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Exhibit 10.3    
    

        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. 

 
 

ASSET PURCHASE AGREEMENT    
    

        THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into this 23rd day of February, 2004 by and among Xyratex Technology Limited a
company registered in England and Wales under the Companies Act 1985 ("Buyer"), ZT Automation LLC, a Delaware limited liability company ("Seller") and ZT Automation Pte. Ltd., a Singapore
corporation (the "Subsidiary"). 

RECITALS  

        A.    Seller owns 100% of the issued and outstanding shares of the Subsidiary. 

        B.    Seller
and the Subsidiary desire to sell, assign and transfer to Buyer, and Buyer desires to purchase and acquire from Seller and the Subsidiary, substantially all their
assets and properties (other than the shares of the Subsidiary) as hereinafter provided. 

        C.    Simultaneously
with the execution of this Agreement Xyratex International Inc. has entered into: (i) Consulting Agreements with two of the members of the
Seller; (ii) Non-Competition Agreements with five of the members of the Seller; and (iii) Employment Agreements with two employees of Seller, and Buyer has entered into a
Joinder Agreement with all of the members of Seller (the "Members"). Accordingly, in consideration of the foregoing and the following representations, warranties, covenants and agreements, and
intending to be legally bound hereby, the parties agree as follows: 

AGREEMENT  

1.     DEFINITIONS AND RULES OF CONSTRUCTION  

        1.1    Definitions.    The terms listed in this Section 1 shall have the meanings
specified or referred to below for all purposes of this Agreement: 

        "Agreement"—as defined in the preamble 

        "Allocation"—as defined in Section 2.8. 

        "Applicable Percentage"—means the percentage of the invoiced amount of Products sold that has been recognized as revenue in
accordance with GAAP revenue recognition principles as such existed on the Closing Date consistently applied. 

        "Assets"—as defined in Section 2.1. 

        "Assumed Liabilities"—as defined in Section 2.6. 

        "Balance Sheet"—as defined in Section 4.5. 

        "Balance Sheet Date"—the date of the Balance Sheet, December 31, 2003. 

        "Business"—means the business conducted by the Seller and the Subsidiary including the design, development, manufacturing,
marketing, selling and support of the Fixed Price Products and Non-Fixed Price Products, as conducted prior to the Closing and as conducted by Buyer after the Closing. 

        "Buyer"—as defined in the preamble. 

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        "Buyer Damages"—as defined in Section 7.2. 

        "Buyer Indemnitees"—as defined in Section 7.2. 

        "Closing"—as defined in Section 3.1. 

        "Closing Date"—as defined in Section 3.1. 

        "COBRA"—as defined in Section 6.8. 

        "Code"—Internal Revenue Code of 1986, as amended. 

        "Completed Earnout Months"—means all Earnout Months beginning February 1, 2004 up to, but not including the month in
which a Subsequent Sale or Liquidation occurs. 

        "Contracts"—as defined in Section 4.13. 

        "Disclosure Schedule"—as defined in Section 4. 

        "Earnout"—as defined in Section 2.4. 

        "Earnout Month"—means a calendar month during the Earnout Period. 

        "Earnout Period"—means the period commencing on January 1, 2004 and ending on December 31, 2006. 

        "Earnout Resolution Period"—as defined in Section 2.5(b). 

        "Earnout Statement"—as defined in Section 2.5(a)(i). 

        "Employment Offers"—as defined in Section 6.7. 

        "Environmental Law"—means any statute, law, rule, ordinance, regulation, treaty, code, or rule of common law of any
Governmental Body now in effect and in each case as amended, and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or final
judgment, relating to: (i) the environment, natural resources, health, safety or protection of species or ecological amenities; or (ii) Hazardous Materials or their release, discharge,
limitation, reduction, prohibition, transportation, disposal or clean-up. 

        "ERISA"—means the Employee Retirement Income Security Act of 1974, as amended. 

        "Excluded Assets"—as defined in Section 2.2. 

        "Fixed Price Products"—means [xxx] and other products as listed in
Schedule 2.4(c), and any other products with substantially the same product function, performance or specification. 

        "GAAP"—means generally accepted accounting principles in the US. 

        "GST"—as defined in Section 6.5(a)(ii). 

        "Governmental Body"—means any: nation, state, county, city, town or other jurisdiction; federal, state, local municipal,
foreign or other government; or governmental authority, including any agency, branch, department, board, commission, court, tribunal, other entity or official exercising governmental or
quasi-governmental authority. 

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        "Hazardous Materials"—means (i) petroleum or petroleum products (including crude oil or any fraction thereof, natural
gas, natural gas liquids, liquefied natural gas, or synthetic gas usable for fuel, or any mixture thereof), polychlorinated biphenyls (PCBs), asbestos or asbestos containing materials, urea
formaldehyde foam insulation, and radon gas; (ii) any substance defined as or included in the definition of "hazardous substance," "hazardous waste," "hazardous material," "extremely hazardous
waste," "restricted hazardous waste," "waste," "special waste," "toxic substance," "toxic pollutant," "contaminant" or "pollutant," or words of similar import, under any applicable Environmental Law;
(iii) infectious materials and other regulated medical wastes; (iv) any substance which is toxic, explosive, corrosive, flammable, radioactive, carcinogenic, mutagenic or otherwise
hazardous and is regulated by any Governmental Body; and (v) any other substance, material or waste the presence of which requires investigation or remediation under any Environmental Law. 

        "Intellectual Property"—means all patents, patent applications, patent rights, trademarks, trademark applications, trade
names, service marks, service mark applications, material licenses, copyrights, trade secrets computer programs and other computer software (including source and object code relating thereto and
contained within Seller's and the Subsidiary's document and source code control systems, but excluding standard, commercially available software developed or produced by others) and inventions, owned
or used by Seller and the Subsidiary and related to their Products. 

        "IP Rights"—as defined in Section 4.17(b). 

        "Knowledge of Buyer"—Means the actual knowledge of Richard Pearce. 

        "Knowledge of Seller"—and similar terms evidencing awareness on the part of Seller or the Subsidiary means the actual
knowledge of Neil A. Brumberger, Michael G. Rogowski, Christopher Martin, Thomas Steiber, Bryan Clark or Joseph Shaughnessy. 

        "Liquidation"—as defined in Section 2.5(e)(ii). 

        "Liquidation Compensation"—as defined in Section 2.5(e)(iv). 

        "Members"—as defined in Recital C. 

        "Non-Fixed Price Products"—means all automation products produced, marketed or sold by Buyer, XII or XSL or any of
their affiliates other than Fixed Price Products, including but, not limited to, [xxx], other disk handling related automation products and Parts and Services related to Fixed
Price Products and Non-Fixed Prices Products, but specifically excluding Buyer's [xxx] products and derivative works thereof. 

        "Order"—as defined in Section 6.5(a)(ii). 

        "Organizational Documents"—means (i) the articles or certificate of incorporation or association and the bylaws of a
corporation; (ii) the partnership agreement and any statement of partnership of a general partnership; (iii) the limited partnership agreement and the certificate of limited partnership
of a limited partnership; (iv) the articles of association or certificate of formation and the bylaws or the limited liability company or operating agreement of a limited liability company;
(v) any charter or similar document adopted or filed in connection with the creation, formation, or organization of any entity and the laws of any entity; and (vi) any amendment to any
of the foregoing. 

        "Permits"—as defined in Section 4.16(a). 

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        "Permitted Liens"—means (i) liens for current taxes not yet due and payable or for taxes being contested in good faith;
(ii) mechanics', materialmen's, warehousemen's, contractors', workmen's, repairmen's, carriers' and similar liens attaching by operation of law, incurred in the ordinary course of business and
securing payments not delinquent or payments which are being contested in good faith, which are not, individually or in the aggregate, material to the conduct of the Business or the use or operation
of the Assets; (iii) the rights, if any, of third-party suppliers or other vendors having possession of equipment of the Business; and (iv) those items listed in
Part 4.13 of the Disclosure Schedule. 

        "Person"—an individual, partnership, corporation, business trust, limited liability company, limited liability partnership,
joint stock company, trust, the executors, administrators or other legal representative of an individual in such capacity, unincorporated association, joint venture, a government or any agency or
department of any government or other entity. 

        "Personal Property"—as defined in Section 4.14. 

        "Prime Rate"—means the base rate on corporate loans posted by at least 75% of the 30 largest banks in the US as reported in  The Wall Street Journal.

        "Products"—means Fixed Price Products and Non-Fixed Price Products. 

        "Projected Revenue"—means (i) the quotient obtained by dividing 35 by the number of Completed Earnout Months multiplied
by (ii) the aggregate Revenue for Completed Earnout Months. 

        "Purchase Price"—as defined in Section 2.3. 

        "Quarterly Earnout Period"—as defined in Section 2.4(c). 

        "Remaining Earnout Months"—means all Earnout Months after the Completed Earnout Months. 

        "Retained Liabilities"—as defined in Section 2.7. 

        "Revenue"—means amounts attributable to sales of Products by Buyer, XII, XSL or any of their affiliates determined by
multiplying the Applicable Percentage of the Products sold by their Standard Unit Prices. Without limiting the foregoing, Revenue shall include amounts attributed to leases of Products to a third
party by Buyer, XII, XSL or any of their affiliates, whether pursuant to operating leases or capital leases, that commence during any Earnout Month and the Revenue attributable to such Product leases
shall equal the Standard Unit Price multiplied by the number of units of Product leased. 

        "Seller"—as defined in the preamble. 

        "Seller Damages"—as defined in Section 7.3. 

        "Seller Indemnitees"—as defined in Section 7.3. 

        "Seller Indemnitors"—means the Seller, the Subsidiary and the Members solely pursuant to the Joinder Agreement. 

        "Seller Material Adverse Effect"—means any material adverse change, event, circumstance or development with respect to, or
material adverse effect on, (i) the Business, Assets, prospects, condition (financial or otherwise), or results of operations of Seller and the Subsidiary, taken as a whole, or (ii) the
ability of the Buyer to operate and use the Assets and conduct the Business after the Closing. 

        "Standard Unit Price"—means (i) for Fixed Price Products, the unit prices specified in
Schedule 2.4(c) and (ii) for Non-Fixed Price Products, the greater of the actual selling price or the product material cost divided by
[xxx]. 

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        "Subsequent Sale"—as defined in Section 2.5(e)(i). 

        "Subsequent Sale Compensation"—as defined in Section 2.5(e)(iii). 

        "Subsidiary"—as defined in the preamble. 

        "Subsidiary Assets"—as defined in Section 6.5(a)(ii). 

        "Tax" or "Taxes"—any federal, state, local or foreign income, gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental (including taxes under Section 59A of the Code), customs duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated or other tax of any kind
whatsoever, whether computed on a separate or consolidated, unitary or combined basis or in other manner, including any interest, penalty or addition thereto, whether disputed or not. 

        "Tax Return"—any return, declaration, report, claim for refund or information return or statement relating to Taxes, including
any schedule or attachment thereto, and including any amendment thereof. 

        "Third Party Claims"—as defined in Section 7.5(a). 

        "Transaction Costs"—means all costs and expenses incurred by a party or its affiliates in connection with this Agreement and
the transactions contemplated by this Agreement for payment to third parties, including investment bankers', brokers', finders', attorneys', accountants' and consultants' fees and disbursements, and
travel expenses. 

        "Transfer Taxes"—means all transfer, sales, use, goods and services, stamp, documentary, and registration taxes, including GST
and all conveyance fees, recording charges and other fees and charges (excluding interest and penalties) that are incurred in connection with the purchase and sale of the Assets and Business pursuant
to this Agreement. 

        "US"—means the United States of America. 

        "XII"—means Xyratex International Inc., a California corporation and affiliate of Buyer. 

        "XSL"—means Xyratex (Singapore) Limited, a company registered in England and Wales under the Companies Act 1985
and affiliate of Buyer. 

        1.2    Rules of Construction.    This Agreement has been negotiated by the parties and is to
be interpreted according to its fair meaning as if the parties had prepared it together and not strictly for or against any party. All references in this Agreement to "parties" refer to parties to
this Agreement unless expressly indicated otherwise. References in this Agreement to Sections, Schedules and Exhibits are to Sections, Schedules and Exhibits of or to this Agreement unless expressly
indicated otherwise. At each place in this Agreement where the context so requires, the masculine, feminine or neuter gender includes the others and the singular or plural number includes the other.
"Including" means "including without limitation." "Or" is used in the inclusive sense of "and/or." 

