Schedule 13D

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DmiPWhOmfgDQszQq7L9v77pyufzXo7OlI+e2Upc0lHUHiiY5n1R+OqDLa8f3OTg1 enU5vP/DuF8Rr5A15+MvKg== 0001193125-05-159132.txt : 20050805 0001193125-05-159132.hdr.sgml : 20050805 20050805162518 ACCESSION NUMBER: 0001193125-05-159132 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 20 FILED AS OF DATE: 20050805 DATE AS OF CHANGE: 20050805 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: NSTOR TECHNOLOGIES INC CENTRAL INDEX KEY: 0000075448 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 952094565 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-32709 FILM NUMBER: 051003078 BUSINESS ADDRESS: STREET 1: 6190 CORTE DEL CEDRO CITY: CARLSBAD STATE: CA ZIP: 92009 BUSINESS PHONE: 760-683-2500 MAIL ADDRESS: STREET 1: 1601 FORUM PLACE, SUITE 500 CITY: W. PALM BEACH STATE: FL ZIP: 33401 FORMER COMPANY: FORMER CONFORMED NAME: IMGE INC DATE OF NAME CHANGE: 19960627 FORMER COMPANY: FORMER CONFORMED NAME: IMGE INC /DE/ DATE OF NAME CHANGE: 19940525 FORMER COMPANY: FORMER CONFORMED NAME: IMNET INC /DE/ DATE OF NAME CHANGE: 19920703 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: XYRATEX LTD CENTRAL INDEX KEY: 0001284823 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER STORAGE DEVICES [3572] IRS NUMBER: 000000000 FILING VALUES: FORM TYPE: SC 13D MAIL ADDRESS: STREET 1: LANGSTONE ROAD CITY: HAVANT UNITED KINGDOM STATE: X0 ZIP: P091SA SC 13D 1 dsc13d.htm SCHEDULE 13D Schedule 13D

As filed with the Securities and Exchange Commission on August 5, 2005

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 13D

(Rule 13d-101)

(Amendment No. )¹

INFORMATION TO BE INCLUDED IN STATEMENT FILED PURSUANT

TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a)

NSTOR TECHNOLOGIES, INC.

(Name of Issuer)

COMMON STOCK, PAR VALUE $0.05 PER SHARE

(Title of Class of Securities)

67018N108

(CUSIP Number )

XYRATEX LTD AND NORMANDY ACQUISITION CORPORATION

LANGSTONE ROAD

HAVANT PO9 1SA

UNITED KINGDOM

ATTENTION: STEVE BARBER

(011) 44 2392 496000

(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)

COPIES TO:

TAD J. FREESE, ESQ.

LATHAM & WATKINS LLP

505 MONTGOMERY STREET, SUITE 2000

SAN FRANCISCO, CALIFORNIA 94111

(415) 391-0600

JULY 27, 2005

(Date of Event Which Requires Filing of This Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box ¨.

Note. Schedules filed in paper format shall include a signed original and five copies of this schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent.

¹	The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes)

(Continued on following pages)

(Page 1 of 8 Pages)


CUSIP No. 67018N108		13D		Page 2 of 8 Pages


1.	Name of Reporting Persons I.R.S. Identification Nos. of above persons (entities Only) Xyratex Ltd
2.	Check the Appropriate Box if a Member of a Group (a) x (b) ¨
3.	SEC Use Only
4.	Source of Funds WC
5.	Check Box if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) Or 2(e)	¨
6.	Citizenship or Place of Organization Bermuda

NUMBER OF

BENEFICIALLY OWNED BY

EACH

REPORTING PERSON

WITH

7. Sole Voting Power

8. Shared Voting Power

61,912,000*

9. Sole Dispositive Power

10. Shared Dispositive Power


11.	Aggregate Amount Beneficially Owned by Each Reporting Person 61,912,000*
12.	Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares	¨
13.	Percent of Class Represented by Amount in Row (11) 37.5*
14.	Type of Reporting Person CO

*See Item 5 herein.


CUSIP No. 67018N108		13D		Page 3 of 8 Pages


1.	Name of Reporting Persons I.R.S. Identification Nos. of above persons (entities only) Normandy Acquisition Corporation
2.	Check the Appropriate Box if a Member of a Group* (a) x (b) ¨
3.	SEC Use Only
4.	Source of Funds AF
5.	Check Box if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e)	¨
6.	Citizenship or Place of organization Delaware

NUMBER OF

BENEFICIALLY

OWNED BY

EACH

REPORTING

PERSON

WITH

7. Sole Voting Power

8. Shared Voting Power

61,912,000*

9. Sole Dispositive Power

10. Shared Dispositive Power


11.	Aggregate Amount Beneficially Owned by Each Reporting Person 61,912,000*
12.	Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares	¨
13.	Percent of Class Represented by Amount in Row (11) 37.5%*
14.	Type of Reporting Person CO

*See Item 5 herein.

Item 1. Security and Issuer.

This statement relates to the shares of common stock, $0.05 par value per share (each a “Share” and collectively, the “Shares”), of nStor Technologies, Inc., a Delaware corporation (the ”Issuer”). The Issuer’s principal executive offices are located at 6190 Corte del Cedro, Carlsbad, California 92011.

Item 2. Identity and Background.

(a)-(c) and (f). This statement is filed by Xyratex Ltd, a Bermuda corporation (“Parent”), and Normandy Acquisition Corporation, a Delaware corporation and an indirect wholly owned subsidiary of Xyratex Ltd (“Purchaser” and together with Parent, the “Reporting Person”). Parent and Purchaser are filing this statement jointly pursuant to a Joint Filing Agreement attached hereto as Exhibit 1. The principal executive and business office of Parent and Purchaser is located at Langstone Road, Havant PO9 1SA, United Kingdom.

Parent and Purchaser’s principal business is enterprise class data storage subsystems and network technology. Purchaser is a recently incorporated Delaware corporation organized solely to carry out certain transactions in connection with the Offer and the Merger (as defined herein).

Information as to each of the executive officers and directors of Parent is set forth on Annex A hereto. Information as to each of the executive officers and directors of Purchaser is set forth on Annex B hereto. Each of such persons on Annex A and Annex B is a citizen of the United Kingdom other than Andrew Sukawaty, Chairman of the Board of Directors of Parent, Ernest Sampias, a director of Parent and Steve Sanghi, a director of Parent, each of whom are citizens of the United States.

(d) During the last five years, neither the Reporting Person nor, to the best of the Reporting Person’s knowledge, any of the individuals named in Annex A or Annex B hereto, has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors).

(e) During the last five years, neither the Reporting Person nor, to the best of the Reporting Person’s knowledge, any of the individuals named in Annex A or Annex B hereto, has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

Item 3. Source and Amount of Funds or Other Consideration.

See Item 4 below.

Beneficial ownership of the Shares which are the subject of this Schedule 13D may be deemed to have been acquired through the execution of Tender and Stockholder Support Agreements, each dated as of July 27, 2005, among Parent, Purchaser and certain stockholders of the Issuer (the “Support Agreements”), a form of which is attached hereto as Exhibit 2 and incorporated herein by reference. The Reporting Person has not paid to any of the stockholders party to the Support Agreements any funds in connection with the execution of the Support

Agreements. The Support Agreements were entered into to induce Parent and Purchaser to enter into, and in consideration for their entering into, the Merger Agreement (as defined below).

Item 4. Purpose of Transaction.

This Schedule 13D relates to the tender offer (the “Offer”) being made by Purchaser to purchase all of the outstanding Shares of the Issuer at a price of $0.105 per Share net to the sellers in cash (subject to applicable withholding taxes), without interest (the “Offer Consideration”), upon the terms and subject to the conditions set forth in the Agreement and Plan of Merger dated as of July 27, 2005 by and among Parent, Purchaser and the Issuer (the “Merger Agreement”), a copy of which is attached hereto as Exhibit 3 and incorporated herein by reference. Pursuant to the Merger Agreement, Parent and Purchaser commenced the Offer on August 5, 2005, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated August 5, 2005 (the “Offer to Purchase”), a copy of which is attached hereto as Exhibit 4 and incorporated herein by reference, and in the related Letter of Transmittal, a copy of which is attached hereto as Exhibit 5 and incorporated herein by reference. As soon as practicable after the purchase of Shares pursuant to the Offer and the satisfaction of the other conditions set forth in the Merger Agreement and in accordance with the relevant provisions of the Delaware General Corporation Law, Purchaser will be merged with and into the Issuer (the “Merger”) with the Issuer being the surviving corporation in the Merger. Following consummation of the Merger, the Issuer will continue as the surviving corporation and will become an indirect wholly owned subsidiary of Parent.

(a)-(g), (j) The information set forth in the “The Offer—Background of the Offer; The Merger Agreement; Other Arrangements” of the Offer to Purchase and “The Offer—Purpose of the Offer; Plans for the Company; Appraisal Rights” of the Offer to Purchase is incorporated herein by reference.

(h)-(i) The information set forth in “The Offer—Effect of the Offer on the Market for the Shares; Stock Exchange Listing(s); Registration under the Exchange Act” of the Offer to Purchase is incorporated herein by reference.

Except as described herein, the Reporting Person has no present plan or proposal which relates to, or could result in, any of the events referred to in paragraphs (a) through (j), inclusive, of Item 4 of Schedule 13D. However, the Reporting Person will continue to review the business of the Issuer and may in the future propose that the Issuer take one or more of such actions.

Item 5. Interest in Securities of the Issuer.

(a)-(c) Pursuant to the Support Agreements, upon the terms set forth therein, the Significant Stockholders (as defined below) have agreed to tender (and not withdraw except in certain circumstances) pursuant to the Offer an aggregate of 61,912,000 Shares, representing approximately 37.5% of the issued and outstanding common stock of the Issuer. In addition, the Significant Stockholders have agreed to vote an aggregate of 61,912,000 Shares, representing approximately 37.5% of the issued and outstanding common stock of the Issuer, in favor of the Merger and the Merger Agreement and against any acquisition proposal other than the Merger and have granted to certain officers or directors of Parent an irrevocable proxy to vote such

Shares in favor of the Proposed Merger, the Merger Agreement and the transactions contemplated by the Merger Agreement. No vote of the stockholders of the Issuer is expected under the terms of the Merger Agreement until after the acceptance for payment of the Shares in the Offer, if at all.

The stockholders who are party to the Support Agreements (collectively, the ”Significant Stockholders”) and their principal addresses are as follows:

•

Barry S. Halperin, 500 Southeast Fifth Avenue, Penthouse #01, Boca Raton, FL 33432

•

H. Irwin Levy, 1601 Forum Place, Suite 500 West Palm Beach, FL 33401

•

Bernard Marden, Two North Breakers Row, Apartment N, Penthouse #3, Palm Beach, FL 33480

The information set forth above with respect to the named Significant Stockholders is as set forth in the documents and reports publicly filed by the Issuer with the Securities and Exchange Commission and such information is qualified in its entirety by reference to such documents and reports. No other information relating to such Significant Stockholders was made available to Parent or Purchaser.

During the last five years, to the best knowledge of the Reporting Person, none of the Significant Stockholders has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

Except as described above, neither the Reporting Person nor, to the best of the Reporting Person’s knowledge, any of the persons listed in Schedule I hereto, (i) beneficially owns or has any right to acquire, directly or indirectly, any equity securities of the Issuer or (ii) effected any transaction in such equity securities during the past 60 days.

(d) To the best knowledge of the Reporting Person, no other person has the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the Shares.

(e) Not Applicable.

Item 6. Contracts, Arrangements, Understandings, or Relationships With Respect to Securities of the Issuer.

On September 2, 2004, Xyratex Technology Limited, an indirect wholly owned subsidiary of Parent, entered into a mutual non-disclosure/confidentiality agreement with nStor Corporation, Inc., a wholly owned subsidiary of Issuer, related to confidential information

concerning the Issuer and/or Parent and discussions or negotiations with respect to the sale of all or any portion of the Issuer. A copy of the mutual non-disclosure/confidentiality agreement is attached hereto as Exhibit 6 and incorporated herein by reference.

As described in the response to Item 5 of this Schedule 13D, pursuant to the terms of the Support Agreements, the Significant Stockholders party to the Support Agreements have agreed to vote an aggregate of 61,912,000 Shares, representing approximately 37.5% of the issued and outstanding common stock of the Issuer, in favor of the Merger and the Merger Agreement and against any acquisition proposal other than the Merger and have granted to certain officers or directors of Parent an irrevocable proxy to vote such Shares in favor of the Proposed Merger, the Merger Agreement and the transactions contemplated by the Merger Agreement.

Parent and Purchaser have entered into a Convertible Preferred Stock Purchase Agreement with H. Irwin Levy pursuant to which Mr. Levy has agree to sell to Purchaser the 9,100 shares of the Issuer’s Series M Preferred Stock owned by Mr. Levy for a purchase price of $3,822,000 plus accrued and unpaid dividends on such shares. The purchase and sale will occur as promptly as practicable following Purchaser’s acquisition of greater than 90% of the Issuer’s outstanding shares of common stock. A copy of the Convertible Preferred Stock Purchase Agreement is attached hereto as Exhibit 14 and incorporated herein by reference.

Except for the Merger Agreement, the Support Agreements, the exhibits hereto (which are incorporated herein by reference) and as described above, neither the Reporting Person nor, to the best of the Reporting Person’s knowledge, any of the persons listed in Schedule I hereto, have any contracts, arrangements, understandings or relationships with any other person with respect to any securities of the Issuer (including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or the voting of any such securities, finder’s fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, division of profits or loss or the giving or withholding of proxies).

Item 7. Material to be Filed as Exhibits.


Exhibit 1		Joint Filing Agreement.
Exhibit 2		Form of Tender and Stockholder Support Agreement, dated as of July 27, 2005, by and among Xyratex Ltd, Normandy Acquisition Corporation and each of Barry S. Halperin, H. Irwin Levy and Bernard Marden.
Exhibit 3		Agreement and Plan of Merger, dated as of July 27, 2005, by and among Xyratex Ltd, Normandy Acquisition Corporation and nStor Technologies, Inc.
Exhibit 4		Offer to Purchase dated August 5, 2005.
Exhibit 5		Letter of Transmittal.
Exhibit 6		Mutual Non-Disclosure/Confidentiality Agreement, entered into on September 3, 2004, by and between nStor Corporation, Inc. and Xyratex Technology Limited.
Exhibit 7		Notice of Guaranteed Delivery.
Exhibit 8		Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
Exhibit 9		Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
Exhibit 10		Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.
Exhibit 11		Joint Press Release issued by Xyratex Ltd and nStor Technologies, Inc. dated July 28, 2005.
Exhibit 12		Summary Advertisement, published August 5, 2005.
Exhibit 13		Form of Non-Competition Agreement, dated as of July 27, 2005, by and among Xyratex Ltd, Normandy Acquisition Corporation and each of Barry S. Halperin, H. Irwin Levy and Bernard Marden.
Exhibit 14		Convertible Preferred Stock Purchase Agreement, dated as of July 27, 2005, by and among Xyratex Ltd, Normandy Acquisition Corporation and H. Irwin Levy.


Exhibit 15		Intellectual Property License Agreement, dated as of July 27, 2005, by and among Xyratex Technology Limited and nStor Corporation, Inc.
Exhibit 16		Promissory Note, dated as of July 27, 2005, by and between Xyratex Technology Limited and nStor Corporation, Inc.

SIGNATURE

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.


	XYRATEX LTD

	By:	/s/ Steve Barber
	Name:	Steve Barber
	Title:	Chief Executive Officer
Date: August 5, 2005

	NORMANDY ACQUISITION CORPORATION

	By:	/s/ Steve Barber
	Name:	Steve Barber
	Title:	President and Chief Executive Officer
Date: August 5, 2005

ANNEX A

DIRECTORS AND EXECUTIVE OFFICERS OF XYRATEX LTD CORPORATION

The following tables set forth the name, present principal occupation or employment and material occupations, positions, offices or employments for the past five years for each member of the Board of Directors and each executive officer of Xyratex Ltd. Unless otherwise indicated, (1) each occupation set forth under an individual’s name refers to employment with Parent; (2) each individual is a citizen of the United Kingdom, unless otherwise stated below and (3) each individual has a principal business address at Langstone Road, Havant PO9 1SA, United Kingdom.

Directors

Andrew Sukawaty

Mr. Sukawaty has served as Chairman of the Board since October 2004, and was the Deputy Chairman of the Board from March 2004 to October 2004. He is Chairman of the Board of Directors and Chief Executive Officer of Inmarsat, a world-wide mobile satellite service provider. He is president of Cable Partners Europe LLC, a cable television services company, a non executive director of mmO2, a mobile telecommunications company, and a director of Powerwave Technologies, a wireless solutions company. He was formerly Chairman of Telenet, a Belgian cable television operator. He has previously held the offices of Chief Executive and President of Sprint PCS, a personal wireless service provider, Chief Executive Officer of NTL, a broadcast and telecommunications service provider, and Chief Operating Officer of Mercury One2One, a digital mobile service network. Mr. Sukawaty is a citizen of the United States.

Steve Barber

Mr. Barber has served as Chief Executive Officer since February 2003. From March 2002 to February 2003, he served as President. From October 2000 to March 2002, Mr. Barber was Executive Vice President and Director of Business Development. He served as division president of Teleplan, an after sales services provider to the information technology and telecommunications industry between 1999 and October 2000.

Jonathan Brooks

Mr. Brooks has served as a director on the Board of Directors since May 2004. Since 2002, he has assisted several venture capital-backed private equity companies in financial and strategic management. He is currently a director of Frontier Silicon Holdings Limited, a supplier of semiconductor technology for use in digital radio and television applications, and Chairman of Picochip Inc., a private equity backed company developing semiconductor solutions for Wimax applications. He is also a director of e2v Technologies plc, a sensor technology company. From 1995 to 2002, Mr. Brooks was Chief Financial Officer and a director of ARM Holdings PLC, a semiconductor equipment and services company.

A-1

Nic Humphries

Mr. Humphries has served as a director on the Board of Directors since September 2003. He is a general partner of HgCapital, a European private equity investment firm, and has been head of HgCapital’s Technology Practice since July 2001. Prior to joining HgCapital, Mr. Humphries was Managing Director of the European business of Geocapital Partners, a technology venture capital firm, and head of Technology and Telecoms at Barclays Private Equity, a mid-market private equity investment firm.

Ernest Sampias

Mr. Sampias has served as a director on the Board of Directors since May 2004. He was appointed Senior Vice President and Chief Financial Officer for McDATA, a storage networking company, in June 2002. Mr. Sampias joined McDATA in September 2001 as Vice President Finance and Controller. Prior to joining McDATA, Mr. Sampias was with US West, a diversified communications company, for 15 years; his last assignment with US West was as Vice President and Chief Financial Officer of US West DEX, the Yellow Pages subsidiary of US West. Mr. Sampias is a citizen of the United States.

Steve Sanghi

Mr. Sanghi has served as a director on the Board of Directors since May 2004. He currently serves as director and President of Microchip Technology, Inc., a semiconductor equipment company, since his appointment in 1990, as CEO since 1991 and as Chairman of the Board of Directors since 1993. Mr. Sanghi is a citizen of the United States.

Executive Officers

Steve Barber

Will Leonard

Mr. Leonard has served as Executive Vice President, Integrated Business Development since November 2002, and has held a variety of senior management positions since 1994.

A-2

Richard Pearce

Mr. Pearce has served as Chief Financial Officer since September 2003. From 1994 to September 2003, he served as Treasurer and as Group Tax Manager.

Steve Thompson

Mr. Thompson serves as Chief Technology Officer.

Adam Wray

Mr. Wray has served as Executive Vice President, Storage Infrastructure since December 2001. Prior to December 2001, Mr. Wray served in several business management and engineering positions within Xyratex Ltd’s storage infrastructure business.

A-3

ANNEX B

DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER

The following tables set forth the name, present principal occupation or employment and material occupations, positions, offices or employments for the past five years for each member of the Board of Directors and each executive officer of Purchaser. Unless otherwise indicated, (1) each occupation set forth under an individual’s name refers to employment with Parent; (2) each individual is a citizen of the United Kingdom and (3) each individual has a principal business address at Langstone Road, Havant PO9 1SA, United Kingdom.

Directors and Executive Officers

Steve Barber

Mr. Barber serves as President, Chief Executive Officer and Director.

Richard Pearce

Mr. Pearce serves as Chief Financial Officer, Secretary and Director.

B-1

Exhibit Index


Exhibit 1		Joint Filing Agreement.
Exhibit 2		Form of Tender and Stockholder Support Agreement, dated as of July 27, 2005, by and among Xyratex Ltd, Normandy Acquisition Corporation and each of Barry S. Halperin, H. Irwin Levy and Bernard Marden.
Exhibit 3		Agreement and Plan of Merger, dated as of July 27, 2005, by and among Xyratex Ltd, Normandy Acquisition Corporation and nStor Technologies, Inc.
Exhibit 4		Offer to Purchase dated August 5, 2005.
Exhibit 5		Letter of Transmittal.
Exhibit 6		Mutual Non-Disclosure/Confidentiality Agreement, entered into on September 3, 2004, by and between nStor Corporation, Inc. and Xyratex Technology Limited.
Exhibit 7		Notice of Guaranteed Delivery.
Exhibit 8		Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
Exhibit 9		Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
Exhibit 10		Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.
Exhibit 11		Joint Press Release issued by Xyratex Ltd and nStor Technologies, Inc. dated July 28, 2005.
Exhibit 12		Summary Advertisement, published August 5, 2005.
Exhibit 13		Form of Non-Competition Agreement, dated as of July 27, 2005, by and among Xyratex Ltd, Normandy Acquisition Corporation and each of Barry S. Halperin, H. Irwin Levy and Bernard Marden.
Exhibit 14		Convertible Preferred Stock Purchase Agreement, dated as of July 27, 2005, by and among Xyratex Ltd, Normandy Acquisition Corporation and H. Irwin Levy.
Exhibit 15		Intellectual Property License Agreement, dated as of July 27, 2005, by and among Xyratex Technology Limited and nStor Corporation, Inc.
Exhibit 16		Promissory Note, dated as of July 27, 2005, by and between Xyratex Technology Limited and nStor Corporation, Inc.

EX-99.1 2 dex991.htm JOINT FILING AGREEMENT Joint Filing Agreement

Exhibit 1

Joint Filing Agreement

In accordance with Rule 13d-1(k)(1) promulgated under the Securities Exchange Act of 1934, as amended, the undersigned hereby agree to the joint filing with the other parties hereto on behalf of each of them a statement on Schedule 13D (including amendments thereto) with respect to the common stock, par value $0.05 per share, of nStor Technologies, Inc., a Delaware corporation, and that this agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument.

In witness whereof, the undersigned hereby execute this agreement as of the 5^th day of August, 2005.


Xyratex Ltd

By:		/s/ Steve Barber
Name:		Steve Barber
Title:		Chief Executive Officer

Normandy Acquisition Corporation

By:		/s/ Steve Barber
Name:		Steve Barber
Title:		President and Chief Executive Officer

EX-99.2 3 dex992.htm FORM OF TENDER AND STOCKHOLDER SUPPORT AGREEMENT Form of Tender and Stockholder Support Agreement

Exhibit 2

FORM OF

TENDER AND STOCKHOLDER SUPPORT AGREEMENT

THIS TENDER AND STOCKHOLDER SUPPORT AGREEMENT, dated as of •, 2005 (the “Agreement”), is by and among Ixtapa, a Bermuda corporation (“Parent”), Ixtapa Acquisition Corporation, a Delaware corporation and a wholly-owned subsidiary of Parent (the “Purchaser”), and • (the “Stockholder”).

RECITALS

WHEREAS, Parent, Purchaser and Normandy, a Delaware corporation (the ”Company”), propose to enter into an Agreement and Plan of Merger, dated as of •, 2005 (as the same may be amended or supplemented from time to time, the “Merger Agreement”), which provides, among other things, that Purchaser will make a cash tender offer (the “Offer”) for all of the outstanding capital stock of the Company and, after expiration of the Offer, will merge with and into the Company (the “Merger”), in each case upon the terms and subject to the conditions in the Merger Agreement (with all capitalized terms used but not defined herein having the meanings set forth in the Merger Agreement);

WHEREAS, the Stockholder owns the number of shares of common stock, par value $0.05 per share, of the Company (the “Common Stock”) set forth and further described on Annex A hereto (such shares of Common Stock, together with any other shares of capital stock of the Company acquired (whether beneficially or of record) by the Stockholder after the date hereof and prior to the earlier of the Effective Time and the termination of all of the Stockholder’s obligations under this Agreement, including any shares acquired by means of purchase, dividend or distribution, or issued upon the exercise of any warrants or options, and the conversion of any convertible securities or otherwise being collectively referred to herein as, the “Subject Shares”); and

WHEREAS, as a condition to the willingness of Parent and Purchaser to enter into the Merger Agreement and make the Offer, Parent has required that the Stockholder agree and, in order to induce Parent and Purchaser to enter into the Merger Agreement, the Stockholder has agreed, to enter into this Agreement.

NOW, THEREFORE, to induce Parent and Purchaser to enter into, and in consideration of their entering into, the Merger Agreement, and in consideration of the premises and the representations, warranties and agreements contained herein, the parties agree as follows:

1. Representations and Warranties of the Stockholder. The Stockholder hereby represents and warrants to Parent and Purchaser as of the date hereof as follows:

(a) Organization. To the extent applicable, the Stockholder is a corporation, partnership or limited liability company, duly organized, validly existing and in good standing under the laws of the jurisdiction of the Stockholder’s organization.

(b) Authority. The Stockholder has the legal capacity and all requisite power and authority to execute and deliver this Agreement and to perform the Stockholder’s obligations hereunder and consummate the transactions contemplated hereby. To the extent applicable, the execution, delivery and performance by the Stockholder of this Agreement and the consummation by the Stockholder of the transactions contemplated hereby have been duly and validly authorized by the Stockholder (or its board of directors or similar governing body, as applicable), and no other actions or proceedings on the part of the Stockholder are necessary to authorize the execution and delivery by the Stockholder of this Agreement and the consummation by the Stockholder of the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Stockholder, and constitutes a valid and binding obligation of the Stockholder enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general principles of equity.

(c) The Subject Shares. Except as set forth on Annex A hereto, (i) the Stockholder is the record and beneficial owner of, and has good and marketable title to, the Subject Shares set forth on Annex A hereto, free and clear of any and all security interests, liens, claims, pledges, options, rights, charges and other encumbrances; (ii) the Stockholder does not own, of record or beneficially, any shares of capital stock of the Company (or rights to acquire any such shares) other than the Subject Shares set forth on Annex A hereto; and (iii) the Stockholder has the sole right to vote, sole power of disposition, sole power to issue instructions with respect to the matters set forth in Sections 3, 4 and 5 hereof, sole power of conversion, sole power to demand appraisal rights and sole power to agree to all of the matters set forth in this Agreement, in each case with respect to all of the Stockholder’s Subject Shares, with no material limitations, qualification or restrictions on such rights, subject to applicable federal securities laws and the terms of this Agreement.

(d) No Conflicts. (A) Except (i) for the filings required under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Securities Act of 1933, as amended (the “Securities Act”), (ii) for the filings required under regulations of the Exchange, (iii) for the applicable requirements of state securities, takeover or Blue Sky laws and (iv) as set forth on Annex A hereto, no filing with, and no permit, authorization, consent or approval of, any state, federal or foreign public body or authority is necessary for the execution of this Agreement by the Stockholder and the consummation by the Stockholder of the transactions contemplated hereby, (B) the execution and delivery of this Agreement by the Stockholder do not, and the consummation by the Stockholder of the transactions contemplated hereby and compliance with the terms hereof will not, conflict with, or result in any violation of, or breach or default (with or without notice or lapse of time or both) under, (1) to the extent applicable, any provisions of the organizational documents of the Stockholder, (2) any material provision of any material trust, loan or credit agreement, note, bond, mortgage, indenture, guarantee, lease, license, contract or other agreement to which the Stockholder is a party or by which the Stockholder is bound, or (3) any material franchise, judgment,

order, writ, injunction, notice, decree, statute, law, ordinance, rule or regulation applicable to the Stockholder or the Stockholder’s property or assets, and (C) the execution and delivery of this Agreement by the Stockholder do not, and the consummation by the Stockholder of the transactions contemplated hereby will not, materially violate any material laws applicable to the Stockholder or result in Parent or Purchaser becoming non-exempt interested stockholders under Section 203 of the DGCL.

2. Representations and Warranties of Parent and Purchaser. Each of Parent and Purchaser hereby represents and warrants to the Stockholder as of the date hereof as follows:

(a) Organization. Each of Parent and Purchaser is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization.

(b) Authority. Each of Parent and Purchaser has the requisite corporate power and authority to execute and deliver this Agreement and to perform its respective obligations hereunder and consummate the transactions contemplated hereby. The execution, delivery and performance by Parent and Purchaser of this Agreement and the consummation by them of the transactions contemplated hereby, have been duly and validly authorized by the Board of Directors of Parent and Purchaser and no other corporate or other action or proceedings on the part of Parent and Purchaser are necessary to authorize the execution and delivery by them of this Agreement and the consummation by them of the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Parent and Purchaser, and constitutes a valid and binding obligation of Parent and Purchaser enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general principles of equity.

(c) No Conflicts. Except for (i) the filings required under the Exchange Act and the Securities Act, (ii) the filings required under the rules and regulations of the Exchange, (iii) the applicable requirements of state securities, takeover or Blue Sky laws, and (iv) such notifications, filings, authorizing actions, orders and approvals as may be required under other laws, (A) no material filing with, and no material permit, authorization, consent or approval of, any state, federal or foreign public body or authority is necessary for the execution of this Agreement by Parent and Purchaser and the consummation by Parent and Purchaser of the transactions contemplated hereby, (B) the execution and delivery of this Agreement by Parent and Purchaser do not, and the consummation by them of the transactions contemplated hereby and compliance with the terms hereof will not, conflict with, or result in any violation of, or breach or default (with or without notice or lapse of time or both) under (1) the charter documents of Parent or Purchaser, (2) any provision of any material trust, loan or credit agreement, note, bond, mortgage, indenture, guarantee, lease, license, contract or other agreement to which Parent or Purchaser is a party or by which it is bound, or (3) any material franchise, judgment, order, writ, injunction, notice, decree, statute, law, ordinance, rule or regulation applicable to Parent or Purchaser or their respective properties or assets, and

(C) the execution and delivery of this Agreement by Parent and Purchaser do not, and the consummation by them of the transactions contemplated hereby will not, violate any laws applicable to Parent or Purchaser, except in the case of clauses (B)(2), (B)(3) and (C) above, for any such conflicts, violations, breaches or defaults that would not have a material adverse effect on the ability of Parent or Purchaser to consummate the transactions contemplated hereby.

3. Tender of Shares.

(a) The Stockholder agrees (i) to tender Shares (the “Tender Shares”) into the Offer on or before the initial date of expiration of such Offer, in each case, free and clear of any liens or other encumbrances except as disclosed herein or those arising from this Agreement and (ii) not to withdraw any Tender Shares so tendered so long as there is no (w) decrease in the Offer Price and the Offer Price is payable in cash, (x) decrease in the number of Shares sought to be purchased in the Offer, (y) condition imposed to the Offer other than those set forth in Annex I of the Merger Agreement and (z) amendment to any term of the Offer in any manner adverse to the holders of Shares. The Stockholder acknowledges and agrees that Parent’s and Purchaser’s obligation to accept for payment and pay for the Subject Shares in the Offer is subject to the terms and conditions of the Offer.

(b) The Stockholder will receive the same Offer Price received by other stockholders of the Company in the Offer with respect to Tender Shares or Subject Shares tendered by the Stockholder in the Offer. In the event that, notwithstanding the provisions of the first sentence of Section 3(a), any Tender Shares are for any reason withdrawn from the Offer, such Tender Shares will remain subject to the terms of this Agreement.

(c) The Stockholder agrees to permit Parent and the Company to publish and disclose in the Offer Documents and Schedule 14D-9 and, if approval of the stockholders of the Company is required under applicable law, the Proxy Statement (including all documents and schedules filed with the Securities and Exchange Commission (the “SEC”)), the Stockholder’s identity and ownership of Common Stock and the nature of the Stockholder’s commitments, arrangements and understandings under this Agreement.

4. Agreement to Vote. The Stockholder agrees that:

(a) At any meeting of stockholders of the Company called to vote upon the Merger Agreement and the transactions contemplated thereby, however called, or at any adjournment or postponement thereof or in connection with any written consent of the holders of Common Stock or in any other circumstances upon which a vote, consent or other approval with respect to the Merger Agreement and the transactions contemplated thereby is sought, the Stockholder shall be present (in person or by proxy) and shall vote (or cause to be voted) all Tender Shares then held of record or beneficially owned by the Stockholder in favor of the Merger and the Merger Agreement and the transactions contemplated thereby.

(b) At any meeting of stockholders of the Company, however called, or at any adjournment or postponement thereof or in any other circumstances upon which a vote or other approval is sought from the Company’s stockholders, the Stockholder shall vote (or cause to be voted) all Tender Shares then held of record or beneficially owned by the Stockholder against any action or agreement (other than the Merger Agreement or the transactions contemplated thereby) that would impede, interfere with, delay, postpone or attempt to discourage the Merger, the Offer or the other transactions contemplated by this Agreement and the Merger Agreement, including, but not limited to any of the following which have such an effect: (i) any Acquisition Proposal; (ii) any action that is reasonably likely to result in a breach in any respect of any representation, warranty, covenant or any other obligation or agreement of the Company under the Merger Agreement or result in any of the conditions set forth in Annex I to the Merger Agreement not being fulfilled; (iii) any extraordinary corporate transaction, such as a merger, consolidation or other business combination involving the Company and its subsidiaries; (iv) a sale, lease or transfer of a material amount of assets of the Company and its subsidiaries or a reorganization, recapitalization, dissolution, winding up or liquidation of the Company and its subsidiaries; (v) any change in the management or board of directors of the Company, except as otherwise agreed to in writing by Parent; (vi) any other material change in the Company’s corporate structure, business, certificate of incorporation or bylaws that is not agreed to by Parent in the exercise of Parent’s discretion; and (vii) any material change in the present capitalization or dividend policy of the Company.

