAUL ANTHONY
  HOLMES

  

 

62

 

	
  SIGNED as a
  DEED by ANTHONY WILLIAM LEONARD in
  the presence of:

  	
   

  	
  }

  	
   

  	
  PAUL ANTHONY
  HOLMES

  

  AS ATTORNEY FOR WILLIAM LEONARD

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SIGNED as a
  DEED by MATTHEW CORNELL in the
  presence of:

  	
   

  	
  }

  	
   

  	
  RICHARD
  CHARLES PEARCE

  
	
   

  	
   

  	
   

  	
   

  	
  AS ATTORNEY
  FOR MATTHEW CORNELL

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SIGNED as a
  DEED by ADAM PETER WRAY in the
  presence of:

  	
   

  	
  }

  	
   

  	
  PAUL ANTHONY
  HOLMES

  
	
   

  	
   

  	
   

  	
   

  	
  AS ATTORNEY
  FOR ADAM WRAY

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SIGNED as a
  DEED by MICHAEL JOHN DINHAM in
  the presence of:

  	
   

  	
  }

  	
   

  	
  MICHAEL JOHN
  DINHAM

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SIGNED as a
  DEED by DEREK HOLT in the
  presence of:

  	
   

  	
  }

  	
   

  	
  D W BRADLEY

  
	
   

  	
   

  	
   

  	
   

  	
  AS ATTORNEY

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SIGNED as a
  DEED by DAVID HUGH MARTIN in the
  presence of:

  	
   

  	
  }

  	
   

  	
  DAVID HUGH
  MARTIN

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SIGNED as a
  DEED by PIOTR JAN NAHAJSKI in
  the presence of:

  	
   

  	
  }

  	
   

  	
  PIOTR JAN
  NAHAJSKI

  

 

63

 

	
  SIGNED as a
  DEED by WILLIAM KENNEDY WILKIE in
  the presence of:

  	
   

  	
  }

  	
   

  	
  WILLIAM
  KENNEDY WILKIE

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SIGNED as a
  DEED by ALISON GRIFFITHS in the
  presence of:

  	
   

  	
  }

  	
   

  	
  ALISON
  GRIFFITHS

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SIGNED as a
  DEED by XTX HgCapital Holdings Jersey acting by power of attorney

  	
   

  	
  }

  	
   

  	
  NIC
  HUMPRHIES

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SIGNED as a
  DEED by Xyratex Group Limited acting by two Directors or one Director and the
  Secretary

  	
   

  	
  }

  	
   

  	
  MICHAEL JOHN
  DINHAM

  STEPHEN IAN LEE BARBER

  

 

64Exhibit
10.5

 

CERTAIN CONFIDENTIAL
INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

 

 

 

Trading Agreement

Reference
Number: XYSLR001

 

Trading Agreement Date: 1st January 2004

 

 

This documents and
records the Agreement and Acceptance of the terms and conditions applicable to
all Xyratex Purchase Orders from whatever location and covers all Solectron
locations stipulated:

 

 

Signed
for and on behalf of:

 

 

A:            Xyratex Technology Limited

 

	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name :  John Andrews

  	
   

  	
  Name: Steve Parnell

  
	
  Title : Commodity Specialist

  	
   

  	
  Title: 
  PCBA Commodity Manager

  

 

 

B:            Solectron Corporation (Milpitas)

 

 

	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name :  Joe Tang

  	
   

  	
   

  
	
  Title : Senior Vice President (Asia Pacific Operations)

  
	
  [For
  and on behalf of Solectron Corporation]

  

 

 

Xyratex, Langstone Road,
Havant, PO9 1SA  Trading Agreement

 

1

 

ABSTRACT

 

This
document sets forth the terms and conditions between Xyratex Technology Limited
(hereinafter referred to as Xyratex) and Solectron  Corporation and its
subsidiaries and affiliates  as detailed in Appendix 1 (hereinafter
referred to as the “Supplier”) for the provision of Goods and/or Services which
may be ordered by Xyratex during the term of this Trading Agreement.