2.     PURCHASE AND SALE  

        2.1    Purchase and Sale of Assets.    Seller and the Subsidiary agree to sell, transfer,
assign and convey to Buyer, XII or XSL, and Buyer agrees to purchase and acquire, or cause XII or XSL to purchase and acquire, from Seller and the Subsidiary, on the Closing Date, all of the assets
and properties (other than those assets and properties specifically identified in Section 2.2) of Seller and the Subsidiary wherever located, (the "Assets"), including the following: 

        (a)   All
customer deposits, cash in bank and on hand, securities and investments; 

        (b)   All
accounts and notes receivable; 

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        (c)   All
refunds, credits and deferred charges; 

        (d)   All
deposits (including property rental deposits) and prepaid taxes and expenses; 

        (e)   All
fixed assets, leasehold improvements, machinery, equipment, furniture, motor vehicles and other tangible personal property; 

        (f)    All
production tooling, dies, tools, molds and spare parts; 

        (g)   All
raw materials, packaging and factory supplies, work in process and finished goods inventories; 

        (h)   All
technology and know-how, including design and repair history, specifications, drawings, designs, manufacturing processes, quality control inspection
criteria, reliability test results and test procedures; 

        (i)    The
originals or full and true copies of all records, including product and sales literature, historical customer and supplier lists, purchasing and shipping records,
artwork, sales leads and marketing files, product development, and regulatory affairs communications including inspection reports; 

        (j)    All
Intellectual Property and IP Rights, including rights to recovery for infringement; 

        (k)   All
Permits, to the extent transferable under applicable law; 

        (l)    The
name "ZT Automation" and any term constituting a variation thereof; and 

        (m)  All
rights of Seller and the Subsidiary in, to and under the Contracts listed on Schedule 2.1 and all insurance policies with respect
to Seller's and the Subsidiary's Business and the Assets. 

        The
Assets to be sold by each of Seller and the Subsidiary and purchased by each of Buyer, XII and XSL are described in the Allocation. Schedule 2.1 lists
all of the assets and properties (other than those assets and properties specifically identified in Section 2.2 and Personal Property as defined in Section 4.14) of each of Seller and
the Subsidiary as of the Balance Sheet Date, together with the net book value of each of such assets as of the Balance Sheet Date and consistent with the Balance Sheet, and in addition separately
identifies (i) any and all of such assets that Seller or the Subsidiary disposed of after the Balance Sheet Date and on or before the Closing Date, together with the net book value as of the
Balance Sheet Date of each of such assets disposed of, and (ii) any and all Assets (other than those assets and properties specifically identified in Section 2.2 and Personal Property as
defined in Section 4.14) acquired by Seller or the Subsidiary after the Balance Sheet Date and on or before the Closing Date, together with the net book value of each of such Assets as of the
date of their acquisition by Seller or the Subsidiary. Schedule 2.1 lists individually each of such assets with an original cost in excess of $10,000, and, unless
Seller includes on Schedule 2.1 each of such assets with an original cost of $10,000 or less, the aggregate net book value, as of the Balance Sheet Date and
consistent with the Balance Sheet, of all of such assets within each asset category with an original cost of $10,000 or less (designated as "Other [name of asset category]"). 

        2.2    Excluded Assets.    Notwithstanding the foregoing, Seller and the Subsidiary shall not
sell, transfer or assign to Buyer, XII or XSL, and shall retain: their minute books, stock books and/or membership records and other records relating exclusively to their organization, existence and
capitalization, any Contracts listed on Schedule 2.2; and all shares of the Subsidiary (collectively, the "Excluded Assets"). 

        2.3    Purchase Price.    The total purchase price for the Assets will consist of the sum of
(i) $8,600,000 plus the Earnout (the "Purchase Price"), and (ii) the assumption by Buyer, XII and XSL of certain liabilities and obligations of Seller and Subsidiary in accordance with
Section 2.6. 

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        2.4    Payment.    The Purchase Price shall be payable as follows: 

        (a)   Buyer
shall pay $6,600,000 to Seller on the Closing Date; 

        (b)   Buyer
shall pay $2,000,000 to Seller; on February 28, 2005; and 

        (c)   Buyer
shall pay to Seller an additional amount, not to exceed $20,400,000, equal to 21.5% of the cumulative Revenue in excess of $19,600,000 of cumulative Revenue (the
"Earnout") for the Earnout Period, with such amounts to be payable as accrued in quarterly installments for each fiscal quarter ending on the last day of February, May, August and November (the
"Quarterly Earnout Period"). The Final Quarterly Earnout Period is the month of December 2006. In addition, and subject to the overall limitation of $20,400,000 for all Earnout payments, Buyer
shall pay to Seller the amount if any by which (i) one-half of the Earnout that would have been paid for the three month period beginning January 1, 2007, had such period
been considered part of the Earnout Period; exceeds (ii) one-half of Earnout that would have been payable for the three month period beginning October 1, 2006 had such three
month period been considered a Quarterly Earnout Period. 

        (d)   All
payments under this Agreement, including pursuant to this Section 2.4, shall be made and payable in US dollars by wire transfer of immediately available funds
to an account set forth in Schedule 2.4(d) or such other wire instruction information as may be provided in writing by Seller to Buyer. 

        (e)   All
payments made pursuant to this Section 2.4, Section 2.5(d) or Section 2.5(e) shall be made by Buyer on its own behalf and on behalf of XII and
XSL, and shall be paid to Seller on Seller's behalf and on behalf of the Subsidiary, and all such payments shall be deemed made in accordance with the Allocation. 

        2.5    Earnout Payment Calculation.    

        (a)   Within
30 days after the end of each Quarterly Earnout Period, Buyer shall prepare a written Earnout Statement, as defined in
Section 2.5(a)(i) below, in the following manner: 

        (i)    Buyer
shall cause to be delivered to Seller a certificate executed by Buyer's Chief Financial Officer or President reflecting the Revenue during the Quarterly Earnout
Period (the "Earnout Statement") and such further detail and information as reasonably requested by Seller to evaluate the Revenue reported in the Earnout Statement, 

        (ii)   Buyer
shall give Seller and the Seller's accountants access to the working papers and information related to the Earnout Statement at such times as may reasonably be
requested by the Seller including, but not limited to, any description of the methodology, procedures, audits and analysis undertaken in connection with the Earnout Statement, for purposes of
preparing, reviewing and resolving any disputes concerning the Earnout Statement. Buyer shall keep and maintain accurate and complete books and records with respect to the basis for each Earnout
Statement for a period of one year after the creation thereof, which records shall include such information as shall be reasonably necessary to verify the Revenue for the Quarterly Earnout Period..
Within 30 days following the delivery to Seller of the Earnout Statement, Seller shall notify Buyer of any dispute of any item contained in the Earnout Statement, which notice shall set forth
in reasonable detail the basis for such dispute. If Seller fails to notify Buyer of any such dispute within such 30 day period, the Earnout Statement shall be deemed to be accepted by Seller. 

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        (b)   In
the event that Seller shall so notify Buyer of any dispute, Buyer and Seller shall cooperate in good faith to resolve such dispute as promptly as possible. If Buyer
and Seller are unable to resolve any such dispute within 15 days of Seller's delivery of such notice (the "Earnout Resolution Period"), then all amounts remaining in dispute shall be submitted
to binding arbitration to be conducted by an arbitrator selected by Seller and Buyer within 10 days after the expiration of the Earnout Resolution Period. If Seller and Buyer are unable to
agree on a single arbitrator, then Buyer and Seller shall each have the right to request the American Arbitration Association to appoint the arbitrator, who shall not have had a material relationship
with Seller, Buyer or any of their respective affiliates within the past two years. All fees and expenses relating to the arbitration shall be borne by the party the arbitrator determines not to have
been the successful party in the arbitration. The prevailing party in the arbitration shall, in addition to any compensation or amount awarded, be awarded such party's own attorneys' fees and expenses
in connection with the arbitration. In addition, if the arbitrator determines that the amount of Revenue reported in the applicable Earnout Statement under dispute was underreported by Buyer by an
amount in excess of 5% of the actual amount of Revenue during such Quarterly Earnout Period, then Seller shall be entitled to recover the fees and expenses of Seller's accountants retained in
connection with the review of such Earnout Statement(s). The arbitrator shall determine only those issues still in dispute and shall be limited to those adjustments, if any, that need be made for the
Earnout Statement to comply with this Agreement. The arbitrator's determination shall be set forth in a written statement delivered to Seller and Buyer within 30 days (or such later date as
shall be mutually agreed upon by the Buyer and Seller) after the initial meeting between the arbitrator and representatives of the Buyer and Seller and such arbitrator's determination shall be final,
binding and conclusive 

        (c)   The
parties acknowledge that the Seller's right to receive the Earnout represents a significant portion of the Purchase Price and is a significant factor in its
willingness to sell the Assets. The parties agree that it is their joint intention that the Business be conducted following the Closing in a commercially reasonable manner and without the intention of
jeopardizing the ability of Seller to receive the Earnout. Buyer covenants and agrees that during each Quarterly Earnout Period Buyer will conduct the Business, including the allocation of financial,
management, sales, marketing and engineering resources, in a manner consistent with the manner in which Buyer otherwise conducts the business of its Storage Infrastructure Division, and shall in no
event take into consideration the Earnout in its decisions as to the operation of the Business. 

        (d)   On
the 45th day following end of each Quarterly Earnout Period, Buyer shall pay to Seller any amount due under Section 2.4(c) that is not disputed.
With respect to any disputed amount, Buyer shall pay Seller immediately upon and in accordance with the final, binding and conclusive determination by the arbitrator as contemplated by
Section 2.5(b). 

        (e)   In
the event of a Subsequent Sale or Liquidation (each as defined below) which occurs on or before November 30, 2004, Buyer shall pay to Seller, in lieu of all
future Earnout payments, $25,000,000 minus the aggregate amount, if any, paid or payable pursuant to Section 2.4 and Section 2.5(d), discounted to net present value using the Prime Rate.
In the event of a Subsequent Sale or Liquidation which occurs after November 30, 2004, Buyer shall pay to Seller, in lieu of all future Earnout payments, (i) the Subsequent Sale
Compensation or Liquidation Compensation (each as defined below); provided, however, that in the event Projected Revenue on the date of a Subsequent
Sale or Liquidation is less than $25,000,000, the Subsequent Sale Compensation or Liquidation Compensation payable by Buyer to Seller shall be zero. All payments pursuant to this Section 2.5(e)
shall be made within 20 days of the Subsequent Sale or Liquidation. 

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        (i)    "Subsequent
Sale" means the sale, transfer or other disposition of (i) all or substantially all of the Business; (ii) a portion of the Storage
Infrastructure Division of Buyer containing the Business; (iii) the entire Storage Infrastructure Division of Buyer; or (iv) any portion of (i), (ii) or (iii) above that
would have a material adverse impact on the Earnout, but excluding (1) a sale, transfer, merger, amalgamation, change of control or sale of substantially all of the assets of Buyer or any
direct or indirect parent of Buyer or (2) a scheme of arrangement by which any Person becomes a direct or indirect parent of Buyer. 

        (ii)   "Liquidation"
means and shall be deemed to have occurred upon the earliest to occur of (i) the commencement of liquidation or winding-up of
(1) the Business, (2) a portion of the Storage Infrastructure Division containing the Business or (3) the entire Storage Infrastructure Division or any portion of the above that
would have a material adverse impact on the Earnout, (ii) any breach by Buyer of the provisions of Section 2.5(c), above and (iii) any discontinuance by Buyer of the sales of or
offer for sale of all or any material portion of the Products that would have a material adverse impact on the Earnout. 

        (iii)  The
Subsequent Sale Compensation, except as otherwise provided in this Section 2.5(e) of the Agreement, means (i) Projected Revenue in excess of
$19,600,000, multiplied by (ii) 0.215, (iii) minus the aggregate amount of Earnout payments paid or payable with respect to all Completed Earnout Months, (iv) discounted to net
present value at the time of payment using the Prime Rate. 

        (iv)  The
Liquidation Compensation, except as otherwise provided in this Section 2.5(e), is calculated in the same manner as the Subsequent Sale Compensation but is
discounted to net present value by using the Prime Rate plus 6.0%. 