(c) The Stockholder hereby irrevocably grants to, and appoints Richard Pearce and Stephen Barber (the “Proxyholders”), or either of them, in their respective capacities as officers or directors of Parent, and any individual who shall hereafter succeed to any such office or directorship of Parent, and each of them individually, the Stockholder’s proxy and attorney-in-fact (with full power of substitution and re-substitution), for and in the name, place and stead of the Stockholder, to vote the Tender Shares in favor of the Merger, the Merger Agreement and the transactions contemplated thereby, against any Acquisition Proposal and as otherwise required by this Section 4, subject to the limitations contained herein. The Stockholder represents that any proxies heretofore given in respect of the Tender Shares are revocable, and that any such proxies are hereby, or have previously been, revoked. This proxy will terminate upon the termination of this Agreement in accordance with its terms. The Stockholder authorizes the Proxyholders to file this proxy and any substitution or revocation of substitution with the Secretary of the Company and with any Inspector of Elections at any meeting of the stockholders of the Company.

(d) The Stockholder understands and acknowledges that Parent and Purchaser are entering into the Merger Agreement in reliance upon the Stockholder’s execution and delivery of this Agreement. The Stockholder hereby affirms that the irrevocable proxy set forth in this Section 4 is given in connection with the execution of the Merger Agreement, and that such irrevocable proxy is given to secure the performance of the duties of the Stockholder under this Agreement. The Stockholder hereby further affirms that the irrevocable proxy is coupled with an interest. Such irrevocable proxy is executed and intended to be irrevocable in accordance with the provisions of Section 212(e) of the DGCL.

5. Restriction on Transfer. Other than pursuant to this Agreement, the Stockholder agrees not to (a) sell, transfer, pledge, encumber, assign or otherwise dispose of (collectively, “Transfer”), or enter into any contract, option or other arrangement or understanding with respect to the Transfer by the Stockholder of, any of the Subject Shares or offer any interest in any Subject Shares to any person other than pursuant to the terms of the Offer, the Merger or this Agreement, (b) to enter into any voting arrangement or understanding, whether by proxy, power of attorney, voting agreement, voting trust or otherwise with respect to the Subject Shares, or (c) take any action that would make any representation or warranty of the Stockholder contained herein untrue or incorrect in any material respect or have the effect of preventing or disabling the Stockholder from performing its obligations under this Agreement.

6. No Solicitation of Acquisition Proposals. The Stockholder shall not, and shall not authorize, permit or cause any of its, directors, officers, employees, agents, representatives and advisors (including any investment banker, attorney or accountant retained by the Company or any of its Subsidiaries or the Stockholder) to, directly or indirectly, (i) encourage (including by way of furnishing non-public information), solicit, initiate or facilitate any Acquisition Proposal, or (ii) participate in any way in discussions or negotiations with, or furnish any information to, any person in connection with, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or could reasonably be expected to lead to, any Acquisition Proposal, or otherwise cooperate in any way with, or participate in or assist, facilitate or encourage any effort or attempt by any other person to do or seek any of the foregoing; provided, however, that nothing contained in this Section 6 shall prevent any Stockholder, in his capacity as director or executive officer of the Company, from engaging in any activity permitted pursuant to Section 5.4 of the Merger Agreement. The Stockholder shall promptly communicate to Parent, to the same extent as is required by the Company pursuant to, and subject to the same conditions contained in, the Merger Agreement, the terms, and other information concerning, any proposal, discussion, negotiation or inquiry and the identity of the party making such proposal or inquiry which the Stockholder may receive in respect of any such Acquisition Proposal.

7. Further Assurances. Upon the terms and subject to the conditions hereof and of the Merger Agreement and the Offer, each of the parties hereto shall use its reasonable efforts to take, or cause to be taken, all appropriate action, and to do or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement. Without limiting the foregoing, each party hereto will, from time to time and without further consideration, execute and deliver, or cause to be executed and delivered, such additional or further consents, documents and other instruments and shall take all such other action as any other party may reasonably request for the purpose of effectively carrying out the transactions contemplated by this Agreement, including (a) vesting good title to the Tender Shares in Purchaser upon consummation of the Offer and (b) using its reasonable efforts to obtain all consents and approvals of governmental authorities and parties to contracts as are necessary for the consummation of the transactions contemplated by this Agreement.

8. Termination. All obligations, agreements and waivers hereunder, will terminate and be of no further force and effect on the earlier of: (a) 12 months after the date the Merger Agreement is terminated in accordance with its terms; and (b) the Effective Time; provided, however, that (i) the obligations, agreements and waivers of the Stockholder under this Agreement shall terminate immediately upon termination of the Merger Agreement pursuant Section 7.1.1, 7.1.2, 7.1.3 or 7.1.4 of the Merger Agreement; and (ii) nothing herein shall relieve any party from liability for any breach hereof.

9. Waiver of Appraisal and Dissenter’s Rights. The Stockholder waives and agrees not to exercise any rights of appraisal or rights to dissent from the Merger that the Stockholder may have with respect to the Stockholder’s Subject Shares.

10. Stockholder Capacity. No person executing this Agreement who is or becomes during the term hereof a director or officer of the Company makes any agreement or understanding herein or is obligated hereunder in his or her capacity as such director or officer. The Stockholder signs solely in its capacity as the record holder and beneficial owner (as further set forth on Annex A hereto) of the Stockholder’s Subject Shares, and nothing herein shall limit or affect any actions taken by any Stockholder in the Stockholder’s capacity as an officer or director of the Company to the extent specifically permitted by the Merger Agreement or required by applicable Law.

11. Specific Performance. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to the remedy of specific performance of such provisions and to an injunction or injunctions and/or such other equitable relief as may be necessary to prevent breaches of this Agreement.

12. Stop Transfer Order; Legend. The Stockholder shall not request that the Company register the transfer (book-entry or otherwise) of any certificate or uncertificated interest representing any of the Subject Shares, unless such transfer is made in compliance with this Agreement. The Stockholder also authorizes the Company or its counsel to notify the Company’s transfer agent that there is a stop transfer order with respect to all of the Subject Shares (and that this Agreement places limits on the voting and transfer of such shares).

13. Adjustments to Prevent Dilution, Etc. In the event of any change in the number of issued and outstanding shares of Subject Shares or Tender Shares by reason of any stock dividend, stock split, split-up, recapitalization, merger or other change in the corporate or capital structure of the Company, the terms “Subject Shares” and “Tender Shares” shall be deemed to refer to and include the Subject Shares or Tender Shares, as applicable, as well as all such stock dividends and distributions and any shares into which or for which any or all of the Subject Shares or Tender Shares, as applicable, may be changed or exchanged. In such event, the amount to be paid per share by Parent pursuant to this Agreement shall be proportionately adjusted.

14. General Provisions.

(a) Amendments. This Agreement may not be modified, altered, supplemented or amended except by an instrument in writing signed by each of the parties hereto.

(b) Notice. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally or sent by overnight courier (providing proof of delivery) to Parent or Purchaser in accordance with Section 8.3 of the Merger Agreement and to the Stockholder at the Stockholder’s address set forth in Annex A hereto (or to such other address as any party may have furnished to the other parties in writing in accordance herewith).

(c) Interpretation. When a reference is made in this Agreement to Sections, such reference shall be to a Section to this Agreement unless otherwise indicated. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

(d) Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more of the counterparts have been signed by each of the parties and delivered to the other party, it being understood that each party need not sign the same counterpart.

(e) Entire Agreement; No Third-Party Beneficiaries. This Agreement (including, without limitation, the documents and instruments referred to herein), (i) constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof and (ii) is not intended to confer upon any person or entity other than the parties hereto any rights or remedies hereunder; provided that the Company is an intended third-party beneficiary of Section 3(c).

(f) Binding Agreement. This Agreement and the obligations hereunder shall attach to the Subject Shares and shall be binding upon the parties and any person or entity to which legal or beneficial ownership of the Subject Shares shall pass, whether by operation of law or otherwise, including, without limitation, the Stockholder’s administrators or successors. Notwithstanding any transfer of Subject Shares, the transferor shall remain liable for the performance of all obligations of the transferor under this Agreement.

(g) Governing Law; Consent to Jurisdiction. This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. All parties to this Agreement hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Chancery Court of the State of Delaware (the “Delaware Court”), and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this

Agreement or any of the transactions contemplated hereby, (iii) irrevocably appoint, to the extent such party is not otherwise subject to service of process in the State of Delaware, the Company’s agent for service of process in the State of Delaware as its agent in the State of Delaware for acceptance of legal process in connection with any such action or proceeding against such party with the same legal force and validity as if served upon such party personally within the State of Delaware, (iv) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court, and (v) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum or is subject to a jury trial. A prevailing party in any action or proceeding arising out of or in connection with this Agreement or any of the transactions contemplated hereby shall be entitled to reimbursement of its attorneys’ fees and costs incurred in such action or proceeding by the other party.

(h) Costs and Expenses. Whether or not the Offer or the Merger is consummated, except as otherwise expressly set forth in this Agreement, all costs and expenses incurred in connection with this Agreement and the consummation of the transactions contemplated hereby shall be paid by the party incurring such expenses.

(i) Assignment. This Agreement shall not be assigned by operation of law or otherwise without the prior written consent of the Stockholder or Purchaser and Parent, as the case may be, provided that Purchaser or Parent may assign, in its respective sole discretion its rights and obligations hereunder to any direct or indirect subsidiary of Parent.

(j) Severability. Whenever possible, each provision or portion of any provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction such invalidity, illegality or unenforceability will not affect any other provision or portion of any provision in such jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein.

IN WITNESS WHEREOF, Parent, Purchaser and the Stockholder have caused this Agreement to be duly executed as of the date first written above.


PARENT

By:
Name:
Title:

PURCHASER

By:
Name:
Title:

STOCKHOLDER


Name:
Title:

ANNEX A

Stockholder’s Name and Address

Shares of Outstanding

Common Stock

Options or Other Rights

to Acquire Shares

of Common Stock

EX-99.3 4 dex993.htm AGREEMENT AND PLAN OF MERGER Agreement and Plan of Merger

Exhibit 3

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

XYRATEX LTD,

NORMANDY ACQUISITION CORPORATION

AND

NSTOR TECHNOLOGIES, INC.

DATED AS OF JULY 27, 2005

TABLE OF CONTENTS


		Page
Article 1 The Offer		2

Section 1.1	The Offer	2
Section 1.2	Company Actions	4
Section 1.3	Directors	6

Article 2 The Merger		8

Section 2.1	The Merger	8
Section 2.2	Effective Time	8
Section 2.3	Effect of the Merger	8
Section 2.4	Certificate of Incorporation; Bylaws	8
Section 2.5	Directors and Officers	8
Section 2.6	Conversion of Securities	9
Section 2.7	Options; Stock Plans	10
Section 2.8	Stockholders’ Meeting	10
Section 2.9	Merger Without Meeting of Stockholders	12
Section 2.10	Dissenting Shares	12
Section 2.11	Payment for Shares	12
Section 2.12	Top-Up Option	14
Section 2.13	Withholding	15

Article 3 Representations and Warranties of the Company		15

Section 3.1	Organization and Qualification; Subsidiaries	15
Section 3.2	Certificate of Incorporation and Bylaws; Corporate Books and Records	16
Section 3.3	Capitalization	16
Section 3.4	Authority	18
Section 3.5	No Conflict; Required Filings and Consents	19
Section 3.6	Permits; Compliance With Law	21
Section 3.7	SEC Filings; Financial Statements	21
Section 3.8	Disclosure Documents	25
Section 3.9	Absence of Certain Changes or Events	26
Section 3.10	Employee Benefit Plans	26
Section 3.11	Labor and Other Employment Matters	30
Section 3.12	Contracts	33
Section 3.13	Litigation	35
Section 3.14	Environmental Matters	35
Section 3.15	Intellectual Property	36
Section 3.16	Taxes	42
Section 3.17	Insurance	45
Section 3.18	Opinion of Financial Advisor	45
Section 3.19	Brokers	45
Section 3.20	Vote Required	46
Section 3.21	Properties	46


Section 3.22	Customers and Suppliers	46
Section 3.23	Certain Business Practices	47
Section 3.24	Interested Party Transactions	47
Section 3.25	Distributors	48

Article 4 Representations and Warranties of Parent and the Purchaser		48

Section 4.1	Organization and Qualification; Capitalization of the Purchaser	48
Section 4.2	Authority	48
Section 4.3	No Conflict; Required Filings and Consents	49
Section 4.4	Disclosure Documents	50
Section 4.5	No Prior Activities	51
Section 4.6	Brokers	51
Section 4.7	Availability of Funds	51

Article 5 Covenants		51

Section 5.1	Conduct of Business by the Company Pending the Closing	51
Section 5.2	Cooperation	56
Section 5.3	Access to Information; Confidentiality	56
Section 5.4	No Solicitation of Transactions	57
Section 5.5	Appropriate Action; Consents; Filings	59
Section 5.6	Certain Notices	61
Section 5.7	Public Announcements	61
Section 5.8	Employee Benefit Matters	61
Section 5.9	FIRPTA Certificate	63
Section 5.10	Indemnification of Directors and Officers	63
Section 5.11	Warrants	64

Article 6 Conditions to Consummation of the Merger		64

Section 6.1	Conditions to Obligations of Each Party	64

Article 7 Termination, Amendment and Waiver		65

Section 7.1	Termination	65
Section 7.2	Effect of Termination	67
Section 7.3	Amendment	69
Section 7.4	Waiver	69

Article 8 General Provisions		69

Section 8.1	Non-Survival of Representations and Warranties	69
Section 8.2	Fees and Expenses	69
Section 8.3	Notices	70
Section 8.4	Certain Definitions	71
Section 8.5	Terms Defined Elsewhere	76
Section 8.6	Headings	79
Section 8.7	Severability	79
Section 8.8	Entire Agreement	79
Section 8.9	Assignment	80
Section 8.10	Parties in Interest	80
Section 8.11	Mutual Drafting	80
Section 8.12	Governing Law; Consent to Jurisdiction; Waiver of Trial by Jury	80
Section 8.13	Counterparts	82

THIS AGREEMENT AND PLAN OF MERGER, dated as of July 27, 2005 (this “Agreement”), is by and among Xyratex Ltd, a Bermuda corporation (“Parent”), Normandy Acquisition Corporation, a Delaware corporation and an indirect wholly-owned subsidiary of Parent (the “Purchaser” or “Merger Sub”), and nStor Technologies, Inc., a Delaware corporation (the “Company”).

WHEREAS, the respective Boards of Directors of Parent, the Purchaser and the Company have approved the acquisition of the Company by Parent on the terms and subject to the conditions set forth in this Agreement;

WHEREAS, pursuant to this Agreement the Purchaser has agreed to commence a tender offer (the “Offer”) to purchase all of the outstanding shares (the “Shares”) of common stock (“Company Common Stock”), par value $0.05 per share, of the Company, at a price per Share of $0.105 net to the seller in cash (the “Offer Price”);

WHEREAS, the Purchaser will purchase the outstanding shares of the Company’s Series M Preferred Stock pursuant to a purchase agreement between Parent, the Purchaser and the holder of such shares;

WHEREAS, the Company has outstanding warrants (the “Warrants”) to purchase 125,000 shares of Company Common Stock that will be terminated prior to the Effective Time;

WHEREAS, the Board of Directors of the Company (the “Company Board”) has, on the terms and subject to the conditions set forth herein, (i) approved the Offer and (ii) approved this Agreement and declared its advisability and is recommending that the Company’s stockholders accept the Offer, tender their Shares to the Purchaser and adopt this Agreement;

WHEREAS, the respective Boards of Directors of Parent, the Purchaser and the Company have approved the merger of the Purchaser with and into the Company with the Company as the survivor, as set forth below (the “Merger”), in accordance with the General Corporation Law of the State of Delaware (the “DGCL”) and upon the terms and subject to the conditions set forth in this Agreement, whereby each issued and outstanding Share not owned directly or indirectly by Parent, the Purchaser or the Company will be converted into the right to receive the Offer Price in cash;

WHEREAS, as a condition to and inducement to Parent’s and the Purchaser’s willingness to enter into this Agreement, simultaneously with the execution of this Agreement, certain stockholders of the Company are entering into support agreements with Parent and the Purchaser (the “Support Agreements”) and certain stockholders of the Company are entering into non-competition agreements with Parent, the Purchaser and the Company (the “Non-Competition Agreements”);

WHEREAS, Xyratex Technology Limited, a subsidiary of Parent, and nStor Corporation Inc., a subsidiary of the Company, have entered into a license agreement (the “License Agreement”) and a promissory note (the “Promissory Note”) in favor and for the benefit of Xyratex Technology Limited; and

WHEREAS, Parent, the Purchaser and the Company desire to make certain representations, warranties, covenants and agreements in connection with the Offer and the Merger and also to prescribe various conditions to the Offer and the Merger;

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth in this Agreement and intending to be legally bound hereby, the parties hereto agree as follows:

Article 1

The Offer

Section 1.1 The Offer.

Section 1.1.1 Provided that this Agreement shall not have been terminated in accordance with Article 7 hereof and none of the events set forth in Annex I hereto (the “Tender Offer Conditions”) shall have occurred, Parent shall cause the Purchaser to (A) commence (within the meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended (including the rules and regulations promulgated thereunder, the “Exchange Act”)) as promptly as reasonably practicable, but in any event within seven business days following the date of this Agreement, an offer to purchase all outstanding Shares at the Offer Price, (B) after affording the Company a reasonable opportunity to review and comment thereon, file a Tender Offer Statement on Schedule TO (the “Schedule TO”) and all other necessary documents with the Securities and Exchange Commission (the “SEC”), make all deliveries, mailings and

telephonic notices required by Rule 14d-3 under the Exchange Act, and publish, send or give the disclosure required by Rule 14d-6 under the Exchange Act by complying with the dissemination requirements of Rule 14d-4 under the Exchange Act in each case in connection with the Offer (collectively, together with any amendments or supplements thereto, the “Offer Documents”) and (C) use commercially reasonable efforts to consummate the Offer, subject to the terms and conditions thereof. Each of Parent and the Purchaser, on the one hand, and the Company, on the other hand, agrees promptly to correct any information provided by it for use in the Offer Documents if and to the extent that it shall have become false or misleading in any material respect, and the Purchaser further agrees to take all steps necessary to cause the Offer Documents as so corrected to be filed with the SEC and to be disseminated to stockholders of the Company, in each case as and to the extent required by applicable federal securities laws. The obligation of the Purchaser to accept for payment, and pay for, any Shares tendered pursuant to the Offer will be subject only to the satisfaction of the Tender Offer Conditions.

Section 1.1.2 Without the prior written consent of the Company, the Purchaser shall not decrease the Offer Price or change the form of consideration payable in the Offer, decrease the number of Shares sought to be purchased in the Offer or impose conditions to the Offer other than those set forth in Annex I hereto or amend any term of the Offer in any manner adverse to the holders of Shares. The Offer shall remain open until the date that is 20 business days (as such term is defined in Rule 14d-1(g)(3) under the Exchange Act) after the commencement of the Offer (the “Expiration Date”), unless the Purchaser shall have extended the period of time for which the Offer is open pursuant to, and in accordance with, the terms of this Agreement or as may be required by applicable law, in which event the term “Expiration Date” shall mean the latest time and date as the Offer, as so extended, may expire. If, at any Expiration Date, any of the Tender Offer Conditions are not satisfied or, if not satisfied, waived by the Purchaser, the Purchaser may, but shall not be required to, extend the Offer. Subject to the terms of the Offer and this Agreement and the satisfaction of all the Tender Offer Conditions as of any Expiration Date, the Purchaser will accept for payment and pay for all Shares validly tendered and not

validly withdrawn pursuant to the Offer as soon as reasonably practicable after such Expiration Date. The Purchaser may, but shall not be required to, provide a subsequent offering period after the Expiration Date, in accordance with Rule 14d-11 under the Exchange Act. Without the prior written consent of the Company, the Purchaser shall not accept for payment or pay for any Shares in the Offer if, as a result, the Purchaser would acquire less than the number of Shares necessary to satisfy the Minimum Condition (as defined in Annex I hereto).

Section 1.2 Company Actions.

Section 1.2.1 The Company shall, after affording Parent a reasonable opportunity to review and comment thereon, file with the SEC and mail to the holders of Shares, as promptly as reasonably practicable on the date of the filing by Parent and the Purchaser of the Offer Documents, a Solicitation/Recommendation Statement on Schedule 14D-9 (together with any amendments or supplements thereto, the “Schedule 14D-9”) reflecting the recommendation of the Company Board that holders of Shares tender their Shares pursuant to the Offer and shall disseminate the Schedule 14D-9 as required by Rule 14d-9 promulgated under the Exchange Act. The Schedule 14D-9 will set forth, and the Company hereby represents, that the Company Board, at a meeting duly called and held at which a quorum was present throughout, has (A) determined by unanimous vote of all of its directors in attendance that each of the transactions contemplated hereby, including each of the Offer and the Merger, is advisable, fair to and in the best interests of the Company and its stockholders, (B) approved the Offer and this Agreement in accordance with the DGCL, (C) recommended acceptance of the Offer and adoption of this Agreement by the Company’s stockholders (if such adoption is required by applicable law), and (D) taken all action necessary to render the restrictions on business combinations contained in Section 203 of the DGCL inapplicable to the Offer, the Merger and the Ancillary Agreements; provided, however, that such recommendation and approval may be withdrawn, modified or amended solely to the extent permitted by Section 5.4.3. In addition, the Schedule 14D-9 will set forth, and the Company further represents, that, prior to the execution hereof, Capitalink, L.C. (the “Company Financial Advisor”) has delivered to the Company Board its written opinion that, as of July 26, 2005, the

consideration to be received by the holders of Shares pursuant to the Offer and the Merger is fair to the holders of Shares from a financial point of view. The Company hereby consents to the inclusion in the Offer Documents of the recommendations of the Company Board described in this Section 1.2.1 and the terms of the opinion of the Company Financial Advisor. Each of the Company, on the one hand, and Parent and the Purchaser, on the other hand, agree promptly to correct any material information provided by either of them for use in the Schedule 14D-9 if and to the extent that it shall have become false or misleading, and the Company further agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and to be disseminated to the holders of Shares, in each case as and to the extent required by applicable federal securities laws. Parent and the Purchaser shall provide the Company and its counsel with a copy of any written comments or telephonic notification of any oral comments that Parent, the Purchaser or their counsel may receive from the SEC or its staff with respect to the Offer promptly after the receipt thereof, shall consult with the Company and its counsel prior to responding to any such comments, and shall provide the Company and its counsel with a copy of any written responses thereto and telephonic notification of any oral responses thereto of Parent, the Purchaser or their counsel. The Company shall provide Parent, the Purchaser and their counsel with a copy of any written comments or telephonic notification of any oral comments that the Company or its counsel may receive from the SEC or its staff with respect to the Offer promptly after receipt thereof, shall consult with Parent, the Purchaser and their counsel prior to responding to any such comments, and shall provide Parent, the Purchaser and their counsel with a copy of any written responses thereto and telephonic notification of any oral responses thereto of the Company or its counsel.

Section 1.2.2 The Company will promptly, and from time to time as requested by Purchaser, furnish the Purchaser with, or cause to be furnished, mailing labels, security position listings, any available non-objecting beneficial owner lists and any available listing or computer list containing the names and addresses of the record holders of the Shares as of the most recent practicable date and shall furnish the Purchaser with, or cause to be furnished, such additional available information (including, but not limited to, updated lists of holders of Shares and their addresses,

mailing labels and lists of security positions and non-objecting beneficial owner lists) and such other assistance as the Purchaser or its agents may reasonably request in communicating to the Company’s record and beneficial stockholders.

Section 1.3 Directors.

Section 1.3.1 Subject to compliance with applicable law, promptly upon the payment by the Purchaser for Shares pursuant to the Offer representing at least such number of Shares as shall satisfy the Minimum Condition, and from time to time thereafter, Parent shall be entitled to designate such number of directors, rounded up to the next whole number, on the Company Board as is equal to the product of the total number of directors on the Company Board (determined after giving effect to the directors elected pursuant to this sentence) multiplied by the percentage that the aggregate number of Shares beneficially owned by Parent or any of its affiliates bears to the total number of Shares then outstanding (including, in each case, any outstanding securities of the Company owned by Parent or any of its affiliates convertible or exchangeable into or exercisable for Shares on an as-converted basis), and the Company shall, upon request of Parent, promptly take all actions necessary to cause Parent’s designees to be so elected, including, if necessary, seeking the resignations of one or more existing directors; provided, however, that prior to the Effective Time, the Company Board shall always have at least two Continuing Directors.

Section 1.3.2 The Company’s obligations to appoint Parent’s designees to the Company Board shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1 thereunder. The Company shall promptly take all actions required pursuant to such Section and Rule in order to fulfill its obligations under this Section 1.3 and shall include in the Schedule 14D-9 such information with respect to the Company and its officers and directors as is required under such Section and Rule in order to fulfill its obligations under this Section 1.3. Parent will supply to the Company any information with respect to itself, the Purchaser, their respective officers, directors and affiliates and proposed designees to the Company Board required by such Section and Rule, and the Company shall include such information in the Schedule 14D-9.

Section 1.3.3 Following the election or appointment of Parent’s designees to the Company Board pursuant to this Section 1.3 and prior to the Effective Time, the Company’s bylaws shall be amended to provide that any Adverse Matter (as defined below) shall require, in addition to any other affirmative votes required under the DGCL, the affirmative vote of not less than a majority of the entire Company Board, which majority shall include the concurrence of a majority of the Continuing Directors; provided, however, that if the foregoing provisions of this subsection are invalid or incapable of being enforced under applicable law, then neither Parent nor the Purchaser shall approve (either in its capacity as a stockholder or as a party to this Agreement, as applicable), and Parent and the Purchaser shall use their reasonable efforts to prevent the occurrence of, such action unless such actions shall have received the unanimous approval of the entire Company Board. For the purposes of this Section 1.3.3, an “Adverse Matter” shall mean any amendment or termination of this Agreement by the Company, any extension by the Company of the time for the performance of any of the obligations or other acts of Parent or the Purchaser hereunder, or any waiver of any condition to the Company’s obligations hereunder or any of the Company’s rights hereunder, if such amendment, termination, extension or waiver would be reasonably likely to have an adverse effect on the stockholders of the Company other than the Purchaser or its affiliates. For purposes of this Section 1.3, the term “Continuing Directors” shall mean any directors of the Company then serving, if any, who are directors as of the date hereof. Notwithstanding the provisions of this Section 1.3, the parties hereto shall use their respective reasonable efforts to ensure that at least two of the members of the Company Board shall, at all times prior to the Effective Time (as defined in Section 2.2 hereof), be Continuing Directors, provided that, if there shall be in office fewer than two Continuing Directors for any reason, the parties shall use their reasonable efforts to cause the Company Board to cause the person designated by the remaining Continuing Director to fill such vacancy, which person shall be deemed to be a Continuing Director for all purposes of this Agreement. If no Continuing Directors then remain, the other directors of the Company then in office shall designate two persons to fill such vacancies who will not be directors, officers, employees or affiliates of Parent or the Purchaser, and such persons shall be

deemed to be Continuing Directors for all purposes of this Agreement. The Company Board shall not delegate any Adverse Matter to any committee of the Company Board unless such committee consists only of Continuing Directors.

Article 2

The Merger

Section 2.1 The Merger. Upon the terms and subject to satisfaction or waiver of the conditions set forth in this Agreement, and in accordance with the DGCL, the Purchaser shall be merged with and into the Company. As a result of the Merger, the separate corporate existence of the Purchaser shall cease, and the Company shall continue as the surviving corporation of the Merger (the “Surviving Corporation”).

Section 2.2 Effective Time. As soon as practicable after the satisfaction or, if permissible, waiver of the conditions set forth in Article 6, the parties hereto shall cause the Merger to be consummated by filing a certificate of merger (the “Certificate of Merger”) with the Secretary of State of the State of Delaware, in such form as required by, and executed in accordance with the relevant provisions of, the DGCL (the date and time of such filing, or if another date and time after the filing date is specified in such filing, such specified date and time, being the “Effective Time”).

Section 2.3 Effect of the Merger. At the Effective Time, the effect of the Merger shall be as provided in the applicable provisions of the DGCL. Without limiting the generality of the foregoing, at the Effective Time, except as otherwise provided herein, all the property, rights, privileges, powers and franchises of the Company and the Purchaser shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and the Purchaser shall become the debts, liabilities and duties of the Surviving Corporation.

Section 2.4 Certificate of Incorporation; Bylaws. At the Effective Time, the Certificate of Incorporation and the Bylaws of the Surviving Corporation shall be amended in their entirety to contain the provisions set forth in the Certificate of Incorporation and the Bylaws of the Purchaser, each as in effect immediately prior to the Effective Time.

Section 2.5 Directors and Officers. The directors of the Purchaser immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and Bylaws

of the Surviving Corporation. The officers of the Company immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and Bylaws of the Surviving Corporation.

Section 2.6 Conversion of Securities. At the Effective Time, by virtue of the Merger and without any action on the part of the Purchaser, the Company or the holders of any of the Company’s securities:

Section 2.6.1 Conversion Generally. Each Share issued and outstanding immediately prior to the Effective Time (other than (i) any Shares held by Parent, the Purchaser, any wholly-owned subsidiary of Parent or the Purchaser, in the treasury of the Company or by any wholly-owned subsidiary of the Company, which Shares, by virtue of the Merger and without any action on the part of the holder thereof, shall be cancelled and retired and shall cease to exist with no payment being made with respect thereto and (ii) Dissenting Shares), shall be cancelled and retired and shall be converted into the right to receive $0.105 in cash (the “Merger Consideration”), payable to the holder thereof, without interest thereon, upon surrender of the certificate formerly representing such Shares.

Section 2.6.2 Purchaser Common Stock. Each share of common stock, par value $.001 per share, of the Purchaser (the “Purchaser Common Stock”) issued and outstanding immediately prior to the Effective Time shall be converted into and become one newly and validly issued, fully paid and nonassessable share of common stock of the Surviving Corporation.

Section 2.7 Options; Stock Plans. Prior to the Effective Time, the Company Board (or, if appropriate, any committee thereof) shall adopt appropriate resolutions and take all other actions necessary and appropriate to provide that, immediately prior to the Effective Time, each unexpired and unexercised option or similar rights to purchase Shares (the “Company Options”), under any stock option plan of the Company, including the 1996 Stock Option Plan, the 2001 Stock Option Plan or any other plan, agreement or arrangement (the “Company Stock Option Plans”), whether or not then exercisable or vested, shall be cancelled. Prior to the Effective Time, any Company Options held by any officer of the Company subject to stockholder approval shall be terminated.

Section 2.8 Stockholders’ Meeting.

Section 2.8.1 If required by applicable law in order to consummate the Merger, the Company shall (A) call and hold a special meeting of its stockholders (the “Company Stockholders’ Meeting”) as promptly as practicable following the later of the Expiration Date or the expiration of any subsequent offering period as permitted by Section 1.1.2, or upon the request of Parent, for the purpose of considering and taking action upon the Merger and this Agreement; (B) prepare and file with the SEC a preliminary proxy statement relating to this Agreement, and use its reasonable efforts (1) to obtain and furnish the information required to be included by the SEC in the Proxy Statement (as defined below) and, after consultation with Parent, to respond promptly to any comments made by the SEC with respect to the preliminary proxy statement and cause a definitive proxy statement (as the same may be supplemented or amended from time to time, the “Proxy Statement”) to be mailed to its stockholders and (2) to obtain the necessary approvals of the Merger and this Agreement by its stockholders; and (C) subject to Section 5.4.3, include in the Proxy Statement the recommendation of the Company Board that stockholders of the Company vote in favor of the approval of this Agreement. In addition, the Company shall prepare and file with the SEC any Other Filings as and when required or requested by the SEC. The Company, after consultation with Parent, will use all reasonable efforts to respond to any comments made by the SEC with respect to any Other Filings. Each of the Company, on the one hand, and Parent and the Purchaser, on the other hand, agree promptly to correct any information provided by either of them for use in

the Proxy Statement if and to the extent that it shall have become false or misleading, and the Company further agrees to take all steps necessary to cause the Proxy Statement as so corrected to be filed with the SEC and to be disseminated to the holders of Shares, in each case as and to the extent required by applicable federal securities laws.

Section 2.8.2 Parent agrees that it will vote, or cause to be voted, all of the Shares then owned by it, the Purchaser or any Parent Subsidiary in favor of the approval of the Merger and this Agreement.

Section 2.9 Merger Without Meeting of Stockholders. Notwithstanding Section 2.8, in the event that Parent, the Purchaser and the Parent Subsidiaries shall acquire and then hold at least 90% of the outstanding Shares pursuant to the Offer or otherwise, the parties hereto agree to take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after the acceptance for payment of and payment for Shares by the Purchaser pursuant to the Offer without a meeting of stockholders of the Company, in accordance with Section 253 of the DGCL.