 

The
Trading Agreement records the agreement of the terms and conditions that would
apply upon the issue of an Order by Xyratex.

 

This
Trading Agreement is made between:

 

Xyratex
Technology Limited

Langstone
Technology Park

Langstone Road

Havant,

Hampshire PO9
1SA

England

 

 

whose
address for the purpose of this Trading Agreement is as quoted above, and

 

 

Solectron
Corporation

847
Gibraltar Drive

Milpitas,
CA 95035

USA

 

 

whose
address for the purpose of this Agreement is as stated above and it`s
Subsidaries and affiliates stated in Appendix 1.

 

Xyratex
desires the Supplier to supply Electronic  Assemblies the Supplier is
willing to perform the Services on the terms and conditions set forth in this
Trading Agreement.

 

2

 

XYRATEX PURCHASE TERMS AND CONDITIONS

 

 

Version 2b

Table of Contents

 

 

Clause:

	
  1.

  	
   

  	
  DEFINITIONS

  
	
  2.

  	
   

  	
  THE
  ORDER

  
	
  3.

  	
   

  	
  PRICE

  
	
  4.

  	
   

  	
  TITLE

  
	
  5.

  	
   

  	
  MATERIALS, PROPERTY,
  DOCUMENTS AND DATA

  
	
  6.

  	
   

  	
  CARRIAGE AND
  PACKING

  
	
  7.

  	
   

  	
  EARLY
  DELIVERY

  
	
  8.

  	
   

  	
  QUALITY WARRANTIES

  
	
  9.

  	
   

  	
  SUCCESSORS AND
  ASSIGNMENT

  
	
  10.

  	
   

  	
  SUBCONTRACTS

  
	
  11.

  	
   

  	
  TERMINATION

  
	
  12.

  	
   

  	
  INSURANCE

  
	
  13.

  	
   

  	
  CONFIDENTIAL
  INFORMATION

  
	
  14.

  	
   

  	
  PUBLICITY

  
	
  15.

  	
   

  	
  GIFTS

  
	
  16.

  	
   

  	
  INTELLECTUAL
  PROPERTY RIGHTS

  
	
  17.

  	
   

  	
  COMPLIANCE
  WITH LAWS AND REGULATIONS

  
	
  18.

  	
   

  	
  COUNTRY OF ORIGIN

  
	
  19.

  	
   

  	
  HARMFUL
  CODE

  
	
  20.

  	
   

  	
  PRODUCT
  DATE COMPLIANCE (Y2000)

  
	
  21.

  	
   

  	
  TOOLS

  
	
  22.

  	
   

  	
  PAYMENT
  TERMS

  
	
  23.

  	
   

  	
  LANGUAGE

  
	
  24.

  	
   

  	
  APPLICABLE LAW

  
	
  25.

  	
   

  	
  TERM AND REVIEW

  
	
  26.

  	
   

  	
  TERMINATION
  OF TRADING AGREEMENT

  
	
  27.

  	
   

  	
  CHANGES
  TO THE TRADING AGREEMENT

  
	
  28.

  	
   

  	
  CONTINUITY OF
  SUPPLY

  
	
  29.

  	
   

  	
  ACKNOWLEDGEMENT
  AND ACCEPTANCE OF PURCHASE ORDERS

  
	
  30.

  	
   

  	
  SURVIVORSHIP

  
	
  31.

  	
   

  	
  APPENDICES
  TO TRADING AGREEMENT

  

 

3

 

The
Order shall be deemed to be accepted either by the express oral or written
acceptance of the offer by the Supplier or by the dispatch of any part of the
Goods and/or performance of the Services specified on the face of the Order.
Xyratex expressly limits acceptance to the terms stated on both sides of the
Order and any attachments. Xyratex and Supplier agree that any additional or
modified terms contained in any acceptance or other form provided by the
Supplier shall not apply to the order.