        (v)   For
the purposes of calculating Subsequent Sale Compensation or Liquidation Compensation, net present value shall be calculated using the Prime Rate (or the Prime Rate
plus 6.0% as applicable) divided by 12 and shall be applied for each Remaining Earnout Month for which Subsequent Sale Compensation or Liquidation Compensation is payable as if the payments were
evenly distributed over the Remaining Earnout Months. 

        2.6    Assumption of Certain Liabilities.    Subject to Section 2.7, Buyer shall
assume, or cause XII or XSL to assume, and to the extent not discharged at the Closing Date, the following liabilities and obligations of Seller and the Subsidiary (collectively, the "Assumed
Liabilities"): 

        (a)   the
liabilities of Seller and the Subsidiary in the amounts reflected or reserved against on the Balance Sheet or disclosed in this Agreement or Schedules hereto; 

        (b)   the
liabilities of Seller and the Subsidiary arising in the ordinary course of business between the Balance Sheet Date and the Closing Date; 

        (c)   the
following liabilities and obligations incurred prior to, on or since the Balance Sheet Date in the ordinary course of business: 

        (i)    a
claim made by a current or former employee, consultant or independent contractor of either Seller or the Subsidiary for compensation at such Person's customary rate of
compensation, but excluding any severance pay or claims with respect to wrongful termination, sexual harassment, breach of contract or other wrongful acts of Seller or the Subsidiary; 

        (ii)   a
claim for any damages or that portion thereof arising from claims first made on or after the Closing Date that arise from misappropriation or infringement of any
intellectual property right of any Person by Seller or Subsidiary; 

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        (iii)  all
warranty claims except warranty claims in excess of the reserve for warranty claims on the Balance Sheet where a manufacturing or design defect of which Seller had
Knowledge that was not disclosed to Buyer proximately caused the warranty claims; and 

        (iv)  other
liabilities of Seller and the Subsidiary that were incurred in the ordinary course of business and did not become due on or before the Closing Date in accordance
with the customary practices of Seller or the Subsidiary; and 

        (d)   obligations
under each Contract listed on Part 4.13 of the Disclosure Schedule and other Contracts not required to be listed on
Part 4.13 of the Disclosure Schedule arising in the ordinary course of business, except to the extent any such Contract is set forth in
Schedule 2.2. 

        The
allocation of specific Assumed Liabilities among each of Buyer, XII and XSL is specified in Schedule 2.6. 

        2.7    Other Liabilities Not Assumed.    Anything in Section 2.6 to the contrary
notwithstanding, none of Buyer, XII or XSL shall assume or be responsible for any liabilities or obligations of Seller or Subsidiary other than the Assumed Liabilities, including the following
(collectively, the "Retained Liabilities"): 

        (a)   any
loans or amounts owed to any member of the Seller, other than amounts owed to employees of Seller as compensation or reimbursable expenses incurred in the ordinary
course of business or as set forth in the Balance Sheet; 

        (b)   any
claim by any customer or supplier of Seller or the Subsidiary or any other Person based on any alleged tort, breach of contract or failure of or defect in
performance by Seller or the Subsidiary or other cause of action arising as a result of activities of Seller or the Subsidiary prior to the Closing Date other than warranty claims included in Assumed
Liabilities to the extent provided in Section 2.6(c)(iii) and other than liabilities arising from the sale of the Products by the Seller and the Subsidiary in the ordinary course of
business prior to the Closing included in Assumed Liabilities to the extent provided in 2.6(c)(iv); 

        (c)   obligations
or liabilities under any Contracts excluded on Schedule 2.2; 

        (d)   any
liquidation or dissolution of Seller or the Subsidiary; 

        (e)   subject
to Section 6.5 any Taxes for which Seller or the Subsidiary is liable, whether attributable to periods prior to, including or subsequent to the Closing
Date; and 

        (f)    the
Seller's obligations under Section 7 of this Agreement. 

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        2.8    Allocation.    Within 21 days after the Closing Date, Buyer shall prepare and
provide to Seller an allocation of the Purchase Price, Assumed Liabilities and all other capitalized costs among the Assets in accordance with Section 1060 of the Code and the Treasury
Regulations promulgated thereunder by completing Schedule 2.8 in accordance with the agreements set forth in Schedule 2.8 and by
making any changes reasonably requested by Seller, which allocation, as it may be revised from time to time in accordance with the following sentence (the "Allocation"), shall be binding upon the
parties and Buyer shall cause XII and XSL to be bound by the Allocation. Buyer shall revise the Allocation and provide a copy thereof to Seller from time to time to reflect any payments made pursuant
to Sections 2.4(c), 2.5(d) or 2.5(e), in each case revising the Allocation in accordance with Section 1060 of the Code and the Treasury Regulations promulgated thereunder and the agreements set
forth in Schedule 2.8 and making any changes reasonably requested by Seller. Following the Closing, the parties shall report, act and file, and Buyer shall cause
XII and XSL to report, act and file, Tax Returns (including Internal Revenue Service Forms 8594) in all respects and for all purposes consistent with the Allocation. Each of Buyer and Seller shall
timely and properly prepare, execute, file and deliver all such documents, forms and other information as the other may reasonably request to facilitate the preparation of the Allocation. No party
shall take, and Buyer shall prevent XII and XSL from taking, any position (whether in audits, tax returns or otherwise) which is inconsistent with the Allocation unless required to do so pursuant to a
"determination" within the meaning of Section 1313(a) of the Code. Upon written request by Buyer or Seller, Seller (in the case of a request by Buyer) or Buyer (in the case of a request by
Seller) shall deliver to the other a copy of the most recent Internal Revenue Service Form 8594 that it has filed or prepared for filing with the Internal Revenue Service in connection with the
purchase and sale of the Assets pursuant to this Agreement. 

        2.9    Further Assurances.    From time to time at the request of Buyer, whether at or after
the Closing Date, Seller or the Subsidiary, at its expense, will execute and deliver such instruments and documents and take such other action as Buyer may reasonably request more effectively to
convey and transfer any of the Assets intended to be transferred hereunder and to protect the right, title and interest of Buyer therein and its enjoyment thereof and otherwise to carry out the
purpose and intent of this Agreement. With respect to any Assets sold hereunder which cannot be physically delivered because they are in the possession of third parties or otherwise, Seller or the
Subsidiary, as the case may be, will give irrevocable instructions to the party in possession that all right, title and interest in and to the same have been vested in Buyer. 

3.     CLOSING  

        3.1    Closing Date.    The consummation of the purchase and sale of the Assets and other
transactions contemplated by this Agreement (the "Closing") will take place at the offices of Latham & Watkins LLP, 135 Commonwealth Drive, Menlo Park, California, on the date of this
Agreement. Upon consummation, the Closing shall be deemed to take place as of the close of business on the Closing Date. The time and date of the Closing are herein referred to as the "Closing Date." 

        3.2    Deliveries.    At the Closing, Seller and the Subsidiary will deliver to Buyer, XII and
XSL, against receipt of the portion of the Purchase Price referred to in Section 2.4(a), such bills of sale and other instruments of transfer and conveyance as, in the opinion of counsel for
Buyer, will be effective to vest in Buyer, XII and XSL, title to the Assets, free and clear of all liens, charges and encumbrances (other than Permitted Liens and as set forth below). At the Closing,
Buyer, XII and XSL, will deliver to Seller and the Subsidiary such instruments of assumption as, in the opinion of counsel for Seller, will be effective to reflect the assumption by Buyer, XII and
XSL, of the Assumed Liabilities to the extent provided in Section 2.6. At the Closing, Buyer will deliver to Seller and the Subsidiary a bank guarantee or standby letter of credit for the
portion of the Purchase Price specified in Section 2.4(b) in the form acceptable to the Seller and attached hereto as Schedule 3.2. 

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   4.     REPRESENTATIONS AND WARRANTIES OF SELLER AND THE SUBSIDIARY  

        Except as set forth on the disclosure schedule, attached hereto (the "Disclosure Schedule"), Seller and the Subsidiary hereby jointly and severally represent and
warrant to Buyer as follows: 

        4.1    Organization and Good Standing.    

        (a)   Seller
is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware, has all requisite power and
authority to own, operate and lease its properties and to carry on its business as now being conducted. Seller is duly registered or qualified to do business and is in good standing in each
jurisdiction in which the nature of the business conducted or the assets owned or leased by it make such registration or qualification necessary, except where the failure to so register or qualify to
do business would not have a Seller Material Adverse Effect. Part 4.1 of the Disclosure Schedule lists each jurisdiction in which Seller is or has filed to be
registered or qualified to conduct business. 

        (b)   The
Subsidiary is a duly organized, validly existing limited liability company under the laws of Singapore, and has all requisite power and authority to own, operate and
lease its properties and to carry on its business as now being conducted. Seller owns 100% of the Subsidiary's issued and outstanding shares, which constitutes 100% of the equity interests in the
Subsidiary. 

        4.2    Subsidiaries.    Other than shares of the Subsidiary, Seller does not own, have any
direct or indirect interest in or have any right or obligation to acquire directly or indirectly, any shares, capital stock, securities, memberships or other interests having voting or other rights to
affect the business and policies of, or ownership interests in, any Person. 

        4.3    Authorization; Authority.    

        (a)   The
execution, delivery and performance by Seller and the Subsidiary of this Agreement and the transactions contemplated hereby have been duly authorized by all
necessary and proper action by the board of managers of Seller, by the requisite members of Seller, the board of directors of the Subsidiary and Seller (as the sole stockholder of the Subsidiary). 

        (b)   Seller
and the Subsidiary have full power and authority to execute, deliver and perform this Agreement and sell the Assets to Buyer pursuant hereto. This Agreement has
been duly executed and delivered by and on behalf of Seller and the Subsidiary and is a legal, valid and binding obligation of Seller and the Subsidiary, and each instrument contemplated by this
Agreement when executed and delivered by Seller or the Subsidiary in accordance with the provisions hereof, will be a legal, valid and binding obligation of Seller or the Subsidiary, as the case may
be, in each case enforceable against Seller or the Subsidiary in accordance with its terms except as enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or
similar laws affecting creditors' rights generally and general equitable principles. 

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        4.4    No Breach or Violation.    Neither the execution and delivery by Seller or the
Subsidiary of this Agreement nor the consummation by Seller or the Subsidiary of the transactions contemplated hereby will: (i) violate or result in a breach of any provision of Seller's or the
Subsidiary's Organizational Documents; (ii) result in a violation or breach of, or constitute a default, in any material respect, under or, require any notice under, or create any rights of
termination, cancellation or acceleration in any third Person, require the consent or approval of any third Person, or in the absence of the consent of any third Person to the transactions
contemplated by this Agreement, result in the loss of any material rights or benefits either automatically or at the election of any Person or result in the creation of any lien or encumbrance upon
any of the Assets pursuant to the terms or any contract, indenture, mortgage, lease, agreement, instrument, commitment or other arrangement to which Seller or the Subsidiary is a party or by which any
of them or any of the Assets is bound; (iii) violate in any material respect any judgment, order, Permit, injunction, writ, decree or award of any Governmental Body against or binding upon
Seller, the Subsidiary or any of the Assets; or (iv) constitute a violation by Seller or the Subsidiary or either automatically or at the election of any Person result in the loss of any rights
or benefits under, of any statute, law, rule, ordinance or regulation of any Governmental Body. 

        4.5    Financial Statements.    Seller has attached to the Disclosure Schedule the
consolidated balance sheets of Seller and the Subsidiary as of and at December 31, 2002 and December 31, 2003 and the consolidated income statements of Seller and the Subsidiary for the
two years ended December 31, 2003. The foregoing financial statements, together with the schedules thereto, (i) are in accordance with the books and records of Seller and the Subsidiary
and (ii) present fairly the results of operations and financial condition of Seller and the Subsidiary at the dates and for the periods covered by such financial statements;  provided, however, that
Buyer acknowledges that such financial statements have not been prepared in accordance with GAAP and have not been audited or
reviewed by Seller's accountant. The balance sheet as of and at December 31, 2003 is sometimes referred to as the "Balance Sheet." 