Section 2.10 Dissenting Shares. Notwithstanding Section 2.6.1, Shares outstanding immediately prior to the Effective Time and held by a holder who has not voted in favor of the Merger or consented thereto in writing and who has demanded appraisal for such Shares in accordance with the DGCL (“Dissenting Shares”) shall not be converted into a right to receive the Merger Consideration (unless such holder fails to perfect or withdraws or otherwise loses such holder’s right to appraisal), but instead such stockholder shall be entitled to such rights as are granted by Section 262 of the DGCL. Notwithstanding the foregoing, if after the Effective Time such holder fails to perfect or withdraws or loses his right to appraisal, such Shares shall be treated as if it had been converted as of the Effective Time into a right to receive the Merger Consideration, without interest. The Company shall give Parent prompt notice of any demands received by the Company for appraisal of Shares, and Parent shall have the right to participate in and to control all negotiations and proceedings with respect to such demands. The Company shall not, except with the prior written consent of Parent, make any payment with respect to, or settle or offer to settle, any such demands.

Section 2.11 Payment for Shares.

Section 2.11.1 From and after the Effective Time, such bank or trust company as shall be designated by Parent and reasonably acceptable to the Company shall act as paying agent (the “Paying Agent”) in effecting the payment of the Merger Consideration in respect of certificates (the “Certificates”) that represented Shares entitled to payment of the Merger Consideration pursuant to Section 2.6.1. Prior to or at the Effective Time, Parent or the Purchaser shall deposit, or cause to be deposited, with the Paying Agent the aggregate Merger Consideration to which holders of Shares shall be entitled at the Effective Time pursuant to Section 2.6.1.

Section 2.11.2 As promptly as reasonably practicable, Parent shall, or shall cause the Paying Agent to, mail to each record holder of Certificates that represented Shares a form of letter of transmittal which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Paying Agent, and instructions for use in surrendering such Certificates and receiving the Merger Consideration in respect thereof. Upon the surrender of each such Certificate, the Paying Agent shall pay the holder of such Certificate the Merger Consideration multiplied by the number of Shares formerly represented by such Certificate, in consideration therefor, and such Certificate shall forthwith be cancelled. Until so surrendered, each such Certificate (other than Certificates representing Shares held by Parent or the Purchaser, any wholly-owned subsidiary of Parent or the Purchaser, in the treasury of the Company or by any wholly-owned subsidiary of the Company or Dissenting Shares) shall represent solely the right to receive the aggregate Merger Consideration relating thereto. No interest or dividends shall be paid or accrue on the Merger Consideration. If the Merger Consideration (or any portion thereof) is to be delivered to any person other than the person in whose name the Certificate formerly representing Shares surrendered therefor is registered, it shall be a condition to such right to receive such Merger Consideration that the Certificate so surrendered shall be properly endorsed or otherwise be in proper form for transfer and that the person surrendering such Shares shall pay to the Paying Agent any transfer or other similar taxes required by reason of the payment of the Merger Consideration to a person other than the registered holder of the Certificate surrendered, or shall establish to the reasonable satisfaction of the Paying Agent that such tax has been paid or is not applicable.

Section 2.11.3 If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if required by Parent, the posting by such person of a bond, in such reasonable amount as Parent may direct, as indemnity against any claim that may be made against it with respect to such Certificate, the Paying Agent will pay to the holder of such lost, stolen or destroyed Certificate the aggregate Merger Consideration relating thereto, without any interest thereon.

Section 2.11.4 Promptly following the date which is 180 days after the Effective Time, Parent shall direct the Paying Agent to deliver to the Surviving Corporation all cash, Certificates and other documents in its possession relating to the transactions described in this Agreement, and the Paying Agent’s duties shall terminate. Thereafter, each holder of a Certificate formerly representing a Share may surrender such Certificate to the Surviving Corporation and (subject to applicable abandoned property, escheat and similar laws) receive in consideration therefor the aggregate Merger Consideration relating thereto, without any interest thereon. Neither Parent nor the Company shall be liable to any holder of Shares for any cash delivered to a public official pursuant to any abandoned property, escheat or similar Law.

Section 2.11.5 After the Effective Time, there shall be no transfers on the stock transfer books of the Surviving Corporation of any Shares which were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates formerly representing Shares are presented to the Surviving Corporation or the Paying Agent, they shall be surrendered and cancelled in return for the payment of the aggregate Merger Consideration relating thereto, as provided in this Article 2.

Section 2.12 Top-Up Option.

Section 2.12.1 The Company hereby irrevocably grants to the Purchaser an irrevocable option (the “Top-Up Option”), such Top-Up Option to be exercisable only on or after the Expiration Date, to purchase that number of Shares (the “Top-Up Option Shares”) equal to the lowest number of Shares that, when added to the number of Shares owned by the Purchaser at the time of such exercise, shall constitute one share more than 90% of the Shares then outstanding (assuming the issuance of the Top-Up Option Shares and the exercise of all outstanding exercisable options to purchase Shares with an exercise price less than the Offer Price) at a price per share payable in cash equal to the Offer Price; provided, however, that the Top-Up Option shall not be exercisable unless immediately after such exercise the Purchaser would own more than 90% of the Shares then outstanding, but if immediately after such exercise the Purchaser would own more than 90% of the Shares then outstanding, then the Purchaser shall exercise the Top-Up Option.

Section 2.12.2 The Purchaser shall exercise the Top-Up Option, in whole but not in part, at any one time after the occurrence of a Top-Up Exercise Event (as defined below) and prior to the Effective Time.

Section 2.12.3 For purposes of this Agreement, a “Top-Up Exercise Event” shall occur only upon the Purchaser’s acceptance for payment pursuant to the Offer of Shares constituting at least 88.1% of the Shares then outstanding (and there being no required approval or consent of any other person with respect to the exercise of the Top-Up Option).

Section 2.13 Withholding. Purchaser shall be entitled to deduct and withhold and shall be entitled to cause the Paying Agent to deduct and withhold, from the Merger Consideration otherwise payable pursuant to this Agreement to the record holders of Shares such amounts as Parent or the Purchaser is required to deduct and withhold under the Code, or any Tax law, with respect to the making of such payment. To the extent that amounts are so withheld by Parent or the Purchaser, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the record holder of Shares in respect of whom such deduction and withholding was made by Parent or the Purchaser.

Article 3

Representations and Warranties of the Company

Except as set forth in the Disclosure Schedule delivered by the Company to Parent prior to the execution of this Agreement (the “Company Disclosure Schedule”), which identifies exceptions by specific Section references, the Company hereby represents and warrants to Parent and the Purchaser as follows:

Section 3.1 Organization and Qualification; Subsidiaries. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Each subsidiary of the Company (each a “Company Subsidiary” and, collectively, the “Company Subsidiaries”) has been duly organized, and is validly existing and in good standing, under the laws of the jurisdiction of its incorporation or organization, as the case may be. Each of the Company and each Company Subsidiary has the requisite power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as it is now being conducted. Except as set forth in Section 3.1 of the Company

Disclosure Schedule, each of the Company and each Company Subsidiary is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification, licensing or good standing necessary, except for such failures to be so qualified, licensed or in good standing that would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. Section 3.1 of the Company Disclosure Schedule sets forth a true and complete list of all of the Company Subsidiaries. None of the Company or any Company Subsidiary holds an Equity Interest in any other person.

Section 3.2 Certificate of Incorporation and Bylaws; Corporate Books and Records. Except as set forth in Section 3.2 of the Company Disclosure Schedule, the copies of the Company’s Restated Certificate of Incorporation (the “Company Certificate”) and Restated Bylaws (the “Company Bylaws”) that are listed as exhibits to the Company’s Form 10-Q for the quarter ended September 3, 2002 and the Company’s Form 10-K for the year ended December 31, 1996 are complete and correct copies thereof as in effect on the date hereof. Except as set forth in Section 3.2 of the Company Disclosure Schedule, the Company is not in violation of any of the provisions of the Company Certificate or the Company Bylaws. True and complete copies of all minute books of the Company have been made available by the Company to Parent.

Section 3.3 Capitalization. The authorized capital stock of the Company consists of 230,000,000 Shares and 1,000,000 shares of preferred stock, par value $0.01 per share (the “Company Preferred Stock”). As of July 22, 2005, (A) 165,097,838 shares of Company Common Stock (other than treasury shares) were issued and outstanding, all of which were validly issued and fully paid, nonassessable and free of preemptive rights, (B) 0 shares of Company Common Stock were held in the treasury of the Company or by the Company Subsidiaries, (C) 9,613,401 (not including an additional 17,286,801 conditional options granted under the Company’s 2001 Stock Option Plan) shares of Company Common Stock were issuable (and such number was reserved for issuance) upon exercise of Company Options outstanding as of such date, and 9,100 shares of Company Preferred Stock are issued or outstanding. Except for the Company Options set forth in section (C) of the prior sentence and the Warrants and agreements set forth in Section 3.3 of the Company Disclosure Schedule, there are no options, warrants or other rights, agreements, arrangements or commitments of any character to which the Company or any Company Subsidiary is a party or by which the

Company or any Company Subsidiary is bound relating to the issued or unissued capital stock or other Equity Interests of the Company or any Company Subsidiary, or securities convertible into or exchangeable for such capital stock or other Equity Interests, or obligating the Company or any Company Subsidiary to issue or sell any shares of capital stock or other Equity Interests, or securities convertible into or exchangeable for such capital stock of, or other Equity Interests in, the Company or any Company Subsidiary. Since March 31, 2005, the Company has not issued any shares of its capital stock, or securities convertible into or exchangeable for such capital stock or other Equity Interests, other than those shares of capital stock reserved for issuance as set forth in this Section 3.3 or Section 3.3 of the Company Disclosure Schedule. The Company has previously provided Parent with a true and complete list, as of the date hereof, of the prices at which outstanding Company Options may be exercised under the applicable Company Stock Option Plan, the number of Company Options outstanding at each such price and the vesting schedule of the Company Options. All shares of Company Common Stock subject to issuance under the Company Stock Option Plans, upon issuance prior to the Effective Time on the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights. Except as set forth in Section 3.3 of the Company Disclosure Schedule, there are no outstanding contractual obligations of the Company or any Company Subsidiary (A) restricting the transfer of, (B) affecting the voting rights of, (C) requiring the repurchase, redemption or disposition of, or containing any right of first refusal with respect to, (D) requiring the registration for sale of, or (E) granting any preemptive, antidilutive or other similar right with respect to, any shares of Company Common Stock or any capital stock of, or other Equity Interests in, the Company or any Company Subsidiary. Except as set forth in Section 3.1 of the Company Disclosure Schedule, each outstanding share of capital stock of each Company Subsidiary is duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights and is owned, beneficially and of record, by the Company or another Company Subsidiary free and clear of all security interests, liens, claims, pledges, options, rights of first refusal, agreements, limitations on the Company’s or any Company Subsidiary’s voting rights, charges and other encumbrances of any nature whatsoever. There are no outstanding contractual obligations of the Company or any Company Subsidiary to provide funds to, or make any investment (in the form of a loan,

capital contribution or otherwise) in, any Company Subsidiary or any other person, other than guarantees by the Company of any indebtedness or other obligations of a wholly-owned Company Subsidiary.

Section 3.4 Authority.

Section 3.4.1 The Company and each relevant Company Subsidiary has all necessary corporate power and authority to execute and deliver this Agreement and each Ancillary Agreement, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated by this Agreement and each Ancillary Agreement to be consummated by the Company or any Company Subsidiary. The execution and delivery of this Agreement and each Ancillary Agreement by the Company or a Company Subsidiary and the consummation by the Company and any relevant Company Subsidiary of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action, and no other corporate proceedings on the part of the Company or any Company Subsidiary and no stockholder votes are necessary to authorize this Agreement or any Ancillary Agreement or to consummate the transactions contemplated hereby or thereby other than, with respect to this Agreement, the need for approval of the holders of a majority of the outstanding Shares if the Purchaser does not acquire at least 90% of the outstanding Shares pursuant to the Offer and, if applicable, the Top-Up Option. This Agreement and each Ancillary Agreement have been duly authorized and validly executed and delivered by the Company and any relevant Company Subsidiary and constitute a legal, valid and binding obligation of the Company or Company Subsidiary, as the case may be, enforceable against the Company or Company Subsidiary, as the case may be, in accordance with their respective terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general principles of equity.

Section 3.4.2 The Company has taken all appropriate actions so that the restrictions on business combinations contained in Section 203 of the DGCL and the Florida Control Share Acquisition Act will not apply with respect to or as a

result of this Agreement or any Ancillary Agreement and the transactions contemplated hereby and thereby, including the Offer and the Merger, without any further action on the part of the stockholders or the Company Board. True and complete copies of all Company Board resolutions reflecting such actions have been previously provided to Parent. No other state takeover statute or similar statute or regulation applies or purports to apply to the Offer, the Merger or any other transaction contemplated by this Agreement or any Ancillary Agreement.

Section 3.5 No Conflict; Required Filings and Consents.

Section 3.5.1 The execution and delivery of this Agreement and each Ancillary Agreement by the Company and any relevant Company Subsidiary do not, and the performance of this Agreement and each Ancillary Agreement by the Company and any relevant Company Subsidiary will not, (A) assuming the stockholder approval set forth in Section 2.8.1 is obtained if required, conflict with or violate any provision of the Company Certificate or Company Bylaws or any equivalent organizational documents of any Company Subsidiary, (B) assuming that all consents, approvals, authorizations and permits described in Section 3.5.2 have been obtained and all filings and notifications described in Section 3.5.2 have been made and any waiting periods thereunder have terminated or expired, conflict with or violate any Law applicable to the Company or any Company Subsidiary or by which any property or asset of the Company or any Company Subsidiary is bound or affected or (C) require any consent or approval under, result in any breach of or any loss of any benefit under, or constitute a change in control or default (or an event which with notice or lapse of time or both would become a default) under, or give to others any right of termination, vesting, amendment, acceleration or cancellation of, or result in the creation of a lien or other encumbrance on any property or asset of the Company or any Company Subsidiary pursuant to, any Material Contract.

Section 3.5.2 The execution and delivery of this Agreement and each Ancillary Agreement by the Company and any relevant Company Subsidiary do not, and the performance of this Agreement and each Ancillary Agreement by the Company and any relevant Company Subsidiary will not, require any consent,

approval, authorization or permit of, or filing with or notification to, any Governmental Entity or any other person, except (A) under the Exchange Act, Securities Act, any applicable Blue Sky Law, the rules and regulations of the Exchange and the filing and recordation of the Certificate of Merger as required by the DGCL and (B) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications to a person or a Governmental Entity, would not, individually or in the aggregate, reasonably be expected to (1) prevent or materially delay consummation of the Offer or the Merger, (2) otherwise prevent or materially delay performance by the Company or any relevant Company Subsidiary of any of its material obligations under this Agreement or any Ancillary Agreement or (3) have a Company Material Adverse Effect.

Section 3.6 Permits; Compliance With Law. Each of the Company and each Company Subsidiary is in possession of all authorizations, licenses, permits, certificates, approvals and clearances of any Governmental Entity necessary for the Company and each Company Subsidiary to own, lease and operate its properties or to carry on their respective businesses substantially in the manner described in the Company SEC Filings filed prior to the date hereof and substantially as it is being conducted as of the date hereof (the “Company Permits”), and all such Company Permits are valid, and in full force and effect, except where the failure to have, or the suspension or cancellation of, or failure to be valid or in full force and effect of, any of the Company Permits would not, individually or in the aggregate, reasonably be expected to (A) prevent or materially delay consummation of the Offer or the Merger, (B) otherwise prevent or materially delay performance by the Company of any of its material obligations under this Agreement or any Ancillary Agreement or (C) have a Company Material Adverse Effect. Except as set forth in Section 3.6 of the Company Disclosure Schedule, none of the Company or any Company Subsidiary is in material conflict with, or in material default or violation of, (1) any Law applicable to the Company or any Company Subsidiary or by which any property or asset of the Company or any Company Subsidiary is bound or affected or (2) any Company Permits.

Section 3.7 SEC Filings; Financial Statements.

Section 3.7.1 Except as set forth in Section 3.7.1 of the Company Disclosure Schedule, the Company has timely filed all registration statements, prospectuses, forms, reports, definitive proxy statements, schedules and documents required to be filed by it under the Securities Act or the Exchange Act, as the case may be, since December 31, 2002 (collectively, the “Company SEC Filings”). Each Company SEC Filing (A) as of its date, complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and (B) did not, at the time it was filed, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. As of the date of this Agreement, no Company Subsidiary is subject to the periodic reporting requirements of the Exchange Act.

Section 3.7.2 Each of the consolidated financial statements (including, in each case, any notes thereto) contained in the Company SEC Filings, as well as the Company’s unaudited consolidated financial statements as of and for the five-month period ended May 31, 2005, (A) was prepared in accordance with GAAP applied (except as may be indicated in the notes thereto and, in the case of unaudited quarterly financial statements, as permitted by Form 10-Q under the Exchange Act) on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto), and (B) presented fairly the consolidated financial position, results of operations and cash flows of the Company and the consolidated Company Subsidiaries as of the respective dates thereof and for the respective periods indicated therein (subject, in the case of unaudited statements, to normal year-end adjustments which were not and will not, individually or in the aggregate, be material). The Company has made available to Parent complete and correct copies of all documents governing all material “off balance arrangements” (as defined by item 303(a)(4) of Regulation S-K promulgated by the SEC) in respect of the Company or any Company Subsidiary.

Section 3.7.3 Except as and to the extent set forth on the consolidated balance sheet of the Company and the consolidated Company Subsidiaries as of December 31, 2004 (the “December 31, 2004 Balance Sheet”) included in the Company’s Form 10-K for the year ended December 31, 2004, including the notes thereto (the “Company Form 10-K”), none of the Company or any consolidated Company Subsidiary has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) that would be required to be reflected on a balance sheet or in notes thereto prepared in accordance with GAAP, except for liabilities or obligations incurred in the ordinary course of business since December 31, 2004 that would not, individually or in the aggregate, reasonably be expected to (A) prevent or materially delay consummation of the Offer or the Merger, (B) otherwise prevent or materially delay performance by the Company of any of its material obligations under this Agreement or any Ancillary Agreement or (C) have a Company Material Adverse Effect.

Section 3.7.4 The Company has previously provided to Parent a complete and correct copy of any amendment or modification which has not yet been

filed with the SEC to any agreement, document or other instrument which previously had been filed by the Company with the SEC pursuant to the Securities Act or the Exchange Act.

Section 3.7.5 To the Company’s knowledge, each director and executive officer of the Company has filed with the SEC on a timely basis all statements required by Section 16(a) of the Exchange Act and the rules and regulations thereunder since December 31, 2004.

Section 3.7.6 The Company maintains and will continue to maintain, through the Effective Time, a standard system of accounting established and administered in accordance with GAAP. The Company and its Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Section 3.7.6 of the Company Disclosure Schedule lists, and the Company has made available to Parent complete and correct copies of, all written descriptions of, and all policies, manuals and other documents promulgating, such internal accounting controls.

Section 3.7.7 Since December 31, 2002, neither the Company nor any Company Subsidiary nor, to the Company’s knowledge, any director, officer, employee, auditor, accountant or representative of the Company or any Company Subsidiary, has received any complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of the Company or any Company Subsidiary or their respective internal accounting controls, including any complaint, allegation, assertion or claim that the Company or any Company Subsidiary has engaged in questionable accounting or auditing practices. Since December 31, 2002, no attorney representing the Company or

any Company Subsidiary, whether or not employed by the Company or any Company Subsidiary, has reported evidence of a material violation of securities laws, breach of fiduciary duty or similar violation by the Company or any of its officers, directors, employees or agents to the Company Board or any committee thereof or to any executive officer of the Company. Since December 31, 2002, there have been no internal investigations regarding accounting or revenue recognition discussed with, reviewed by or initiated at the direction of the chief executive officer, chief financial officer, general counsel, the Company Board or any committee thereof.

Section 3.7.8 To the Company’s knowledge, no employee of the Company or any Company Subsidiary has provided or is providing information to any law enforcement agency regarding the commission or possible commission of any crime or the violation or possible violation of any applicable Law. Neither the Company nor any Company Subsidiary nor any officer, employee, contractor, subcontractor or agent of the Company or any such Company Subsidiary has discharged, demoted, suspended, threatened, harassed or in any other manner discriminated against an employee of the Company or any Company Subsidiary in the terms and conditions of employment because of any act of such employee described in 18 U.S.C. § 1514A(a).

Section 3.7.9 All accounts receivable of the Company and the Company Subsidiaries reflected on the December 31, 2004 Balance Sheet or arising thereafter have originated from bona fide transactions in the ordinary course of business consistent with past practices and in accordance with SEC regulations and GAAP applied on a consistent basis and, to the Company’s knowledge, are not subject to valid defenses, setoffs or counterclaims. The Company’s reserve for contractual allowances and doubtful accounts is adequate and has been calculated in a manner consistent with past practices. Since the date of the December 31, 2004 Balance Sheet, neither the Company nor any of the Company Subsidiaries has modified or changed in any material respect its sales practices or methods including, without limitation, such practices or methods in accordance with which the Company or any of the Company Subsidiaries sell goods, fill orders or record sales.

Section 3.7.10 All accounts payable of the Company and the Company Subsidiaries reflected on the December 31, 2004 Balance Sheet or arising thereafter are the result of bona fide transactions in the ordinary course of business. Since the date of the December 31, 2004 Balance Sheet, the Company and the Company Subsidiaries have not altered in any material respects their practices for the payment of such accounts payable, including the timing of such payment.

Section 3.8 Disclosure Documents.

Section 3.8.1 The Schedule 14D-9, the Proxy Statement and any Other Filings, and any amendments or supplements thereto, when filed by the Company with the SEC, or when distributed or otherwise disseminated to the Company’s stockholders, as applicable, will comply as to form in all material respects with the applicable requirements of the Exchange Act.

Section 3.8.2 (A) The Proxy Statement, as supplemented or amended, if applicable, at the time such Proxy Statement or any amendment or supplement thereto is first mailed to stockholders of the Company and at the time such stockholders vote on adoption of this Agreement, and (B) the Schedule 14D-9 and any Other Filing or any amendment or supplement thereto, at the time of the filing and at the time of any distribution or dissemination thereof, in each case, will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. The representations and warranties contained in this Section 3.8.2 will not apply to statements or omissions included in the Schedule 14D-9, the Proxy Statement or any Other Filings based upon information furnished in writing to the Company by Parent or the Purchaser specifically for use therein.

Section 3.8.3 The information with respect to the Company or any of the Company Subsidiaries that the Company furnishes to Parent specifically for use in the Offer Documents, at the time of the filing thereof, at the time of any distribution or dissemination thereof and at the time of the consummation of the Offer, will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.

Section 3.9 Absence of Certain Changes or Events. Since December 31, 2004, except as specifically contemplated by, or as disclosed in, this Agreement, the Company and each Company Subsidiary have conducted their businesses in the ordinary course consistent with past practice and, since such date, there has not been (A) any Company Material Adverse Effect or any event or development that would, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, (B) any event or development that would, individually or in the aggregate, reasonably be expected to prevent or materially delay the performance of this Agreement or any Ancillary Agreement by the Company or (C) any action taken by the Company or any Company Subsidiary during the period from January 1, 2005 through the date of this Agreement that, if taken during the period from the date of this Agreement through the Effective Time, would constitute a breach of Section 5.1.

Section 3.10 Employee Benefit Plans.

Section 3.10.1 Section 3.10.1 of the Company Disclosure Schedule sets forth a true and complete list of each “employee benefit plan” as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and any other plan, policy, program, practice, agreement, understanding or arrangement (whether written or oral) providing compensation or other benefits to any current or former director, officer, employee or consultant (or to any dependent or beneficiary thereof of the Company or any ERISA Affiliate), which are now, or were within the past 6 years, maintained, sponsored or contributed to by the Company or any ERISA Affiliate, or under which the Company or any ERISA Affiliate has any obligation or liability, whether actual or contingent, including, without limitation, all incentive, bonus, deferred compensation, vacation, holiday, cafeteria, medical, disability, stock purchase, stock option, stock appreciation, phantom stock, restricted stock or other stock-based compensation plans, policies, programs, practices or arrangements (each a “Company Benefit Plan”). None of the Company, or, to the Company’s knowledge, any other person or entity, has any express or implied commitment, whether legally enforceable or not, to modify, change or terminate any Company Benefit Plan, other than with respect to a modification, change or termination required by ERISA or the Code.

With respect to each Company Benefit Plan, the Company has delivered to Parent true, correct and complete copies of (A) each Company Benefit Plan (or, if not written, a written summary of its material terms), including without limitation all plan documents, trust agreements, insurance contracts or other funding vehicles and all amendments thereto, (B) all summaries and summary plan descriptions, including any summary of material modifications, (C) the three most recent annual reports (Form 5500 series) filed with the IRS with respect to such Company Benefit Plan (and, if any such annual report is a Form 5500R, the Forms 5500C filed with respect to such Company Benefit Plan), (D) the most recent actuarial report or other financial statement relating to such Company Benefit Plan, (E) the most recent determination or opinion letter, if any, issued by the IRS with respect to any Company Benefit Plan and any pending request for such a determination letter, (F) the most recent nondiscrimination tests performed under the Code (including 401(k) and 401(m) tests) for each Company Benefit Plan, (G) all filings made with any Governmental Entity, including but not limited to, any filings under the Voluntary Compliance Resolution or Closing Agreement Program or the Department of Labor Delinquent Filer Program.

Section 3.10.2 Each Company Benefit Plan has been administered in all material respects in accordance with its terms and all applicable Law, including ERISA and the Code, and contributions required to be made under the terms of any of the Company Benefit Plans as of the date of this Agreement have been timely made or, if not yet due, have been properly reflected on the most recent consolidated balance sheet filed or incorporated by reference in the Company SEC Filings prior to the date of this Agreement. With respect to the Company Benefit Plans, no event has occurred and, to the Company’s knowledge, there exists no condition or set of circumstances in connection with which the Company could be subject to any material liability (other than for routine benefit liabilities) under the terms of, or with respect to, such Company Benefit Plans, ERISA, the Code or any other applicable Law.

Section 3.10.3 (A) Each Company Benefit Plan which is intended to qualify under Section 401(a), Section 401(k), Section 401(m) or Section 4975(e)(6)

of the Code has either received a favorable determination letter from the IRS as to its qualified status or the remedial amendment period for such Company Benefit Plan has not yet expired, and to the Company’s knowledge, each trust established in connection with any Company Benefit Plan which is intended to be exempt from federal income taxation under Section 501(a) of the Code is so exempt, and to the Company’s knowledge no fact or event has occurred that could adversely affect the qualified status of any such Company Benefit Plan or the exempt status of any such trust; (B) to the Company’s knowledge there has been no prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code and other than a transaction that is exempt under a statutory or administrative exemption) with respect to any Company Benefit Plan that could result in liability to the Company or any ERISA Affiliate; (C) each Company Benefit Plan can be amended, terminated or otherwise discontinued after the Effective Time in accordance with its terms, without liability (other than (i) liability for ordinary administrative expenses typically incurred in a termination event or (ii) if the Company Benefit Plan is a pension benefit plan subject to Part 2 of Title I of ERISA, liability for the accrued benefits as of the date of such termination (if and to the extent required by ERISA) to the extent that either there are sufficient assets set aside in a trust or insurance contract to satisfy such liability or such liability is reflected on the most recent consolidated balance sheet filed or incorporated by reference in the Company SEC Filings prior to the date of this Agreement); (D) no suit, administrative proceeding, action or other litigation has been brought, or to the Company’s knowledge is threatened, against or with respect to any such Company Benefit Plan, including any audit or inquiry by the IRS or United States Department of Labor (other than routine benefits claims); (E) no Company Benefit Plan is a multiemployer pension plan (as defined in Section 3(37) of ERISA) (“Multiemployer Plan”) or other pension plan subject to Title IV of ERISA and neither the Company nor any ERISA Affiliate has sponsored or contributed to or been required to contribute to a Multiemployer Plan or other pension plan subject to Title IV of ERISA; (F) no material liability under Title IV of ERISA has been incurred by the Company or any ERISA Affiliate that has not been satisfied in full, and no condition exists that presents a material risk to the Company or any ERISA Affiliate of incurring or being subject

(whether primarily, jointly or secondarily) to a material liability thereunder; (G) none of the assets of the Company or any ERISA Affiliate is, or may reasonably be expected to become, the subject of any lien arising under ERISA or Section 412(n) of the Code; (H) neither the Company nor any ERISA Affiliate has any liability under ERISA Section 502; (I) all tax, annual reporting and other governmental filings required by ERISA and the Code have been timely filed with the appropriate Governmental Entity and all notices and disclosures have been timely provided to participants; (J) all contributions and payments to such Company Benefit Plan are deductible under Code sections 162 or 404; (K) no amount is subject to Tax as unrelated business taxable income under Section 511 of the Code; and (L) no excise tax could be imposed upon the Company under Chapter 43 of the Code.

Section 3.10.4 No amount that could be received (whether in cash or property or the vesting of property) as a result of the consummation of the transactions contemplated by this Agreement or any Ancillary Agreement, by any employee, officer or director of the Company or any Company Subsidiary who is a “disqualified individual” (as such term is defined in proposed Treasury Regulation Section 1.280G-1) under any Company Benefit Plan could be characterized as an “excess parachute payment” (as defined in Section 280G(b)(1) of the Code). Set forth in Section 3.10.4 of the Company Disclosure Schedule is (A) the estimated maximum amount that could be paid to any disqualified individual as a result of the transactions contemplated by this Agreement under all employment, severance and termination agreements, other compensation arrangements and Company Benefit Plans currently in effect, and (B) the “base amount” (as defined in Section 280G(b)(e) of the Code) for each such individual as of the date of this Agreement.

Section 3.10.5 Except as required by Law, no Company Benefit Plan provides any of the following retiree or post-employment benefits to any person: medical, disability or life insurance benefits. No Company Benefit Plan is a voluntary employee benefit association under Section 501(a)(9) of the Code. The Company and each ERISA Affiliate are in material compliance with (i) the requirements of the applicable health care continuation and notice provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and the regulations (including

proposed regulations) thereunder and any similar state law and (ii) the applicable requirements of the Health Insurance Portability and Accountability Act of 1996, as amended, and the regulations (including the proposed regulations) thereunder.

Section 3.10.6 None of the Company or any Company Subsidiary maintains, sponsors, contributes or has any liability with respect to any employee benefit plan program or arrangement that provides benefits to non-resident aliens with no U.S. source income outside of the United States.

Section 3.11 Labor and Other Employment Matters.

Section 3.11.1 Each of the Company and each Company Subsidiary is in compliance in all material respects with all applicable Laws respecting labor, employment, fair employment practices, terms and conditions of employment, workers’ compensation, occupational safety, plant closings, and wages and hours. None of the Company or any Company Subsidiary is liable for any payment to any trust or other fund or to any Governmental Entity, with respect to unemployment compensation benefits, social security or other benefits or obligations for employees (other than routine payments to be made in the ordinary course of business and consistent with past practice). None of the Company or any Company Subsidiary is a party to any collective bargaining or other labor union contract applicable to persons employed by the Company or any Company Subsidiary, and no collective bargaining agreement or other labor union contract is being negotiated by the Company or any Company Subsidiary. There is no labor dispute, strike, slowdown or work stoppage against the Company or any Company Subsidiary pending or, to the Company’s knowledge, threatened that would reasonably be expected to have a Company Material Adverse Effect. No labor union or similar organization has otherwise been certified to represent any persons employed by the Company or any Company Subsidiary or to the Company’s knowledge has applied to represent such employees or is attempting to organize so as to represent such employees. There is no charge or complaint against the Company or any Company Subsidiary by the National Labor Relations Board or any comparable state or foreign agency pending or, to the Company’s knowledge, threatened, except where such charge or complaint would not, individually or in the

aggregate, reasonably be expected to have a Company Material Adverse Effect. None of the Company or any Company Subsidiary is materially delinquent in payments to any of its employees for any wages, salaries, commissions, bonuses or other direct compensation for any services performed for it. To the Company’s knowledge, there are no material controversies pending or threatened, between the Company or any Company Subsidiary and any of their current or former employees, which controversies have or could reasonably be expected to result in action, suit, proceeding, claim, arbitration or investigation before any Governmental Entity. To the Company’s knowledge, no employee of the Company or any Company Subsidiary is in any material respect in violation of any term of any employment contract, non-disclosure agreement, non-competition agreement or any restrictive covenant to a former employer relating to the right of any such employee to be employed by the Company or such Company Subsidiary because of the nature of the business conducted or presently proposed by the Company to be conducted by it or to the use of trade secrets or proprietary information of others. To the Company’s knowledge, no executive officer or key employee of the Company or any Company Subsidiary has given notice that such executive officer or key employee intends to terminate his or her employment with the Company or such Company Subsidiary.

Section 3.11.2 The Company has identified in Section 3.11.2 of the Company Disclosure Schedule and has made available to Parent true and complete copies of: (A) all severance and employment agreements with directors, officers or employees of or consultants to the Company or any Company Subsidiary; (B) all severance programs and policies of each of the Company and each Company Subsidiary with or relating to its employees; and (C) all plans, programs, agreements and other arrangements of the Company and each Company Subsidiary with or relating to its directors, officers, employees or consultants which contain change in control provisions. Except as set forth in Section 3.11.2 of the Company Disclosure Schedule, none of the execution and delivery of this Agreement or any Ancillary Agreement or the consummation of the transactions contemplated hereby or thereby will (either alone or in conjunction with any other event, such as termination of employment) (A) result in any payment (including, without limitation, severance, unemployment compensation,

parachute or otherwise) becoming due to any director or any employee of the Company or any Company Subsidiary or affiliate from the Company or any Company Subsidiary or affiliate under any Company Benefit Plan or otherwise, (B) significantly increase any benefits otherwise payable under any Company Benefit Plan or (C) result in any acceleration of the time of payment or vesting of any material benefits. No individual who is a party to an employment agreement listed in Section 3.11.2 of the Company Disclosure Schedule or any agreement incorporating change in control provisions with the Company has terminated employment or been terminated, nor has any event occurred that could give rise to a termination event, in either case under circumstances that has given, or could give, rise to a severance obligation on the part of the Company under such agreement. Section 3.11.2 of the Company Disclosure Schedule sets forth the Company’s best estimates of the amounts payable to the executives listed therein, as a result of the transactions contemplated by this Agreement, any Ancillary Agreement and/or any subsequent employment termination (including any cash-out or acceleration of options and restricted stock and any “gross-up” payments with respect to any of the foregoing), based on compensation data applicable as of the date of such Company Disclosure Schedule and the assumptions stated on that Company Disclosure Schedule. No amount that could be received (whether in cash or property or the vesting of property), in connection with the consummation of the transactions contemplated by this Agreement, by any employee, officer or director of the Company or any of its Subsidiaries who is a “disqualified individual” (as such term is defined in proposed Treasury Regulation Section 1.280G-1) under any Company Benefit Plan or otherwise may be characterized as an “excess parachute payment” (as defined in Section 280G(b)(1) of the Code).