 

CLAUSE 1.                                  DEFINITIONS

 

The
following expressions are defined as:

 

1) “Xyratex”
(the trading name of Xyratex Technology Limited and its subsidiary companies)
shall mean the company which issues the Order. The company issuing the order is
detailed on the face of the Order.

 

2) “Supplier”
shall mean the person, firm or company to whom the Order is addressed.

 

3) “Goods”
shall mean articles, materials, software or any other items as detailed on the
face of the Order.

 

4) “Services”
shall mean the service as detailed on the face of the Order.

 

5) “Affiliate”
means any subsidiary, holding company, or company with a holding company in
common as defined in Section 736 of the UK Companies Act 1985, or equivalent
legislative act within the country that the Order originates however, any such
subsidiary or company or other entity shall be deemed to be an Affiliate for
the purposes of the relevant Order only so long as such ownership exists.

 

6) “Order”
shall mean the purchase order.

 

7) “Forecast”
shall mean schedules provided to the Supplier which predict future
requirements. The Forecast will be for planning purposes only and does not
constitute an Order.

 

8) “Specification”
shall mean drawings, documents, electronic data and other items used to define
the Goods or Service.

 

9) “Trading
Agreement” shall mean this document and the schedules and attachments hereto.

 

4

 

CLAUSE 2.                                  THE ORDER

 

Reference
to Supplier’s bids or proposals in the Order shall not, unless otherwise
provided for on the face of the Order, modify the terms and conditions of the
Order, and no other agreement or quotation modifying any such terms and
conditions will be binding upon Xyratex unless made in writing and signed by
Xyratex’s authorised representative. Where the Order is issued pursuant to, or
forms part of a separate Xyratex Agreement for Goods or Services, the terms and
conditions of such Agreement, if in conflict with those of the Order, shall
take precedence, but only to the extent of such conflict.

 

CLAUSE 3.                                  PRICE

 

The
price detailed on the face of the Order will not be changed for the duration of
the Order unless mutually agreed and covered by a formal Purchase Order
amendment.

 

CLAUSE 4.                                  TITLE

 

Goods
and Services of the Order shall pass at time of delivery, provided that passing
of title does not prejudice either Xyratex’s right to reject for non-conformity
with the Specification or any other rights that Xyratex may have under the
Order. If advance payments from Xyratex to the Supplier pursuant to the Order
are made, then title, but not risk, is passed to Xyratex when Goods or Services
are allocated to the Order. All items allocated should be adequately marked and
recorded as being the property of Xyratex.

 

CLAUSE 5.                                  MATERIALS, PROPERTY, DOCUMENTS AND DATA

 

Any
such items, tangible or intangible, consigned or issued by Xyratex to the
Supplier in connection with work being performed for Xyratex shall be used
solely for such purposes, and upon termination or completion of the Order,
shall be returned to Xyratex upon request. The Supplier shall not transmit or
communicate outside the country in which it is resident or registered, or
except for purchases of materials normally purchased by the Supplier,
communicate or divert to others, any Xyratex specification, drawing or other
data, or product of such data.

 

CLAUSE 6.                                  CARRIAGE AND PACKING

 

All
Goods are to be delivered carriage and insurance  paid (Incoterms 2000 CIP), or unless otherwise indicated in
writing , to the address specified on the Order, and all costs and expenses
incurred or suffered for the transport and delivery shall be payable by the
Supplier unless otherwise agreed. Xyratex accepts no responsibility for the
risk of damage, loss or delay in transit. All packages must be clearly marked
with the country of origin of Goods, name and address of sender and Xyratex
Order number as detailed on the Order, part number (if applicable), and show
gross tare

 

5

 

and
net weight and/or quantity.  All related
shipping documentation required for the fulfillment of the Order shall be
provided by the Supplier at no additional cost to Xyratex.