        4.6    Undisclosed Liabilities.    Neither Seller nor the Subsidiary has any debts or
liabilities of any nature whatsoever, whether accrued, absolute or contingent, determined or undetermined, asserted or unasserted, known or unknown, and whether due or to become due (including
liability for taxes, assessments, penalties, fees or interest), except (i) liabilities of the type not required by GAAP to be reflected or specifically reserved against in the Balance Sheet,
which either individually or in the aggregate are not material, (ii) liabilities or obligations specifically reflected or specifically reserved against on the Balance Sheet or the notes thereto
or otherwise disclosed in this Agreement or the Schedules to this Agreement or (iii) liabilities arising in the ordinary course of business since the Balance Sheet Date. To the Knowledge of
Seller, Seller and Subsidiary have paid all liabilities when due, and neither Seller nor the Subsidiary have any liabilities other than those not yet due in the ordinary course of business in
accordance with the terms on which Seller and the Subsidiary customarily due business with vendors of goods, service providers and others. 

        4.7    Accounts Receivable.    All accounts receivable and all other receivables that are
reflected on the Balance Sheet and all accounts receivable that have arisen since the Balance Sheet Date represent obligations from sales actually made or services actually performed by Seller or the
Subsidiary in the ordinary course of business. To the Knowledge of Seller and except to the extent paid before the Closing Date, the accounts receivable are current and collectible. There is no
contest or claim, and to the Knowledge of Seller, no defense or right of setoff with any account debtor of an account receivable. Part 4.7 of the Disclosure
Schedule contains a list of all accounts receivable as of the date of this Agreement and the aging of each account receivable. 

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        4.8    Inventories.    To the Knowledge of the Seller, except for defective, damaged, slow
moving or obsolete items and items of below-standard quality, all of which have been written off or written down to Seller's good faith estimate of net realizable value on the Balance Sheet, all
inventories (including raw materials and supplies, manufactured and purchased parts, goods in process and finished goods) reflected on the Balance Sheet consist of items of a quality and quantity that
are fit, usable and, in the case of finished goods, saleable in the ordinary course of business. Items of inventory now on hand that were purchased after the Balance Sheet Date were purchased in the
ordinary course of business at a cost not exceeding market prices prevailing at the time of purchase. All items of inventory reflected on the Balance Sheet or acquired after the Balance Sheet Date,
except those that have been sold in the ordinary course of business, are owned by Seller or the Subsidiary. To the Knowledge of Seller, the quantities of each item of inventory are not excessive. 

        4.9    Absence of Certain Changes.    Since the Balance Sheet Date and except as is specified in
Part 4.9 of the Disclosure Schedule: 

        (a)   there
has not been any material adverse change in the condition (financial or otherwise), net worth, Assets, liabilities, business or results of operations of Seller or
the Subsidiary (other than changes made or incurred in the ordinary course of business that are not material and adverse, either individually or in the aggregate), and, to the Knowledge of Seller, no
event has occurred or circumstance exists that may result in such a material adverse change; 

        (b)   neither
Seller nor the Subsidiary has (i) incurred any obligation or liability or entered into, and none of Seller, the Subsidiary or the Assets have become bound
by, any agreement, contract, lease or license or series of related agreements, contracts, leases and licenses (except for this Agreement) other than in the ordinary course of business and involving
obligations and liabilities not in excess of $10,000 individually or $25,000 in the aggregate; (ii) discharged or satisfied any material lien or other encumbrance, paid any material liability
or obligation whether fixed or contingent (except in the ordinary course of business or as required by the terms hereof) or accelerated, terminated, modified or canceled any agreement, contract, lease
or license; (iii) mortgaged, pledged or subjected to any lien or other encumbrance any of the Assets; (iv) sold, assigned, transferred, leased or otherwise disposed of or agreed to
dispose of any of the Assets (except for sales of inventories in the ordinary course of business); (v) waived or released any material rights; (vi) made any capital expenditure or
improvement in excess of $10,000 individually, or $25,000 in the aggregate, or entered into any commitment therefore; (vii) suffered any material damage, destruction or loss (whether or not
covered by insurance) adversely affecting the assets or its business; (viii) paid or agreed to pay any bonuses or make or agree to make any increase in the rate of wages, salaries, or other
remuneration of any of the members of the Subsidiary's board of directors, the members of the Seller's board of managers, officers or employees; or (ix) paid or agreed to pay any pension,
retirement allowance or other employee benefit not required by any existing plan, agreement or arrangement to any of the members of the Subsidiary's board of directors, the members of the Seller's
board of managers, officers or employees, whether past or present; and 

        (c)   Seller
has not (i) declared or paid any dividends or made any distributions to the Members, either in cash or in kind; (ii) repurchased any of its
membership or other equity interests; (iii) made any other payment to or on behalf of any direct or indirect owner of its membership or other equity interests, other than compensation and
expense reimbursements to employees in the ordinary course of business; or (iv) sold or disposed of any of its membership or other equity interests. 

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        4.10    Taxes.    

        (a)   Seller
has never elected to be classified as an association or corporation for federal or state income or franchise tax purposes, and is and throughout the entire period
of its existence has been treated as a partnership for such purposes. 

        (b)   Each
of Seller and the Subsidiary has timely filed all material Tax Returns that it was required to file. All such Tax Returns were correct and complete in all material
respects. All Taxes due and payable by Seller or the Subsidiary through the date hereof (whether or not shown or required to be shown on any Tax Return) have been paid. Neither Seller nor the
Subsidiary is currently the beneficiary of any extension of time within which to file any Tax Return. There are no liens on any of the assets of Seller or the Subsidiary that arose in connection with
any failure (or alleged failure) to pay any Tax other than liens for Taxes not yet due and payable. 

        (c)   Seller
and the Subsidiary have withheld and paid all Taxes required to have been withheld and paid in connection with any amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other third party, and all forms (including Forms W-2 and 1099) required with respect thereto have been properly completed and timely
filed. 

        (d)   There
is no dispute or claim concerning any Tax liability of Seller or the Subsidiary either (i) claimed or raised by any authority in writing or (ii) to
the Knowledge of Seller, based upon personal contact with any agent of any authority. Part 4.10(d) of the Disclosure Schedule lists all federal, state, local and
foreign income Tax Returns filed with respect to Seller and the Subsidiary for taxable periods ended on or after January 1, 2000, indicates those Tax Returns that have been audited and
indicates those Tax Returns that currently are the subject of audit. Seller has delivered or made available to Buyer correct and complete copies of all income Tax Returns, examination reports and
statements of deficiencies assessed against or agreed to by Seller or the Subsidiary since December 31, 2000. 

        (e)   Neither
Seller nor the Subsidiary has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency. 

        (f)    Seller
is not a party to any Tax allocation or sharing agreement with any party other than the Subsidiary. Seller has no liability for the Taxes of any Person other than
the Subsidiary under any provision of federal, state, local or foreign law, as a transferee or successor, by contract or otherwise. 

        4.11    Litigation.    There are no claims, actions, suits or legal or administrative
arbitrations or other proceedings or investigations pending against Seller or the Subsidiary, or, to the Knowledge of Seller, threatened against or affecting Seller or the Subsidiary, before or by any
Governmental Body or by any private Person or entity. To the Knowledge of Seller, there are no facts which would provide a basis for any such claim, action, suit or proceeding. There are no existing
or to the Knowledge of Seller, threatened, orders, judgments or decrees of any court or Governmental Body which specifically apply to Seller or the Subsidiary or any of the Assets or the Business. 

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        4.12    Labor Matters.    Neither the employees of Seller nor the employees of the Subsidiary
are parties to any collective bargaining agreement, and there are no grievances, disputes or controversies pending or threatened between Seller or the Subsidiary and any union. To the Knowledge of
Seller, there have not been and are not now existing any threats of strikes, work stoppages, organizational efforts or demands for collective bargaining by any union or like organization respecting
Seller or the Subsidiary. To the Knowledge of Seller, Seller and the Subsidiary have complied in all material respects with all applicable statutes, laws, rules, ordinances or regulations of any
Governmental Body relating to wages, hours, collective bargaining and the payment of social security and similar taxes, and are not liable for any arrears of wages or any taxes or penalties for
failure to comply with any of the foregoing. To the Knowledge of Seller, Seller and the Subsidiary have complied in all material respects with all applicable statutes, laws, rules, ordinances or
regulations of any Governmental Body relating to occupational safety and are not liable for any penalties for failure to comply therewith. To the Knowledge of Seller, there are no present employees of
Seller or the Subsidiary who have expressed an intention not to accept employment with Buyer after the Closing, whose departure Seller or Subsidiary believe may have a Seller Material Adverse Effect. 

        4.13    Contracts.    

        (a)   Part 4.13
of the Disclosure Schedule contains a complete and accurate list of the following contracts, agreements, leases and other
commitments, whether oral or written, to which Seller or the Subsidiary is a party (the "Contracts"): (i) each executory contract, agreement or arrangement for the purchase of any services,
materials, supplies or equipment involving individually more than $10,000 or in the aggregate more than $25,000; (ii) each executory contract, agreement or commitment for the sale of assets,
products or services involving a value estimated at more than $10,000 including contracts for provision of service warranties, to provide advertising allowances or promotional services and relating to
sales on consignment; (iii) each contract with any customer, dealer, distributor, broker, agent, consultant or sales representative; (iv) each employment or nondisclosure contract
executed by any employee of Seller or the Subsidiary; (v) each collective bargaining agreement; (vi) each lease or sublease of real or personal property as to which Seller or the
Subsidiary is either lessor, lessee, sublessor or sublessee or relating to real or personal property occupied, used or in the possession of Seller or the Subsidiary; (vii) each contract or
commitment with or to any present or former member of the Subsidiary's board of directors, member of the Seller's board of managers, officer, member, equity holder or other affiliate of Seller or the
Subsidiary; (viii) each mortgage, indenture, note, obligation, agreement or other instrument for or relating to the borrowing of money either as borrower or lender; (ix) each conditional
sales contract, security agreement, pledge agreement, trust receipt or any other agreement or arrangement whereby any of the Assets is subject to a lien, encumbrance, charge or other restriction in
effect on the Closing Date (other than restrictions set forth in the license agreements listed in the Disclosure Schedule and Permitted Liens); (x) guarantees of any obligations for the
borrowing of money or otherwise, or any other agreements of guarantee or indemnification (other than endorsements made for collection in the ordinary course of business and indemnification agreements
made in the ordinary course of sales of the Products); (xi) each material franchise or franchise agreement, material license or licensing agreement (and other than for standard, commercially
available software developed or produced by others); (xii) each contract, agreement or commitment entered into outside the ordinary and usual course of business; (xiii) contracts
restricting Seller's or the Subsidiary's right to conduct the Business in any areas or in any way limiting Seller's or the Subsidiary's right to compete; and (xiv) each contract, agreement or
commitment, to the Knowledge of Seller, entered into for less than a fair consideration or, to the Knowledge of Seller, which has had or will have a Seller Material Adverse Effect. 

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        (b)   To
the Knowledge of Seller, each Contract is in full force and effect and enforceable against Seller or the Subsidiary and against the other parties thereto, in each
case in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium, or other laws of general application affecting the rights and remedies of creditors, and general
principles of equity. To the Knowledge of Seller, none of Seller, the Subsidiary or any other party thereto, is in breach or default under any Contract and, no event has occurred which with notice or
the lapse of time, or both, could constitute a breach or default under any Contract or would accelerate any obligation or create any lien or encumbrance under any Contract. Neither Seller not the
Subsidiary has assigned any of their interest in any Contract. No claim has been asserted to Seller in writing that is materially adverse to Seller's or the Subsidiary's rights under any Contract.
Neither Seller not the Subsidiary have received any formal notice, written or oral, that Seller, the Subsidiary or any other party thereto is in breach or default under any material provision of any
Contract. To the Knowledge of Seller, no Person (i) has threatened to claim any such breach or default or (ii) has threatened to terminate or not renew any Contract. 