Section 3.11.3 There are no pending or threatened claims (other than claims for benefits in the ordinary course), lawsuits or arbitrations which have been asserted or instituted against any Company Benefit Plan, any fiduciaries thereof with respect to their duties to such Company Benefit Plans or the assets of any of the trusts under any Company Benefit Plan which could reasonably be expected to result in any material liability of the Company or any Company Subsidiary to the Pension Benefit Guarantee Corporation, the Department of Treasury, the Department of Labor or any Multiemployer Plan.

Section 3.12 Contracts.

Section 3.12.1 Subsections (A) through (K) of Section 3.12.1 of the Company Disclosure Schedule list the following types of contracts and agreements to which the Company or any Company Subsidiary is a party (such contracts and agreements as are required to be set forth in Section 3.12.1 of the Company Disclosure Schedule being the “Company Material Contracts”):

(A) each “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC) with respect to the Company and its Subsidiaries;

(B) each contract and agreement which will result in payments by or to the Company of more than $250,000, in the aggregate, over the remaining term of such contract or agreement;

(C) all broker, distributor, dealer, manufacturer’s representative, franchise, agency, sales promotion, market research, marketing consulting and advertising contracts and agreements to which the Company or any Company Subsidiary is a party;

(D) all management contracts (excluding contracts for employment) and contracts with other consultants, including any contracts involving the payment of royalties or other amounts calculated based upon the revenues or income of the Company or any Company Subsidiary or income or revenues related to any product of the Company or any Company Subsidiary to which the Company or any Company Subsidiary is a party;

(E) all contracts and agreements evidencing indebtedness for borrowed money;

(F) all contracts and agreements with any Governmental Entity to which the Company or any Company Subsidiary is a party;

(G) all contracts and agreements that limit, or purport to limit, the ability of the Company or any Company Subsidiary to compete in any line of business or with any person or entity or in any geographic area or during any period of time;

(H) all contracts and agreements providing for benefits under any Company Benefit Plan;

(I) all material contracts or arrangements that result in any person or entity holding a power of attorney from the Company or any Company Subsidiary that relates to the Company, any Company Subsidiary or their respective businesses;

(J) all contracts for employment required to be listed in Section 3.8 of the Company Disclosure Schedule; and

(K) all other contracts and agreements, whether or not made in the ordinary course of business, which are material to the Company and its Subsidiaries, taken as a whole, or the conduct of its business, or the absence of which would, individually or in the aggregate, prevent or materially delay consummation of any of the transactions contemplated by this Agreement or the Ancillary Agreements or otherwise prevent or materially delay the Company from performing its obligations under this Agreement or the Ancillary Agreement or would, individually or in the aggregate, have a Company Material Adverse Effect.

Section 3.12.2 (i) Each Company Material Contract is a legal, valid and binding agreement of the Company, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general principles of equity, and none of the Company Material Contracts is in material default by its terms or has been cancelled by the other party; (ii) neither the Company nor any Company Subsidiary, and to the Company’s knowledge, no other party, is in material breach or violation of, or material default under, any Company Material Contract; (iii) the Company and the Subsidiaries have not received any claim of material default under any such agreement; and (iv) neither the execution of this Agreement nor the consummation of any transaction contemplated by this Agreement shall constitute a material default under, give rise to cancellation rights under, or otherwise adversely affect any of the material rights of the Company or any Company Subsidiary under any Company Material Contract. The Company has furnished or made available to Parent true and complete copies of all Company Material Contracts, including any amendments thereto.

Section 3.13 Litigation. (A) Except as set forth in Section 3.13 of the Company Disclosure Schedule, there is no suit, claim, action, proceeding or investigation pending or, to the Company’s knowledge, threatened against the Company or any Company Subsidiary or for which the Company or any Company Subsidiary is obligated to indemnify a third party and (B) none of the Company or any Company Subsidiary is subject to any material outstanding order, writ, injunction, decree or arbitration ruling, award or other finding.

Section 3.14 Environmental Matters.

Section 3.14.1 Each of the Company and each Company Subsidiary (1) is in compliance with all, and is not subject to any liability with respect to any, applicable Environmental Laws, (2) holds or has applied for all Environmental Permits necessary to conduct their current operations and (3) is in compliance with their respective Environmental Permits, except, in each case, as would not individually or in the aggregate, have a Company Material Adverse Effect.

Section 3.14.2 None of the Company or any Company Subsidiary has received any written notice, demand, letter, claim or request for information alleging that the Company or any Company Subsidiary may be in violation of, or liable under, any Environmental Law.

Section 3.14.3 None of the Company or any Company Subsidiary (A) has entered into or agreed to any consent decree or order or is subject to any judgment, decree or judicial order relating to compliance with Environmental Laws, Environmental Permits or the investigation, sampling, monitoring, treatment, remediation, removal or cleanup of Hazardous Materials and, to the Company’s knowledge, no investigation, litigation or other proceeding is pending or threatened in writing with respect thereto, or (B) has any obligation to indemnify, hold harmless or insure any other person in connection with any claim actually threatened or asserted in writing by any third-party for any liability under any Environmental Law or relating to any Hazardous Materials.

Section 3.14.4 None of the real property owned or leased by the Company or any Company Subsidiary is listed or, to the Company’s knowledge, proposed for listing on the “National Priorities List” under the Comprehensive

Environmental Response, Compensation and Liability Act of 1980, as amended as of the date hereof (“CERCLA”), as updated through the date hereof, or any similar state or foreign list of sites requiring investigation or cleanup.

Section 3.14.5 Neither the Company nor any of the Company Subsidiaries has ever treated, stored, transported, disposed of, arranged for or permitted the disposal of, handled, released, or exposed any person to, any Hazardous Materials, or owned or operated any property or facility (and no such property or facility is contaminated by any Hazardous Materials) in a manner that has given or could reasonably be expected to give rise to any material liabilities pursuant to any Environmental Law for fines, penalties, injuries or damages to persons or the environment, or costs of environmental investigation, cleanup or monitoring.

Section 3.14.6 The Company and the Company Subsidiaries have furnished to Parent all material environmental audits, reports and other material environmental documents relating to the past or current operations or facilities of the Company or the Company Subsidiaries, or their respective predecessors or Affiliates, which are in their possession or under their reasonable control.

Section 3.15 Intellectual Property.

Section 3.15.1 Section 3.15.1 of the Company Disclosure Schedule sets forth with respect to the Intellectual Property of the Company: (i) for each Patent, the title of the invention, the patent number or application serial number for each jurisdiction in which filed, date issued, and present status thereof; (ii) for each Trademark, tradename or service mark and the application serial number or registration number (if any), for each country, province and state; (iii) for any URL or domain name, the registration date, any renewal date and name of registry; (iv) for each registered Copyright, the number and date of registration for each among country, province and state, in which a copyright application has been registered; (v) a list of all Software incorporated in, provided with or otherwise necessary to use, support and maintain, the Company’s products, including all Software that the Company provides or makes available to its customers, including redundant array of independent disks code, object code and source code files; (vi) the identity of all third parties to whom the

Company has provided, made available, or disclosed Software source code, including agents; (vii) for each Mask Work (if any), whether or not registered, the date of first commercial exploitation and if registered, the registration number and date of registration, for each applicable country, province and state; and (viii) a list of the specifications, schematics, files, bills of materials, mechanical drawings, datasheets and reports relating to certain Intellectual Property of the Company that is material to the Company’s business. True and correct copies of all applications filed and registration for Intellectual Property (including all pending applications, application related documents) owned or controlled by or on behalf of the Company have been provided or made available to the Purchaser. For purposes of this Section 3.15, references to the Company shall include the Company Subsidiaries.

Section 3.15.2 (A) all trademark registrations and pending trademark applications of the Company are currently in compliance with all legal requirements, other than any requirement that, if not satisfied, would not result in a cancellation of any such registration or otherwise affect the use, priority or enforceability of the Trademark in question, (B) no registered Trademark of the Company has been or is now involved in any opposition or cancellation proceeding in the United States Patent and Trademark Office, (C) to the Company’s knowledge the Company is the owner of all right, title and interest in and to all of the Trademarks used in the Company’s business, in each case free and clear of any and all encumbrances, covenants, conditions and restrictions or other adverse claims or interests of any kind or nature, and the Company has not received any written notice or claim or to its knowledge, any oral notice or claim, challenging the Company’s complete and exclusive ownership of the Trademarks or suggesting that any other person has any claim of legal or beneficial ownership with respect thereto, and (D) there is no agreement, decree, arbitral award or other provision or contingency which obligates the Company to grant licenses in future Trademarks owned by the Company.

Section 3.15.3 All Patents of the Company are currently in compliance with legal requirements (including payment of filing, examination, and maintenance fees and proofs of working or use) other than any requirement that, if not satisfied, would not result in a revocation or lapse or otherwise affect the enforceability

of the Patent in question. The Company is the owner of all right, title and interest in and to all of the Patents, in each case free and clear of any and all encumbrances, covenants, conditions and restrictions or other adverse claims or interests of any kind or nature, and the Company has not received any written notice or claim (or to the Company’s knowledge, oral notice or claim), challenging the Company’s complete and exclusive ownership of the Patents or suggesting that any other person has any claim of legal or beneficial ownership with respect thereto. There is no agreement, decree, arbitral award or other provision or contingency which obligates the Company to grant licenses in future Patents.

Section 3.15.4 The Company is the owner of all right, title and interest in and to each of the Copyrights, Software and Mask Works covering materials used by the Company other than those as to which the rights being exercised by the Company have been licensed from another person (collectively, “Company Owned Copyrights”), free and clear of any and all encumbrances, covenants, conditions and restrictions or other adverse claims or interests of any kind or nature, and the Company has not received any written notice or claim (or, to the Company’s knowledge, any oral notice or claim) challenging the Company’s complete and exclusive ownership of the Company Owned Copyrights or suggesting that any other person has any claim of legal or beneficial ownership with respect thereto.

Section 3.15.5 The Company has not received any written notice or claim ( or, to the Company’s knowledge, any oral notice or claim) challenging or questioning the validity or enforceability of any of the Company Owned Copyrights or indicating an intention on the part of any person to bring a claim that any Company Owned Copyright is invalid, is unenforceable or has been misused and, to the Company’s knowledge, no Company Owned Copyright has otherwise been challenged or threatened in any way.

Section 3.15.6 The Company has not taken any action or, to the Company’s knowledge, failed to take any action, or used or enforced or failed to use or enforce any of the Company Owned Copyrights, in each case in a manner that would result in the unenforceability of any of the Company Owned Copyrights.

Section 3.15.7 The Company has not granted to any person any right, license or permission to exercise any rights under any of the Company Owned Copyrights other than non-exclusive licenses granted in the ordinary course of business to customers and has not provided any source code for its Software to any third party.

Section 3.15.8 The Company is the owner of all right, title and interest in and to each of its Trade Secrets and has taken all reasonable steps in accordance with normal industry practice to protect its rights in its Trade Secrets. Without limiting the generality of the foregoing, the Company enforces a policy of requiring each relevant employee, consultant and contractor to execute proprietary information, confidentiality and assignment agreements substantially in the Company’s standard forms that assign to the Company all rights to any Intellectual Property relating to the Company’s business that has been developed or is currently under development by the employees, consultants or contractors, as applicable, and, except under nondisclosure or confidentiality agreements, or in connection with the release or distribution of products, to the Company’s knowledge there has been no disclosure by the Company of its confidential information or Trade Secrets at such time as the Company generally treated such information as confidential or proprietary.

Section 3.15.9 Section 3.15.9 of the Company Disclosure Schedule sets forth all third-party components, whether hardware, firmware or Software, that are incorporated in or provided by the Company with Company’s products or that are otherwise necessary for the manufacture of the Company’s products. Section 3.15.9 of the Company Disclosure Schedule also sets forth a complete and accurate list of: (a) all license agreements granting to the Company any right to use or practice any rights under any Intellectual Property (other than software commercially available to any person for a license fee of no more than Ten Thousand Dollars ($10,000) (collectively, the “Company Inbound License Agreements”), indicating for each the title and the parties thereto; and (b) all current forms of standard license agreements used by the Company in the ordinary course of business under which the Company grants licenses of Software or grants other rights in or to use or practice any rights under any Intellectual Property (collectively, the “Company Outbound License Agreements”). There is no outstanding or, to the Company’s

knowledge, threatened dispute or disagreement with respect to any Company Inbound License Agreement or any Company Outbound License Agreement that would reasonably be likely to have a Material Adverse Effect. True, correct and complete executed copies of all Company Inbound License Agreements and material Company Outbound License Agreements have been made available to the Purchaser.

Section 3.15.10 The Company owns or possesses adequate licenses or other rights to use, free and clear of encumbrances (except in the case of licenses, the interests of the licensing party), orders, arbitration awards and contingent licenses arising from termination provisions (or other causes) in agreements between the Company and any other person all of its Intellectual Property. The Intellectual Property, including the Patents, Trade Secrets, Company Owned Copyrights, the Company’s unregistered Copyrights, the Company Owned Materials, all Intellectual Property that is currently under development by or for the Company and the Company’s rights granted to it under the Company Inbound License Agreements, constitute all the Intellectual Property rights and Company Inbound License Agreements used in the operation of the Company’s businesses as currently conducted and are all such Intellectual Property rights and Company Inbound License Agreements necessary to operate such business after the Effective Time in substantially the same manner as such businesses have been operated by the Company during the six months prior to the Effective Time.

Section 3.15.11 The Company has not received any notice alleging, or otherwise has knowledge of (A) the invalidity with respect to any of the Intellectual Property (existing or under development) of the Company or (B) alleged infringement, misappropriation or breach, of any rights of others. Neither the Company’s past nor present use of Intellectual Property or any of its Software or technology infringes upon or misappropriates, breaches or otherwise conflicts with the rights of any other person anywhere in the world in any material respect. No Intellectual Property that is owned by the Company is subject to any outstanding order, judgment, decree, stipulation or agreement restricting the use thereof by the Company or, in the case of Intellectual Property licensed by the Company to others, restricting the sale, transfer, assignment or licensing thereof by the Company to any person. To the

Company’s knowledge, no third party is misappropriating, infringing, diluting or violating any Intellectual Property owned or exclusively licensed to the Company, and no claims for any of the foregoing have been brought against any third party by the Company.

Section 3.15.12 The Software owned or purported to be owned by the Company was: (i) developed by employees of the Company within the scope of their employment; (ii) developed by independent contractors who have assigned their Intellectual Property rights to the Company pursuant to written agreements; or (iii) otherwise acquired by the Company from a third party who assigned all Intellectual Property rights in the Software to the Company. The Company currently is not experiencing an abnormal level (as compared to industry standard levels) of bugs or programming errors in any of its Software. The Company has not intentionally incorporated any disabling device or mechanism in the Software and, to the Company’s knowledge, the Software is free of all viruses, worms, trojan horses and other material known contaminants. None of the Software is, in whole or in part, subject to the provisions of any open source or quasi-open source license agreement or any other agreement obligating the Company to make source code available to third parties or publish source code. The Company has made no submission or suggestion and is not subject to any agreement with standards bodies or other entities which would obligate the Company to grant licenses to or otherwise impair its control of its Intellectual Property.

Section 3.15.13 The Company owns all right, title and interest to the inventions (whether or not patentable) and improvements thereto, invention disclosures and all related technical information, manufacturing, engineering and technical drawings, specifications, schematics, files, bills of materials, mechanical drawings, datasheets, reports, documentation and works of authorship (whether or not registered or copyrightable) relating to the Company’s business, and in connection with any of the foregoing, all documents, disks, records, reports, files and other media on which any of the foregoing is stored comprising or included in the materials used by the Company other than those as to which the rights being exercised by the Company have been licensed from another person (collectively, “Company Owned Materials”) free

and clear of any and all encumbrances, covenants, conditions and restrictions or other adverse claims or interests of any kind or nature, and the Company has not received any written notice or claim (or, to the Company’s knowledge, any oral notice or claim) challenging the Company’s complete and exclusive ownership of the Company Owned Materials or suggesting that any other person has any claim of legal or beneficial ownership with respect thereto.

Section 3.16 Taxes.

Section 3.16.1 Except as set forth in Section 3.16.1 of the Company Disclosure Schedule, each of the Company and the Company Subsidiaries has timely filed all Tax Returns with the appropriate taxing authority required to be filed through the date hereof, taking into account any extensions of time within which to file such Tax Returns. All such Tax Returns were complete and correct in all material respects. All Taxes that are shown as due on such filed Tax Returns have been paid, and the unpaid Taxes of the Company and each Company Subsidiary (whether or not shown as being due on any Tax Returns) does not exceed the reserve for Tax Liability (excluding any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the Company’s most recent consolidated balance sheet contained in their financial statements (rather than in any notes thereto) filed with the SEC as of the date hereof. Neither the Company nor any Company Subsidiary is the beneficiary of any extension of time within which to file any Tax Return. No material claim has ever been made by an authority in a jurisdiction where the Company or a Company Subsidiary does not file Tax Returns that the Company or a Company Subsidiary, respectively, is or may be subject to taxation by that jurisdiction.

Section 3.16.2 Except as set forth in Section 3.16.2 of the Company Disclosure Schedule, no deficiencies for Taxes of the Company or any Company Subsidiary have been claimed, proposed or assessed by any taxing or other Governmental Entity. Except as set forth in Section 3.16.2 of the Company Disclosure Schedule, there are no pending or, to the Company’s knowledge or any Company Subsidiary, threatened audits, assessments or other administrative or court proceedings

with regard to any Taxes or Tax Returns of the Company or any Company Subsidiary, and none of the Company or any Company Subsidiary has received a written notice or announcement of any audits or proceedings. Audits of federal, state and local Tax Returns by the relevant taxing authorities with respect to the Company or any Company Subsidiary have been completed for the periods set forth on Schedule 3.16.2 and, except as set forth in such Schedule, none of the Company, any Company Subsidiary or any predecessor to any such entity has been notified that any taxing or other governmental authority intends to audit a Tax Return for any other period. The Company has delivered or made available to Parent complete and accurate copies of federal, state and local Tax Returns of each of the Company, the Company Subsidiaries and their predecessors for the years ended December 31, 2000 - 2004, and complete and accurate copies of all examination reports and statements of deficiencies assessed against or agreed to by the Company, any Company Subsidiary or any predecessor to any such entity since December 31, 1999. No requests for waivers of time to assess any Taxes are pending and none of the Company or any Company Subsidiary has waived any statute of limitations with respect to Taxes or agreed to any extension of time with respect to any Tax assessment or deficiency for any open tax year.

Section 3.16.3 Except as set forth in Section 3.16.3 of the Company Disclosure Schedule, there are no material Tax liens upon any property or assets of the Company or any Company Subsidiary, except liens for current Taxes not yet due and payable and liens for Taxes that are being contested in good faith by appropriate proceedings.

Section 3.16.4 Each of the Company and the Company Subsidiaries has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party.

Section 3.16.5 None of the Company or any Company Subsidiary is responsible for the Taxes of any other person (other than Taxes of the Company or a Company Subsidiary) (i) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local, or foreign law), (ii) as a transferee or successor or (iii) by contract.

Section 3.16.6 None of the Company or any Company Subsidiary has (i) filed a consent pursuant to Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply to any disposition of any asset owned by it; (ii) agreed, or is required, to make any adjustment under Section 481(a) of the Code by reason of a change in accounting method or otherwise; (iii) made an election, or is required, to treat any asset as owned by another person pursuant to the provisions of Section 168(f) of the Code or as tax-exempt bond financed property or tax-exempt use property within the meaning of Section 168 of the Code; (iv) acquired or owns any assets that directly or indirectly secure any debt the interest on which is tax exempt under Section 103(a) of the Code; (v) made or will make a consent dividend election under Section 565 of the Code; or (vi) made any of the foregoing elections or is required to apply any of the foregoing rules under any comparable state or local Tax provision.

Section 3.16.7 The Company has not been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period described in Section 897(c)(1)(A)(ii) of the Code.

Section 3.16.8 (i) Neither the Company nor any Company Subsidiary is party to any Tax-sharing agreements or similar arrangements (including indemnity arrangements) with respect to or involving the Company or any Company Subsidiary or the assets of any such entity; and (ii) after the Effective Time, none of the Company or any Company Subsidiary or the assets of any such entity shall be bound by any such Tax-sharing agreements or similar arrangements or have any liability thereunder for amounts due in respect of periods prior to the Effective Time.

Section 3.16.9 None of the interest payable by the Company or any Company Subsidiary under outstanding indebtedness is nondeductible under Code Section 163 or is treated as interest on corporate acquisition indebtedness under Code Section 279.

Section 3.16.10 None of the Company or any Company Subsidiary is a party to any contract, plan, or arrangement under which it is obligated to make or to provide, or could become obligated to make or to provide, a payment or benefit that would not be deductible as a result of application of Section 280G of the Code.

Section 3.16.11 Neither the Company nor any Company Subsidiary has distributed the stock of any corporation in a transaction satisfying the requirements of Section 355 of the Code since January 1, 2000, and neither the stock of the Company nor the stock of any Company Subsidiary has been distributed in a transaction satisfying the requirements of Section 355 of the Code since January 1, 2000.

Section 3.16.12 Neither the Company nor any Company Subsidiary has entered into any transaction identified as a “listed transaction” for purposes of Treasury Regulations §§ 1.6011-4(b)(2) or 301.6111-2(b)(2). If any of the Company or Company Subsidiary has entered into any transaction such that, if the treatment claimed by it were to be disallowed, the transaction would constitute a substantial understatement of federal income tax within the meaning of Code Section 6662, then it believes that it has either (x) substantial authority for the tax treatment of such transaction or (y) disclosed on its Tax Return the relevant facts affecting the tax treatment of such transaction.

Section 3.17 Insurance. The Company maintains insurance coverage with reputable insurers in such amounts and covering such risks as the Company believes are adequate.

Section 3.18 Opinion of Financial Advisor. The Company Financial Advisor has delivered to the Company Board its written opinion that, as of July 26, 2005, the consideration to be received by the holders of Shares pursuant to the Offer and the Merger is fair to the holders of Shares from a financial point of view.

Section 3.19 Brokers. No broker, finder or investment banker (other than the Company Financial Advisor and Legg Mason) is entitled to any brokerage, finder’s or other fee or commission in connection with the Offer, the Merger or any other transaction contemplated

by this Agreement or any Ancillary Agreement based upon arrangements made by or on behalf of the Company or any Company Subsidiary. The Company has previously provided Parent with a true and complete copy of each agreement between the Company and the Company Financial Advisor pursuant to which such firm would be entitled to any payment in connection with the Offer, the Merger or any other transaction contemplated by this Agreement or any Ancillary Agreement.

Section 3.20 Vote Required. The affirmative vote of the holders of a majority of the outstanding Shares is the only vote, if any, of the holders of any class or series of capital stock of the Company necessary to approve this Agreement or the Merger.

Section 3.21 Properties. Except as set forth in Section 3.21 of the Company Disclosure Schedule, each of the Company and its Subsidiaries has good and valid title to, or in the case of leased properties and assets, valid leasehold or subleasehold interests in, all of its properties and assets, tangible and intangible, real, personal and mixed, used or held for use in its business, free and clear of any security interest, lien, claim, pledge, option, right, agreement, charge or encumbrance, except for such imperfections of title, if any, that do not materially interfere with the present value of the subject property. All of such tangible properties and assets have been maintained in the ordinary course of business and are in operable condition (normal wear and tear excepted) in all material respects.

Section 3.22 Customers and Suppliers

Section 3.22.1 Section 3.22.1 of the Company Disclosure Schedule sets forth a true and complete list of the top ten customers of the Company and its Subsidiaries (based on the revenue from such customer during the 5-month period ended May 31, 2005).

Section 3.22.2 No customer that accounted for more than ten percent of the Company’s consolidated revenues during the 5-month period ended May 31, 2005 and no material supplier of the Company and its Subsidiaries, (A) has cancelled or otherwise terminated any contract with the Company or any Company Subsidiary prior to the expiration of the contract term, (B) has returned, or threatened to return, a substantial amount of any of the products, equipment, goods and services purchased from the Company or any Company Subsidiary or (C) to the Company’s

knowledge, has threatened, or indicated its intention, to cancel or otherwise terminate its relationship with the Company or its Subsidiaries or to reduce substantially its purchase from or sale to the Company or any Subsidiary of any products, equipment, goods or services.

Section 3.22.3 Neither the Company nor any Company Subsidiary has (A) breached, in any material respect, any agreement with or (B) engaged in any fraudulent conduct with respect to, any such customer or supplier of the Company or a Company Subsidiary.

Section 3.22.4 All material orders contained in backlog have been accepted by the Company or its Subsidiary and the customer, and, to its knowledge, the Company has received no notice that any such customer intends to cancel any such material order.

Section 3.23 Certain Business Practices. None of the Company, any Company Subsidiary or, to the Company’s knowledge, any directors or officers, agents or employees of the Company or any Company Subsidiary, has: (A) used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to political activity; (B) made any unlawful payment to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns or violated any provision of the Foreign Corrupt Practices Act of 1977, as amended; or (C) made any payment in the nature of criminal bribery.

Section 3.24 Interested Party Transactions

Section 3.24.1 Except as set forth in Section 3.24 of the Company Disclosure Schedule, no director, officer or other affiliate of the Company or any Company Subsidiary has or has had, directly or indirectly: (A) an economic interest in any person that has furnished or sold, or furnishes or sells, services or products that the Company or any Company Subsidiary furnishes or sells, or proposes to furnish or sell; (B) an economic interest in any person that purchases from or sells or furnishes to, the Company or any Company Subsidiary, any goods or services; (C) a beneficial interest in any contract or agreement disclosed in the Company Disclosure Schedule; or (D) any contractual or other arrangement with the Company or any Subsidiary; provided, however, that ownership of no more than five percent (5%) of the outstanding voting stock of a publicly traded corporation shall not be deemed an “economic interest in any person” for purposes of this Section 3.24.1.

Section 3.24.2 Except as set forth in Section 3.24 of the Company Disclosure Schedule, the Company and its Subsidiaries have not, since December 31, 2002, (A) extended or maintained credit, arranged for the extension of credit or renewed an extension of credit in the form of a personal loan to or for any director or executive officer (or equivalent thereof) of the Company, or (B) materially modified any term of any such extension or maintenance of credit. There are no extensions of credit maintained by the Company or any of its Subsidiaries to which the second sentence of Section 13(k)(1) of the Exchange Act applies.

Section 3.25 Distributors. Section 3.25 of the Company Disclosure Schedule sets forth a true and complete list of the material distributors of the Company’s products. Each such distributor has no right of return other than warranty rights with respect to such inventory.

Article 4

Representations and Warranties of Parent and the Purchaser

Parent and the Purchaser, jointly and severally, hereby represent and warrant to the Company as follows:

Section 4.1 Organization and Qualification; Capitalization of the Purchaser. Each of Parent and the Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation, and has the requisite power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as it is now being conducted. Each of Parent and the Purchaser is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification, licensing or good standing necessary, except for such failures to be so qualified, licensed or in good standing that would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect.

Section 4.2 Authority. Each of Parent and the Purchaser has all necessary corporate power and authority to execute and deliver this Agreement and each Ancillary Agreement to which it is party, to perform its obligations hereunder and thereunder, and to

consummate the transactions contemplated by this Agreement and each Ancillary Agreement to be consummated by it. The execution and delivery of this Agreement and each Ancillary Agreement to which it is a party by each of Parent and the Purchaser, as applicable, and the consummation by each of Parent and the Purchaser of the transactions contemplated hereby or thereby have been duly and validly authorized by all necessary corporate action (including approval by Parent as the sole stockholder of the Purchaser), and no other corporate proceedings on the part of Parent or the Purchaser are necessary to authorize this Agreement or any such Ancillary Agreement or to consummate the transactions contemplated hereby and thereby. This Agreement and each Ancillary Agreement to which Parent or Purchaser is a party have been duly authorized and validly executed and delivered by Parent and the Purchaser, as applicable, and constitute a legal, valid and binding obligation of Parent and the Purchaser, enforceable against Parent and the Purchaser in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general principles of equity.

Section 4.3 No Conflict; Required Filings and Consents.

Section 4.3.1 The execution and delivery of this Agreement and each Ancillary Agreement to which Parent or the Purchaser is a party do not, and the performance thereof by Parent and the Purchaser will not, (A) conflict with or violate any provision of the Certificate of Incorporation or Bylaws of Parent or the Purchaser, (B) (assuming that all consents, approvals, authorizations and permits described in Section 4.3.2 have been obtained and all filings and notifications described in Section 4.3.2 have been made and any waiting periods thereunder have terminated or expired) conflict with or violate any Law applicable to Parent or the Purchaser or any other subsidiary of Parent (each a “Parent Subsidiary” and, collectively, the “Parent Subsidiaries”) or by which any property or asset of Parent, the Purchaser or any Parent Subsidiary is bound or affected or (C) result in any breach of, any loss of any benefit under or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any right of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or other encumbrance on any property or asset of Parent, the Purchaser or any Parent Subsidiary pursuant to, any contract that is material to Parent.

Section 4.3.2 The execution and delivery of this Agreement and each Ancillary Agreement to which Parent or the Purchaser is a party do not, and the performance hereof and thereof by Parent and the Purchaser will not, require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Entity or other person, except (A) under the Exchange Act, Securities Act, any applicable Blue Sky Law, the rules and regulations of the Exchange and filing of the Certificate of Merger as required by the DGCL and (B) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not, individually or in the aggregate, reasonably be expected to (1) prevent or materially delay consummation of the Offer or the Merger, (2) otherwise prevent or materially delay performance by Parent or the Purchaser of any of their material obligations under this Agreement or any Ancillary Agreement or (3) have a Parent Material Adverse Effect.

Section 4.4 Disclosure Documents.

Section 4.4.1 The information with respect to Parent and the Purchaser that Parent or the Purchaser furnishes to the Company specifically for use in the Schedule 14D-9, the Proxy Statement or any Other Filings will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading (A) in the case of the Proxy Statement, as supplemented or amended, if applicable, at the time such Proxy Statement or any amendment or supplement thereto is first mailed to stockholders of the Company and at the time such stockholders vote on adoption of this Agreement, and (B) in the case of the Schedule 14D-9 and any Other Filings, or any supplement or amendment thereto, at the time of the filing thereof and at the time of any distribution or dissemination thereof.

Section 4.4.2 The Offer Documents, when filed, distributed or disseminated, as applicable, will comply as to form in all material respects with the applicable requirements of the Exchange Act and, at the time of the filing thereof, at the time of any distribution or dissemination thereof and at the time of consummation of the Offer, will not contain any untrue statement of a material fact or omit to state any

material fact necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading. The representations and warranties contained in this Section 4.4.2 will not apply to statements or omissions included in the Offer Documents based upon information furnished in writing to Parent or the Purchaser by the Company specifically for use therein.

Section 4.5 No Prior Activities. The Purchaser has not incurred, directly or indirectly, any liabilities or obligations, except those incurred in connection with its incorporation or with the negotiation of this Agreement, each Ancillary Agreement to which it is a party, the performance of its obligations hereunder and thereunder and the consummation of the transactions contemplated hereby and thereby. The Purchaser has not engaged, directly or indirectly, in any business or activity of any type or kind, or entered into any agreement or arrangement with any person or entity, and is not subject to or bound by any obligation or undertaking, that is not contemplated by or in connection with this Agreement, each Ancillary Agreement to which it is a party, the Offer Documents and the transactions contemplated hereby and thereby.

Section 4.6 Brokers. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the Offer or the Merger based upon arrangements made by or on behalf of Parent or any Parent Subsidiary.

Section 4.7 Availability of Funds. Parent has, and will have, currently available funds necessary for the consummation of the Offer.