 

CLAUSE 7.                                  EARLY DELIVERY

 

Xyratex
has the right to return to the Supplier, at the Supplier’s expense, any Goods
delivered more than 5 days before the agreed delivery date.

 

CLAUSE 8.           QUALITY
WARRANTIES

 

The
Supplier acknowledges that it understands the purpose and conditions of use of
the Goods or Services supplied in accordance with the Order. The Supplier
warrants that the Goods or Services comply with their specified description,
are in accordance with the Xyratex Specification, if provided, are fit for the
purpose for which they were designed or required, and are of merchantable and
satisfactory quality, and Services will be performed with skill and care. Goods
and Services are subject to Xyratex inspection after delivery or performance.
If such warranties are not met, then at the option of Xyratex, the Goods or
Services may be rejected and;

 

1)
The Supplier’s account debited; and

 

2)
The Order may be cancelled in full if the in the event that Xyratex demand
reduces as a result of such warranties not being met by the Supplier; or

 

3) Goods or Services may
be reworked by Xyratex or a third party, the third party to be mutually agreed;
or

 

4)
Goods or Services may be returned to Supplier, who shall replace, repair or
re-perform and/or redeliver;

 

all
of the above will be conducted to the satisfaction of Xyratex, at the
Supplier’s expense and risk.

 

Inspection,
delivery, approval or payment by Xyratex shall not operate as a waiver of any
breach of warranty or of any term or condition of the Order.  No rights, remedies and warranties available
to Xyratex under the Order or by operation of law are waived or modified except
by Xyratex in writing.

 

The Supplier shall warrant the Goods or Services
for [xxx] from delivery.

 

CLAUSE 9.                                  SUCCESSORS AND ASSIGNMENT

 

The
Order shall be binding upon and inure to the benefit of Xyratex, its successors
and assigns, and shall be binding upon and inure to the benefit of the
Supplier, its successors, and to the extent assignment is approved by Xyratex
as provided in the

 

6

 

Order,
the Supplier’s successors and assigns.

 

All
rights and benefits in the Order are or may be assigned by Xyratex to its
Affiliate. Xyratex will give written notification to the supplier of the intent
of such assignment.

 

The Supplier may not
delegate, assign or transfer its rights or obligations under this Agreement,
whether in whole or part, without the written consent of Xyratex.

 

CLAUSE 10.                           SUBCONTRACTS

 

The
Supplier shall not subcontract, delegate or assign its obligations under the
Order without the prior written consent of Xyratex. Purchases of materials
normally purchased by the Supplier or required by the Order shall not be
construed as subcontracts, delegations or assignments requiring consent. The
Supplier shall, in any event, remain responsible for the performance of the
Order and have sole responsibility for the management of all subcontractors in
executing the Order. The Supplier shall accept full responsibility for all risk,
loss and damage howsoever arising from the use of any such subcontractor.

 

CLAUSE 11.                           TERMINATION

 

Default

 

The
occurrence of any of the following shall constitute an “Event of Default” on
the part of the Supplier;

 

1) Failure to deliver the Goods or perform the
Services within the time

specified
in the Order;

 

2)
Failure to have demonstrated commercially reasonable efforts to fulfil the
obligations of the Order, so as to endanger its ability to perform the Order;

 

3)
Failure to perform any other obligation, agreement or covenant of the Order;

 

In
an Event of Default as defined herein, Xyratex shall have the option to
terminate the Order in part or in full.