        4.14    Personal Property.    Part 4.14 of the Disclosure
Schedule contains a complete and accurate list of all machinery, equipment, furniture, fixtures and other tangible personal property (collectively, the "Personal Property") with an original cost in
excess of $5,000 owned by Seller or the Subsidiary or used in connection with the Business, as of the Balance Sheet Date, separately identifying the Personal Property owned and that not owned.
Part 4.14 of the Disclosure Schedule also includes the net book value of each of such assets as of the Balance Sheet Date and consistent with the Balance Sheet,
and, unless Seller includes on Part 4.14 of the Disclosure Schedule all items of Personal Property with an original cost of $10,000 or less, the aggregate net book
value, as of the Balance Sheet Date and consistent with the Balance Sheet, of all Personal Property with an original cost of $10,000 or less (designated as "Other Personal Property").
Part 4.14 of the Disclosure Schedule also separately identifies (i) any and all of such assets that Seller or the Subsidiary disposed of after the Balance
Sheet Date and on or before the Closing Date, together with the net book value as of the Balance Sheet Date of each of such assets disposed of, and (ii) any and all Assets acquired by Seller or
the Subsidiary after the Balance Sheet Date and on or before the Closing Date, together with the net book value of each of such Assets as of the date of their acquisition by Seller or the Subsidiary.
Part 4.14 of the Disclosure Schedule shall specify, for each listed item of Personal Property whether such item of Personal Property is owned or was acquired or
disposed of by Seller or the Subsidiary.. Except for Permitted Liens, all Personal Property owned or leased by Seller or the Subsidiary is free and clear of all liens, claims, changes, pledges,
security interests and encumbrances of any kind or nature, and Seller or the Subsidiary owns good and transferable title to all of the Personal Property other than that identified in
Part 4.14 of the Disclosure Schedule as being leased by Seller or Subsidiary. All items of Personal Property owned or leased by Seller or the Subsidiary are in good
operating condition and repair, fit for their intended purpose, normal wear and tear excepted. 

        4.15    Real Property.    Neither Seller nor the Subsidiary owns any real property.
Part 4.15 of the Disclosure Schedule hereto lists all the real property leased or otherwise used by Seller or the Subsidiary in connection with its business and
operations. The leases set forth in Part 4.15 of the Disclosure Schedule constitute valid and enforceable leasehold interests of Seller and the Subsidiary, free and
clear of all liens, charges or encumbrances (other than Permitted Liens), and no claim has been asserted adverse to the rights of Seller or the Subsidiary affecting or questioning Seller's or the
Subsidiary's right to the continued possession or use of the leased premises. 

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        4.16    Permits and Licenses; Compliance with Laws.    

        (a)   Part 4.16
of the Disclosure Schedule contains a list of all permits, licenses, notices and other approvals and authorizations of all
Governmental Bodies issued to or held by Seller or the Subsidiary and relating to the Business as conducted prior to the Closing Date (collectively, the "Permits"). The Permits comprise all permits,
licenses, notices and other approvals and authorizations of all Governmental Bodies which are necessary for conduct of Seller's and the Subsidiary's Business as conducted prior to the Closing Date,
except where failure to have such Permit would not have a Seller Material Adverse Effect, and all of such Permits are in full force and effect as of the Closing Date. 

        (b)   To
the Knowledge of Seller, conduct of Seller's and the Subsidiary's Business has not and does not violate in any material respect any statute, law, rule, ordinance,
regulation, order, judgment or decree of any Governmental Body that applies to Seller or the Subsidiary or use or operation of the Assets or conduct of the Business. Neither Seller not the Subsidiary
has received any complaint, summons, citation or notice of violation from any Governmental Body with regard to the use or operation of the Assets and conduct of the Business. 

        4.17    Intellectual Property.    

        (a)   Part 4.17
of the Disclosure Schedule sets forth an accurate and complete list of the material Intellectual Property. True and
complete copies of all materials comprising such Intellectual Property (other than standard, commercially available software developed or produced by others) have been provided or made available to
Buyer. 

        (b)   Seller
and the Subsidiary have the right to use all material Intellectual Property (such Intellectual Property and the rights thereto, including any rights to recovery
for infringement, are collectively referred to in this Agreement as the "IP Rights"). There are no royalty agreements with any Person with respect to commercialization of any products presently sold
or under development by Seller or the Subsidiary except license fees associated with commercially available items. Seller has taken all steps commercially reasonable or appropriate to maintain and
fully protect all IP Rights. Seller has no Knowledge of any misuse, infringement, misappropriation or other violation of any IP Rights of any other Person and Seller has no Knowledge of any actual,
pending or threatened proceeding alleging any misuse, infringement, misappropriation or other violation of any IP Rights of any other Person. Except as set forth in
Part 4.13 of the Disclosure Schedule, neither Seller nor the Subsidiary has entered into any agreement, commitment or arrangement (whether written or oral) to
license or otherwise permit the use or exploitation of any IP Rights by any other Person (including that which would prevent, restrict or otherwise inhibit Buyer's freedom to use and exploit any IP
Rights). 

        (c)   The
execution, delivery and performance by Seller and Subsidiary of this Agreement and the consummation of the transactions contemplated hereby will not constitute a
material breach of any instrument or agreement governing any IP Rights and will not (i) cause the material modification of any terms of any licenses or agreements relating to any IP Rights
(including the modification of the effective rate of any royalties or other payments provided for in any such license or agreement); (ii) cause the forfeiture or termination of any IP Rights;
(iii) give rise to a right of forfeiture or termination of any IP Rights; or (iv) materially impair the right of Buyer to use, sell or license any IP Rights or portion thereof. 

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        (d)   None
of the manufacture, marketing, license, sale or intended use of any past or current product or technology licensed, sold or under development by the Seller or the
Subsidiary (i) violates any license or agreement between Seller or the Subsidiary and any other Person or (ii) to the Knowledge of Seller, infringes any patents, trademarks, service
marks, trade names, copyrights, logos, corporate names or identifying marks and styles of any other Person, or otherwise violates or infringes upon any intellectual property, trade secret or other
confidential or proprietary information of any other Person. To the Knowledge of Seller, there is no pending or threatened claim or litigation contesting the validity, ownership or right to use, sell,
license or dispose of any IP Rights of Seller, nor has Seller or the Subsidiary received any notice asserting that any IP Rights or the proposed use, sale, license or disposition thereof conflicts or
will conflict with the rights of any Person. 

        (e)   To
the Knowledge of Seller, none of Seller's or the Subsidiary's employees or consultants with access to proprietary information of Seller and the Subsidiary, is
obligated under any contract, covenant or other agreement or commitment of any nature, or subject to any judgment, decree or order of any Governmental Body that would (i) interfere with
(A) the normal duties reasonably expected for the position held by that employee, or (B) such consultant's duties to Seller and the Subsidiary, or (ii) would conflict with
Seller's or the Subsidiary's Business as presently conducted or as presently proposed to be conducted. Seller and the Subsidiary have not entered into agreements to indemnify any Person against any
charge of infringement or misappropriation of any intellectual property, other than as set forth in Part 4.17(e) of the Disclosure Schedule and in indemnification
provisions contained in purchase orders or customer agreements arising in the ordinary course of business. All current and former employees and consultants have signed written assignments to Seller or
the Subsidiary of any and all rights or claims in any intellectual property that any such employees or consultants have or may have by reason of any contribution, participation or other role in the
development, conception, creation, reduction to practice or authorship of any invention, innovation, development or work of authorship or any other intellectual property that is used in the Business,
and Seller or the Subsidiary possesses original signed copies of all such written assignments in its files and has provided or made available copies of same to Buyer. 

        4.18    Web Site Domains.    Seller and the Subsidiary own or have valid licenses to use all
of the content (including the domain names) and software relating to the World Wide Web domains set forth on Part 4.18 of the Disclosure Schedule. 

        4.19    Adequacy of Assets.    The Assets constitute all of the assets, tangible and
intangible, and to the Knowledge of Seller, rights necessary to conduct the Business of Seller and the Subsidiary as presently conducted by them and include all of the operating assets of Seller and
the Subsidiary. 

        4.20    Documents and Records.    The documents and records that Seller is delivering to Buyer
are true and correct in all material respects and accurately reflect the status of the business relationships with customers and suppliers of Seller and the Subsidiary. There are no arrangements or
agreements which would have a Seller Material Adverse Effect. 

        4.21    Insurance.    Part 4.21 of the Disclosure Schedule
contains a list identifying all insurance policies and indemnity and surety bonds with respect to the Seller's and the Subsidiary's Business and the Assets. All such policies and bonds are in full
force and effect and there are no outstanding requirements or recommendations by any insurance or surety company or by any governmental authority which require or recommend repairs or other work to be
done on or with respect to any of the Assets. Seller has not received any notice or other communication from any such insurance or surety company canceling or materially amending or materially
increasing the annual or other premiums payable under any of said insurance policies, and to the Knowledge of Seller, no such cancellation, amendment or increase of premiums is threatened. 

19

 

        4.22    Notification re Insurance Claims.    Seller has promptly and adequately notified its
insurance carriers of any and all claims with respect to the properties, operations or products of Seller or the Subsidiary for which Seller or the Subsidiary is insured. 

        4.23    Environmental Matters.    The use by Seller or the Subsidiary of each parcel of real
property currently leased, occupied, maintained or operated by Seller or the Subsidiary comply in all material respects with, and neither Seller nor the Subsidiary is in material violation of, or has
materially violated, in connection with the leasing occupation, maintenance or operation of such real property and the conduct of the business related thereto, any applicable Environmental Law.
Neither the Seller nor the Subsidiary have received, nor, to the Knowledge of Seller, are pending or threatened any notice, order or communication from any Governmental Body or from any private
citizen acting in the public interest or a current or prior owner, lessee, occupier or operator of any such real property of any violation of, failure to comply with, or any obligation to bear the
cost of any liability under, any Environmental Law. To the Knowledge of Seller, there is no Environmental Law requiring any work, repairs, construction or capital expenditures with respect to any such
real property, nor has Seller or the Subsidiary received any notice of any of the foregoing. 

        4.24    Employee Benefit Plans and
Agreements.    Part 4.24 of the Disclosure Schedule contains a true and complete list of all pension, profit sharing, retirement,
deferred compensation, bonus, incentive, stock option, stock purchase, severance, fringe benefit, welfare or other employee benefit plans, agreements, arrangements or understandings to which Seller or
the Subsidiary are parties, that are maintained, sponsored or contributed to by Seller or the Subsidiary or that relate to or provide benefits for any employees or former employees of Seller or the
Subsidiary. With respect to Seller and each other employer which, along with Seller, is treated as a single employer for the purposes of Title IV of ERISA, since the effective date of ERISA: 

        (a)   No
such employer has made contributions to, or withdrawn in a complete or partial withdrawal (resulting in a withdrawal liability) from, a multiemployer plan (as defined
in ERISA); 

        (b)   No
single-employer plan (as defined in ERISA) sponsored, maintained or contributed to by such an employer has been terminated or has been the subject of a notice of
intent to terminate filed with the Pension Benefit Guaranty Corporation; 

        (c)   No
pension plan (as defined in ERISA) sponsored, maintained or contributed to by such an employer has incurred any accumulated funding deficiency (as defined in ERISA),
whether or not waived; and 

        (d)   No
reportable event (as defined in ERISA) has occurred with respect to any such pension plan (other than such reportable event for which notice has been waived by
regulation or statute). 

        4.25    Certain Payments.    Since January 1, 1999, none of Seller, Subsidiary, any
member of the Seller, member of the Subsidiary's board of directors, member of the Seller's board of managers, officer, agent, or employee of Seller or the Subsidiary, or any predecessor or any other
Person associated with or acting for or on behalf of Seller or the Subsidiary or any predecessor, has directly or indirectly: (i) made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any Person, private or public, regardless of form, whether in money, property, or services (A) to obtain favorable treatment in securing business,
(B) to pay for favorable treatment for business secured, (C) to obtain special concessions or for special concessions already obtained, for or in respect of Seller, the Subsidiary, any
predecessor, or any affiliate of Seller the Subsidiary or any predecessor, or (D) in violation of any statute, law, rule, ordinance or regulation of any Governmental Body; or
(ii) established or maintained any fund or asset that has not been recorded in the books and records of Seller or the Subsidiary. 

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        4.26    Conflicts of Interest.    

        (a)   Except
as set forth in Part 4.26 of Disclosure Schedules, to the Knowledge of Seller, no member of the Subsidiary's board of
directors, member of the Seller's board of managers, officer, employee or member of Seller or the Subsidiary, entity controlled by any such director, manager, officer, employee or member of Seller or
the Subsidiary, or relative of any such director, manager, officer, employee or member of Seller or the Subsidiary (i) owns, directly or indirectly, any interest in excess of three percent in,
or is an employee or representative of or consultant to, any corporation, firm, association or other business entity or organization which is, or is engaged in business as, a supplier of products or
services to Seller or the Subsidiary, a competitor of Seller or the Subsidiary or to whom Seller or the Subsidiary sells or provides goods or services; (ii) owns, directly or indirectly, in
whole or in part any tangible or intangible property which Seller or the Subsidiary is using or the use of which is necessary for the conduct of the Business; or (iii) has any cause of action
or other claim whatsoever against, or owes any amount to, Seller or the Subsidiary. 