Article 5

Covenants

Section 5.1 Conduct of Business by the Company Pending the Effective Time. The Company agrees that, between the date of this Agreement and the Effective Time, except as specifically permitted by any other provision of this Agreement, unless Parent shall otherwise agree in writing: the Company will, and will cause each Company Subsidiary to, (A) maintain its existence in good standing under applicable Laws, (B) subject to the restrictions set forth in this Section 5.1, conduct its operations only in the ordinary and usual course of business consistent with past practice and (C) use its commercially reasonable efforts to keep available the

services of the current officers, key employees and consultants of the Company and each Company Subsidiary and preserve the current relationships of the Company and each Company Subsidiary with such of the customers, suppliers and other persons with which the Company or any Company Subsidiary has significant business relations as is reasonably necessary to preserve substantially intact its business organization. Without limiting the foregoing, and as an extension thereof, except as specifically permitted or contemplated by any other provision of this Agreement, the Company shall not (unless required by applicable Law or the regulations or requirements of any stock exchange or other regulatory organization applicable to the Company), and shall not permit any Company Subsidiary to, between the date of this Agreement and the Effective Time, directly or indirectly, do, or agree to do, any of the following without the prior written consent of Parent:

Section 5.1.1 amend or otherwise change its certificate of incorporation or by-laws or equivalent organizational documents;

Section 5.1.2 (A) issue, sell, pledge, dispose of, grant, transfer, encumber, or authorize the issuance, sale, pledge, disposition, grant, transfer or encumbrance of any shares of capital stock of, or other Equity Interests in, the Company or any Company Subsidiary of any class, or securities convertible or exchangeable or exercisable for any shares of such capital stock or other Equity Interests, or any options, warrants or other rights of any kind to acquire any shares of such capital stock or other Equity Interests or such convertible or exchangeable securities, or any other ownership interest (including, without limitation, any such interest represented by contract right), of the Company or any Company Subsidiary, other than the issuance of Shares upon the exercise of Company Options or Warrants outstanding as of the date hereof in accordance with their terms, (B) sell, pledge, dispose of, transfer, lease, license, guarantee or encumber, or authorize the sale, pledge, disposition, transfer, lease, license, guarantee or encumbrance of, any material property or assets (including Intellectual Property) of the Company or any Company Subsidiary, except pursuant to existing contracts or commitments or the sale or purchase of goods in the ordinary course of business consistent with past practice, or enter into any commitment or transaction or series of commitments or transactions outside the ordinary course of business consistent with past practice or involving aggregate receipts, payments or expenses (direct, contingent or otherwise) in excess of $100,000;

Section 5.1.3 declare, set aside, make or pay any dividend or other distribution (whether payable in cash, stock, property or a combination thereof) with respect to any of its capital stock (other than dividends paid by a wholly-owned Company Subsidiary to the Company or to any other wholly-owned Company Subsidiary) or enter into any agreement with respect to the voting of its capital stock;

Section 5.1.4 reclassify, combine, split, subdivide or redeem, purchase or otherwise acquire, directly or indirectly, any of its capital stock, other Equity Interests or any other securities;

Section 5.1.5 (A) acquire (including, without limitation, by merger, consolidation, or acquisition of stock or assets) any interest in any person or any division thereof or any assets, other than acquisitions of assets in the ordinary course of business consistent with past practice; (B) incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, or otherwise as an accommodation become responsible for, the obligations of any person (other than a wholly-owned Company Subsidiary) for borrowed money; (C) terminate, cancel or request any material change in, or agree to any material change in, any Company Material Contract; (D) make or authorize any capital expenditure in excess of the Company’s budget as disclosed to Parent prior to the date hereof; (E) enter into any agreement or arrangement that limits or otherwise restricts the Company or any Company Subsidiary or any of their affiliates or any successor thereto or that could, after the Effective Time, limit or restrict Parent or any affiliate (including the Surviving Corporation) or any successor thereto from engaging or competing in any line of business in any geographic area; or (F) enter into or amend any contract, agreement, commitment or arrangement that, if fully performed, would not be permitted under this Section 5.1.5;

Section 5.1.6 except as may be required by contractual commitments or corporate policies with respect to severance or termination pay in existence on the date of this Agreement as disclosed in Section 3.11.2 of the Company

Disclosure Schedule: (A) increase the compensation or benefits payable or to become payable to its directors, officers or employees (except for increases in accordance with past practices in salaries or wages of employees of the Company or any Company Subsidiary which are not across-the-board increases); (B) grant any rights to severance or termination pay to, or enter into any employment or severance agreement with, any director, officer or employee of the Company or any Company Subsidiary, or establish, adopt, enter into or amend any collective bargaining, bonus, profit sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination, severance or other plan, agreement, trust, fund, policy or arrangement for the benefit of any director, officer or employee, except to the extent required by applicable Law or the terms of a collective bargaining agreement in existence on the date of this Agreement; or (C) take any affirmative action to amend or waive any performance or vesting criteria or accelerate vesting, exercisability or funding under any Company Benefit Plan, except, in each case, to the extent required by applicable Law or existing term of any such Company Benefit Plan described in the Company Disclosure Schedule;

Section 5.1.7 (A) pre-pay any long-term debt, or pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, contingent or otherwise), except in the ordinary course of business consistent with past practice and in accordance with their terms, (B) accelerate or delay collection of notes or accounts receivable in advance of or beyond their regular due dates or the dates when the same would have been collected in the ordinary course of business consistent with past practice, (C) delay or accelerate payment of any account payable or in advance of its due date or the date such liability would have been paid in the ordinary course of business consistent with past practice or (D) vary the Company’s inventory practices in any material respect from the Company’s past practices;

Section 5.1.8 make any change in accounting policies or procedures, except as required by GAAP or by a Governmental Entity;

Section 5.1.9 waive, release, assign, settle or compromise any material claims, or any material litigation or arbitration;

Section 5.1.10 make or change any election in respect of Taxes, adopt or change any material accounting method in respect of Taxes, enter into any tax allocation agreement, tax sharing agreement, tax indemnity agreement or closing agreement, settle or compromise any claim, notice, audit report or assessment in respect of Taxes, or consent to any extension or waiver of the limitation period applicable to any claim or assessment in respect of Taxes;

Section 5.1.11 enter into any new material line of business;

Section 5.1.12 modify, amend or terminate, or waive, release or assign any material rights or claims with respect to any confidentiality or standstill agreement to which the Company is a party;

Section 5.1.13 write up, write down or write off the book value of any assets, individually or in the aggregate, for the Company and the Company Subsidiaries taken as a whole, in excess of $175,000, except for depreciation and amortization in accordance with GAAP consistently applied;

Section 5.1.14 take any action to exempt, or make not subject to, (A) the provisions of Section 203 of the DGCL, or (B) any other state takeover law or state law that purports to limit or restrict business combinations or the ability to acquire or vote shares, any person (other than Parent, the Purchaser and any Parent Subsidiary) or any action taken thereby, which person or action would have otherwise been subject to the restrictive provisions thereof and not exempt therefrom;

Section 5.1.15 take any action that is intended or would reasonably be expected to result in any of the Tender Offer Conditions or the conditions to the Merger set forth in Article 6 not being satisfied;

Section 5.1.16 acquire, or agree to acquire, from any Person, any Intellectual Property, except in the ordinary course of business consistent with past practice (including in size and nature);

Section 5.1.17 commence any litigation, suit, claim, action, proceeding or investigation;

Section 5.1.18 fail to make in a timely manner any filings with the SEC required under the Securities Act or the Exchange Act or the rules and regulations promulgated thereunder;

Section 5.1.19 adopt a stockholder rights plan or agreement or “poison pill”; or

Section 5.1.20 authorize or enter into any agreement or otherwise make any commitment to do any of the foregoing.

Section 5.2 Cooperation. The Company and Parent shall coordinate and cooperate in connection with (A) the preparation of the Offer Documents, the Schedule 14D-9 and the Proxy Statement (if any), (B) determining whether any action by or in respect of, or filing with, any Governmental Entity is required, or any actions, consents, approvals or waivers are required to be obtained from parties to any Company Material Contracts in connection with the consummation of the Merger and (C) seeking any such actions, consents, approvals or waivers or making any such filings, furnishing information required in connection therewith or with the Offer Documents, the Schedule 14D-9 and the Proxy Statement (if any) and timely seeking to obtain any such actions, consents, approvals or waivers. In addition, Parent and the Company will immediately collaborate to formulate an appropriate roadmap for research and development prior to the Effective Time with the goal of preparing for integrated operational and sales channels.

Section 5.3 Access to Information; Confidentiality.

Section 5.3.1 From the date of this Agreement to the Effective Time the Company shall, and shall cause each Company Subsidiary and each of their respective directors, officers, employees, accountants, consultants, legal counsel, advisors, and agents and other representatives, (collectively, “Company Representatives”) to: (A) provide to Parent and the Purchaser and their respective officers, directors, employees, accountants, consultants, legal counsel, advisors, agents and other representatives (collectively, the “Parent Representatives”) access at reasonable times upon prior notice to the officers, employees, agents, properties, offices and other facilities of such party and to the books and records thereof and (B) furnish as promptly as reasonably practicable such information concerning the business,

properties, contracts, assets, liabilities, personnel and other aspects of such party as Parent, the Purchaser or the Parent Representatives may reasonably request. No investigation conducted pursuant to this Section 5.3.1 shall affect or be deemed to modify or limit any representation or warranty made in this Agreement.

Section 5.3.2 The parties shall comply with, and shall cause their respective Representatives to comply with, all of their respective obligations under the Confidentiality Agreement previously executed by the Company and Parent dated September 2, 2004 (the “Confidentiality Agreement”).

Section 5.4 No Solicitation of Transactions.

Section 5.4.1 The Company agrees that, prior to the Effective Time, it shall not, and shall not authorize or permit any Company Subsidiary or Company Representative, directly or indirectly, to take any action to (A) encourage (including by way of furnishing non-public information), solicit, initiate or facilitate any Acquisition Proposal, (B) enter into any agreement with respect to any Acquisition Proposal or enter into any agreement, arrangement or understanding requiring it to abandon, terminate or fail to consummate the Offer or the Merger or any other transaction contemplated by this Agreement or (C) participate in any way in discussions or negotiations with, or furnish any information to, any person in connection with, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or could reasonably be expected to lead to, any Acquisition Proposal; provided, however, that if, at any time prior to the consummation of the Offer, the Company Board determines in good faith, after receiving advice of outside counsel, that it would otherwise constitute a breach of its fiduciary duties to stockholders, the Company may, in response to a Superior Proposal and subject to the Company’s compliance with Section 5.3.2, (1) furnish information with respect to the Company and the Company Subsidiaries to the person making such Superior Proposal pursuant to a customary confidentiality agreement (which will include customary standstill provisions) the benefits of the terms of which are no more favorable to the other party to such confidentiality agreement than those in the Confidential Agreement and (2) participate in discussions with respect to such Superior Proposal. Upon

execution of this Agreement, the Company, its affiliates and their respective officers, directors, employees, representatives legal counsel, advisors and agents shall cease immediately and cause to be terminated any and all existing discussions or negotiations with any parties conducted heretofore with respect to an Acquisition Proposal and promptly request that all confidential information with respect thereto furnished on behalf of the Company be returned.

Section 5.4.2 The Company shall immediately advise Parent of any inquiry received by it relating to any potential Acquisition Proposal and of the terms of any proposal or inquiry, including the identity of the person and its affiliates making the same, that it may receive in respect of any such potential Acquisition Proposal, or of any information requested from it (including copies of any such information actually provided) or of any negotiations or discussions being sought to be initiated with it, shall furnish to the Purchaser a copy of any such proposal or inquiry, if it is in writing, or a written summary of any such proposal or inquiry (as well as of any additional information received by the Company with respect to an Acquisition Proposal), if it is not in writing, and shall keep Parent fully informed on a current basis with respect to the status of any such negotiations or discussions and any developments with respect to the foregoing.

Section 5.4.3 Neither the Company Board nor any committee thereof shall (A) withdraw or modify, or propose publicly to withdraw or modify, in a manner adverse to Parent, the approval or recommendation by the Company Board or such committee of the Offer and the Merger and the adoption and approval of this Agreement, (B) approve or recommend, or propose publicly to approve or recommend, any Acquisition Proposal other than the Offer and the Merger or (C) cause the Company to enter into any letter of intent, agreement in principle, acquisition agreement or other agreement related to any Acquisition Proposal other than the Offer and the Merger. Nothing contained in this Section 5.4.3 shall prohibit the Company or the Company Board (1) from taking and disclosing to its stockholders a position contemplated by Rule 14d-9 or Rule 14e-2(a) promulgated under the Exchange Act with regard to an Acquisition Proposal (provided that the Company Board shall not withdraw or modify in an adverse manner its approval or recommendation of the Offer,

the Merger or this Agreement except as set forth below) or (2) in the event that a Superior Proposal is made and the Company Board determines in good faith, after receiving advice of outside counsel, that it would otherwise constitute a breach of its fiduciary duty to stockholders, from withdrawing or modifying its recommendation of the Offer and the Merger prior to consummation of the Offer and no earlier than two (2) business days following the day of delivery of written notice to Parent of its intention to do so, so long as the Company continues to comply with all other provisions of this Agreement.

Section 5.5 Appropriate Action; Consents; Filings.

Section 5.5.1 The Company and Parent shall use their commercially reasonable efforts to (A) take, or cause to be taken, all appropriate action and do, or cause to be done, all things necessary, proper or advisable under applicable Law or otherwise to consummate and make effective the transactions contemplated by this Agreement and each Ancillary Agreement as promptly as practicable, (B) obtain from any Governmental Entities any consents, licenses, permits, waivers, approvals, authorizations or orders required or advisable to be obtained or made by Parent, the Purchaser or the Company or any of their respective subsidiaries, or to avoid any action or proceeding by any Governmental Entity, in connection with the authorization, execution and delivery of this Agreement and each Ancillary Agreement and the consummation of the transactions contemplated herein and therein, including without limitation the Offer and the Merger and (C) make all necessary filings, and thereafter make any other required submissions, with respect to this Agreement and each Ancillary Agreement, the Offer and the Merger required under (1) the Exchange Act, and any other applicable federal or state securities Laws, and (2) any other applicable Law; provided, that the Company and Parent shall cooperate with each other in connection with (X) preparing and filing of the Offer Documents, the Schedule 14D-9, Proxy Statement (if any) and any Other Filings, (Y) determining whether any action by or in respect of, or filing with, any Governmental Entity is required, in connection with the consummation of the Offer or the Merger and (Z) seeking any such actions, consents, approvals or waivers or making any such filings, including providing copies of all filed documents to the non-filing party and its advisors prior to filing and, if

requested, accepting all reasonable additions, deletions or changes suggested in connection therewith; and provided, further, that nothing in this Section 5.5.1 shall require Parent or the Company to agree to (I) the imposition of material conditions, (II) the requirement of divestiture of material assets or property or (III) the requirement of expenditure of money by Parent or the Company to a third party (other than a Governmental Entity) in exchange for any such consent. The Company and Parent shall furnish to each other all information required for any application or other filing under the rules and regulations of any applicable Law (including all information) in connection with the transactions contemplated by this Agreement and each Ancillary Agreement.

Section 5.5.2 The Company and Parent shall give (or shall cause their respective subsidiaries to give) any notices to third parties, and use, and cause their respective subsidiaries to use, all reasonable efforts to obtain any third party consents, (A) necessary, proper or advisable to consummate the transactions contemplated in this Agreement and each Ancillary Agreement, (B) required to be disclosed in the Company Disclosure Schedule, (C) required to prevent a Company Material Adverse Effect from occurring prior to or after the Effective Time or (D) otherwise referenced in paragraph I of Annex I; provided, however that the Company and Parent shall coordinate and cooperate in determining whether any actions, consents, approvals or waivers are required to be obtained from parties to any Company Material Contracts in connection with consummation of the Offer or the Merger and seeking any such actions, consents, approvals or waivers. In the event that either party shall fail to obtain any third-party consent described in the first sentence of this Section 5.5.2, such party shall use all reasonable efforts, and shall take any such actions reasonably requested by the other party hereto, to minimize any adverse effect upon the Company and Parent, their respective subsidiaries, and their respective businesses resulting, or which could reasonably be expected to result after the consummation of the Offer or the Effective Time, from the failure to obtain such consent.

Section 5.5.3 From the date of this Agreement until the Effective Time, the Company shall promptly notify Parent in writing of any pending or, to the Company’s knowledge, threatened action, suit, arbitration or other proceeding or

investigation by any Governmental Entity or any other person (A) challenging or seeking material damages in connection with the Offer, the Merger or any other transaction contemplated by this Agreement or any Ancillary Agreement or (B) seeking to restrain or prohibit the consummation of the Offer, the Merger or any other transaction contemplated by this Agreement or any Ancillary Agreement or otherwise limit the right of Parent, the Purchaser or any Parent Subsidiary to own or operate all or any portion of the businesses or assets of the Company or any Company Subsidiary.

Section 5.6 Certain Notices. From and after the date of this Agreement until the Effective Time, each party hereto shall promptly notify the other party hereto of (A) the occurrence, or non-occurrence, of any event that would be likely to cause any condition to the obligations of any party to effect the Offer, Merger or any other transaction contemplated by this Agreement or any Ancillary Agreement not to be satisfied or (B) the failure of the Company or Parent, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it pursuant to this Agreement which would reasonably be expected to result in any condition to the obligations of any party to effect the Offer, the Merger or any other transaction contemplated by this Agreement or any Ancillary Agreement not to be satisfied; provided, however, that the delivery of any notice pursuant to this Section 5.6 shall not cure any breach of any representation or warranty contained in this Agreement or otherwise limit or affect the remedies available hereunder to the party receiving such notice.

Section 5.7 Public Announcements. Parent and the Company shall consult with each other before issuing any press release or otherwise making any public statements with respect to the Merger and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by applicable Law or the Exchange.

Section 5.8 Employee Benefit Matters. Parent and the Purchaser shall employ or continue to employ such employees as determined by Parent, the Purchaser and the Company by the Effective Time (the “Transferred Employees”), with the understanding that such employment shall be at will for all employees other than those who have entered into employment agreements, if any, with Parent and/or the Purchaser. At Parent’s request, the Company Board shall adopt resolutions terminating, effective immediately prior to the Effective

Time, any Company Benefit Plan which is intended to meet the requirements of Section 401(k) of the Code (each such Company Benefit Plan, a “401(k) Plan”). At the Effective Time, the Company shall provide Parent with (i) executed resolutions of the Company Board authorizing such 401(k) Plan termination in a form acceptable to Parent and (ii) an executed amendment to each such 401(k) Plan sufficient as determined in Parent’s discretion to assure compliance with all applicable requirements of the Code and regulations thereunder. Each Transferred Employee shall, as of the Effective Time, become fully vested in his or her account balance under the Company’s 401(k) Plan. Parent and the Purchaser shall, to the extent permissible under applicable laws and in its sole discretion, either take whatever actions are reasonably necessary or appropriate to effect a trust-to-trust transfer of the accounts of Transferred Employees in the Company’s 401(k) Plan into a plan designated by Parent or the Purchaser to accept the transferred accounts or take whatever actions are reasonably necessary or appropriate in order for such plan to accept the transferred accounts by rollover of eligible rollover distributions. With respect to such Transferred Employees, Parent or the Purchaser (or the Company) shall (i) cause any Transferred Employee that was covered under a medical plan, dental or vision plan, disability benefit plan or life insurance plan (collectively the “Benefit Plans”) immediately prior to the Effective Time to be covered on the Effective Time by the same or a comparable employee benefit plan, program or arrangement maintained by Parent or the Purchaser, without limitations based upon pre-existing conditions (and the amount of any expenses incurred prior to the Effective Time under the Benefit Plans shall be credited toward satisfaction of deductibles under the benefit plans of Parent), (ii) cause the Surviving Corporation to recognize all service completed by the Transferred Employees for purposes of determining eligibility service and vesting service under any employee benefit plan, program or arrangement maintained by Parent or any Parent Subsidiary (collectively, “Parent Benefit Plans”) for their employees on or after the Effective Time and (iii) cause the Surviving Corporation to assume responsibility for the vacation time and sick leave benefits due to the Transferred Employees as of the Effective Time. Prior to the Effective Time, the Company Board, or an appropriate committee of non-employee directors thereof, shall adopt a resolution consistent with the interpretive guidance of the SEC so that the disposition by any officer or director of the Company who is a covered person of the Company for purposes of Section 16 of the Exchange Act and the rules and regulations thereunder (“Section 16”) of Shares or options to acquire Shares pursuant to this Agreement and the Merger shall be an exempt transaction for purposes of Section 16.

Section 5.9 FIRPTA Certificate. The Company shall deliver to Parent, as agent for the Company, a form of notice to the IRS in accordance with the requirements of Treasury Regulation Section 1.897-2(h)(2) and in form and substance reasonably acceptable to Parent along with written authorization for Parent to deliver such notice form to the IRS on behalf of the Company upon the consummation of the Merger.

Section 5.10 Indemnification of Directors and Officers.

Section 5.10.1 Parent and the Surviving Corporation agree that the indemnification obligations set forth in the Company Certificate and the Company Bylaws shall survive the Merger (and, prior to the Effective Time, Parent shall cause the Certificate of Incorporation and Bylaws of the Purchaser to reflect such provisions) and shall not be amended, repealed or otherwise modified for a period of six years after the Effective Time in any manner that would adversely affect the rights thereunder of any individual who on or prior to the Effective Time was a director, officer, trustee, fiduciary, employee or agent of the Company or any Company Subsidiary or who served at the request of the Company or any Company Subsidiary as a director, officer, trustee, partner, fiduciary, employee or agent of another corporation, partnership, joint venture, trust, pension or other employee benefit plan or enterprise, unless such amendment or modification is required by Law. The individuals to which this Section 5.10.1 applies shall be intended third party beneficiaries of this Section 5.10.1.

Section 5.10.2 For six years from the Effective Time, the Surviving Corporation shall provide to the Company’s directors and officers (as of the date hereof and as of the Effective Time) an insurance and indemnification policy that provides coverage for events occurring prior to the Effective Time (the “D&O Insurance”) that is no less favorable than the Company’s existing policy (true and complete copies which have been previously provided to Parent) or, if substantially equivalent insurance coverage is unavailable, the best available coverage; provided, however, that the Surviving Corporation shall not be required to pay an aggregate premium for the six years of D&O Insurance in excess of $250,000. The provisions of the immediately preceding sentence shall be deemed to have been satisfied if prepaid policies have been obtained prior to the Effective Time for purposes of this Section 5.10.2, which policies

provide such directors and officers with coverage for an aggregate period of six years with respect to claims arising from facts or events that occurred on or before the Effective Time, including, without limitation, in respect of the transactions contemplated by this Agreement. If such prepaid policies have been obtained prior to the Effective Time, Parent shall, and shall cause the Surviving Corporation to, maintain such policies in full force and effect, and continue to honor the obligations thereunder. The directors and officers to whom this Section 5.10.2 applies shall be intended third party beneficiaries of this Section 5.10.2).

Section 5.11 Warrants. The Company shall take all action necessary to cause the Warrants to be terminated at or prior to the Effective Time.

Article 6

Conditions to Consummation of the Merger

Section 6.1 Conditions to Obligations of Each Party. The respective obligations of each party to consummate the Merger shall be subject to the satisfaction at or prior to the Effective Time of each of the following conditions:

Section 6.1.1 This Agreement shall have been approved and adopted by the requisite vote of the stockholders of the Company, if required by applicable Law.

Section 6.1.2 The Purchaser shall have accepted for payment and paid for Shares in an amount sufficient to meet the Minimum Condition and otherwise pursuant to the Offer in accordance with the terms hereof.

Section 6.1.3 The consummation of the Merger shall not be restrained, enjoined or prohibited by any order, judgment, decree, injunction or ruling (whether temporary, preliminary or permanent) of a court of competent jurisdiction or any other Governmental Entity, and there shall not have been any statute, rule or regulation enacted, promulgated or deemed applicable to the Merger by any Governmental Entity which prevents the consummation of the Merger or has the effect of making the purchase of Shares illegal.

Article 7

Termination, Amendment and Waiver

Section 7.1 Termination. This Agreement may be terminated, and the Merger contemplated hereby may be abandoned, at any time prior to the Effective Time by action taken or authorized by the Board of Directors of the terminating party or parties, whether before or after approval of the Merger by the stockholders of the Company:

Section 7.1.1 By mutual written consent of Parent and the Company, by action of their respective Boards of Directors;

Section 7.1.2 By the Company if Parent or the Purchaser shall not have accepted for payment and paid for Shares pursuant to the Offer in accordance with the terms hereof and thereof on or before December 31, 2005; provided, however, that the Company may not terminate this Agreement pursuant to this Section 7.1.2 if the Company shall have (1) failed to fulfill any material obligation under this Agreement, which failure has been the cause of, or resulted in, the failure of any condition to the Offer to have been satisfied on or before such date, or (2) otherwise materially breached this Agreement;

Section 7.1.3 By either the Company or Parent if the Offer is terminated or withdrawn pursuant to its terms without any Shares being purchased thereunder; provided, however, that neither the Company nor Parent may terminate this Agreement pursuant to this Section 7.1.3 if such party shall have materially breached this Agreement;

Section 7.1.4 By either the Company or Parent if any court of competent jurisdiction or other Governmental Entity shall have issued an order, decree or ruling or taken any other action permanently restraining, enjoining or otherwise prohibiting (A) the acceptance for payment of, or payment for, Shares pursuant to the Offer or (B) the Merger, and such order, decree, ruling or other action shall have become final and nonappealable (which order, decree, ruling or other action the party seeking to terminate this Agreement shall have used its reasonable efforts to resist, resolve or lift, as applicable, subject to the provisions of Section 5.5);

Section 7.1.5 By Parent prior to the purchase of Shares pursuant to the Offer, if (A) the Company Board shall have withdrawn or adversely modified (including by amendment to the Schedule 14D-9), or failed upon Parent’s request to reconfirm, its approval or recommendation of the Offer, the Merger or this Agreement (or determined to do so); (B) the Company Board shall have determined to recommend to the Company’s stockholders that they approve an Acquisition Proposal other than the Offer and the Merger or shall have determined to accept a Superior Proposal; (C) a tender offer or exchange offer that, if successful, would result in any person or group becoming a beneficial owner of 20% or more of the outstanding Shares is commenced (other than by Parent or an affiliate of Parent) and the Company Board fails to recommend that the Company’s stockholders not tender their Shares in such tender or exchange offer; (D) any person (other than Parent or an affiliate of Parent) or group becomes the beneficial owner of 20% or more of the outstanding Shares; or (E) the Company shall have furnished or caused to be furnished confidential information or data to, or engaged in negotiations or discussions with, another person other than pursuant to Section 5.4.1;

Section 7.1.6 By the Company, if the Company Board determines to accept a Superior Proposal, but only after the Company (A) provides Parent with not less than two (2) business days’ notice of its determination to accept such Superior Proposal, including all terms thereof, (B) within the not less than two (2) business day period referred, the Company has and has caused its financial and legal advisors to, negotiate with Parent to make such adjustments in the terms and conditions of this Agreement with the goal of enabling the Company to proceed with the transactions contemplated hereby, (C) fulfills its obligations under Section 7.2 hereof upon such termination (provided that the Company’s right to terminate this Agreement under this Section 7.1.6 shall not be available if the Company is then in breach of Section 5.4) and (D) following such two (2) business day period, the Company Board determines in good faith (i) that such proposal still constitutes a Superior Proposal (after giving effect to all of the concessions which may be offered by Parent pursuant to clause (B) above) and (ii) that, after receiving advice of outside counsel, it would constitute a breach of its fiduciary duties not to accept such Superior Proposal; or

Section 7.1.7 By Parent, prior to the purchase of Shares pursuant to the Offer, if the Minimum Condition shall not have been satisfied by the Expiration Date of the Offer and on or prior to such Expiration Date the Company shall have received an Acquisition Proposal.

Section 7.2 Effect of Termination.

Section 7.2.1 In the event of termination of this Agreement by either the Company or Parent as provided in Section 7.1, this Agreement shall forthwith become void and there shall be no liability or obligation on the part of Parent or the Company or their respective subsidiaries, officers or directors except (A) with respect to Section 2.8, Section 5.3, Section 5.7, this Section 7.2 and Article 8 and (B) with respect to any liabilities or damages incurred or suffered by a party as a result of the breach by another party of any of its representations, warranties, covenants or other agreements set forth in this Agreement or any Ancillary Agreement.

Section 7.2.2 Intentionally Omitted

Section 7.2.3 Intentionally Omitted.

Section 7.2.4 Termination Fee. (A) In the event that this Agreement is terminated pursuant to Section 7.1.5 or 7.1.6, then the Company shall pay to Parent immediately prior to such termination, in the case of a termination by the Company, or within two business days thereafter, in the case of a termination by Parent, a termination fee of $848,000; and (B) in the event that this Agreement is terminated pursuant to Section 7.1.7 and the Company either enters into a definitive agreement relating to or consummates such Acquisition Proposal (with, for purposes of this Section 7.2.4, all of the references to 20% changed to “at least 50%”) within 12 months of such termination, then the Company shall pay Parent, no later than two business days after the earlier to occur of (1) the date of entrance by the Company or any Company Subsidiary into a definitive agreement concerning a transaction that constitutes an Acquisition Proposal and (2) the date the Company consummates such Acquisition Proposal (provided that if any agreement referred to in clauses (1) and (2) of this sentence is entered into by the Company or any Company Subsidiary within 12 months of the termination of this Agreement, or if there is no such agreement with respect to a

purchase contemplated by clause (2), any tender, exchange or other offer or arrangement for the Company’s voting securities is first publicly announced within 12 months of such termination of this Agreement), then in either such case, a termination fee of $848,000.

Section 7.2.5 All payments under this Section 7.2 shall be made by wire transfer of immediately available funds to an account designated by the party entitled to receive payment.

Section 7.3 Amendment. Subject to Section 1.3.3 hereof, this Agreement may be amended by the Company, Parent and the Purchaser by action taken by or on behalf of their respective Boards of Directors at any time prior to the Effective Time; provided, however, that, after approval of the Merger by the Company’s stockholders, no amendment may be made which, by Law or in accordance with the rules of any relevant stock exchange, requires further approval by such stockholders; and provided, further, that after any approval of this Agreement by the Company’s stockholders, there may not be any extension or waiver of this Agreement which decreases the Merger Consideration or which adversely affects the rights of the Company’s stockholders hereunder without the approval of such stockholders. This Agreement may not be amended except by an instrument in writing signed by the parties hereto.

Section 7.4 Waiver. Subject to Section 1.3.3, at any time prior to the Effective Time, Parent and Purchaser, on the one hand, and the Company, on the other hand, may (A) extend the time for the performance of any of the obligations or other acts of the other, (B) waive any inaccuracies in the representations and warranties of the other contained herein or in any document delivered pursuant hereto and (C) waive compliance by the other with any of the agreements or conditions contained herein. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the party or parties to be bound thereby, but such extension or waiver or failure to insist on strict compliance with an obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure.

Article 8

General Provisions

Section 8.1 Non-Survival of Representations and Warranties. None of the representations and warranties in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time. This Section 8.1 shall not limit any covenant or agreement of the parties which by its terms contemplates performance after the Effective Time.

Section 8.2 Fees and Expenses. All expenses incurred by the parties hereto shall be borne solely and entirely by the party which has incurred the same, except printing, reproduction, mailing and other similar costs related to the Schedule TO and Schedule 14D-9, which will be split equally.

Section 8.3 Notices. Any notices or other communications required or permitted under, or otherwise given in connection with this Agreement, shall be in writing and shall be deemed to have been duly given when delivered in person or upon electronic confirmation of receipt when transmitted by facsimile transmission (but only if followed by transmittal by national overnight courier or hand for delivery on the next business day) or on receipt after dispatch by registered or certified mail, postage prepaid, addressed, or on the next business day if transmitted by national overnight courier, in each case as follows:

If to Parent or the Purchaser, addressed to it at:

Xyratex Ltd

Langstone Road

Havant

Hampshire PO9 1SA

United Kingdom

Fax: 44 23 9245 3654

Attention: Sundeep Bains

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

Latham & Watkins

505 Montgomery Street, Suite 2000

San Francisco, California 94111

Fax: (415) 395-8095

Attention: Tad J. Freese

If to the Company, addressed to it at:

nStor Technologies, Inc.

West Palm Beach, Florida 33401

Fax: (561) 640-3160

Attention: Jack Jaiven

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

Greenberg Traurig, P.A.

401 E. Las Olas Blvd., Suite 401

Ft. Lauderdale, Florida 33301

Fax: (954) 765-1477

Attention: Donn Beloff

Section 8.4 Certain Definitions. For purposes of this Agreement, the term:

“affiliate” means a person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the first-mentioned person;

“Acquisition Proposal” means any offer or proposal concerning any (A) merger, consolidation, other business combination or similar transaction involving the Company or any Company Subsidiary, (B) sale, lease or other disposition directly or indirectly by merger, consolidation, business combination, share exchange, joint venture or otherwise, of assets of the Company or any Company Subsidiary representing 20% or more of the consolidated assets, revenues or net income of the Company and the Company Subsidiaries, (C) issuance or sale or other disposition (including by way of merger, consolidation, business combination, share exchange, joint venture or similar transaction) of Equity Interests representing 20% or more of the voting power of the Company, (D) transaction in which any person will acquire beneficial ownership or the right to acquire beneficial ownership or any group has been formed which beneficially owns or has the right to acquire beneficial ownership of, Equity Interests representing 20% or more of the voting power of the Company or (E) any combination of the foregoing (other than the Offer and the Merger).

“Ancillary Agreements” means the Non-Competition Agreements, the License Agreement, the Promissory Note and the Indemnification and Litigation Support Agreement between the Company, nStor Corporation and H. Irwin Levy.

“beneficial ownership” (and related terms such as “beneficially owned” or “beneficial owner”) has the meaning set forth in Rule 13d-3 under the Exchange Act.

“Blue Sky Laws” means any state securities, “blue sky” or takeover law.

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

“Company Material Adverse Effect” means any effect on, change affecting, or condition having an effect on, the Company or the Company Subsidiaries that is, or would reasonably be expected to (a) prevent the Company from consummating the transactions contemplated by this Agreement or (b) result in actual damages or a diminution in the value of the Company and the Company Subsidiaries, taken as a whole, in excess of $1 million.

“contracts” means any of the agreements, contracts, leases, powers of attorney, notes, loans, evidence of indebtedness, purchase orders, letters of credit, settlement agreements, franchise agreements, undertakings, covenants not to compete, employment agreements, licenses, instruments, obligations, commitments, understandings, policies, purchase and sales orders, quotations and other executory commitments to which the Company or any Company Subsidiary is a party or to which any of the assets of the Company or any Company Subsidiary are subject, whether oral or written, express or implied.

“control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly or as trustee or executor, of the power to direct or cause the direction of the management or policies of a person, whether through the ownership of stock or as trustee or executor, by contract or credit arrangement or otherwise.