 

Convenience

 

The
Order may be terminated at Xyratex’s option at any time by giving notice. In
the event of such termination notice, the Supplier shall at all times mitigate
the effect of any such termination and shall invoke all cancellation agreements
relevant to the Order and within [xxx] of the termination notice submit in
writing to Xyratex an auditable account of the Order, records of which shall be
made available for inspection detailing. Xyratex will be liable, once mutually
agreed, for the following:

 

7

 

1)
The order price of finished Goods or Services and the cost of work in progress
specific to the Order that are within the specified lead times, lead time
profile or agreed finished goods hub stock;

 

2)
Liability for materials, components or other items or services purchased by the
Supplier exclusively for the fulfillment of the Order and delivered to the
Supplier; and

 

3)
The Supplier’s liability for materials, components, other items or services for
which firm irrevocable commitments have been made to a subcontractor for the
exclusive benefit of the Order;

 

Notwithstanding
the foregoing Xyratex shall not be liable to pay for any goods or services
which are not in accordance with the Specification, not determined in writing
within [xxx] of notice nor shall Xyratex be liable for any loss or damage other
than provided for in this clause and, in particular, Xyratex expressly excludes
liability for indirect, specific or consequential loss or damages for the loss
of profit, business, revenue, goodwill or anticipated savings.

 

Supplier
will report to Xyratex on a monthly basis, the value of any unique “excess or
obsolete material” directly attributable to Xyratex projects that has been
bought against a specified Purchase Order. Any such material which is reported
as non-moving, with no activity or usage for a > (greater than) 6 months
period will be subject to review by both parties and disposition on liability.
The Supplier shall also report on a monthly basis the lead times of any unique
components.

 

Xyratex
will honour (by means of a Purchase Order or Letter of Authority) all fair and
reasonable excess or obsolete materials, provided they are mutually agreed
between both Xyratex and the Supplier. In all cases, the Supplier will mitigate
to reduce any such agreed liabilities to a minimum and also by enforcing buy
back agreements with component suppliers (unless otherwise agreed).

 

The
process in which the format, type and timescales of this information is to be
further detailed in a separate Service Level Agreement which is to be agreed
between both Supplier and Xyratex.

 

CLAUSE 12.                           INSURANCE

 

The
Supplier shall be liable for and shall indemnify Xyratex against any claim,
cost or proceeding resulting from death or injury to any person(s) or damage to
any property caused by the negligence of the Supplier or of the Supplier’s
employees.  The Supplier shall arrange,
and provide evidence to Xyratex as required, Public Liability insurance with a
indemnity equivalent to [xxx] in respect of any one claim or incident, and
which shall remain in place for the term of the Order.

 

8

 

CLAUSE 13.                           CONFIDENTIAL INFORMATION

 

The
Supplier shall not disclose to any third party or use for any purpose other
than to fulfil its obligations under the Order, any information received from
Xyratex or its Affiliates in connection with the Order which has been disclosed
by Xyratex to the Supplier in confidence, except that which is otherwise
publicly available or is publicly disclosed by Xyratex or its Affiliates
subsequent to receipt by Supplier of such information, or is rightfully
received by the Supplier from a third party. The Supplier and Xyratex shall
sign a formal Reciprocal Non Disclosure Agreement encompassing all business
conducted between the Supplier and Xyratex.

 

CLAUSE 14.                           PUBLICITY

 

The
Supplier shall not, without the written consent of Xyratex, advertise, or
otherwise disclose the existence of the Order, or the fact that the Supplier
has furnished, or agreed to furnish, to Xyratex Goods or Services.

 

CLAUSE 15.                           GIFTS

 

The
Supplier shall not make or offer gifts or gratuities to Xyratex employees. Such
gifts or offerings may be construed as attempts to improperly influence the
business relationship with Xyratex.

 

CLAUSE 16.                           INTELLECTUAL PROPERTY RIGHTS

 

1) In a case where Goods are to be developed or created for
Xyratex as specified the Order, all intellectual property rights arising from
such development or creation (except patent rights which are subject to
paragraph (2) below) shall belong exclusively to Xyratex, and the Supplier
hereby assigns such rights to Xyratex. The Supplier shall obtain from all
contributors to the development or creation of such Goods a full waiver of any
moral rights therein.