        (b)   Part 4.26
of the Disclosure Schedule contains a complete and accurate description of all past and present transactions, agreements,
contracts, loans, guarantees and other commitments by Seller or the Subsidiary with or for the benefit of any member of the Subsidiary's board of directors, member of the Seller's board of managers,
officer, employee or member of Seller or the Subsidiary, entity controlled by any such director, manager, officer, employee or member of Seller or the Subsidiary, or relative of any such director,
manager, officer, employee or member of Seller or the Subsidiary. All such transactions, agreements, contracts, loans, guarantees and other commitments were made in the ordinary course of business and
contained only such terms as would have been agreed to by unaffiliated Persons in an arms' length transaction. 

        4.27    Bank and Financial Accounts.    Part 4.27 of the
Disclosure Schedule is a true and complete list of: (i) names and locations of all banks and other financial institutions at which Seller or the Subsidiary maintains accounts, the account
number of each such account, and the names of all Persons authorized to make withdrawals therefrom; (ii) the names and locations of all banks and other financial institutions that have issued
certificates of the deposit or similar financial instruments held by Seller or the Subsidiary and the principal amount and maturity dates of such certificates of deposit or other instruments; and
(iii) the names and locations of all banks or other entities in which Seller or the Subsidiary rents, holds or has access to a safety deposit box or similar secure storage device or facility
and the names of all Persons authorized to open such boxes, devices or facilities. 

        4.28    No Brokers' or Finders' Fees.    Neither Seller nor the Subsidiary, the members of
Seller nor any officer or member of the Subsidiary's board of directors or member of the Seller's board of managers has incurred any obligation or liability for any investment banker fees, brokerage
fees, commissions, finders' fees or other similar payments in connection with any of the transactions contemplated by this Agreement, other than fees payable to Andersen & Co., LLC, if any. 

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   5.     BUYER'S REPRESENTATIONS AND WARRANTIES  

        Buyer represents and warrants to Seller and the Subsidiary as follows: 

        5.1    Organization and Good Standing.    Buyer is a duly organized, validly existing company
registered in England and Wales under the Companies Act 1985 and has all requisite power and authority to own, operate and lease its properties and to carry on its business as now being conducted. 

        5.2    Authorization.    Buyer has full power and authority to execute, deliver and perform
this Agreement. The execution, delivery and performance by Buyer of this Agreement and the transactions contemplated hereby have been duly authorized by all necessary and proper action. This Agreement
has been duly executed and delivered on behalf of Buyer and is a legal, valid and binding obligation of Buyer, and each other instrument contemplated by this Agreement, when executed and delivered by
Buyer in accordance with the provisions of this Agreement, will be a legal, valid and binding obligation of Buyer, in each case enforceable against Buyer in accordance with its terms except as
enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or similar laws affecting creditors' rights generally and general equitable principles. 

        5.3    No Breach or Violation.    Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will: (i) violate or conflict with any provision of Buyer's Organizational Documents; (ii) conflict with, or result in a violation or
breach of, or constitute a default under, any term or provision of any contract, indenture, mortgage, lease, agreement, instrument, commitment or other arrangement to which Buyer is a party or by
which it is bound; (iii) violate any judgment, order, injunction, writ, decree or award of any Governmental Body against, or binding upon Buyer; or (iv) constitute a violation by Buyer
of any statute, law, rule, ordinance or regulation of any Governmental Body. 

        5.4    No Brokers' or Finders' Fees.    None of Buyer, Buyers' shareholders or any officer or
director of Buyer has incurred any obligation or liability for any investment banker fees, brokerage fees, commissions, finders' fees or other similar payments in connection with any of the
transactions contemplated by this Agreement. 

        5.5    Financial Statements.    Buyer has delivered to Seller the audited consolidated balance
sheets and consolidated income statements of Buyer and its subsidiaries as of and at December 31, 2002, and unaudited consolidated balance sheets and consolidated income statements of Buyer and
its subsidiaries as of and at December 31, 2003. The foregoing financial statements, together with the schedules thereto, (a) are in accordance with the books and records of Buyer and
its subsidiaries and (b) present fairly the results of operations and financial condition of Buyer and its subsidiaries at the dates and for the periods covered by such financial statements,
except to the extent that footnote disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been omitted; provided
however, that Seller acknowledges that such financial statements have not been prepared in accordance with U.S. GAAP. 

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        5.6    Undisclosed Liabilities.    Neither Buyer nor any of its subsidiaries has any debts or
liabilities of any nature whatsoever, whether accrued, absolute or contingent, determined or undetermined, asserted or unasserted, known or unknown, and whether due or to become due (including
liability for taxes, assessments, penalties, fees or interest), except (i) liabilities of the type not required by GAAP to be reflected or specifically reserved against in the Buyer's
consolidated balance sheets, which to the Knowledge of Buyer either individually or in the aggregate are not material; (ii) liabilities or obligations specifically reflected or specifically
reserved against on the Buyer's consolidated balance sheets or the notes thereto or otherwise disclosed in this Agreement; or (iii) liabilities arising in the ordinary course of business since
November 30, 2003. Buyer and its subsidiaries have paid all liabilities when due, and neither Buyer nor its subsidiaries have any liabilities other than those not yet due in the ordinary course
of business in accordance with the terms on which Buyer or its subsidiaries customarily do business with vendors of goods, service providers and others. 

        5.7    Absence of Certain Changes.    Since November 30, 2003, there has not been any
material adverse change in the condition (financial or otherwise), net worth, assets, liabilities, business or results of operations of Buyer or its subsidiaries (other than changes made or incurred
in the ordinary course of business that are not material and adverse, either individually or in the aggregate). 

6.     COVENANTS  

        6.1    Name Change.    Seller will immediately after the Closing Date take all such action as
may be required to change its name promptly following the Closing Date to one which does not include the name "ZT Automation" or any variant thereof. 

        6.2    Bulk Transfer Laws.    The parties mutually agree to waive compliance with the
provisions of the California Uniform Commercial Code—Bulk Transfer Law or any other applicable "bulk transfer" law in connection with the sale of the Assets. Nothing herein contained shall
be construed as an acknowledgment by any Person that any such law is applicable to such sale. 

        6.3    Records and Documents.    For six years following the Closing Date, Buyer shall grant
to Seller and its representatives, at Seller's request, access to and the right to make copies of, at Seller's expense, books, records, documents, and files, possession of which is transferred to
Buyer pursuant to this Agreement. If after such period, Buyer determines to dispose of any such books, records, documents or files, it shall first give Seller 60 days' written notice during
which period Seller shall have the right to take all or part of such records. 

        6.4    Public Announcements.    Except as and to the extent required by law, without the prior
written consent of the other party, none of Buyer, Seller, or the Subsidiary will, and each will direct its officers, directors, employees and representatives not to, make directly or indirectly any
public comment, statement or communication with respect to, or otherwise disclose or permit the disclosure of the existence of discussions regarding, a possible transaction between the parties or any
of the terms, conditions or other aspects of the transaction contemplated by this Agreement. If a party is required by law to make any such disclosure, it must first provide to the other party the
content of the proposed disclosure, the reasons that such disclosure is required by law, and the time and place that the disclosure will be made. 

        6.5    Sales Tax Matters; Tax Clearance Certificates.    

        (a)   Transfer
Taxes 

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        (i)    Within
five days after providing the Allocation to Seller as provided in Section 2.8, Buyer shall cause XII to pay to Seller an amount equal to 8.25% of the
aggregate amount allocated on such Allocation (prior to the addition of California sales tax thereon) to tangible personal property located in Fremont, California on the Closing Date, excluding
inventory, work in process and raw materials held for resale, motor vehicles and any other items that Buyer reasonably determines are not subject to California sales tax. 

        (ii)   Within
five days after the later of (i) the date on which Buyer provides the allocation to Seller as provided in Section 2.8, or (ii) the date on
which Seller provides to Buyer an invoice for the Singapore goods and services tax, if applicable, to the purchase and sale of the Assets pursuant to this Agreement, together with an analysis and
calculations supporting the applicability and amount of such tax, Buyer shall cause XSL to pay to Seller the amount of the applicable Singapore goods and services tax ("GST"). The parties acknowledge
and agree that the Business of the Subsidiary and its Assets (the "Subsidiary Assets") shall be sold as a going concern for the purposes of the Goods and Services Tax (Excluded Transactions) Order
1994, Singapore (the "Order") and GST should not be chargeable in respect of that part of the Purchase Price allocated to the Subsidiary Assets. To this end, Buyer agrees that after Closing XSL shall
use the Subsidiary Assets in carrying on the same kind of business as the Business, whether or not as part of any existing business of XSL. In connection with the foregoing, the parties agree that in
the event there are any requests and/or enquiries from the GST authority the same shall be dealt with by the Subsidiary and Buyer in consultation with each other and they shall co-operate
with and provide all necessary information and assistance required by the GST authority upon being requested to do so by the other. 

        (iii)  Within
five days after the date on which Seller provides to Buyer an invoice, together with appropriate supporting information, for any Transfer Taxes other than
California sales tax and GST, Buyer shall pay, and/or cause XII or XSL to pay, to Seller the amount of the applicable tax, fee or other charge. 

        (iv)  Seller
and the Subsidiary shall, at their own expense, prepare and file all necessary Tax Returns and other documentation with respect to, and shall pay, all Transfer
Taxes, and, if required by applicable law, the parties shall, and shall cause their affiliates to, join in the execution of any such Tax Returns and other documentation;  provided, however, that Buyer
shall pay, and/or cause XII or XSL to pay to Seller or Subsidiary all out-of-pocket expenses
incurred in preparing and filing all necessary Tax Returns and other documentation with respect to all Transfer Taxes; provided, further, that Buyer
also make available and shall cause XII and XSL to make available to Seller or Subsidiary the services of employees of Buyer, XII and XSL reasonably requested by Seller to prepare and file all
necessary Tax Returns and other documentation with respect to all Transfer Taxes at no cost to Seller or Subsidiary. 

        (b)   If
Buyer, XII or XSL elects to request a certificate from any taxing authority to the effect that no taxes, interest or penalties, whether arising from or in connection
with the sale of the Assets hereunder or otherwise, are required to be withheld by Buyer, XII or XSL from the purchase price paid or to be paid to Seller, including a certificate of payment from the
California State Board of Equalization as to California sales and use taxes and a certificate of release of buyer from the California Employment Development Department as to California employment
taxes and income tax withholdings, Seller shall use commercially reasonable efforts, at Buyer's expense, to promptly comply with all reasonable requests made by Buyer, XII or XSL or the taxing
authority in order to facilitate the prompt issuance of the certificate by the taxing authority to Buyer, XII or XSL. Without limiting the generality of the immediately preceding sentence, Seller
shall timely file all applicable tax returns, and timely make Seller's records available to the taxing authority for audit, in each case as required for the prompt issuance of any certificate
described in the immediately preceding sentence. 

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        6.6    Transaction Costs.    Whether or not the transactions contemplated by this Agreement
are consummated, Seller shall be responsible for and shall pay all of Seller's and the Subsidiary's Transaction Costs, including any fees to be paid to Andersen & Co., LLC if any, and Buyer
shall be responsible for and shall pay all of its Transaction Costs. 

        6.7    Employee Matters.    Buyer or its affiliates have extended offers of employment to all
employees of the Seller and Subsidiary, other than Neil A. Brumberger and Bryan Clark, which employment offers are conditioned upon the consummation of the transactions contemplated by this Agreement
(the "Employment Offers"). Employees of Seller and the Subsidiary who accept the Employment Offers shall be eligible for participation in the employee benefit plans of Buyer. 

        6.8    COBRA.    From the Closing, Seller shall cease to provide any group health plan to any
employee. Commencing on the later of (i) the date Seller ceases to provide any group health plan to any employee or (ii) the Closing Date, Buyer shall be responsible for providing
continuation coverage and notice of such continuing coverage as required under the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"), under a group health plan maintained by Buyer, to
those individuals, including current and former employees of Seller and the Subsidiary and any other qualified beneficiaries under COBRA with respect to such current and former employees, who are
"M & A qualified beneficiaries," as defined in Treas. Reg. § 54.4980B-9, Q&A-4(a) and (c), with respect to the transactions contemplated in this Agreement. 