“Environmental Laws” means any federal, state, local or foreign statute, law, ordinance, regulation, rule, code, treaty, writ or order and any enforceable judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree, judgment, stipulation, injunction, permit, authorization, policy, opinion, or agency requirement, in each case having the force and effect of law, relating to the pollution, protection, investigation or restoration of the environment, health and safety as affected by the environment or natural resources, including, without limitation, those relating to the use, handling, presence, transportation, treatment, storage, disposal, release, threatened release or discharge of Hazardous Materials or noise, odor, wetlands, pollution or contamination, including but not limited to CERCLA, the Occupational Safety and Health Act, as amended, and any regulations promulgated thereunder, and the Resource Conservation and Recovery Act, as amended, and any regulations promulgated thereunder.

“Environmental Permits” means any permit, approval, identification number, license and other authorization required under any applicable Environmental Law.

“Equity Interest” means any share, capital stock, partnership, member or similar interest in any entity, and any option, warrant, right or security convertible, exchangeable or exercisable therefor.

“ERISA Affiliate” means any entity, trade or business that is a member of a group described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that includes the Company or any Company Subsidiary, or that is a member of the same “controlled group” as the Company or any Company Subsidiary pursuant to Section 4001(a)(14) of ERISA.

“Exchange” means the American Stock Exchange.

“Expenses” includes all reasonable out-of-pocket expenses (including, without limitation, all fees and expenses of counsel, accountants, investment bankers, experts and consultants to a party hereto and its affiliates) incurred by a party or on its behalf in connection with or related to the authorization, preparation, negotiation, execution and performance of this Agreement and the transactions contemplated hereby, including the preparation, printing, filing and mailing of the Offer Documents, Schedule 14D-9 and Proxy Statement and any solicitation of stockholder approvals and all other matters related to the transactions contemplated by this Agreement.

“GAAP” means generally accepted accounting principles as applied in the United States.

“Governmental Entity” means any domestic or foreign governmental, administrative, judicial or regulatory authority.

“group” is defined as in the Exchange Act, except where the context otherwise requires.

“Hazardous Materials” means (A) any petroleum, petroleum products, byproducts or breakdown products, radioactive materials, asbestos-containing materials or polychlorinated biphenyls or (B) any chemical, material or other substance defined or regulated as toxic or hazardous or as a pollutant or contaminant or waste under any applicable Environmental Law.

“Intellectual Property” means all (a) U.S. and foreign patents and patent applications and disclosures relating thereto (and any patents that issue as a result of those patent applications), and any renewals, reissues, reexaminations, extensions, continuations, continuations-in-part, divisions and substitutions relating to any of the patents and patent applications, as well as all related foreign patent and patent applications that are counterparts to such patents and patent applications (collectively, “Patents”), (b) U.S. and foreign trademarks, service marks, trade dress, logos, trade names, service names and corporate names, all whether

registered or unregistered, and the goodwill associated therewith and registrations and applications for registration thereof (collectively, “Trademarks”), (c) U.S. and foreign copyrights and rights under copyrights, including moral rights, and registrations and applications for registration thereof (collectively, “Copyrights”), (d) U.S. and foreign mask work rights and registrations and applications for registration thereof (collectively, “Mask Works”), (e) confidential information and proprietary information, including any formula, pattern, compilation, program, device, method, technique, know how, processes, formulae, industrial models, designs, specifications, schematics, data sheets, technology, methodologies, firmware, development tools, flow charts, annotations, data bases and data collections, that (1) derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use, and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy (collectively, “Trade Secrets”), (f) URL and domain name registrations, (g) inventions (whether or not patentable) and improvements thereto, invention disclosures and all related technical information, manufacturing, engineering and technical drawings, know how and, in connection with any of the foregoing, all documents, disks, records, reports, files and other media on which any of the foregoing is stored, and (h) works of authorship (whether or not registered or copyrightable), (i) Software and (j) any other intellectual property or proprietary rights now known or hereafter recognized in any jurisdiction.

“IRS” means the United States Internal Revenue Service.

“knowledge” means, with respect to any person, the actual knowledge of such person or, if applicable, of any executive officer or chairman of the board of directors of such person, following reasonable inquiry.

“Law” means foreign or domestic law, statute, code, ordinance, rule, regulation, order, judgment, writ, stipulation, award, injunction, decree or arbitration award or finding.

“Other Filings” means all filings made by, or required to be made by, the Company with the SEC other than the Schedule 14D-9 and the Proxy Statement.

“Parent Material Adverse Effect” means any effect on, change affecting, or condition having an effect on, Parent or the Parent Subsidiaries that is, or would reasonably be expected to be, materially adverse to (a) the business, financial condition or results of operations

of Parent and the Parent Subsidiaries, taken as a whole, except, in each case, for any such effect, change or condition resulting from or arising out of (i) changes or developments in the principal industry in which Parent operates generally, which changes or developments do not disproportionately affect Parent relative to other participants in such industry in any material respect, (ii) changes or developments in financial or securities markets in the United States or the economy in the United States which changes do not disproportionately affect Parent in any material respect or (iii) any change in Parent’s stock price or trading volume, in and of itself, or (b) the ability of Parent to consummate the transactions contemplated by this Agreement.

“person” means an individual, corporation, limited liability company, partnership, association, trust, unincorporated organization, other entity or group.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Software” means individually each, and collectively all, of the computer programs, including interfaces and any embedded software programs or applications, owned or licensed to the Company or otherwise included as an asset of the Company, including as to each program, the processes and routines used in the processing of data, the object code, source code (as to third party source code, when rights to the source code may be obtained), tapes, disks, and all improvements, modifications, enhancements, versions and releases relating thereto.

“subsidiary” or “subsidiaries” of Parent, the Company, the Surviving Corporation or any other person means any corporation, partnership, joint venture or other legal entity of which Parent, the Company, the Surviving Corporation or such other person, as the case may be (either alone or through or together with any other subsidiary), owns, directly or indirectly, a majority of the stock or other equity interests the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity.

“Superior Proposal” means a bona fide Acquisition Proposal (but with all of the percentages included in the definition of such term raised to 50.01% for purposes of this definition) made by a third party which was not solicited by the Company, any Company Subsidiary, any Company Representatives or any other Company affiliates and which, in the good faith judgment of the Company Board, taking into account, to the extent deemed

appropriate by the Company Board, the various legal, financial and regulatory aspects of the proposal and the person making such proposal (A) if accepted, is reasonably likely to be consummated, (B) if consummated would, after receiving advice of the Company’s financial advisor, result in a transaction that is more favorable to the Company’s stockholders, from a financial point of view, than the Offer and the Merger as the same may be proposed by Parent to be amended pursuant to clause (B) of Section 7.1.6 and (C) is not subject to any financing condition.

“Taxes” means any federal, state, local or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital stock, franchise, profits, withholding, social security, 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, including any interest, penalty, or addition thereto, whether disputed or not.

“Tax Liability” means a liability for any Tax.

“Tax Returns” means 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.

Section 8.5 Terms Defined Elsewhere. The following terms are defined elsewhere in this Agreement, as indicated below:


*“401(k) Plan”*		Section 5.8

*“Adverse Matter”*		Section 1.3.3

*“Agreement”*		Preamble

*“Benefit Plans”*		Section 5.8

*“business day”*		Section 1.1.2

*“CERCLA”*		Section 3.14.4

*“Certificate of Merger”*		Section 2.2

*“Certificates”*		Section 2.11.1


*“Company”*		Preamble

*“Company Benefit Plan”*		Section 3.10.1

*“Company Board”*		Recitals

*“Company Bylaws”*		Section 3.2

*“Company Common Stock”*		Recitals

*“Company Certificate”*		Section 3.2

*“Company Disclosure Schedule”*		Article 3

*“Company Financial Advisor”*		Section 1.2.1

*“Company Form 10-K”*		Section 3.7.3

*“Company Inbound License* *Agreements”*		Section 3.15.9

*“Company Material Contract”*		Section 3.12

*“Company Options”*		Section 2.7

*“Company Outbound License* *Agreements”*		Section 3.15.9

*“Company Owned Copyrights*		Section 3.15.4

*“Company Owned Materials”*		Section 3.15.13

*“Company Permits”*		Section 3.6

*“Company Preferred Stock”*		Section 3.3

*“Company Representatives”*		Section 5.3.1

*“Company SEC Filings”*		Section 3.7.1

*“Company Stock Option Plans”*		Section 2.7

*“Company Stockholders’ Meeting”*		Section 2.8.1

*“Company Subsidiary”*		Section 3.1

*“Confidentiality Agreement”*		Section 5.3.2

*“Continuing Directors”*		Section 1.3.3


*“D&O Insurance”*		Section 5.9.2

*“DGCL”*		Recitals

*“December 31, 2004 Balance Sheet”*		Section 3.7.3

*“Dissenting Shares”*		Section 2.10

*“Effective Time”*		Section 2.2

*“ERISA”*		Section 3.10

*“Exchange Act”*		Section 1.1.1

*“Expiration Date”*		Section 1.1.2

*“License Agreement”*		Recitals

*“Merger”*		Recitals

*“Merger Consideration”*		Section 2.6.1

*“Minimum Condition”*		Annex I

*“Multiemployer Plan”*		Section 3.10.3

*“Offer”*		Recitals

*“Offer Documents”*		Section 1.1.1

*“Offer Price”*		Recitals

*“Parent”*		Preamble

*“Parent Benefit Plans”*		Section 5.8

*“Parent Representatives”*		Section 5.3.1

*“Parent Subsidiary”*		Section 4.3.1

*“Paying Agent”*		Section 2.11.1

*“Promissory Note”*		Recitals

*“Proxy Statement”*		Section 2.8.1

*“Purchaser”*		Preamble

*“Purchaser Common Stock”*		Section 2.6.2


*“Schedule 14D-9”*		Section 1.2.1

*“Schedule TO”*		Section 1.1.1

*“SEC”*		Section 1.1.1

*“Section 16”*		Section 5.8

*“Shares”*		Recitals

*“Support Agreement”*		Recitals

*“Surviving Corporation”*		Section 2.1

*“Tender Offer Conditions”*		Section 1.1.1

*“Top-Up Exercise Event”*		Section 2.12.3

*“Top-Up Option”*		Section 2.12.1

*“Top-Up Option Shares”*		Section 2.12.1

*“Transferred Employees”*		Section 5.8

*“Warrants”*		Recitals

Section 8.6 Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

Section 8.7 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of Law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible.

Section 8.8 Entire Agreement. This Agreement (together with the Exhibits, Parent and Company Disclosure Schedules and the other documents delivered pursuant hereto),

each Ancillary Agreement and the Confidentiality Agreement constitute the entire agreement of the parties and supersede all prior agreements and undertakings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof and, except as otherwise expressly provided herein, are not intended to confer upon any other person any rights or remedies hereunder.

Section 8.9 Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties and any such purported assignment without such consent shall be void; provided, however, that either Parent or the Purchaser (or both) may assign its rights hereunder (including, without limitation, the right to make the Offer to purchase Shares in the Offer) to a wholly-owned subsidiary of Parent or the Purchaser but nothing shall relieve the assignor from its obligations hereunder.

Section 8.10 Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto and their respective successors and assigns, and nothing in this Agreement, express or implied, other than pursuant to Section 5.10, is intended to or shall confer upon any other person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

Section 8.11 Mutual Drafting. Each party hereto has participated in the drafting of this Agreement, which each party acknowledges is the result of extensive negotiations between the parties.

Section 8.12 Governing Law; Consent to Jurisdiction; Waiver of Trial by Jury.

Section 8.12.1 This Agreement shall be governed by, and construed in accordance with, the Laws of the State of Delaware, without regard to laws that may be applicable under conflicts of laws principles.

Section 8.12.2 Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the Court of Chancery of the State of Delaware, and any appellate court thereof, in any action or proceeding arising out of or relating to this Agreement or the agreements delivered in connection herewith or the transactions contemplated hereby or thereby or

for recognition or enforcement of any judgment relating thereto, and each of the parties hereby irrevocably and unconditionally (A) agrees not to commence any such action or proceeding except in such court, (B) agrees that any claim in respect of any such action or proceeding may be heard and determined in such court, (C) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any such action or proceeding in any such court and (D) waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 8.3. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

Section 8.12.3 EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (C) IT MAKES SUCH WAIVERS VOLUNTARILY AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.12.3.

Section 8.13 Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.

IN WITNESS WHEREOF, Parent, the Purchaser and the Company have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.


XYRATEX LTD

By:		/s/ Steve Barber
Name:		Steve Barber
Title:		Director

NORMANDY ACQUISITION CORPORATION

By:		/s/ Steve Barber
Name:		Steve Barber
Title:		President

NSTOR TECHNOLOGIES, INC.

By:		/s/ Jack Jaiven
Name:		Jack Jaiven
Title:		VP/CFO

ANNEX I

Conditions to the Offer. Notwithstanding any other provisions of the Offer, the Purchaser shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC including Rule 14e-1(c) promulgated under the Exchange Act, pay for any tendered Shares, and may terminate or, subject to the terms of the Agreement, amend the Offer, unless there shall have been validly tendered and not validly withdrawn prior to the Expiration Date that number of Shares which represents at least 88.1% of the total number of outstanding Shares on the date of purchase (the “Minimum Condition”). In addition, notwithstanding any other term of the Offer or the Agreement, the Purchaser shall not be required to accept for payment or, subject as aforesaid, pay for any tendered Shares, and may terminate or, subject to the terms of the Agreement, amend the Offer, at any time on or after the date of the Agreement and prior to the time of acceptance for payment or payment for any Shares, if any of the following events shall occur:

(A) there shall be any action taken, or any statute, rule, regulation, legislation, interpretation, judgment, order or injunction enacted, enforced, promulgated, amended, issued or deemed applicable to the Offer, by any legislative body, court, government or governmental, administrative or regulatory authority or agency, domestic or foreign, that, in the reasonable judgment of Parent, would be expected to, directly or indirectly: (i) make illegal or otherwise prohibit or materially delay consummation of the Offer or the Merger or seek to obtain material damages or make materially more costly the making of the Offer; (ii) prohibit or materially limit the ownership or operation by Parent or the Purchaser of all or any material portion of the business or assets of the Company and the Company Subsidiaries taken as a whole or compel Parent or the Purchaser to dispose of or hold separate all or any material portion of the business or assets of Parent, or of the Company and the Company Subsidiaries taken as a whole, or seek to impose any material limitation on the ability of Parent or the Purchaser to conduct its business or own such assets; (iii) impose material limitations on the ability of Parent or the Purchaser effectively to acquire, hold or exercise full rights of ownership of the Shares, including without limitation the right to vote any Shares acquired or owned by the Purchaser or Parent on all matters properly presented to the Company’s stockholders; (iv) require divestiture by Parent or the Purchaser of any Shares; (v) result in a Company Material Adverse Effect; or

(B) any change shall have occurred in the business, financial condition or results of operations of the Company or any Company Subsidiary that has, or could reasonably be expected to have, a Company Material Adverse Effect; or

(C) (i) the Company Board shall have withdrawn or adversely modified (including by amendment to the Schedule 14D-9), or failed promptly upon Parent’s request to reconfirm, its approval or recommendation of the Offer, the Merger or the Agreement; (ii) the Company Board shall have determined to recommend to the Company’s stockholders that they approve an Acquisition Proposal other than the Offer and the Merger or shall have determined to accept a Superior Proposal; (iii) a tender offer or exchange offer that, if successful, would result in any person or group becoming a beneficial owner of 20% or more of the outstanding Shares is commenced (other than by Parent or an affiliate of Parent) and the Company Board fails to recommend that the Company’s stockholders not tender their Shares in such tender or exchange offer; (iv) any person (other than Parent or an affiliate of Parent) or group becomes the beneficial owner of 20% or more of the outstanding Shares; or (v) the Company shall have furnished or caused to be furnished confidential information or data to, or engaged in negotiations or discussions with, another person other than pursuant to Section 5.4.1.

(D) the Company, Parent and the Purchaser shall have reached an agreement that the Offer or the Agreement be terminated, or the Agreement shall have been terminated in accordance with its terms; or

(E) (i) any of the representations and warranties of the Company contained in the Agreement that are qualified by reference to a Company Material Adverse Effect shall not be true when made or at any time prior to the consummation of the Offer as if made at and as of such time (except for representations and warranties which speak as of a particular date, shall not be true as of such particular date), or (ii) any of the representations and warranties of the Company contained in the Agreement that are not so qualified shall not be true when made or at any time prior to the consummation of the Offer as if made at and as of such time (except for representations and warranties which speak as of a particular date, shall not be true as of such particular date), except where such failure to be true would not have or not reasonably be expected to result in a Company Material Adverse Effect; or

(F) the Company shall have failed to perform in any material respect or to comply in any material respect with any of its material obligations, covenants or agreements under the Agreement or any Ancillary Agreement; or

(G) there shall have occurred, and continued to exist, (i) any general suspension of, or limitation on prices for, trading in securities on the American Stock Exchange, (ii) a commencement of a war, armed hostilities, acts of terrorism or other national or international crisis involving the United States or, in the case of any of the foregoing existing on the date of the Agreement, a material acceleration or worsening thereof in each case that could reasonably be expected to have a Company Material Adverse Effect or (iii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States or a material limitation (whether or not mandatory) by any Governmental Entity on the extension of credit by banks or other lending institutions; or

(H) any required approval, permit, authorization or consent, with respect to the Company, the Company Subsidiaries or the Company’s business, of any other person or entity shall not have been obtained, the lack of which, individually or in the aggregate, has had, or could reasonably be expected to have, a Company Material Adverse Effect; or

(I) Todd Gresham shall not have agreed to continue to be employed by the Company on terms reasonably acceptable to Parent; or

(J) the outstanding notes issued by the Company to the Chairman of the Company’s board of directors (or entities affiliated therewith) shall not have been amended and restated to provide for a four-year non-convertible term loan with quarterly payments of interest at the lesser of prime plus 100 basis points or seven percent per annum; or

(K) the convertible promissory notes issued by the Company to Bernard Marden and Alan Miller shall not have been amended and restated to eliminate the conversion features of such promissory notes.

The foregoing conditions (including those set forth in the initial paragraph) are for the benefit of Parent and the Purchaser and may be asserted by Parent or the Purchaser regardless of the circumstances giving rise to any such conditions and may be waived by Parent or the Purchaser in whole or in part at any time and from time to time in their reasonable discretion, in

each case subject to the terms of the Agreement. The failure by Parent or the Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time prior to the Expiration Date.

The capitalized terms used in this Annex I shall have the meanings set forth in the Agreement and Plan of Merger, dated as of July 27, 2005, by and among Parent, the Purchaser and the Company.

EX-99.4 5 dex994.htm OFFER TO PURCHASE Offer to Purchase

Exhibit 4

OFFER TO PURCHASE FOR CASH

ALL OUTSTANDING SHARES OF COMMON STOCK

NSTOR TECHNOLOGIES, INC.

$0.105 NET PER SHARE

NORMANDY ACQUISITION CORPORATION,

AN INDIRECT WHOLLY OWNED SUBSIDIARY OF

XYRATEX LTD

THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, SEPTEMBER 2, 2005, UNLESS THE OFFER IS EXTENDED.

THE OFFER IS BEING MADE PURSUANT TO AN AGREEMENT AND PLAN OF MERGER, DATED AS OF JULY 27, 2005 (THE “MERGER AGREEMENT”), BY AND AMONG XYRATEX LTD, A BERMUDA CORPORATION (“PARENT”), NORMANDY ACQUISITION CORPORATION, A DELAWARE CORPORATION AND INDIRECT WHOLLY OWNED SUBSIDIARY OF PARENT (“PURCHASER”), AND NSTOR TECHNOLOGIES, INC., A DELAWARE CORPORATION (THE “COMPANY”). THE COMPANY’S BOARD OF DIRECTORS HAS DETERMINED THAT EACH OF THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT, INCLUDING EACH OF THE OFFER AND THE PROPOSED MERGER (AS DEFINED HEREIN), ARE ADVISABLE, FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS, HAS APPROVED THE OFFER AND THE MERGER AGREEMENT, AND HAS RECOMMENDED THAT THE COMPANY’S STOCKHOLDERS ACCEPT THE OFFER AND ADOPT THE MERGER AGREEMENT.

THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE HAVING BEEN VALIDLY TENDERED AND NOT VALIDLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF SHARES OF COMMON STOCK, PAR VALUE $0.05 PER SHARE, OF THE COMPANY (THE “SHARES”), WHICH REPRESENTS AT LEAST 88.1% OF THE TOTAL NUMBER OF OUTSTANDING SHARES ON THE DATE OF PURCHASE. THE OFFER IS SUBJECT TO OTHER CONDITIONS DESCRIBED IN “THE OFFER—CONDITIONS TO THE OFFER.”

THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION, AND YOU SHOULD CAREFULLY READ BOTH IN THEIR ENTIRETY BEFORE YOU MAKE A DECISION WITH RESPECT TO THE OFFER.

IMPORTANT

If you wish to tender all or any part of your Shares, prior to the expiration date of the Offer you should either:

(1) complete and sign the Letter of Transmittal (or a facsimile thereof) included with this Offer to Purchase in accordance with the instructions in the Letter of Transmittal, have your signature thereon guaranteed if required by Instruction 1 to the Letter of Transmittal, mail or deliver the Letter of Transmittal (or such facsimile thereof) and any other required documents to Computershare Trust Company of New York, the depositary for the Offer, and either (a) deliver the certificates for such Shares to Computershare Trust Company of New York along with the Letter of Transmittal (or a facsimile thereof) or (b) deliver such Shares pursuant to the procedures for book-entry transfers as set forth in “The Offer—Procedure for Tendering Shares,” or

(2) request your broker, dealer, commercial bank, trust company or other nominee to effect the transaction for you.

If you have Shares registered in the name of a broker, dealer, commercial bank, trust company or other nominee, you must contact such broker, dealer, commercial bank, trust company or other nominee if you desire to tender your Shares.

If you desire to tender your Shares and your certificates for such Shares are not immediately available or you cannot comply with the procedures for book-entry transfers described in this Offer to Purchase on a timely basis, you may tender such Shares by following the procedures for guaranteed delivery set forth in “The Offer—Procedure for Tendering Shares—Guaranteed Delivery.”

A summary of the principal terms of the Offer appears on pages 1-5 of this Offer to Purchase.

If you have questions about the Offer, you may call MacKenzie Partners, Inc., the information agent for the Offer, at its address and telephone number set forth on the back cover of this Offer to Purchase. You can also obtain additional copies of this Offer to Purchase, the related Letter of Transmittal and the Notice of Guaranteed Delivery from MacKenzie Partners, Inc., or your broker, dealer, commercial bank, trust company or other nominee.

August 5, 2005

TABLE OF CONTENTS


		Page

SUMMARY TERM SHEET		1

INTRODUCTION		6

THE OFFER		9

Terms of the Offer; Expiration Date		9

Extension of Tender Period; Termination; Amendment		9

Acceptance for Payment and Payment		11

Procedure for Tendering Shares		11

Withdrawal Rights		13

United States Federal Income Tax Considerations		14

Price Range of Shares; Dividends		16

Certain Information Concerning the Company		16

Certain Information Concerning Parent and Purchaser		17

Source and Amount of Funds		18

Background of the Offer; The Merger Agreement; Other Arrangements		18

Purpose of the Offer; Plans for the Company; Appraisal Rights		32

Effect of the Offer on the Market for the Shares; Stock Exchange Listing(s); Registration under the Exchange Act		33

Dividends and Distributions		33

Conditions to the Offer		34

Certain Legal Matters; Regulatory Approvals		35

Fees and Expenses		38

Miscellaneous		38

Schedule I—Directors and Executive Officers of Parent and Purchaser

Schedule II—Section 262 of the Delaware General Corporation Law

SUMMARY TERM SHEET

This summary term sheet is a brief description of the Offer being made by Xyratex Ltd (“Parent”) through its indirect wholly owned subsidiary, Normandy Acquisition Corporation (“Purchaser” and together with Parent, “we,” “us” or “our”), to purchase all of the issued and outstanding shares of common stock, par value $0.05 per share (the “Shares”), of nStor Technologies, Inc. (the “Company”) at a price of $0.105 per Share net to the seller in cash, without interest. The following are some of the questions you, as a stockholder of the Company, may have and answers to those questions. You should carefully read (i) this Offer to Purchase, (ii) the Agreement and Plan of Merger, dated as of July 27, 2005 by and among Parent, Purchaser and the Company (the “Merger Agreement”) and (iii) the Letter of Transmittal in their entirety because the information in this summary term sheet is not complete, and additional important information is contained in the remainder of this Offer to Purchase, the Merger Agreement and the Letter of Transmittal. Where applicable, we have included references to the sections of this Offer to Purchase where you will find additional information regarding the topics covered in this Summary Term Sheet.

Q:	Who is offering to buy my securities? Why?

A: Parent is a Bermuda corporation and is making this Offer through its indirect wholly owned subsidiary, Normandy Acquisition Corporation, a Delaware corporation formed for the purpose of making a tender offer for the Shares and merging with the Company. The tender offer is the first step in our plan to acquire all of the outstanding Shares. See “The Offer—Certain Information Concerning Parent and Purchaser” for additional information.

Q:	What are the classes and amounts of securities sought in the Offer?

A: We are seeking to purchase all of the Company’s issued and outstanding Shares. See the “Introduction” to this Offer to Purchase and “The Offer—Terms of the Offer; Expiration Date” for additional information.

Q:	How much are you offering to pay for my securities and what is the form of payment? Will I have to pay any fees or commissions?

A: We are offering to pay $0.105 per Share, net to you, in cash, without interest. If you tender your Shares to us in the Offer, you will not have to pay brokerage fees, commissions or similar expenses. If you own your Shares through a broker or other nominee, and your broker or other nominee tenders your Shares on your behalf, your broker or other nominee may charge you a fee for doing so. You should consult your broker or other nominee to determine whether any charges will apply.

Q:	Has the Company’s board of directors approved the Offer?

A: Yes. This Offer is being made pursuant to an Agreement and Plan of Merger, dated as of July 27, 2005, by and among Parent, the Company and Purchaser. The Company’s board of directors, at a meeting duly called and held at which a quorum was present, has:

•

determined that each of the transactions contemplated by the Merger Agreement, including the Offer and the merger of Purchaser with and into the Company, is advisable, fair to and in the best interests of the Company and its stockholders;

•

approved the Offer and the Merger Agreement; and

•

recommended that the Company’s stockholders accept the Offer and adopt the Merger Agreement.

See “The Offer—Background of the Offer; The Merger Agreement; Other Arrangements” for additional information.

Q:	How long do I have to decide whether to tender in the Offer?

A: Unless we extend the Offer, you have until 12:00 midnight, New York City time, on Friday, September 2, 2005, to decide whether to tender your Shares in the Offer. Further, if you cannot deliver everything required to make a valid tender to Computershare Trust Company of New York, the depositary for the Offer, prior to such time, you may be able to use a guaranteed delivery procedure, which is described in “The Offer—Procedure for Tendering Shares—Guaranteed Delivery.”

Q:	Can the Offer be extended and under what circumstances?

A: We may extend the Offer pursuant to, and in accordance with, the terms of Merger Agreement or as may be required by applicable law. We may extend, for instance, if any of the conditions specified in “The Offer—Conditions to the Offer” are not satisfied prior to the scheduled expiration date of the Offer.

We may also elect to provide a “subsequent offering period” for the Offer. A subsequent offering period, if we include one, will be an additional period of time beginning after we have purchased Shares tendered during the Offer, during which stockholders may tender their Shares and receive payment for Shares validly tendered. If we decide to provide a subsequent offering period, we will make a public announcement of our decision at least five business days in advance. We do not currently intend to include a subsequent offering period, although we reserve the right to do so. See “The Offer—Terms of the Offer; Expiration Date” for additional information.

Q:	How will I be notified if the Offer is extended?

A: If we decide to extend the Offer, we will inform Computershare Trust Company of New York, the depositary for the Offer, of that fact and will make a public announcement of the extension, not later than 9:00 a.m., New York City time, on the business day after the day on which the Offer was scheduled to expire. See “The Offer—Extension of Tender Period; Termination; Amendment” for additional information.

Q:	What is the most significant condition to the Offer?

A: The most significant condition to the Offer, which may be waived by us in our reasonable discretion, is:

•

We are not obligated to purchase any tendered Shares unless the Company’s stockholders validly tender and do not validly withdraw prior to the expiration date of the Offer that number of Shares which represents at least 88.1% of the total number of outstanding Shares on the date of purchase.

The Offer is subject to other conditions described in “The Offer—Conditions to the Offer.”

Q:	Has anyone agreed to tender their shares in the Offer?

A: Yes. Three of the Company’s largest stockholders, Barry S. Halperin, H. Irwin Levy and Bernard Marden, have agreed to tender an aggregate of 61,912,000 Shares, or approximately 37.5% of the Company’s Shares outstanding as of July 31, 2005, in the Offer pursuant to the Tender and Stockholder Support Agreements entered into by us with these parties (each, a “Support Agreement” and collectively, the “Support Agreements”). See “The Offer—Background of the Offer; The Merger Agreement; Other Arrangements” for additional information.

Q:	How do I tender my Shares?

A: To tender Shares, you must deliver the certificates representing your Shares, together with a completed Letter of Transmittal, to Computershare Trust Company of New York, the depositary for the Offer, not later than the time the Offer expires. If your Shares are held in “street name” by your broker, dealer, commercial bank, trust company or other nominee, such nominee can tender your Shares through The Depository Trust Company. If you

cannot deliver everything required to make a valid tender to the depositary prior to the expiration date of the Offer, you may still be able to tender your Shares for a limited amount of additional time by having a broker, bank or other fiduciary which is a member of the Securities Transfer Agents Medallion Program or other eligible institution guarantee that the missing items will be received by the depositary within three American Stock Exchange trading days after the expiration of the Offer. However, the depositary must receive the missing items within that three trading day period. See “The Offer—Procedure for Tendering Shares” for additional information.

Q:	Until what time can I withdraw tendered Shares?

A: You can withdraw tendered Shares at any time until the Offer has expired and, if we have not agreed to accept your Shares for payment by October 4, 2005, you can withdraw them at any time after such date until we accept Shares for payment. If we decide to provide a subsequent offering period, we will accept Shares tendered during that period immediately and thus you will not be able to withdraw Shares tendered in the Offer during any subsequent offering period. See “The Offer—Withdrawal Rights” for additional information.

Q:	How do I withdraw tendered Shares?

A: To withdraw Shares, you, or your broker or other nominee if your Shares were held in “street name,” must deliver a written notice of withdrawal, or a facsimile of one, with the required information to Computershare Trust Company of New York, the depositary for the Offer, while you have the right to withdraw the Shares. See “The Offer—Withdrawal Rights” for additional information.

Q:	When and how will I be paid for my tendered Shares?

A: Subject to the terms and conditions of the Offer, we will pay for all validly tendered and not validly withdrawn Shares promptly after the expiration date of the Offer, subject to the satisfaction or waiver of the conditions to the Offer, as set forth in “The Offer—Conditions to the Offer.” We will pay for your validly tendered and not validly withdrawn Shares by depositing the purchase price with Computershare Trust Company of New York, the depositary for the Offer, which will act as your agent for the purpose of receiving payments from us and transmitting such payments to you. In all cases, payment for validly tendered Shares will be made only after timely receipt by Computershare Trust Company of New York of certificates for such Shares (or of a confirmation of a book-entry transfer of such Shares as described in “The Offer—Procedure for Tendering Shares”), a properly completed and duly executed Letter of Transmittal and any other required documents for such Shares.

Q:	Do you have the financial resources to make payment?

A: Yes. We will need approximately $24.0 million to purchase all Shares pursuant to the Offer and the Preferred Shares (as defined herein), and to pay related fees and expenses. Since we will have more than $75.0 million in cash and working capital available, the Offer is not subject to any financing condition. See “The Offer—Source and Amount of Funds” for additional information.

Q:	Is your financial condition relevant to my decision to tender in the Offer?

A: Since we have sufficient cash and working capital to purchase the Shares and pay all fees relating to the Offer, the Offer is not subject to any financing condition. Therefore, we believe our financial condition is not material to your decision whether to tender in the Offer. If you do not tender in the Offer, in the subsequent merger (if it occurs), you will receive, for each Share you hold, the same cash price paid under the terms of the Offer, subject to any appraisal rights properly exercised under Delaware law. See “The Offer—Certain Information Concerning Parent and Purchaser—Available Information” for additional information.

Q:	Will the Offer be followed by a merger?

A: Yes. We have entered into a merger agreement with the Company, and if we accept for payment and pay for the number of Shares which represents at least 88.1% of the total number of outstanding Shares on the date of purchase (or fewer Shares, if we waive the Minimum Condition, as defined herein), we intend to consummate the Proposed Merger, which is a second-step merger in which Purchaser is expected to be merged with and into the Company with the Company continuing as the surviving corporation and an indirect wholly owned subsidiary of Parent.

Upon the acceptance for payment of and payment for the number of Shares which represents at least 88.1% (but less than 90%) of the total number of outstanding Shares on the date of purchase, Purchaser will be obligated pursuant to the terms of the Merger Agreement to exercise an irrevocable option (the “Top-Up Option”) granted to it by the Company to purchase for $0.105 per share the lowest number of Shares that, when added to the number of Shares owned by Purchaser at the time of exercising the Top-Up Option, will constitute one share more than 90% of the outstanding Shares.

Additionally, upon owning the number of Shares that represent at least 90% of the outstanding Shares, we would have sufficient voting power to approve the Proposed Merger without the affirmative vote of any other stockholder of the Company. If the Proposed Merger takes place, Parent will own all of the Shares and all remaining stockholders (other than Parent, Purchaser or other subsidiaries of Parent) will receive the same cash price paid under the terms of the Offer for each Share they hold.

Q:	If the number of Shares that represent 90% of the outstanding Shares are tendered and accepted for payment or issued pursuant to the exercise of the Top-Up Option, will the Company continue as a public company?