 

2)The
right to apply for patent protection on an invention made by the Supplier in
the creation or development of Goods, and any patent granted thereon, shall
belong to the Supplier. The Supplier hereby grants to Xyratex and its
Affiliates a world-wide, non-exclusive, royalty-free, irrevocable, unrestricted
license under any such patent granted. 
Any license granted will be valid only during the course of business
between both parties and will cease on termination of this Trading Agreement.

 

CLAUSE 17.                           COMPLIANCE WITH LAWS AND REGULATIONS

 

Both
parties shall at all times comply and act so as to enable the other party to
comply, and indemnify the other party against any damage arising from breach of
this condition, with all applicable laws, statutory regulations and enactment’s

 

9

 

including,
but not limited to, those relating to health and safety at work and the control
of hazardous substances.

 

The
Supplier shall supply the Goods and Services with environmental responsibility,
shall not supply or use asbestos, or materials or equipment containing
asbestos, in the provision of the Goods and Services. And all Goods and
Services supplied which contain or are manufactured using ozone depleting
substances (as defined by the Montreal Protocol) shall, be clearly and
securely, labeled by the supplier as follows :

Warning :

Contains or
manufactured with, (insert
chemical name of substance(s) ), a substance which harms public health and the
environment by destroying ozone in the upper atmosphere.

 

CLAUSE 18.                           COUNTRY OF ORIGIN

 

The
Supplier shall declare the country of origin of all Goods or Services on all
invoices, advice notes and packaging.

 

CLAUSE 19.                           HARMFUL CODE

 

“Harmful
Code” shall mean any computer code or programming instructions that are
intentionally constructed with the ability to damage or otherwise adversely
affect computer programs, data files or hardware without the agreement or
intent of the user, and includes instructions known as worms and viruses.

 

The
Supplier will take  all reasonable
efforts and measures to ensure that any code provided in the Goods or Services
shall not contain any Harmful Code. The Supplier will notify Xyratex
immediately of any suspected contamination, and take remedial action to remove
any of the Harmful Code.

 

CLAUSE 20.                           PRODUCT DATE COMPLIANCE (Y2000)

 

Supplier represents and warrants to Xyratex that Supplier has
undertaken measures to eliminate, to the extend reasonably practicable,
disruption to Supplier’s internal systems and processes involved in performing
services as provided in this agreement as a result of or due to the date change
from and between December 1999 and January 2000, and due to the year being a
leap year.

 

CLAUSE 21.                           TOOLS

 

Where
the Order includes the provision of tools, including the materials and property
referred to in Section 5, to be used by the Supplier for the manufacture of
Goods or supply of Services to the Specification, the following shall apply.
Any tools, materials and property supplied by Xyratex shall be inspected by
Solectron and, subject to acceptance of the foregoing, Solectron shall accept
risk and responsibility.

 

10

 

1)
Such tools and related documents shall:

 

a)
become and remain the property of Xyratex;

 

b)
be marked with an appropriate number provided by Xyratex;

 

c)
not be mortgaged or encumbered in any way;

 

d)
be used, subject to the approval of Xyratex, only for the manufacture of Goods
for Xyratex;

 

e)
be warranted by Supplier capable of producing to the Specification;

 

f)
be regularly serviced, maintained, repaired or replaced as necessary for their
agreed life at the cost, except when in the possession of Xyratex, and any such
replacement tools shall become and remain the property of Xyratex;

 

g)
not be moved by the Supplier from its premises, or modified in any way, without
the prior approval of Xyratex; and

 

h)
be made readily available for inspection by Xyratex at all reasonable times.

 

i)
tools consigned by Xyratex for use by supplier shall be warranted by Xyratex as
fit for purpose. Any maintenance, repair or replacement required will be the
responsibility of Xyratex.

 

2)
The Supplier shall be responsible for all damage to property or death or injury
to persons arising from use or possession of the tools and shall indemnify
Xyratex against all related claims or damages.