        6.9    Compliance with Singapore Employment Law.    Notwithstanding Section 6.7 but
subject to the Closing, the transfer of employment of the individuals listed on Schedule 6.9, who are employees of the Subsidiary prior to the Closing and protected
by the Employment Act Chapter 91 of the laws of Singapore, shall be governed by Section 18A of the Employment Act of the laws of Singapore, and Buyer and the Subsidiary shall each comply with
their respective obligations under such Section 18A. 

        6.10    Revised Disclosure.    Seller shall deliver to Buyer a revised
Schedule 2.1 within seven days of the Closing Date. Such revised Schedule 2.1 shall contain all of the information required pursuant to
Section 2.1 of the Agreement. Seller shall also deliver to Buyer Attachment 4.8 to the Disclosure Schedule within seven days of the
Closing Date. Such Attachment 4.8 to the Disclosure Schedule shall be in a form mutually agreed upon by both Buyer and Seller. 

        6.11    Bank Guarantee or Standby Letter of Credit.    Within five days after the Closing
Date, Buyer shall deliver to Seller and the Subsidiary a bank guarantee or standby letter of credit equal to the portion of the Purchase Price specified in Section 2.4(b) providing for
(i) an expiration date of such bank guarantee or standby letter of credit of September 30, 2005 and (ii) permitting partial drawings thereunder, up to but not to exceed the
portion of the Purchase Price specified in Section 2.4(b), and in all other respects in a form mutually agreed upon by Buyer, Seller and HSBC Bank. Upon Seller's receipt of an original bank
guarantee or standby letter of credit as provided for in this Section 6.11, Seller and the Subsidiary shall return to Buyer, in the manner requested by Buyer, that certain original letter of
credit from HSBC Bank, dated February 18, 2004, and previously delivered by Buyer to Seller and the Subsidiary on the Closing Date. 

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7.     SURVIVAL AND INDEMNIFICATION  

        7.1    Survival.    The respective representations and warranties of Seller, the Subsidiary
and Buyer set forth in this Agreement (including statements contained in any schedule or certificate or other instrument delivered by or on behalf of any party hereto or in connection with the
transactions contemplated hereby), and any term or provision of this Agreement intended, by its terms, to be observed and performed after the Closing Date, shall survive the execution of this
Agreement, the Closing and any examinations, investigations or inspections made by or on behalf of the parties until February 28, 2005; provided,
however, that (i) the representations and warranties contained in Section 4.10 shall survive for a period of 60 days following the expiration of the
applicable statute of limitations with respect to such representations and warranties and (ii) if, prior to such termination, a state of facts shall have become known which threatens to give
rise to a liability against which any party or parties hereto would be entitled to indemnification hereunder and the indemnified party or parties shall have given notice of a claim for indemnification
pursuant to Section 7.4 with respect to such state of facts to the indemnifying party or parties, then the rights of the indemnified party or parties to indemnification with respect to such
liability shall continue until such particular liability shall have been finally determined and disposed of. 

        7.2    Seller's Indemnification.    Seller Indemnitors agree, as provided in this Agreement
and the Joinder Agreement, to indemnify and hold Buyer, its officers, directors, shareholders, affiliates and representatives (collectively, the "Buyer Indemnitees") each harmless from and against and
in respect of any damages, losses, liabilities, claims or expenses (including court costs and reasonable attorneys' fees associated therewith) ("Buyer Damages") arising from or incurred by any Buyer
Indemnitee as a result of: 

        (i)    the
inaccuracy of any representation or breach of any warranty of Seller contained in this Agreement (including any Schedule, Exhibit or certificate or other instrument
delivered by or on behalf of Seller or the Subsidiary or in connection with the transactions contemplated hereby); 

        (ii)   any
default by Seller in the observance or performance of any covenant or obligation on its part to be observed or performed under this Agreement; and 

        (iii)  the
Retained Liabilities. 

        The
amount of any Buyer Damages shall be reduced by any amount actually received by a Buyer Indemnitee with respect thereto under any insurance coverage or from any other responsible
party. Buyer Indemnitees shall use commercially reasonable efforts to collect any amounts available under such insurance coverage and from any responsible Person other than a party to this Agreement.
If a Buyer Indemnitee receives an amount under insurance coverage from such other Person other than a party to this Agreement with respect to Buyer Damages at any time prior to any indemnification
provided by Seller or the Subsidiary pursuant to this Section 7.2, Buyer Indemnitees' out-of-pocket costs incurred in connection with the collection of such amount shall
offset such reduction. If a Buyer Indemnitee receives an amount under insurance coverage from such other Person other than a party to this Agreement with respect to Buyer Damages at any time
subsequent to any indemnification provided by Seller or the Subsidiary pursuant to this Section 7.2, then such Buyer Indemnitee shall promptly reimburse Seller first for any payment made to
such Buyer Indemnitee, without regard to out-of-pocket costs incurred by Buyer Indemnitee in connection with the collection of such amount or
out-of-pocket expenses incurred by Seller or the Subsidiary in connection with providing such indemnification, but only to the extent that such amount received by such Buyer
Indemnitee under insurance coverage plus the amount of any indemnification provided to such Buyer Indemnitee by Seller or the Subsidiary exceed the Buyer Damages and thereafter reimbursing Buyer
Indemnitee, on the one hand, and Seller and Subsidiary, on the other hand, dollar-for-dollar for any out-of-pocket costs incurred by Buyer Indemnitee in
connection with the collection of such amount or out-of-pocket expenses incurred by Seller or the Subsidiary in connection with providing such indemnification, respectively. 

26

 

        7.3    Buyer's Indemnification.    Buyer agrees to indemnify and hold Seller, the Subsidiary,
their officers, directors, affiliates and representatives (collectively, the "Seller Indemnitees") each harmless from and against and in respect of any damages, losses, liabilities, claims or expenses
(including court costs and reasonable attorneys' fees associated therewith) ("Seller Damages") arising from or incurred by any Seller Indemnitee as a result of: 

        (i)    the
inaccuracy of any representation or breach of any warranty of Buyer contained in this Agreement (including any Schedule, Exhibit, certificate or other instrument
delivered by or on behalf of Buyer or in connection with the transactions contemplated hereby); 

        (ii)   any
default by Buyer in the observance or performance of any covenant or obligation on its part to be observed or performed under this Agreement; 

        (iii)  the
Assumed Liabilities; and 

        (iv)  the
use or operation of the Assets and conduct of the Business on and after the Closing Date. 

        7.4    Indemnification Procedure; Defense.    As soon as reasonably practical after obtaining
knowledge thereof, the indemnified party or parties shall notify the indemnifying party or parties of any claim or demand which the indemnified party or parties have determined has given or could give
rise to a right of indemnification under this Agreement. Any claims for indemnification under this Section 7 shall be in writing and shall set forth in reasonable detail: (i) the amount
in US dollars that the party seeking indemnification has paid or accrued or reasonably believes that it will have to pay or accrue for its Damages; (ii) specifying the individual amounts or
items included in the total amount claimed, the date each such item was paid or accrued; and (iii) the basis for such anticipated or actual Damages, the facts giving rise to the claim or
alleged basis for the claim, and the nature of the misrepresentation, breach of warranty or covenant or other matter to which such item is related. However, subject to Section 7.1, the failure
of the indemnified party to give notice of any such claim promptly shall not adversely affect the indemnified party's right to indemnity hereunder except to the extent that such failure adversely
affects the right of the indemnifying party to assert any reasonable defense to such claim. 

        7.5    Matters Involving Third Parties.    

        (a)   If
any third party shall notify any indemnified party with respect to any matter (a "Third Party Claim") which may give rise to a claim for indemnification against any
indemnifying party under this Section 7, then the indemnified party shall promptly notify each indemnifying party thereof in writing. 

27

 

        (b)   Any
indemnifying party will have the right to defend the indemnified party against the Third Party Claim so long as: (i) the indemnifying party notifies the
indemnified party in writing within 20 days after the indemnified party has given notice of the Third Party Claim that the indemnifying party will indemnify the indemnified party from and
against the entirety of any Damages the indemnified party may suffer resulting from or caused by the Third Party Claim; (ii) the Third Party Claim involves only money damages and does not seek
an injunction or other equitable relief that is likely to have a material adverse effect on the indemnified party; and (iii) the indemnifying party conducts the defense of the Third Party Claim
actively and diligently. If the indemnifying party assumes the defense of any such claim, the indemnifying party shall select counsel reasonably acceptable to the indemnified party to conduct the
defense of such Third Party Claim. If the indemnifying party shall have assumed the defense of any Third Party Claim in accordance with this Section 7.5(b), the indemnifying party shall be
authorized to consent to a settlement of, or the entry of any judgment arising from, any such Third Party Claim, without the prior consent of the indemnified party; provided,
however, that: (i) the indemnifying party shall pay or cause to be paid all amounts arising out of such settlement or judgment concurrently with the effectiveness
thereof; (ii) such settlement or judgment does not involve the encumbrance of any assets of the indemnified party or include any restriction that would apply to the indemnified party; and
(iii) that a condition to any such settlement shall be a complete release of such indemnified party and its affiliates, directors, officers, employees and agents with respect to such Third
Party Claim. 

        (c)   So
long as the indemnifying party is conducting the defense of the Third Party Claim in accordance with Section 7.5(b) above, (i) the indemnified party may
retain separate co-counsel at its sole cost and expense and participate in (but not control) the defense of the Third Party Claim and (ii) the indemnified party will not consent to
the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the indemnifying party, which consent shall not to be unreasonably
withheld or delayed. Each indemnified party shall, and shall cause each of its affiliates, directors, officers, employees and agents to, cooperate fully with the indemnifying party in the defense of
such Third Party Claim being defended by the indemnifying party pursuant to Section 7.5(b), including providing full access to documents, properties, books and records reasonably requested by
the indemnifying party and make available all officers, directors, employees and indemnified parties reasonably requested by the indemnifying party for investigations, depositions and trial. 

        (d)   In
the event any of the conditions in Section 7.5(b) and 7.5(c) above are or become unsatisfied or the indemnifying party does not assume the defense of such
Third Party Claim in the first instance, (i) the indemnified party will have the right to defend against, and consent to the entry of any judgment or enter into any settlement with respect to,
the Third Party Claim in any manner it reasonably may deem appropriate, subject to the prior written consent of the indemnifying party, which consent shall not to be unreasonably withheld or delayed
and (ii) the indemnifying parties will reimburse the indemnified party for the costs of defending against the Third Party Claim (including reasonable attorneys' fees and expenses). 

28

 

        7.6    Limitations to Indemnification.    (a) Seller Indemnitors will have no liability for
indemnification with respect to any of the matters described in Section 7.2 unless the total of all Buyer Damages with respect to such matters exceeds a threshold of $250,000, in which event
Seller Indemnitors shall have liability for all Buyer Damages in excess of $250,000 as provided in this Section 7.6. Any Buyer Damages arising under Section 4.10 shall not be counted for
the purposes of calculating the $250,000 threshold. Seller Indemnitors shall have liability for Buyer Damages and indemnification under this Agreement up to a maximum of $6,000,000 (subject to
Section 7.6(b)) solely as follows: 

        (i)    The
first $2,000,000 of Buyer Damages for which Buyer Indemnitees may be entitled to indemnification with respect to a claim under this Article 7 shall be paid to
Buyer Indemnitees by offset adjustment from the amount otherwise payable to Seller pursuant to Section 2.4(b); and 

        (ii)   Any
Buyer Damages in excess of $2,000,000 for which Buyer Indemnitees may be entitled to indemnification with respect to a claim under this Section 7 shall be
paid to Buyer Indemnitees by offset of any amounts due or that become due to Seller pursuant to the Earnout. If, however, any of the Earnout or the amount payable pursuant to Section 2.4(b) has
been paid to Seller before the assertion of a claim under this Section 7, Seller Indemnitors shall be liable to pay to Buyer Indemnitees up to the amount of all Earnout Payments previously
distributed by Seller and Subsidiary but shall in no event be liable for any amount in excess of such previously distributed Earnout payments and payments pursuant to Section 2.4(b). 