A: Yes; however, if and when the Proposed Merger takes place, the Company will no longer be publicly traded. It is possible that, following the expiration date of the Offer and prior to the merger, if we accept for payment and pay for all the tendered Shares, there may be so few remaining stockholders and publicly held Shares that:

•

the Shares will no longer be eligible to be traded on the American Stock Exchange or any securities exchange;

•

there may not be an active public trading market, or, possibly, any public trading market, for the Shares; and

•

the Company may cease making filings with the SEC or otherwise cease being subject to the SEC rules relating to publicly held companies.

See “The Offer—Effect of the Offer on the Market for the Shares; Stock Exchange Listing(s); Registration under the Exchange Act” for additional information.

Q:	If I decide not to tender, how will the Offer affect my Shares?

A: If the Proposed Merger takes place, stockholders not tendering in the Offer will receive the same amount of cash per Share that they would have received had they tendered their Shares in the Offer, subject to any appraisal rights properly exercised under Delaware law. Therefore, if the Proposed Merger takes place and you do not exercise appraisal rights, the only difference to you between tendering your Shares and not tendering your Shares is that you will be paid earlier if you tender your Shares. However, if the Proposed Merger does not take place and the Offer is consummated, the number of stockholders and Shares that are still in the hands of the public may be so small that there will no longer be an active public trading market, or, possibly, any public trading market, for the Shares, which may affect prices at which Shares trade. Also, as described above, the Company may cease making filings with the SEC or otherwise cease being subject to the SEC rules relating to publicly held companies. See “The Offer—Effect of the Offer on the Market for the Shares; Stock Exchange Listing(s); Registration under the Exchange Act” for additional information.

Q:	Are appraisal rights available in either the Offer or the Proposed Merger?

A: Appraisal rights are not available in the Offer. If the Proposed Merger is consummated, holders of Shares at the effective time of the merger who do not vote in favor of, or consent to, the Proposed Merger will have rights under Section 262 of the Delaware General Corporation Law to demand appraisal of their Shares. Under Section 262, stockholders who demand appraisal and comply with the applicable statutory procedures will be entitled to receive a judicial determination of the fair value of their Shares, exclusive of any element of value arising from the accomplishment or expectation of the Proposed Merger, and to receive payment of that fair value in cash, together with a fair rate of interest, if any. Any such judicial determination of the fair value of Shares could be based upon factors other than, or in addition to, the price per Share to be paid in the Proposed Merger or the market value of the Shares. The value so determined could be more or less than the price per Share to be paid in the Proposed Merger. See “The Offer—Purpose of the Offer; Plans for the Company; Appraisal Rights” for additional information.

Q:	What is the market value of my Shares as of a recent date?

A: On July 27, 2005, the last full trading day before the date the Company announced that it entered into the Merger Agreement, the closing sales price per Share of the Company was $0.15.

Q:	What are the United States federal income tax consequences of the proposed transactions?

A: Your receipt of cash consideration in the Offer or Proposed Merger will be a taxable transaction for U.S. federal income tax purposes. You should consult your tax advisor about the particular tax consequences to you of tendering your Shares in the Offer or exchanging your Shares in the Proposed Merger. See “The Offer—United States Federal Income Tax Considerations” for additional information.

Q:	Who can I talk to if I have questions about the Offer?

A: You can call MacKenzie Partners, Inc., the information agent for the Offer, at (800) 322-2885 (toll free).

To the Holders of Common Stock of nStor Technologies, Inc.:

INTRODUCTION

Xyratex Ltd, a Bermuda corporation (“Parent”), through its indirect wholly owned subsidiary, Normandy Acquisition Corporation, a Delaware corporation (“Purchaser” and together with Parent, “we,” “us” or “our”), hereby offers to purchase all of the issued and outstanding common stock, par value $0.05 per share (the “Shares”), of nStor Technologies, Inc., a Delaware corporation (the “Company”) at the price of $0.105 per Share net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which together, as each may be amended, supplemented or otherwise modified from time to time, constitute the “Offer”).

The Offer is being made pursuant to the Agreement and Plan of Merger, dated as of July 27, 2005 (the “Merger Agreement”), by and among the Parent, Purchaser and the Company. The Merger Agreement provides that, as soon as practicable following consummation of the Offer, Purchaser will be merged with and into the Company (the “Proposed Merger”) with the Company continuing as the surviving corporation (the “Surviving Corporation”) and as an indirect wholly owned subsidiary of Parent. Pursuant to the Merger Agreement, at the effective time of the Proposed Merger (the “Effective Time”), each Share outstanding immediately prior to the Effective Time (other than Shares held in the treasury of the Company or by any Company Subsidiary or by Parent, Purchaser or any other subsidiary of Parent or Purchaser, all of which will be canceled, and Shares held by stockholders who properly exercise their appraisal rights under the Delaware General Corporation Law (the “DGCL”)) will be cancelled and retired and will be converted into the right to receive a cash payment of $0.105 per Share, net without interest (the “Merger Consideration”). The Merger Agreement is more fully described in “The Offer—Background of the Offer; The Merger Agreement; Other Arrangements.”

If you tender your Shares to us in the Offer, you will not be obligated to pay brokerage fees, commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, transfer taxes on the sale of Shares pursuant to the Offer. If you own your Shares through a broker or other nominee, and your broker tenders your Shares on your behalf, your broker or nominee may charge you a fee for doing so. You should consult your broker or nominee to determine whether any charges will apply. We will pay all charges and expenses of Computershare Trust Company of New York (the “Depositary”) and MacKenzie Partners, Inc. (the “Information Agent”) incurred in connection with the Offer. See “The Offer—Fees and Expenses” for additional information.

The Company’s board of directors has (1) determined that each of the transactions contemplated by the Merger Agreement, including each of the Offer and the Proposed Merger, is advisable, fair to and in the best interests of the Company and its stockholders, (2) approved the Offer and the Merger Agreement and (3) recommended that the Company’s stockholders accept the Offer and adopt the Merger Agreement.

Capitalink, L.C. (“Capitalink”), the Company’s financial advisor, has delivered to the Company’s board of directors its written opinion that, as of July 26, 2005 and based on the matters considered and subject to the assumptions, conditions and qualifications set forth in such opinion, the cash consideration to be received in the Offer and the Proposed Merger by holders of Shares (other than Parent, affiliates of Parent or holders of Shares for which appraisal rights have been properly exercised) was fair, from a financial point of view, to such holders. The full text of Capitalink’s written opinion, which describes the assumptions made, procedures followed, matters considered and limitations on the review undertaken, is included as an annex to the Company’s Solicitation/Recommendation Statement on Schedule 14D-9 (the “Schedule 14D-9”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which is being mailed to stockholders concurrently herewith. The opinion was not intended to be and does not constitute a recommendation to any holder of Shares whether or not to tender his or her Shares in the Offer or, if required, how to vote, or whether or not to take any action, with respect to the Offer and the Proposed Merger. Holders of Shares are urged to read the full text of such opinion carefully and in its entirety.

The purpose of the Offer and the proposed second-step merger is to enable Parent to acquire control of, and the entire equity interest in, the Company. Parent currently intends, as soon as practicable following

consummation of the Offer, to seek to have Purchaser consummate the Proposed Merger with the Company continuing as the surviving corporation and an indirect wholly owned subsidiary of Parent. Pursuant to the Proposed Merger, immediately prior to the Effective Time, each then remaining Share outstanding (other than Shares owned by Parent, Purchaser, other subsidiaries of Parent or Purchaser, in the treasury of the Company or by any wholly owned subsidiary of the Company, all of which will be cancelled and retired and will cease to exist, and other than Shares that are held by stockholders, if any, who properly exercise their appraisal rights under the DGCL) would be cancelled and retired and converted into the right to receive the Merger Consideration.

The Offer is conditioned upon, among other things, there having been validly tendered and not validly withdrawn prior to the expiration date of the Offer that number of Shares which represents at least 88.1% of the total number of outstanding Shares on the date of purchase (the “Minimum Condition”). Any or all of the conditions to the Offer may be waived by us in our reasonable discretion. The Offer is subject to other conditions described in “The Offer—Conditions to the Offer.”

The Company has advised us that as of July 31, 2005, 165,097,838 Shares were issued and outstanding. Immediately prior to the commencement of the Offer, Parent and its subsidiaries owned no Shares. However, Parent and Purchaser may be deemed to beneficially own 61,912,000 Shares, representing approximately 37.5% of the outstanding Shares as of July 31, 2005, as a result of Tender and Stockholder Support Agreements (each, a “Support Agreement” and collectively, the “Support Agreements”) that were entered into by certain stockholders of the Company in connection with the Merger Agreement, pursuant to which such stockholders agreed to tender such Shares. We believe that the Minimum Condition would be satisfied if approximately 145,451,196 Shares, including those subject to the Support Agreements, were validly tendered and not validly withdrawn prior to the expiration of the Offer.

In order to induce us to enter into the Merger Agreement, three of the Company’s largest stockholders, Barry S. Halperin, H. Irwin Levy and Bernard Marden (each, a “Significant Stockholder” and together, the “Significant Stockholders”) owning in the aggregate 97,782,387 Shares, or approximately 59.2% of the issued and outstanding Shares as of July 31, 2005, have each entered into a Support Agreement, each dated as of July 27, 2005, with Parent and Purchaser pursuant to which the Significant Stockholders have, subject to certain limitations, (i) agreed to tender 61,912,000 Shares (the “Tender Shares”), or approximately 37.5% of the Company’s Shares outstanding as of July 31, 2005, into the Offer, (ii) agreed not to withdraw any Tender Shares tendered in the Offer, (iii) agreed to vote such Tender Shares in favor of the Proposed Merger and Merger Agreement and against any acquisition proposal other than the Proposed Merger and (iv) granted to certain officers or directors of Parent an irrevocable proxy to vote such Tender Shares in favor of the Proposed Merger, the Merger Agreement and the transactions contemplated by the Merger Agreement. For a discussion of the Support Agreements, see “The Offer—Background of the Offer; The Merger Agreement; Other Arrangements.”

The Proposed Merger is subject to the satisfaction or waiver of certain conditions, including, if required, the approval and adoption of the Merger Agreement by the affirmative vote of the holders of a majority of the outstanding Shares. If the Minimum Condition is satisfied and we acquire Shares pursuant to the Offer, we would have sufficient voting power to approve the Proposed Merger without the affirmative vote of any other stockholder of the Company. In addition, in order to facilitate a short-form merger following the completion of the Offer, the Company has granted Purchaser an irrevocable option, which Purchaser will be obligated to exercise if the Minimum Condition is met and Purchaser accepts for payment Shares tendered pursuant to the Offer of at least 88.1% (but less than 90%) of the Shares then outstanding, to purchase that number of Shares equal to the lowest number of Shares that, when added to the number of Shares owned by Purchaser at the time the option is exercised, will constitute one Share more than 90% of the Shares then outstanding (assuming the issuance of Shares pursuant to the Top-Up Option and the exercise of all outstanding exercisable options to purchase Shares with a exercise price less than $0.105), at a price per share equal to $0.105. We may exercise this option only so long as immediately after the exercise we would own more than 90% of the Shares then outstanding. The Company has also agreed, if required, to cause a meeting of its stockholders to be held as

promptly as practicable following the expiration date of the Offer for the purpose of considering and taking action upon the Proposed Merger and the Merger Agreement. We have agreed to vote all Shares that we acquire in the Offer in favor of the approval and adoption of the Merger Agreement. See “The Offer—Background of the Offer; The Merger Agreement; Other Arrangements.”

In the event the Offer is terminated or not consummated, or after the expiration of the Offer and pending the consummation of the Proposed Merger, in accordance with applicable law and the Merger Agreement, we may explore any and all options which may be available. In this regard, and after expiration or termination of the Offer, we may seek to acquire additional Shares through open market purchases, block trades, privately negotiated transactions, a tender offer or exchange offer or otherwise, upon such terms and at such prices as we may determine, which may be more or less than the price offered or paid per Share pursuant to the Offer and could be for cash or other consideration.

THE OFFER

Terms of the Offer; Expiration Date

On the terms and subject to the conditions set forth in this Offer (including, if the Offer is extended or amended, the terms and conditions of such extension or amendment), we will accept for payment and pay for all Shares that are validly tendered and not validly withdrawn prior to the Expiration Date.

“Expiration Date” means 12:00 midnight, New York City time, on Friday, September 2, 2005, unless we extend the period of time for which the Offer is open, subject to the terms of the Merger Agreement or as may be required by applicable law, in which event “Expiration Date” means the latest time and date as the Offer, as so extended, may expire.

The Offer is conditioned upon, among other things, the Minimum Condition having been satisfied. The Offer is subject to other conditions described in “—Conditions to the Offer.” If any such condition is not satisfied, we may: (a) terminate the Offer and return all tendered Shares; (b) extend the Offer and, subject to certain conditions and to your withdrawal rights as set forth in “—Withdrawal Rights,” retain all Shares until the expiration date of the Offer as so extended; or (c) subject to the terms and conditions of the Merger Agreement, including the requirement that we obtain the Company’s consent to waive the Minimum Condition and, subject to any requirement to extend the period of time during which the Offer must remain open, purchase all Shares validly tendered and not validly withdrawn prior to the Expiration Date or delay acceptance for payment or payment for Shares, subject to applicable law, until satisfaction or waiver of the conditions to the Offer. For a description of our right to extend, amend, delay or terminate the Offer, see “—Extension of Tender Period; Termination; Amendment,” “—Background of the Offer; The Merger Agreement; Other Arrangements” and “—Conditions to the Offer.”

Under Rule 14d-11 of the Exchange Act, we may, subject to certain conditions, provide a subsequent offering period of from three to 20 business days in length following the expiration of the Offer on the Expiration Date. A subsequent offering period would be an additional period of time, following the expiration of the Offer and the purchase of Shares in the Offer, during which stockholders may tender Shares not tendered in the Offer. A subsequent offering period, if one is included, is not an extension of the Offer, which already will have been completed.

We do not currently intend to include a subsequent offering period in the Offer, although we reserve the right to do so. Pursuant to Exchange Act Rule 14d-7, we will not offer withdrawal rights during a subsequent offering period to Shares tendered during a subsequent offering period or to Shares tendered in the Offer and accepted for payment. We will pay the same consideration to stockholders tendering Shares in the Offer or in a subsequent offering period, if we include one.

As of the date of this Offer to Purchase, we own no Shares. However, we may be deemed to beneficially own 61,912,000 Shares, representing approximately 37.5% of the outstanding Shares as of July 31, 2005, as a result of the Support Agreements that were entered into by the Significant Stockholders in connection with the Merger Agreement, pursuant to which the Significant Stockholders agreed to tender such Shares. For a discussion of the Support Agreements, see “—Background of the Offer; The Merger Agreement; Other Arrangements.” The Company has advised us that as of July 31, 2005, 165,097,838 Shares were issued and outstanding. The actual number of Shares that will satisfy the Minimum Condition will depend on the facts as they exist on the date of purchase.

Extension of Tender Period; Termination; Amendment.

We reserve the right to extend the Expiration Date, in our reasonable discretion, if at the scheduled Expiration Date any of the conditions to the Offer have not been satisfied or waived. We also have the right to extend the Offer for any period required by any rule, regulation, interpretation or position of the Securities and Exchange Commission (the “SEC”) or the SEC Staff applicable to the Offer or any period required by applicable

law. Except as described in the next paragraph, we expressly reserve the right to waive any of the conditions to the Offer, to make any change in the terms of our conditions to the Offer and to provide a subsequent offering period for the Offer in accordance with Rule 14d-11 under the Exchange Act.

We will not, however, without the prior written consent of the Company, (i) decrease the price per Share to be paid in the Offer, (ii) change the form of consideration payable in the Offer, (iii) decrease the number of Shares sought to be purchased in the Offer, (iv) waive the Minimum Condition, (v) impose additional conditions to the Offer or (vi) amend any other term of the Offer in any manner adverse to the holders of Shares.

If we increase or decrease the percentage of Shares being sought or increase or decrease the consideration to be paid for Shares pursuant to the Offer and the Offer is scheduled to expire at any time before the expiration of 10 business days from, and including, the date that notice of such increase or decrease is first published, sent or given in the manner specified below, we will extend the Offer until the expiration of 10 business days from, and including, the date of such notice. If we make a material change in the terms of the Offer (other than a change in price or percentage of securities sought) or in the information concerning the Offer, or waive a material condition of the Offer, we will extend the Offer, if required by applicable law, for a period sufficient to allow you to consider the amended terms of the Offer. In a published release, the SEC has stated its view that an offer must remain open for a minimum period of time following a material change in the terms of such offer and that the waiver of a condition such as the Minimum Condition is a material change in the terms of an offer. The release states that an offer should remain open for a minimum of five business days from the date the material change is first published, sent or given to stockholders, and that if material changes are made with respect to information that approaches the significance of price or percentage of Shares sought, a minimum of 10 business days may be required to allow adequate dissemination and investor response. “Business day” means any day other than Saturday, Sunday or a federal holiday and consists of the time period from 12:01 a.m. through 12:00 midnight, New York City time.

Any extension, delay, termination, waiver or amendment will be followed as promptly as practicable by public announcement, in the case of an extension of the Offer to be made no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date, in accordance with the public announcement requirements of Rule 14e-1(d) under the Exchange Act. Subject to applicable law (including Rules 14d-4(d) and 14d-6(c) under the Exchange Act, which require that material changes in the information published, sent or given to any stockholders in connection with the Offer be promptly disseminated to stockholders in a manner reasonably designed to inform them of such changes), and without limiting the manner in which we may choose to make any public announcement, we have no obligation to publish, advertise or otherwise communicate any public announcements other than by issuing a press release to the Dow Jones News Service.

If we extend the time during which the Offer is open, or if we are delayed in its acceptance for payment of or payment for Shares pursuant to the Offer for any reason, then, without prejudice to our rights under the Offer, the Depositary may retain tendered Shares on our behalf and those Shares may not be withdrawn except to the extent tendering stockholders are entitled to withdrawal rights as described herein under “—Withdrawal Rights.” However, our ability to delay the payment for Shares that we have accepted for payment is limited by Rule 14e-1(c) under the Exchange Act, which requires that a bidder pay the consideration offered or return the securities deposited by or on behalf of stockholders promptly after the termination or withdrawal of the bidder’s offer.

The Company has provided to us, or caused to be provided to us, the Company’s stockholder list and security position listings for the purpose of disseminating the Offer to holders of Shares. This Offer to Purchase, the related Letter of Transmittal and other related documents will be mailed to record holders of Shares whose names appear on the Company’s stockholder list and will be furnished, for subsequent transmittal to beneficial owners of Shares, to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the stockholder list or, if applicable, who are listed as participants in a clearing agency’s security position listing.

Acceptance for Payment and Payment

Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), we will accept for payment and pay for all Shares that are validly tendered and not validly withdrawn on or prior to the Expiration Date pursuant to the Offer as soon as we are permitted to do so under applicable law, subject to the satisfaction or waiver of the conditions set forth in “—Conditions to the Offer.” For a description of our right to terminate the Offer and not accept for payment or pay for Shares or to delay acceptance for payment or payment for Shares, see “—Extension of Tender Period; Termination; Amendment.”

For purposes of the Offer, we will be deemed to have accepted for payment tendered Shares when, as and if we give oral or written notice of our acceptance to the Depositary. We will pay for Shares accepted for payment pursuant to the Offer by depositing the purchase price with the Depositary. The Depositary will act as your agent for the purpose of receiving payments from us and transmitting such payments to you. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of certificates for such Shares (or of a confirmation of a book-entry transfer of such Shares into the Depositary’s account at the Book-Entry Transfer Facility (as defined below)), a properly completed and duly executed Letter of Transmittal and any other required documents. Accordingly, payment may be made to tendering stockholders at different times if delivery of the Shares and other required documents occurs at different times. For a description of the procedure for tendering Shares pursuant to the Offer, see “—Procedure for Tendering Shares.”

Under no circumstances will we pay interest on the consideration paid for Shares pursuant to the Offer, regardless of any delay in making such payment. If we increase the consideration to be paid for Shares pursuant to the Offer, we will pay such increased consideration for all Shares purchased pursuant to the Offer.

We reserve the right to transfer or assign, in whole or from time to time in part, to one or more of our wholly owned subsidiaries the right to purchase Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve us of our obligations under the Offer or prejudice your rights to receive payment for Shares validly tendered and accepted for payment. If any tendered Shares are not purchased pursuant to the Offer for any reason, or if certificates are submitted for more Shares than are tendered, certificates for such unpurchased or untendered Shares will be returned (or, in the case of Shares tendered by book-entry transfer, such Shares will be credited to an account maintained at the Book-Entry Transfer Facility (as defined below)), without expense to you, as promptly as practicable following the expiration or termination of the Offer.

Procedure for Tendering Shares

To tender Shares pursuant to the Offer, either (1) the Depositary must receive at one of its addresses set forth on the back cover of this Offer to Purchase (A) a properly completed and duly executed Letter of Transmittal and any other documents required by the Letter of Transmittal and (B) certificates for the Shares to be tendered or delivery of such Shares pursuant to the procedures for book-entry transfer described below (and a confirmation of such delivery including an Agent’s Message (as defined below) if the tendering stockholder has not delivered a Letter of Transmittal), in each case by the Expiration Date, or (2) the guaranteed delivery procedure described below must be complied with.

Book-Entry Delivery

The Depositary will establish an account with respect to the Shares at The Depository Trust Company (the “Book-Entry Transfer Facility”) for purposes of the Offer within two business days after the date of this Offer to Purchase, and any financial institution that is a participant in the system of the Book-Entry Transfer Facility may make delivery of Shares by causing the Book-Entry Transfer Facility to transfer such Shares into the Depositary’s account in accordance with the procedures of the Book- Entry Transfer Facility. However, although delivery of Shares may be effected through book-entry transfer, the Letter of Transmittal properly completed and duly executed together with any required signature guarantees or an Agent’s Message and any other required

documents must, in any case, be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase by the Expiration Date, or the guaranteed delivery procedure described below must be complied with. Delivery of the Letter of Transmittal and any other required documents to the Book-Entry Transfer Facility does not constitute delivery to the Depositary. “Agent’s Message” means a message, transmitted by the Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a book-entry confirmation which states that the Book-Entry Transfer Facility has received an express acknowledgment from the participant in the Book-Entry Transfer Facility tendering the Shares that are the subject of such book-entry confirmation which such participant has received, and agrees to be bound by, the terms of the Letter of Transmittal and that Purchaser may enforce such agreement against such participant.

Signature Guarantees

Except as otherwise provided below, all signatures on a Letter of Transmittal must be guaranteed by a financial institution (including most banks, savings and loan associations and brokerage houses) that is a member of a recognized Medallion Program approved by The Securities Transfer Association, Inc. or any other “Eligible Guarantor Institution” (as such term is defined in Rule 17Ad-15 under the Exchange Act (each an “Eligible Institution”). Signatures on a Letter of Transmittal need not be guaranteed (1) if the Letter of Transmittal is signed by the registered holder of the Shares tendered therewith and such holder has not completed the box entitled “Special Payment Instructions” on the Letter of Transmittal or (2) if such Shares are tendered for the account of an Eligible Institution. See Instructions 1 and 5 of the Letter of Transmittal.

Guaranteed Delivery

If you wish to tender Shares pursuant to the Offer and cannot deliver such Share Certificates and all other required documents to the Depositary by the Expiration Date, or cannot complete the procedure for delivery by book-entry transfer on a timely basis, you may nevertheless tender such Shares if all of the following conditions are met:

•

such tender is made by or through an Eligible Institution;

•

a properly completed and duly executed Notice of Guaranteed Delivery in the form provided by Purchaser is received by the Depositary (as provided below) by the Expiration Date; and

•

the Share Certificates (or a confirmation of a book-entry transfer into the Depositary’s account at the Book-Entry Transfer Facility), together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantee or an Agent’s Message and any other documents required by the Letter of Transmittal, are received by the Depositary within three American Stock Exchange trading days after the date of execution of the Notice of Guaranteed Delivery.

The Notice of Guaranteed Delivery may be delivered by hand or transmitted by facsimile transmission or mailed to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in such Notice.

The method of delivery of Shares and all other required documents, including through the Book-Entry Transfer Facility, is at your option and risk, and the delivery will be deemed made only when actually received by the Depositary. If certificates for Shares are sent by mail, we recommend registered mail with return receipt requested, properly insured.

Back-up Withholding

Under the United States federal income tax laws, the Depositary will be required to withhold a portion of the amount of any payments made to certain stockholders pursuant to the Offer or the Proposed Merger. In order to avoid such back-up withholding, you must provide the Depositary with your correct taxpayer identification number (“TIN”) and certify that you are not subject to such back-up withholding by completing the Substitute

Form W-9 included in the Letter of Transmittal. Certain stockholders (including, among others, all corporations and certain foreign individuals and entities) are not subject to back-up withholding. If a stockholder does not provide its correct TIN or fails to provide the certifications described above, the Internal Revenue Service may impose a penalty on the stockholder and payment of cash to the stockholder pursuant to the Offer may be subject to back-up withholding. All stockholders tendering Shares pursuant to the Offer should complete and sign the Substitute Form W-9 included in the Letter of Transmittal to provide the information necessary to avoid back-up withholding. If you are a non-resident alien or foreign entity not subject to back-up withholding, you must give the Depositary a properly completed Form W-8BEN Certificate of Foreign Status or successor form in order to avoid backup withholding with respect to payments made to you.

Grant of Proxy

By executing a Letter of Transmittal (or delivering an Agent’s Message), you irrevocably appoint Steve Barber and Richard Pearce as your proxies in the manner set forth in the Letter of Transmittal to the full extent of your rights with respect to the Shares tendered and accepted for payment by us (and any and all other Shares or other securities issued or issuable in respect of such Shares on or after the date of this Offer to Purchase). All such proxies are irrevocable and coupled with an interest in the tendered Shares. Such appointment is effective only upon our acceptance for payment of such Shares. Upon such acceptance for payment, all prior proxies and consents granted by you with respect to such Shares and other securities will, without further action, be revoked, and no subsequent proxies may be given nor subsequent written consents executed (and, if previously given or executed, will cease to be effective). Our designees will be empowered to exercise all your voting and other rights as they, in their sole discretion, may deem proper at any annual, special or adjourned meeting of the Company’s stockholders, by written consent or otherwise. We reserve the right to require that, in order for Shares to be validly tendered, immediately upon our acceptance for payment of such Shares, we are able to exercise full voting rights with respect to such Shares and other securities (including voting at any meeting of stockholders then scheduled or acting by written consent without a meeting). The foregoing proxies are effective only upon acceptance for payment of Shares pursuant to the Offer. The Offer does not constitute a solicitation of proxies, absent a purchase of Shares, for any meeting of the Company’s stockholders, which will be made only pursuant to separate proxy solicitation materials complying with the Exchange Act.

The tender of Shares pursuant to any one of the procedures described above will constitute your acceptance of the Offer, as well as your representation and warranty that (1) you own the Shares being tendered and (2) you have the full power and authority to tender, sell, assign and transfer the Shares tendered, as specified in the Letter of Transmittal. Our acceptance for payment of Shares tendered by you pursuant to the Offer will constitute a binding agreement between us with respect to such Shares, upon the terms and subject to the conditions of the Offer.

Validity

We will determine, in our reasonable discretion, all questions as to the form of documents and the validity, eligibility (including time of receipt) and acceptance for payment of any tender of Shares, and our determination shall be final and binding. We reserve the absolute right to reject any or all tenders of Shares that we determine not to be in proper form or the acceptance for payment of or payment for which may, in the opinion of our counsel, be unlawful. We also reserve the absolute right to waive any defect or irregularity in any tender of Shares. Our interpretation of the terms and conditions of the Offer will be final and binding. None of Parent, Purchaser, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defect or irregularity in tenders or waiver of any such defect or irregularity or incur any liability for failure to give any such notification.

Withdrawal Rights

You may withdraw tenders of Shares made pursuant to the Offer at any time prior to the Expiration Date. Thereafter, such tenders are irrevocable, except that they may be withdrawn after October 4, 2005 unless

such Shares are accepted for payment as provided in this Offer to Purchase. If we extend the period of time during which the Offer is open, are delayed in accepting for payment or paying for Shares pursuant to the Offer for any reason, or are unable to accept Shares for payment pursuant to the Offer for any reason, then, without prejudice to our rights under the Offer, the Depositary may, on our behalf, retain all Shares tendered, and such Shares may not be withdrawn except as otherwise provided in this section. Any such delay will be accompanied by an extension of the Offer to the extent required by law.

To withdraw tendered Shares, a written or facsimile transmission notice of withdrawal with respect to the Shares must be timely received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase, and the notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of Shares, if different from that of the person who tendered such Shares. If the Shares to be withdrawn have been delivered to the Depositary, a signed notice of withdrawal with (except in the case of Shares tendered by an Eligible Institution) signatures guaranteed by an Eligible Institution must be submitted prior to the release of such Shares. In addition, such notice must specify, in the case of Shares tendered by delivery of certificates, the name of the registered holder (if different from that of the tendering stockholder) and the serial numbers shown on the particular certificates evidencing the Shares to be withdrawn or, in the case of Shares tendered by book-entry transfer, the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares. Withdrawals may not be rescinded, and Shares withdrawn will thereafter be deemed not validly tendered for purposes of the Offer. However, withdrawn Shares may be re-tendered by again following one of the procedures described in “—Procedure for Tendering Shares” at any time prior to the Expiration Date.

We will determine, in our reasonable discretion, all questions as to the form and validity (including time of receipt) of any notice of withdrawal, and our determination shall be final and binding. None of Parent, Purchaser, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defect or irregularity in any notice of withdrawal or waiver of any such defect or irregularity or incur any liability for failure to give any such notification.

If we provide a subsequent offering period following the Offer, we will not offer withdrawal rights to Shares tendered during a subsequent offering period or to Shares tendered in the Offer and accepted for payment. We will pay the same consideration to stockholders tendering Shares in the Offer or in a subsequent offering period, if it includes one.

United States Federal Income Tax Considerations

The following summary of United States federal income tax consequences of the Offer and the Proposed Merger to holders of the Company’s Shares is based on the Internal Revenue Code of 1986, as amended (the “Code”), applicable Treasury Regulations, and administrative and judicial interpretations thereof, each as in effect as of the date of this Offer to Purchase, all of which may change, possibly with retroactive effect. This summary assumes that Shares are held as capital assets. It does not address all of the tax consequences that may be relevant to particular stockholders in light of their personal circumstances, or to other types of stockholders (including, without limitation, banks, insurance companies or other financial institutions, brokers, dealers or traders in securities or commodities, insurance companies, partnerships, “S” corporations and other asset pass-through entities, expatriates, tax-exempt organizations, persons who are subject to alternative minimum tax, persons who hold Shares as a position in a “straddle” or as part of a “hedging” or “conversion” transaction, persons that have a functional currency other than the United States dollar, or persons who acquired their Shares upon the exercise of stock options or otherwise as compensation). In addition, this summary does not address any state, local or foreign tax consequences of the Offer or the Proposed Merger.

WE URGE EACH HOLDER OF SHARES TO CONSULT ITS OWN TAX ADVISOR REGARDING THE UNITED STATES FEDERAL INCOME OR OTHER TAX CONSEQUENCES OF THE OFFER OR THE PROPOSED MERGER TO SUCH HOLDER.

United States Holders

For purposes of this discussion, a “United States Holder” is a holder of Shares that for United States federal income tax purposes is (i) an individual citizen or resident of the United States; (ii) a corporation or an entity treated as a corporation for United States federal income tax purposes created or organized in or under the laws of the United States or any State or the District of Columbia; (iii) an estate the income of which is subject to United States federal income taxation regardless of its source or (iv) a trust (a) the administration over which a United States court can exercise primary supervision and (b) all of the substantial decisions of which one or more United States persons have the authority to control and certain other trusts considered United States Holders for federal income tax purposes. A “Non-United States Holder” is a holder of Shares other than a United States Holder.

The receipt of cash in exchange of Shares pursuant to the Offer or the Proposed Merger will be a taxable transaction for United States federal income tax purposes. In general, a United States Holder who sells Shares pursuant to the Offer or receives cash in exchange for Shares pursuant to the Proposed Merger will recognize gain or loss for United States federal income tax purposes equal to the difference, if any, between the amount of cash received and the holder’s adjusted tax basis in the Shares sold pursuant to the Offer or exchanged for cash pursuant to the Proposed Merger. Gain or loss will be determined separately for each block of Shares (i.e., Shares acquired at the same cost in a single transaction) sold for cash pursuant to the Offer or surrendered for cash pursuant to the Proposed Merger. Any such gain or loss would be long-term capital gain or loss if the holding period for the Shares exceeded one year. Long-term capital gains of noncorporate taxpayers will generally be subject to a reduced rate of United States federal income tax. Capital gains of corporate stockholders are generally taxable at the regular tax rates applicable to corporations.

If the Proposed Merger is consummated, a United States Holder who exercises appraisal rights and receives cash in exchange for its Shares will generally recognize capital gain or loss equal to the difference between the cash received and the holder’s adjusted tax basis in the Shares exchanged therefor.

Non-United States Holder

A Non-United States Holder generally will not be subject to United States federal income tax (or withholding thereof) in respect of gain recognized pursuant to the receipt of cash in exchange for Shares pursuant to the Offer or the Proposed Merger unless:

•

the gain is effectively connected with a Non-United States Holder’s conduct of a trade or business in the United States (and, under an applicable income tax treaty, is attributable to a permanent establishment or fixed base in the United States), in which case such gain generally will be taxed in the same manner as gains of United States persons, and such gain may also be subject to the branch profits tax in the case of a corporate Non-United States Holder;

•

the Non-United States Holder is an individual who is present in the United States for 183 days or more in the taxable year of the disposition and meets certain other requirements, in which case such individual will be subject to a flat 30% tax on the gain derived from the sale, which may be offset by United States capital source losses, even though the individual is not considered a resident of the United States; or

•

the Company is or has been a “United States real property holding corporation” for United States federal income tax purposes at any time during the shorter of the five-year period ending on the date of disposition or the period that the Non-United States Holder held the Shares.