 

3)
The Supplier upon request from Xyratex, and at no cost to Xyratex, except for
reasonable delivery charges, shall deliver the tools and related documentation
to Xyratex. In the event that the Supplier:

 

(a)
fails to comply promptly with such request; or

 

(b)
is unable to continue production; or

 

(c)
is in the process of actual or impending insolvency, receivership and/or
liquidation; or

 

(d)
is in breach of the Order;

 

then
Xyratex shall have the right to enter the Supplier’s premises and take
immediate possession of the tools and related documents, and the Supplier
expressly waives any rights or remedies it may have with regard to such tools
and related documentation including, but not limited to, any rights to notice

 

11

 

and
a hearing, undertaking or surety which might otherwise be required to be given
to the Supplier before any writ or court order may be issued or become
enforceable. The Supplier shall notify Xyratex promptly of any of the events
described in (b) or (c) above.

 

CLAUSE 22.         PAYMENT
TERMS

 

Supplier
invoices, acceptable to Xyratex will be paid [xxx].

 

CLAUSE 23.         LANGUAGE

 

English
shall be the language for all means of communication between the Supplier and
Xyratex in any matter concerning the Order.

 

CLAUSE 24.         APPLICABLE
LAW

 

The
Order shall be governed by the laws of England, whose courts shall be the
exclusive courts of competent jurisdiction, or by the laws of the country from
which the Order originates at the sole discretion of Xyratex.

 

CLAUSE 25.         TERM AND REVIEW

 

This
Trading Agreement shall commence on 1st November 2003 and shall
remain in effect indefinitely, subject to the Termination provision (Clause 26)
being exercised by either party.

 

CLAUSE 26.         TERMINATION OF TRADING AGREEMENT

 

This
Trading Agreement may be terminated by:

 

•
either party giving [xxx] written notice to the other.

 

Either party shall have the
option to terminate the order in part or in full should the following occur:

 

1)
The filing of any voluntary petition in bankruptcy by the Supplier, or the
filing of an involuntary petition by the Supplier’s creditors;

 

2)
The appointment of a receiver to take possession of substantially all of the
Supplier’s assets;

 

3)
The execution or other judicial seizure of all or substantially all of the
Supplier’s assets;

 

12

 

The termination of this Trading Agreement
shall not affect or impair any rights obligations under any, then pending
purchase orders in existence prior to such termination or expiration, nor shall
it relieve any portion of any obligation or liability incurred hereunder or
thereunder prior to such termination or expiration, nor shall it effect or
impair the rights of either party arising out of this Trading Agreement prior
to such termination or expiration. Except as expressly provided therein or as
otherwise agreed upon by the parties in writing at the time of the termination.

 

CLAUSE 27.         CHANGES
TO THE TRADING AGREEMENT

 

Any
change to this Trading Agreement shall be recorded and re-issued.  Notice of any request for change by either
party is to be submitted in writing to the other and shall include, but not be
limited to:

 

• a
definition of the proposed change;

• a
statement of action needed to implement the change; and

• the
necessary changes to the scope of Goods and/or Services.

 

Following
notice of any requested change, until such time as change may be agreed by the
parties, the existing terms and conditions of this Trading Agreement shall
prevail.  The request for change shall
be reviewed without unreasonable delay.

 

CLAUSE 28.         CONTINUITY
OF SUPPLY

 

The
Supplier undertakes to provide a minimum of six months notice of obsolescence
of the Goods or constituent parts, supplied pursuant to the Xyratex Order(s) or
parts thereof required for the manufacture of the Goods detailed in the
Order(s).

 

The
Supplier shall advise Xyratex forthwith of any factors or circumstances which
shall or are likely to, affect the continuity of supply of Goods and/or
Services. Whereby six months notice is not forthcoming from component
manufacturers then Solectron will advise the maximum possible notification in
these instances.