        (b)   The
threshold and maximum limitation of this Section 7.6 shall not apply to fraud or any breach of Section 6.6. No claim by a Buyer Indemnitee for
indemnification under Section 7.2(i) may be made after February 28, 2005; provided, however, that claims for Buyer Damages arising
from or incurred by a Buyer Indemnitee as a result of the inaccuracy of the representations or breach of the warranties of Seller and the Subsidiary contained in Section 4.10 may be made on or
before the 60th day following the expiration of the applicable statute of limitations with respect to such representations and warranties. A claim by a Buyer Indemnitee for indemnification under
Section 7.2(ii) or Section 7.2(iii) may be made at any time after the Closing Date. 

        7.7    Maintenance of LLC Entity and Funds.    Seller shall maintain its existence, and not
initiate or consummate any action to liquidate, dissolve or wind-up its existence until the expiration of all Quarterly Earnout Periods. 

8.     MISCELLANEOUS  

        8.1    Headings.    The section and other headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 

        8.2    Governing Law.    The validity, construction and performance of this Agreement shall be
governed by the laws, without regard to the laws as to choice or conflict of laws, of the State of California. 

29

 

        8.3    Entire Agreement.    This Agreement, including the Exhibits and Schedules, and the
Joinder Agreement embody the entire agreement and understanding between the parties pertaining to the subject matter of this Agreement, and supersede all prior agreements, understandings,
negotiations, representations and discussions, whether verbal or written, of the parties, pertaining to that subject matter, including that certain letter between the Buyer and the Seller dated
December 11, 2003. There are no promises, terms, conditions or obligations of the parties pertaining to that subject matter other than as contained in this Agreement and the Joinder Agreement.
All schedules and exhibits to this Agreement constitute an integral part of this Agreement as if fully written herein. 

        8.4    Assignment.    Neither this Agreement nor any rights under this Agreement may be
assigned by any party without the prior written consent of the other party, provided that Seller may assign its rights to the members of Seller or to a liquidating trust of which they are the
beneficiaries, and Buyer may assign but not novate its rights to one or more of its affiliates. 

        8.5    Binding Effect.    The provisions of this Agreement shall bind and inure to the benefit
of the parties and their respective successors and permitted assigns. 

        8.6    Parties in Interest.    Nothing in this Agreement, expressed or implied, is intended to
confer on any Person or entity other than the parties any right or remedy under or by reason of this Agreement. 

        8.7    Notices.    Any notice or communication required or permitted by this Agreement shall
be deemed sufficiently given if in writing and, if delivered personally, when it is delivered or, if delivered in another manner, the earlier of when it is actually received by the Person to which it
is directed, or when the period set forth below expires (whether or not it is actually received): 

        (a)   if
transmitted by telecopier, telex or facsimile transmission ("fax"), 24 hours after (i) transmission to the Person's fax number set forth below, with the
Person's name and address set forth below clearly shown on the page first transmitted, and (ii) receipt by the transmitting Person of written confirmation of successful transmission, which
confirmation may be produced by the transmitting Person's equipment; 

        (b)   if
deposited in the mail, postage prepaid, and addressed to the Person to receive it as set forth below, (i) four days after such deposit if addressed to a
location in the same country, or (ii) 10 days after such deposit if addressed to a location outside of the country in which deposited; or 

        (c)   if
sent by DHL Worldwide Express, or a similar delivery service in general usage for delivery to the address of the Person to receive it as set forth below,
24 hours after the delivery time promised by the delivery service: 

        If
to Buyer or any Buyer Indemnitee: 

Xyratex
Technology Limited

Langstone Road

Havant

Hampshire PO9 1SA

United Kingdom

Attention: David Bradley

Fax No. +44 23 9245 3654 

30

 

With
a copy to: 

Heller
Ehrman White & McAuliffe LLP

601 S. Figueroa Street, 40th Floor

Los Angeles, California 90017-5758

Attention: Stephen E. Newton

Fax No. (213) 614-1868 

If
to Seller, the Subsidiary or any Seller Indemnitee: 

Areal
Density LLC

106 Ohlone Ct.

Los Gatos, California 95032

Attention: Neil A. Brumberger

Fax No. (408) 395-3750 

With
a copy to: 

Latham &
Watkins LLP

135 Commonwealth Drive

Menlo Park, California 94025

Attention: Christopher L. Kaufman

Fax No. (650) 463-2600 

or
to such other address as a Person to whom notice is to be given has furnished to the other Persons listed above in the manner provided above. 

        8.8    Counterparts.    This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together will constitute a single agreement. 

        8.9    Amendments and Waiver.    This Agreement may be amended, modified or supplemented only
by a writing executed by each of the parties. Any party may in writing waive any provision of this Agreement to the extent such provision is for the benefit of the waving party. No action taken
pursuant to this Agreement, including any investigation by or on behalf of any party, shall be deemed to constitute a waiver by that party of its or any other party's compliance with any
representations or warranties or with any provisions of this Agreement. No waiver by any party of a breach of any provision of this Agreement shall be construed as a wavier of any subsequent or
different breach, and no forbearance by a party to seek a remedy for noncompliance or breach by another party shall be construed as a waiver of any right or remedy with respect to such noncompliance
or breach. 

        8.10    Attorneys' Fees.    If any party files suit or takes other action to enforce any
provision of this Agreement, the prevailing party shall be entitled to all costs and expenses of suit and investigation (not limited to court costs), including attorneys' fees at the hourly rates
usually charged by that party's attorneys. 

        8.11    Severability.    The invalidity or unenforceability of any particular provision of
this Agreement shall not affect the other provisions, and this Agreement shall be construed in all respects as if any invalid or unenforceable provision were omitted. 

31

 

        8.12    Dispute Resolution.    Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be settled by binding arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules. The parties shall attempt to
resolve any disputes or claims among themselves; provided, however, that any party may at any time send written notice to the other party, with a copy to the American Arbitration Association of its
demand for arbitration, which demand shall contain a statement setting forth in reasonable detail the nature of the dispute, the names and addresses of all other parties, the amount involved, if any,
the section(s) of this Agreement to which the dispute relates and the remedy sought. 

        Any
arbitration shall be heard by a single neutral arbitrator. The arbitrator appointed must be a former or retired judge of the California Superior Court or any higher court in
California. The parties shall attempt to mutually agree on an arbitrator and may select such arbitrator from a list of names of qualified arbitrators provided by the American Arbitration Association
or may nominate other candidates to serve as the single arbitrator. If within 30 days after the service of the initial demand for arbitration on the responding party, or such later time as
shall be mutually agreed upon by the parties, the parties are unable to mutually agree upon a single arbitrator or if for any other reason the appointment cannot be made, the American Arbitration
Association shall have the power to and shall appoint a single arbitrator from among its members within 10 days thereafter, which individual shall not have any financial or personal interest in
the result of the arbitration or any present or past relationship within the last five years with the parties or their representatives. If for any reason an arbitrator is unable to perform the duties
of the office, the American Arbitration Association may, on proof satisfactory to it, declare the office vacant and vacancies shall be filled in accordance with the provisions set forth above. The
parties hereby agree that all arbitration proceedings and hearings shall be held in San Francisco, California. The location for an arbitration within San Francisco, California shall be mutually agreed
by the parties, but failing such agreement within 10 days of a written request by any party, the arbitration shall be conducted at a location in San Francisco, California chosen by the
designated arbitrator. 

        The
arbitrator shall be required to apply substantive California law. The arbitrator shall have the power to grant all appropriate legal and equitable relief (both by way of interim
relief and as a part of its final award) as may be granted by any court of the State of California, to carry out the terms of this Agreement (e.g., declaratory and injunctive relief and damages). All
awards and orders of the arbitrator (including, but not limited to, interim relief) shall be final and binding subject to confirmation, correction or vacation pursuant to California Code of Civil
Procedure Sections 1285 and following. 

        It
is the intention of the parties that all Arbitration Proceedings be conducted as expeditiously as reasonably possible in keeping with fairness and with a minimum of legal formalities.
Therefore, the parties have agreed that the rules of evidence shall not apply to any Arbitration Proceeding, except that notwithstanding the foregoing, the attorney/client privilege and work product
protection shall be applicable in all Arbitration Proceedings. The parties agree that only limited discovery shall be allowed in an Arbitration Proceeding and incorporate California Code of Civil
Procedure, Sections 1283.1(b) and 1283.05 for this purpose. Absent leave from the arbitrator, each party to the arbitration shall be limited to two document production requests (seeking no more than
ten distinct categories of documents) and five depositions and such discovery shall be completed within 60 days following appointment of the arbitrator. The arbitrator may grant leave to take
any additional discovery upon a showing of substantial need. In addition, the parties shall exchange the names, qualifications and a narrative report stating the opinion and basis therefore of any
expert who may be called 15 days prior to the start of the arbitration. Any depositions noticed of any parties to any arbitration proceeding, including any officers, directors or managing
agents of a party, shall take place in San Francisco at a location designated by the party noticing the deposition. 

32

 

        Unless
modified by the arbitrator upon a showing of good cause, all Arbitration Proceedings shall proceed upon the following schedule: (a) within one month from the service of the
notice of the request to arbitrate, the parties shall select the arbitrator; (b) within 15 days after selection of the arbitrator, the parties shall conduct a pre-arbitration
conference at which a schedule of pre-arbitration discovery shall be set, all pre-arbitration motions scheduled and any other necessary pre-arbitration matters
decided; (c) all discovery allowed by the arbitrator shall be completed within 45 days following the pre-arbitration conference; (d) all pre-arbitration
motions shall be filed and briefed so that they may be heard no later than one month following the discovery cut-off; (e) the arbitration shall be scheduled to commence no later
than one month after the decision on all pre-arbitration motions, but in any event no later than five months following the service of the notice of arbitration; (f) each party shall
have five days to present evidence and make closing statements to the arbitrator, and such proceedings shall be completed within 30 days of the commencement of the arbitration; (g) after
the presentation of evidence and closing statements by both parties, the arbitrator shall declare the hearing closed; and (h) the arbitrator shall render his or her written decision (including,
without limitation, any and all findings of fact and conclusions of law and the identification of the prevailing party in the arbitration) within one month after the hearing is declared closed. The
parties intend the foregoing schedule to be an outside maximum timetable, and nothing herein shall prevent the arbitrator from ordering a shorter timetable if the arbitrator concludes that the same is
warranted by the circumstances of any particular arbitration proceeding. 

        Unless
the parties otherwise agree in writing, all proceedings involving the parties in an arbitration proceeding initiated pursuant to this provision shall be reported by a certified
shorthand reporter and written transcripts of the proceedings shall be prepared and made available to the parties. 

        Prior
to the award, filing fees of the American Arbitration Association and fees of the arbitrator, shall be borne equally by the parties, and other expenses of the arbitration shall be
borne by the party incurring such costs. The prevailing party in the arbitration shall, in addition to any compensation or amount awarded, be awarded such party's own attorneys' fees and expenses in
connection with the arbitration. The non-prevailing party (as determined by the arbitrator) shall also reimburse the prevailing party for all previously paid filing fees of the American
Arbitration Association, fees of the arbitrator and other expenses of the arbitration paid prior to the award. A post-arbitration proceeding to determine costs, if needed, shall be held
within 10 days of notice of the award. 

        The
terms of this Section 8.12 shall be specifically enforceable under applicable law in any court of competent jurisdiction. The award rendered by the arbitrator shall be final
(subject to confirmation, correction or vacation as set forth in California Code of Civil Procedure Sections 1285 and following) and judgment may be entered in accordance with applicable law in any
court having jurisdiction thereof. 

        *
* * 

33

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

	 	 	BUYER
	

 	
 	
XYRATEX TECHNOLOGY LIMITED
	

 	
 	
By:	

/s/  A. ROBSON      
 Name: A. Robson

Title:

	 	 	SELLER
	

 	
 	
ZT AUTOMATION LLC
	

 	
 	
By:	

/s/  NEIL A. BRUMBERGER      
 Name: Neil A. Brumberger

Title: CEO

	 	 	SUBSIDIARY
	

 	
 	
ZT AUTOMATION PTE. LTD.
	

 	
 	
By:	

/s/  NEIL A. BRUMBERGER      
 Name: Neil A. Brumberger

Title: Director

34

QuickLinks

Exhibit 10.3

ASSET PURCHASE AGREEMENTExhibit 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

  

 

64

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