XYRATEX LTD 2005 EMPLOYMENT INCENTIVE PLAN ADOPTED BY THE BOARD OF DIRECTORS ON MAY 11, 2005

 

any person controlled by the Company or by any employee benefit plan (or related trust) sponsored or maintained by the Company or any person controlled by the Company, or

 

(B)  an acquisition of voting securities by the Company or a corporation owned, directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of the stock of the Company, or

 

(C)  an acquisition of voting securities pursuant to a transaction described in clause (3) below that would not be a Change of Control under clause (3);

 

Notwithstanding the foregoing, the following event shall not constitute an “acquisition” by any person or group for purposes of this subsection (d): an acquisition of the Company’s securities by the Company which causes the Company’s voting securities beneficially owned by a person or group to represent 50% or more of the combined voting power of the Company’s then outstanding voting securities; provided, however, that if a person or group shall become the beneficial owner of 50% or more of the combined voting power of the Company’s then outstanding voting securities by reason of share acquisitions by the Company as described above and shall, after such share acquisitions by the Company, become the beneficial owner of any additional voting securities of the Company, then such acquisition shall constitute a Change of Control; or

 

(2)  during any period of two consecutive years, individuals who, at the beginning of such period, constitute the Board together with any new director(s) (other than a director designated by a person who shall have entered into an agreement with the Company to effect a transaction described in clauses (1) or (3) of this subsection (d)) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the two year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or

 

(3)  the consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of the Company’s assets or (z) the acquisition of assets or stock of another entity, in each case other than a transaction

 

(A)  which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such person, the “Successor Entity”)) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction, and

 

(B)  after which no person or group beneficially owns voting securities representing 50% or more of the combined voting power of the Successor Entity;

 

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provided, however, that no person or group shall be treated for purposes of this clause (B) as beneficially owning 50% or more of combined voting power of the Successor Entity solely as a result of the voting power held in the Company prior to the consummation of the transaction; or

 

(4)  the Company’s stockholders approve a liquidation or dissolution of the Company.

 

The Committee shall have full and final authority, which shall be exercised in its discretion, to determine conclusively whether a Change of Control of the Company has occurred pursuant to the above definition, and the date of the occurrence of such Change of Control and any incidental matters relating thereto.

 

(e)                                  “Code” means the Internal Revenue Code of 1986, as amended.

 

(f)                                    “Committee” means the Board or the Compensation Committee of the Board as further described in Article 10.

 

(g)                                 “Director” means a member of the Board.

 

(h)                                 “Disability” means, for purposes of this Plan, that the Participant qualifies to receive long-term disability payments under the Company’s long-term disability insurance program, as it may be amended from time to time.

 

(i)                                     “Eligible Participant” means any Employee who has not previously been an Employee or Director of the Company or a Subsidiary, or where the Employee has previously been an Employee or Director of a Subsidiary, is commencing employment with the Company or a Subsidiary following a bona fide period of non-employment by a Subsidiary, if he or she is granted an Award in connection with his or her commencement of employment with the Company or a Subsidiary and such grant is considered by the Board to be an essential and material inducement to his or her entering into employment with the Company or a Subsidiary.  The Board may in its discretion adopt procedures from time to time to ensure that an Employee is eligible to participate in the Plan prior to the granting of any Awards to such Employee under the Plan (including, without limitation, a requirement, that each such Employee certify to the Company prior to the receipt of an Award under the Plan that he or she has not been previously employed by the Company or a Subsidiary, or if previously employed by a Subsidiary, has had a bona fide period of non-employment, and that the grant of Awards under the Plan is an inducement material to his or her agreement to enter into employment with the Company or a Subsidiary).

 

(j)                                     “Employee” means any officer or other employee (as defined in accordance with Section 3401(c) of the Code) of the Company or any Subsidiary.

 

(k)                                  “Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

(l)                                     “Fair Market Value” shall mean, as of any date, the value of Stock determined as follows:

 

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(1)                                  If the Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system for the last market trading day prior to the date of determination, as reported in The Wall Street Journal or such other source as the Committee deems reliable;

 

(2)                                  If the Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean of the closing bid and asked prices for the Stock on the date prior to the date of determination as reported in The Wall Street Journal or such other source as the Committee deems reliable; or

 

(3)                                  In the absence of an established market for the Stock, the Fair Market Value thereof shall be determined in good faith by the Committee.

 

(m)                               “Incentive Stock Option” means an Option that is intended to meet the requirements of Section 422 of the Code or any successor provision thereto.  Incentive Stock Options may not be granted under the Plan.

 

(n)                                 “Independent Director” means a Director who is not an Employee of the Company and who qualifies as “independent” within the meaning of NASD Rule 4200(a)(14), if the Company’s securities are traded on the Nasdaq National Market, or the requirements of any other established stock exchange on which the Company’s securities are traded, as such rules or requirements may be amended from time to time..

 

(o)                                 “NASD” means the National Association of Securities Dealers, Inc.

 

(p)                                 “Non-Qualified Stock Option” means an Option that is not intended to be an Incentive Stock Option.

 

(q)                                 “Option” means a right granted to a Participant pursuant to Article 5 of the Plan to purchase a specified number of shares of Stock at a specified price during specified time periods.  An Option must be a Non-Qualified Stock Option.

 

(r)                                    “Participant” means an Eligible Participant who has been granted an Award pursuant to the Plan.

 

(s)                                  “Plan” means this Xyratex Ltd 2005 Employment Incentive Plan, as it may be amended from time to time.

 

(t)                                    “Restricted Stock” means Stock awarded to a Participant pursuant to Article 6 that is subject to certain restrictions and to risk of forfeiture.

 

(u)                                 “Restricted Stock Unit” means an Award granted pursuant to Article 7.

 

(v)                                 “Stock” means the common shares of the Company and such other securities of the Company that may be substituted for Stock pursuant to Article 9.

 

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(w)                               “Subsidiary” means any corporation or other entity of which a majority of the outstanding voting stock or voting power is beneficially owned directly or indirectly by the Company.

 

ARTICLE 3
SHARES SUBJECT TO THE PLAN

 

3.1                               NUMBER OF SHARES.

 

(a)                                  Subject to Article 9, the aggregate number of shares of Stock which may be issued or transferred pursuant to Awards under the Plan shall be 1,000,000 shares.

 

(b)                                 To the extent that an Award terminates, expires, or lapses for any reason, any shares of Stock subject to the Award shall again be available for the grant of an Award pursuant to the Plan.  Additionally, any shares of Stock tendered or withheld to satisfy the grant or exercise price or tax withholding obligation pursuant to any Award shall again be available for the grant of an Award pursuant to the Plan.  To the extent permitted by applicable law or any exchange rule, shares of Stock issued in assumption of, or in substitution for, any outstanding awards of any entity acquired in any form of combination by the Company or any Subsidiary shall not be counted against shares of Stock available for grant pursuant to this Plan.

 

3.2                               STOCK DISTRIBUTED.  Any Stock distributed pursuant to an Award may consist, in whole or in part, of authorized and unissued Stock or Stock purchased on the open market.

 

ARTICLE 4
ELIGIBILITY AND PARTICIPATION

 

4.1                               ELIGIBILITY.

 

(a)                         &