 

CLAUSE 29.         ACKNOWLEDGEMENT AND ACCEPTANCE OF PURCHASE ORDERS

 

For
the term of this Trading Agreement the Supplier shall acknowledge, in writing,
and confirm the acceptance of all orders within (3) working days of receipt of
the Purchase Order.

 

CLAUSE 30.         SURVIVORSHIP

 

The
provision and obligations to Clauses 4 (Title), 7 (Early Delivery), 8 (Quality
Warranties), 9 (Successors & Assignment), 11 (Termination), 12 (Insurance),
13 (Confidential Information), 16 (Intellectual Property Rights), 19 (Harmful
Code), 20 (Product Date Compliance), 21 (Tools), 22 (Payment Terms), 24
(Applicable Law)

 

13

 

and
shall survive any such termination or cancellation of this Trading Agreement
for what ever reason.

 

CLAUSE 31.         APPENDICES
TO TRADING AGREEMENT

 

Appendices
are to be added to this Trading Agreement (in the form of official amendment)
by mutual consent. Such appendices will cover Service Level Agreements and
Supply Quality Requirements specific to the individual business unit of Xyratex
Technology. These documents are to be added after conclusion of the Trading
Agreement.

 

14

 

Appendix One

 

Solectron Technology Singapore Private
Limited:

 

Solectron Singapore Pte. Ltd.

    138 Joo Seng Road

    Singapore 368261

    Tel: (65) 6378-4355

 

Solectron Technology Singapore Pte. Ltd.

    12 Kallang Way

    Singapore 349216

    Tel: (65) 6841-1888

 

 

Solectron Technology (Malaysia) Sdn.
Bhd:

 

Solectron Technology, Sdn. Bhd.

    PLO 226A, Kawasan Perindustrian Senai Fasa III

    81400, Senai

    Johor

    Malaysia

    Tel: (607) 559-2225

 

Solectron Technology, Sdn. Bhd.

    Plot 13, Phase IV

    Prai Industrial Estate

    13600 Prai

    Penang

    Malaysia

    Tel: (604) 507-5600

 

Solectron Malaysia Sdn. Bhd.

    No. 2736 Mk1, Lorong Perusahaan, Baru 2

    Prai Industrial Estate

    13600 Prai

    Penang

    West Malaysia

    Tel: (604) 398-6808

 

Solectron (Shenzhen) Technology Co:

 

Solectron (Shenzhen) Technology Co., Ltd.

    3, Tian Fu Road

    Tong Fu Yu Industrial Park

    Shenzhen

    PRC, 518103

    Tel: 86 (755) 7314188

 

15

 

Solectron (Suzhou) Technology Co Ltd:

 

Solectron (Suzhou) Technology Co., Ltd.

    No. 9, Suqian Road

    China-Singapore Suzhou Industrial Park

    Suzhou, Jiangsu

    PRC, 215021

    Tel: 86 (512) 6761-2300

 

PT Solectron Technology Indonesia:

 

PT Solectron Technology Indonesia

    Blk 515 JI Rambutan

    Muku Kuning, Batam 29433

    Indonesia

    Tel: 62 (80) 611660

 

Xyratex Technology Limited:

 

Xyratex Technology Limited

Langstone Technology Park

Langstone Road

Havant,

Hampshire PO9 1SA

England

 

Xyratex (Malaysia) Sdn. Bhd:

 

Xyratex (Malaysia) Sdn. Bhd.

Lots 34 & 37

Persiaran Bunga Tanjung 1

Senawang Industrial Park

70400 Seremban

Negeri Sembilan, Malaysia

Tel: 60 6679 5400

 

Xyratex
Sacremento:

 

Xyratex Technology.

840 Embarcadero Drive

Suite 80

West Sacremento

California

95605-1503

USA

Tel:
916 375 8181

 

Xyratex San
Jose:

 

Xyratex Technology.
2031 Concourse Drive

San Jose

California

95131-1727

 

16

 

USA

Tel:
408 894 0800

 

17

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