Generally, a corporation is a “United States real property holding corporation” if the fair market value of its “United States real property interests” equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests plus its other assets used or held for use in a trade or business. The tax relating to stock in a “United States real property holding corporation” generally will not apply to a Non-United States Holder whose holdings, direct and indirect, at all times during the applicable period, constituted 5% or less of the

Shares, provided that the Shares were regularly traded on an established securities market. We believe the Company has never been, is not currently and is not likely to become a United States real property holding corporation for United States federal income tax purposes in the future.

THE FOREGOING DOES NOT PURPORT TO BE AN ANALYSIS OF THE POTENTIAL TAX CONSIDERATIONS RELATING TO PARTICIPATION IN THE OFFER OR THE PROPOSED MERGER, AND IS NOT TAX ADVICE. THEREFORE, STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF TENDERING INTO THE OFFER OR EXCHANGING SHARES PURSUANT TO THE PROPOSED MERGER, INCLUDING THE APPLICABILITY OF FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.

Price Range of Shares; Dividends

The Shares are listed and principally traded on the American Stock Exchange under the symbol “NSO.” The following table sets forth for the calendar quarters indicated the high and low sales prices per Share on the American Stock Exchange based on published financial sources.


	High		Low
Year Ended December 31, 2003
First Quarter	$	.34	$	.21
Second Quarter		.61		.31
Third Quarter		1.15		.41
Fourth Quarter		.87		.45
Year Ended December 31, 2004
First Quarter	$	.70	$	.31
Second Quarter		.45		.23
Third Quarter		.33		.14
Fourth Quarter		.35		.21
Year Ending December 31, 2005
First Quarter	$	.40	$	.18
Second Quarter		.23		.12
Third Quarter (through August 1, 2005)		.16		.09

On July 27, 2005, the last full trading day before the date the Company announced that it entered into the Merger Agreement, the closing sales price per Share of the Company was $0.15.

On August 1, 2005, the closing sales price per Share of the Company was $0.10. We recommend that you obtain a recent quotation for Shares before deciding whether to tender your Shares. As reported in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004, the Company did not pay dividends on its common stock for the years ended December 31, 2003 and 2004 and did not expect to pay any dividends in the near future.

Certain Information Concerning the Company

General

The Company is a Delaware corporation, with principal executive offices at 6190 Corte Del Cedro, Carlsbad, California 92011. The telephone number of the Company’s executive offices is (760) 683-2500. The Company, through its wholly owned subsidiary, nStor Corporation, Inc., delivers storage solutions that secure and protect critical information. Serving both OEM (Original Equipment Manufacturer) and SI (solution integrator) customers, the Company provides innovative technology solutions encompassing storage hardware, software, services and applications, designed to help businesses solve some of their greatest challenges. The

Company is a supplier of flexible, high-performance and intelligent data storage solutions (Storage Solutions) with a product family that includes application-driven storage platforms, Redundant Array of Independent Disks (RAID) controllers, storage management software and services.

Available Information

The Company is subject to the informational requirements of the Exchange Act and in accordance therewith files periodic reports and other information with the SEC relating to its business, financial condition and other matters. The Company is required to disclose certain information, as of particular dates, concerning the Company’s directors and officers, their remuneration, stock options granted to them, the principal holders of the Company’s securities and any material interest of such persons in transactions with the Company. Such reports and other information may be inspected at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. Copies of such material can also be obtained at prescribed rates from the Public Reference Section of the SEC at 100 F Street, N.E., Washington, D.C. 20549, or free of charge at the web site maintained by the SEC at http://www.sec.gov.

Except as otherwise stated in this Offer to Purchase, the information concerning the Company contained herein has been furnished by the Company or its representatives or taken from or is based upon reports and other documents on file with the SEC or otherwise publicly available. Although we have no knowledge that would indicate that any statements contained herein based upon such reports and documents are untrue, we take no responsibility for the accuracy or completeness of the information contained in such reports and other documents or for any failure by the Company to disclose events that may have occurred and may affect the significance or accuracy of any such information but that are unknown to us.

Certain Information Concerning Parent and Purchaser

General

Parent is a Bermuda corporation with principal executive offices at Langstone Road, Havant PO9 1SA, United Kingdom. The telephone number of Parent’s executive offices is (011) 44 2392 496000. Parent is a provider of enterprise class data storage subsystems and network technology. Building on over 20 years of research and development experience in disk drive development, storage systems and high-speed communication protocols, Parent designs and manufactures enabling technology that provides OEM (Original Equipment Manufacturer) and disk drive manufacturers with data storage products to support high-performance storage and data communication networks. Parent’s product strategy addresses the needs of storage and network systems and storage infrastructure marketplaces.

Purchaser is a Delaware corporation incorporated on July 25, 2005, with principal executive offices at Langstone Road, Havant PO9 1SA, United Kingdom. The telephone number of Purchaser’s executive offices is (011) 44 2392 496000. To date, Purchaser has engaged in no activities other than those incident to Purchaser’s formation and the commencement of the Offer. Purchaser is an indirect wholly owned subsidiary of Parent.

The name, business address, principal occupation or employment, five-year employment history and citizenship of each director and executive officer of Parent and Purchaser and certain other information are set forth on Schedule I to this Offer to Purchase. Except as set forth in this Offer to Purchase, during the past two years, none of us, nor, to our best knowledge, any of the persons listed on Schedule I hereto, has had any business relationship or transaction with the Company or any of its executive officers, directors or affiliates that is required to be reported under the rules and regulations of the SEC applicable to the Offer. Except as set forth in this Offer to Purchase, none of the persons listed in Schedule I, nor any of their respective associates or majority-owned subsidiaries, beneficially owns any securities of the Company. Except as set forth in this Offer to Purchase, there have been no contacts, negotiations or transactions between us or any of our subsidiaries or, to our best knowledge, any of the persons listed in Schedule I to this Offer to Purchase, on the one hand, and the Company or its affiliates, on the other hand, concerning a merger, consolidation or acquisition, tender offer or

other acquisition of securities, an election of directors or a sale or other transfer of a material amount of assets. None of the persons listed in Schedule I has, during the past five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). Except as described in Schedule I, none of the persons listed in Schedule I has, during the past five years, been a party to any judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws.

As of the date of this Offer to Purchase, Parent and Purchaser own no Shares. However, we may be deemed to beneficially own 61,912,000 Shares, representing approximately 37.5% of the outstanding Shares as of July 31, 2005, as a result of the Support Agreements. For a detail discussion of the Support Agreements, see “—Background of the Offer; The Merger Agreement; Other Arrangements.”

Available Information

Parent is subject to certain of the informational requirements of the Exchange Act and in accordance therewith files reports and other information with the SEC relating to its business, financial condition and other matters. Parent is a “foreign private issuer” and, under the rules adopted under the Exchange Act, is exempt from some of the filing requirements of the Exchange Act, including the proxy and information provisions of Section 14 and the reporting and liability provisions applicable to officers, directors and significant shareholders under Section 16 of the Exchange Act. However, Parent files reports and other information with the SEC as required by the Exchange Act. Such reports and other information should be available for inspection and copying at the offices of the SEC in the same manner as set forth with respect to the Company in “—Certain Information Concerning the Company—Available Information.”

Source and Amount of Funds

We will need approximately $24.0 million to purchase all of the outstanding Shares pursuant to the Offer and the Preferred Shares (as defined herein), to pay expenses incurred in connection with the Proposed Merger and to pay related fees and expenses. Purchaser intends to obtain all funds needed for the Offer and the Proposed Merger through a capital contribution or a loan from Parent. Parent plans to provide the funds for such capital contribution or loan from its available cash and working capital. The Offer is not subject to any financing condition.

Background of the Offer; The Merger Agreement; Other Arrangements

Background of the Offer

The first contact between the Company and Parent occurred during the summer of 2004 when one of the Company’s sales representatives made a routine sales call to Matt Cornell, Parent’s Executive Vice President, Storage Systems. Following that call, on September 3, 2004, nStor Corporation, Inc., a wholly owned subsidiary of the Company (“nStor Corporation”), and Xyratex Technology Limited, an indirect wholly owned subsidiary of Parent (“Xyratex Technology”), entered into a standard Non-Disclosure Agreement to allow the Company to disclose certain proprietary information concerning its products to Parent.

On January 6, 2005, Mr. Cornell contacted Todd Gresham, the Company’s CEO and President, to discuss potential business synergies and Parent’s interest in purchasing various products from the Company.

On January 25, 2005, Mr. Gresham met with Mr. Cornell and Steve Thompson, Parent’s Chief Technology Officer, in Boston, Massachusetts. At that meeting, the parties further discussed the Company’s products and the Company’s sales to various original equipment manufacturers (OEMs). Mr. Cornell suggested that a joint development agreement or strategic alliance of some type with the Company would be of interest to Parent.

During early February 2005, Messrs. Gresham and Cornell spoke several times and, on February 10, 2005, the Company sent Parent a sample of one of the Company’s products for testing and evaluation.

On March 1, 2005, Mr. Cornell advised Mr. Gresham that Parent was actively considering separate potential acquisition candidates and that Parent was very interested in the Company as an acquisition candidate.

On March 7, 2005, Mr. Gresham traveled to England to meet with Mr. Cornell, Mr. Thompson, Richard Pearce, Parent’s Chief Financial Officer and Steve Barber, Parent’s Chief Executive Officer, to discuss a possible business combination between the Company and Parent.

On March 9, 2005, there was a conference call among Mr. Levy, Mr. Gresham, Jack Jaiven, the Company’s Vice President and Acting Chief Financial Officer, Mr. Pearce and Mr. Barber. Parent expressed a positive initial evaluation of the Company’s products and proposed a purchase of the Company, or its assets, subject to satisfactory completion of due diligence. Parent proposed an initial purchase price of $10 million to $15 million, plus a potential earn-out. Discussions continued during the remainder of March 2005. During that period, the Company and Parent negotiated with respect to valuation of the Company.

On April 4, 2005, Mr. Jaiven sent Mr. Pearce an outline of a proposed purchase transaction in which Parent would acquire all of the Company’s outstanding common stock for an agreed upon valuation with the consideration in the form of shares of common stock of Parent plus an option to acquire additional shares of common stock of Parent.

During April 2005, negotiations continued and Parent accelerated its due diligence review of the Company. The Company also provided Parent with various due diligence information at the Company’s research and development facility in Lake Mary, Florida.

On April 26, 2005, representatives of the Company, Parent and the parties’ legal advisors held their first conference call to discuss a proposed transaction structure involving a tender offer for the Company’s outstanding shares of capital stock.

On May 6, 2005, Messrs. Levy, Jaiven and Gresham, as well as one of the Company’s directors, Mark Shirman, representing the Company, and Messrs. Barber and Pearce, representing Parent, met in Boston to continue discussion of a possible business combination. During the meeting, the parties discussed and agreed upon several material terms of a possible business combination.

As a result of the May 6, 2005 meeting, on May 13, 2005, the Company received a Proposed Term Sheet (the “Term Sheet”) from Parent. That Term Sheet proposed the purchase of all of the outstanding capital stock of the Company in exchange for common stock of Parent. The exchange ratio was based on (i) a value of $24.5 million (assuming a Company tangible net worth of -$1.7 million) and (ii) Parent’s common share price over a 90-day period prior to execution of definitive agreements. The purchase price would be reduced by various change of control payments and transaction expenses.

The parties discussed the Term Sheet for several weeks. During those discussions, the parties agreed that the proposed transaction should be restructured as an all cash tender offer in lieu of the proposed stock-for-stock exchange with the remaining economic terms the same as set forth in the Term Sheet. The Company’s representatives indicated that a cash transaction was acceptable. Rather than continue negotiations on the Term Sheet, the parties decided to begin negotiating a definitive Merger Agreement.

On June 2, 2005, Parent’s counsel circulated the first draft of a Merger Agreement between Parent, Purchaser and the Company. The aggregate proposed merger consideration was $24.5 million in cash, less an adjustment for any decrease in the Company’s net worth from March 31, 2005 to May 31, 2005, less certain change of control payments and transaction expenses if paid by Parent.

During June and the first three weeks of July 2005, Parent continued its due diligence investigation of the Company. During the same period, representatives of Parent and the Company and their respective legal advisors discussed and negotiated on many occasions all aspects of the proposed merger and the definitive Merger Agreement and ancillary agreements. Those negotiations covered all aspects of the transaction, including, among other things: the representations and warranties made by the parties; the restrictions on the conduct of the Company’s business following execution and delivery of the Merger Agreement; the conditions to completion of the offer and the merger; the provisions regarding termination; the amount, triggers and payment of the termination fee and the consequences of termination; the delivery and terms of the tender offer; the amount and the terms of a proposed loan to the Company; and the terms and scope of a proposed license agreement.

During the week of July 25, 2005, the parties and their legal advisors concluded negotiations of the Merger Agreement and various ancillary agreements.

On July 27, 2005, Parent’s board of directors approved the Merger Agreement in the form presented. Following such approval, on July 27, 2005, the Merger Agreement was executed by Parent, Purchaser and the Company and the Support Agreements were executed by the stockholders named therein, Purchaser and Parent.

On July 28, 2005, Parent and the Company, before the opening of trading on AMEX and Nasdaq, issued a joint press release announcing the transaction.

The Merger Agreement

The following is a summary of the material provisions of the Merger Agreement, a copy of which is filed as an exhibit to the Tender Offer Statement on Schedule TO filed with the SEC. This summary is qualified in its entirety by reference to the Merger Agreement, which is incorporated by reference herein. Capitalized terms used herein and not otherwise defined have the meanings ascribed to them in the Merger Agreement.

Overview. Pursuant to the terms and conditions of the Merger Agreement, Parent, Purchaser and the Company are required to use their commercially reasonable efforts to take, or cause to be taken, all action and do, or cause to be done, all other things necessary, proper or advisable to consummate and make effective the transactions contemplated by the Merger Agreement, including the commencement by Parent and Purchaser of the Offer to purchase all outstanding Shares at $0.105 per Share. The obligation of Purchaser to accept for payment or pay for any Shares tendered pursuant to the Offer will be subject only to the satisfaction of the conditions set forth in “—Conditions to the Offer.” The conditions described in “—Conditions to the Offer” are for the benefit of Parent and Purchaser and may be asserted by Parent or Purchaser regardless of the circumstances giving rise to any such conditions and may be waived by Parent or Purchaser in whole or in part at any time and from time to time in their reasonable discretion, in each case subject to the terms of the Merger Agreement.

In order to induce Parent and Purchaser to enter into the Merger Agreement, the Significant Stockholders of the Company each entered into a Support Agreement with Parent and Purchaser under which the Significant Stockholders agreed, among other things, to tender an aggregate of 61,912,000 Shares in the Offer upon the terms and conditions set forth therein. See “—Other Arrangements—The Support Agreements” below for additional information.

As a further inducement to Parent and Purchaser to enter into the Merger Agreement, the Company granted Purchaser an irrevocable option (the “Top-Up Option”), exercisable if the Minimum Condition is met and Purchaser accepts for payment Shares tendered pursuant to the Offer of at least 88.1% (but less than 90%) of the Shares then outstanding (the “Top-Up Exercise Event”), to purchase that number of Shares equal to the lowest number of Shares that, when added to the number of Shares owned by Purchaser at the time of such exercise, will constitute one share more than 90% of the Shares then outstanding (assuming the issuance of Shares pursuant to

the Top-Up Option and the exercise of all outstanding exercisable options to purchase Shares with a exercise price less than $0.105), at a price per share equal to $0.105; provided, however, that the Top-Up Option will not be exercisable unless immediately after such exercise Purchaser would own more than 90% of the Shares then outstanding. Purchaser must exercise the Top-Up Option, in whole but not in part, at any one time after the occurrence of the Top-Up Exercise Event and prior to the Effective Time of the Merger Agreement.

In the Merger Agreement, the Company has agreed that as promptly as reasonably practicable on the date Parent’s and Purchaser’s Offer documents are filed with the SEC, it will file with the SEC and mail to its stockholders a Solicitation/Recommendation Statement on Schedule 14D-9 reflecting the recommendation of the Company Board that the Company’s stockholders accept the Offer, tender all their Shares to Purchaser and adopt the Merger Agreement and the transactions contemplated thereby.

The Proposed Merger. The Merger Agreement provides that, if all of the conditions to the Proposed Merger have been fulfilled or waived and the Merger Agreement has not been terminated, Purchaser will be merged with and into the Company, and the Company will continue as the surviving corporation (the “Surviving Corporation”) and an indirect wholly owned subsidiary of Parent.

At the Effective Time, each Share issued and outstanding immediately prior to the Effective Time (other than Shares held in the treasury of the Company or by any Company Subsidiary or by Parent, Purchaser or any other subsidiary of Parent or Purchaser, all of which will be canceled, and Shares held by stockholders who properly exercise their appraisal rights under the DGCL) will be cancelled and retired and will be converted into the right to receive a cash payment of $0.105, payable to the holder thereof, without any interest thereon, upon surrender of the certificate formerly representing such Shares. Each share of common stock of Purchaser outstanding immediately prior to the Effective Time will automatically be converted at the Effective Time into one validly issued and outstanding share of common stock of the Surviving Corporation.

The Merger Agreement provides that upon payment by Purchaser in accordance with the Offer for Shares representing at least such number as shall satisfy the Minimum Condition, and from time to time thereafter, Parent will be entitled to designate such number of directors, rounded up to the next whole number, as will give Parent representation on the Company Board equal to the product of (i) the total number of directors on the Company Board (determined after giving effect to the directors elected pursuant to this sentence) multiplied by (ii) the percentage that the aggregate number of Shares beneficially owned by Parent or any of its affiliates bears to the total number of Shares then outstanding, and the Company will, upon the request of Parent, promptly take all actions necessary to cause Parent’s designees to be elected, including, if necessary, seeking the resignations of one or more existing directors, provided, however, that at all times prior to the Effective Time at least two members of the Company Board will be Continuing Directors (as defined below). Following the election or appointment of Parent’s designees and prior to the Effective Time, (i) any amendment or termination of the Merger Agreement by the Company, (ii) any extension by the Company of the time for the performance of any of the obligations or other acts of Parent and Purchaser under the Merger Agreement and (iii) any waiver of any condition to the Company’s obligations or rights under the Merger Agreement, if such amendment, termination, extension or waiver would be reasonably likely to have an adverse effect on the stockholders of the Company other than the Purchaser or its affiliate, will require the approval of a majority of the entire Company Board, which majority will include the concurrence of a majority of the directors of the Company then in office who are not designated by Parent (the “Continuing Directors”), except to the extent that applicable law requires that such action be acted upon by the full Company Board, in which case the action will require the approval of both a majority of the full Company Board and a majority of the Continuing Directors.

Recommendation. The Company represents and warrants in the Merger Agreement that the Company Board at a meeting duly called and held at which a quorum was present throughout has:

(i) determined that each of the transactions contemplated by the Merger Agreement, including the Offer and the Proposed Merger, is advisable, fair to and in the best interests of the Company and its

stockholders, approved the Offer and the Merger Agreement and recommended that the Company’s stockholders accept the Offer and adopt the Merger Agreement; and

(ii) taken all action necessary to render the restrictions set forth in Section 203 of the DGCL inapplicable to the Offer, the Proposed Merger and the Ancillary Agreements (as defined in the Merger Agreement).

The Company Board agreed not to withdraw, modify or amend its recommendations described above in a manner adverse to Parent or Purchaser (or propose publicly its intention to do so), except that the Company Board shall be permitted to withdraw, amend or modify its recommendation (or publicly propose its intention to do so) of the Merger Agreement, the Offer or the Proposed Merger in a manner adverse to Parent or Purchaser or approve or recommend or enter into an agreement with respect to a Superior Proposal (as defined below) if the Company has complied with the terms of the Merger Agreement. A withdrawal, modification or amendment of the recommendation of the Company Board or any committee thereof in any manner adverse to Parent or Purchaser, however, may give rise to certain termination rights on the part of Parent and Purchaser under the Merger Agreement and the right to receive certain termination fees as set forth therein. See “—Termination” and “—Termination Fee” below.

Representations and Warranties. In the Merger Agreement, the Company has made customary representations and warranties to Parent and Purchaser, including but not limited to representations and warranties relating to the Company’s organization and qualification, authority to enter into the Merger Agreement and consummate the transactions contemplated thereby, compliance with applicable laws, capitalization, subsidiaries, ability to enter into and consummate the transactions contemplated by the Merger Agreement without breaching contracts or violating laws, required consents and approvals, SEC filings (including financial statements), the documents supplied by the Company related to the Offer, the absence of certain material adverse changes or events since December 31, 2004, taxes, employee benefit plans, absence of brokers, licenses and permits, environmental matters, labor and employment matters, intellectual property, material agreements, business practices, litigation, insurance, affiliate transactions, opinion of its financial advisor, required vote of stockholders, state takeover statutes and regulatory filings.

Parent and Purchaser have also made customary representations and warranties to the Company, including representations and warranties relating to Parent’s and Purchaser’s organization and qualification, authority to enter into the Merger Agreement and consummate the transactions contemplated thereby, documents supplied by Parent and Purchaser related to the Offer, required consents and approvals, ability to enter into and consummate the transactions contemplated by the Merger Agreement without breaching contracts or violating laws, the availability of sufficient funds to perform their obligations under the Merger Agreement, the interim operations of Purchaser and the absence of brokers.

Interim Agreements of Parent, Purchaser and the Company. Pursuant to the Merger Agreement, unless Parent has agreed in writing thereto or except as otherwise expressly contemplated by the Merger Agreement, the Company will, and will cause each Company Subsidiary to:

(i) maintain its existence in good standing under applicable laws;

(ii) conduct its operations only in the ordinary and usual course of business consistent with past practice; and

(iii) use its commercially reasonable efforts to keep available the services of the current officers, key employees and key consultants of the Company and each Company Subsidiary, and preserve current relationships with such customers, suppliers and other persons with which the Company or any Company Subsidiary has significant business relations as is reasonably necessary to preserve substantially intact its business organization.

In addition, from the date of the Merger Agreement to the Effective Time, unless Parent has consented in writing thereto or except as otherwise expressly contemplated by the Merger Agreement, the Company will not and will not permit any Company Subsidiary, directly or indirectly, to do or agree to do, any of the following:

(i) amend or otherwise change its certificate of incorporation or bylaws or equivalent organizational documents;

(ii) (A) issue, sell, pledge, dispose of, grant, transfer, encumber, or authorize the issuance, sale, pledge, disposition, grant, transfer, or encumbrance of any shares of capital stock of, or other Equity Interests in, the Company or any Company Subsidiary of any class, or securities convertible or exchangeable or exercisable for any shares of such capital stock or other Equity Interests, or any options, warrants or other rights of any kind to acquire any shares of such capital stock or other Equity Interests or such convertible or exchangeable securities, or any other ownership interest, of the Company or any Company Subsidiary, other than the issuance of Shares upon the exercise of Company Options or Warrants outstanding as of the date of the Merger Agreement in accordance with their terms or (B) sell, pledge, dispose of, transfer, lease, license, guarantee or encumber, or authorize the sale, pledge, disposition, transfer, lease, license, guarantee or encumbrance of, any material property or assets (including Intellectual Property) of the Company or any Company Subsidiary, except pursuant to existing contracts or commitments or the sale or purchase of goods in the ordinary course of business consistent with past practice, or enter into any commitment or transaction or series of commitments or transactions outside the ordinary course of business consistent with past practice or involving aggregate receipts, payments or expenses in excess of $100,000;

(iii) declare, set aside, make or pay any dividend or other distribution (whether payable in cash, stock, property or a combination thereof) with respect to any of its capital stock (other than dividends paid by a wholly owned Company Subsidiary to the Company or to any other wholly owned Company Subsidiary) or enter into any agreement with respect to the voting of its capital stock;

(iv) reclassify, combine, split, subdivide or redeem, purchase or otherwise acquire, directly or indirectly, any of its capital stock, other Equity Interests or any other securities;

(v) (A) acquire (including, without limitation, by merger, consolidation, or acquisition of stock or assets) any interest in any person or any division thereof or any assets, other than acquisitions of assets in the ordinary course of business consistent with past practice; (B) incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, or otherwise as an accommodation become responsible for, the obligations of any person (other than a wholly owned Company Subsidiary) for borrowed money; (C) terminate, cancel or request any material change in, or agree to any material change in, any Company Material Contract; (D) make or authorize any capital expenditure in excess of the Company’s budget as disclosed to Parent prior to the date hereof; (E) enter into any agreement or arrangement that limits or otherwise restricts the Company or any Company Subsidiary or any of their affiliates or any successor thereto or that could, after the Effective Time, limit or restrict Parent or any affiliate (including the Surviving Corporation) or any successor thereto from engaging or competing in any line of business in any geographic area; or (F) enter into or amend any contract, agreement, commitment or arrangement that, if fully performed, would not be permitted under the terms of the Merger Agreement;

(vi) except as may be required by contractual commitments or corporate policies with respect to severance or termination pay in existence on the date of the Merger Agreement as disclosed in the Company Disclosure Schedule: (A) increase the compensation or benefits payable or to become payable to its directors, officers or employees (except for increases in accordance with past practices in salaries or wages of employees of the Company or any Company Subsidiary which are not across-the-board increases), (B) grant any rights to severance or termination pay to, or enter into any employment or severance agreement with, any director, officer or employee of the Company or any Company Subsidiary, or establish, adopt, enter into or amend any collective bargaining, bonus, profit sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination, severance or other plan, agreement, trust, fund, policy or arrangement for the benefit of any director, officer or employee, except to the extent required by applicable law or the terms of a collective bargaining agreement in

existence on the date of the Merger Agreement or (C) take any affirmative action to amend or waive any performance or vesting criteria or accelerate vesting, exercisability or funding under any Company Benefit Plan, except, in each case, to the extent required by applicable law or existing term of any such Company Benefit Plan described in the Company Disclosure Schedule;

(vii) (A) pre-pay any long-term debt, or pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, contingent or otherwise), except in the ordinary course of business consistent with past practice and in accordance with their terms, (B) accelerate or delay collection of notes or accounts receivable in advance of or beyond their regular due dates or the dates when the same would have been collected in the ordinary course of business consistent with past practice, (C) delay or accelerate payment of any account payable or in advance of its due date or the date such liability would have been paid in the ordinary course of business consistent with past practice or (D) vary the Company’s inventory practices in any material respect from the Company’s past practices;

(viii) make any change in accounting policies or procedures, except as required by GAAP or by a Governmental Entity;

(ix) waive, release, assign, settle or compromise any material claims, or any material litigation or arbitration;

(x) make or change any election in respect of taxes, adopt or change any material accounting method in respect of taxes, enter into any tax allocation agreement, tax sharing agreement, tax indemnity agreement or closing agreement, settle or compromise any claim, notice, audit report or assessment in respect of taxes, or consent to any extension or waiver of the limitation period applicable to any claim or assessment in respect of taxes;

(xi) enter into any new material line of business;

(xii) modify, amend or terminate, or waive, release or assign any material rights or claims with respect to any confidentiality or standstill agreement to which the Company is a party;

(xiii) write up, write down or write off the book value of any assets, individually or in the aggregate, for the Company and the Company Subsidiaries taken as a whole, in excess of $175,000, except for depreciation and amortization in accordance with GAAP consistently applied;

(xiv) take any action to exempt or make not subject to (A) the provisions of Section 203 of the DGCL or (B) any other state takeover law or state law that purports to limit or restrict business combinations or the ability to acquire or vote shares, any person (other than Parent, Purchaser and any subsidiary of Parent) or any action taken thereby, which person or action would have otherwise been subject to the restrictive provisions thereof and not exempt therefrom;

(xv) take any action that is intended or would reasonably be expected to result in any of the Conditions to the Offer or the conditions to the Proposed Merger set forth in the Merger Agreement not being satisfied;

(xvi) acquire, or agree to acquire, from any person or group any Intellectual Property, except in the ordinary course of business consistent with past practice;

(xvii) commence any litigation, suit, claim, action, proceeding or investigation;

(xviii) fail to make in a timely manner any filings with the SEC required under the Securities Act or the Exchange Act or the rules and regulations promulgated thereunder;

(xix) adopt a stockholder rights plan or agreement or “poison pill”; or

(xx) authorize or enter into any agreement or otherwise make any commitment to do any of the foregoing.

Stockholder Approval; Proxy Statement. In the Merger Agreement, the parties have agreed that, if necessary, the Company will (1) call and hold a special meeting of its stockholders for the purpose of considering

and taking action upon the Proposed Merger and the Merger Agreement as promptly as practicable following the later of the Expiration Date, the expiration of any subsequent offering period contemplated by the Merger Agreement, or upon the request of Parent, (2) prepare and file with the SEC and mail to its stockholders a proxy statement relating to the Merger Agreement and (3) recommend to its stockholders the approval of the Merger Agreement and the other transactions contemplated thereby, including the Proposed Merger, unless the Company Board approves or recommends, or enters into an agreement with respect to, a Superior Proposal (as defined below), or except to the extent that the Company Board determines in good faith (after consultation with outside counsel) that to do so would create a material risk of a breach by the Company Board of its fiduciary duties to the Company’s stockholders. The Company must use reasonable efforts to obtain the necessary approvals by its stockholders for the Proposed Merger and take all other actions reasonably requested by Parent to secure the vote of stockholders for approval of the Proposed Merger, the Merger Agreement and the other transactions contemplated thereby. At any such meeting, all of the Shares then owned by Parent, Purchaser and by any of Parent’s other subsidiaries or affiliates will be voted in favor of the Proposed Merger and the Merger Agreement. Notwithstanding the foregoing, in the event that Purchaser, or any other direct or indirect subsidiary of Parent, acquires at least 90% of the outstanding Shares, the Company, Purchaser and Parent will take all necessary and appropriate action to cause the Proposed Merger to become effective as soon as practicable in accordance with Section 253 of the DGCL.

Indemnity; Insurance. Parent and Surviving Corporation have agreed that the indemnification obligations set forth in the Company Certificate and the Company Bylaws shall survive the Proposed Merger and shall not be amended, repealed or otherwise modified for a period of six years after the Effective Time in any manner that would adversely affect the rights thereunder of any individual who on or prior to the Effective Time was a director, officer, trustee, fiduciary, employee or agent of the Company or any Company Subsidiary or who served at the request of the Company or any Company Subsidiary as a director, officer, trustee, partner, fiduciary, employee or agent of another corporation, partnership, joint venture, trust, pension or other employee benefit plan or enterprise, unless such amendment or modification is required by law.

For six years from the Effective Time, the Surviving Corporation will provide to the Company’s directors and officers (as of the date hereof and as of the Effective Time) an insurance and indemnification policy that provides coverage for events occurring prior to the Effective Time (the “D&O Insurance”) that is no less favorable than the Company’s existing policy or, if substantially equivalent insurance coverage is unavailable, the best available coverage; provided, however, that the Surviving Corporation shall not be required to pay an aggregate premium for the six years of D&O Insurance in excess of $250,000.

No Solicitation. The Company has agreed that, prior to the Effective Time, it will not, and will not authorize or permit any Company Subsidiary or Company Representative, directly or indirectly, to take any action to (A) encourage (including by way of furnishing non-public information), solicit, initiate or facilitate any Acquisition Proposal (as defined below), (B) enter into any agreement with respect to any Acquisition Proposal or enter into any agreement, arrangement or understanding requiring it to abandon, terminate or fail to consummate the Proposed Merger or any other transaction contemplated by the Merger Agreement or (C) participate in any way in discussions or negotiations with, or furnish any information to, any person in connection with, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or could reasonably be expected to lead to, any Acquisition Proposal; provided, however, that if, at any time prior to the consummation of the Offer, the Company Board determines in good faith, after consultation with outside counsel, that it would otherwise constitute a breach of its fiduciary duties to stockholders, the Company may, in response to a Superior Proposal (as defined below) and subject to the Company’s compliance with the Merger Agreement, (1) furnish information with respect to the Company and the Company Subsidiaries to the person making such Superior Proposal pursuant to a customary confidentiality agreement the benefits of the terms of which are no more favorable to the other party to such confidentiality agreement than those in place with Parent as amended as of the date thereof and (2) following the execution of such a confidentiality agreement, participate in discussions with respect to such Superior Proposal. The Merger Agreement requires that the Company, its affiliates and their respective officers, directors, employees, representatives legal counsel, advisors and agents cease immediately

and cause to be terminated any and all existing discussions or negotiations with any parties conducted before execution of the Merger Agreement with respect to an Acquisition Proposal and promptly request that all confidential information with respect thereto furnished on behalf of the Company be returned.

“Acquisition Proposal” is defined in the Merger Agreement as any offer or proposal concerning any (A) merger, consolidation, other business combination or similar transaction involving the Company or any Company Subsidiary, (B) sale, lease or other disposition directly or indirectly by merger, consolidation, business combination, share exchange, joint venture or otherwise, of assets of the Company or any Company Subsidiary representing 20% or more of the consolidated assets, revenues or net income of the Company and the Company Subsidiaries, (C) issuance or sale or other disposition (including by way of merger, consolidation, business combination, share exchange, joint venture or similar transaction) of Equity Interests representing 20% or more of the voting power of the Company, (D) transaction in which any person will acquire beneficial ownership or the right to acquire beneficial ownership or any group has been formed which beneficially owns or has the right to acquire beneficial ownership of, Equity Interests representing 20% or more of the voting power of the Company or (E) any combination of the foregoing (other than the Offer and the Proposed Merger).

“Superior Proposal” is defined in the Merger Agreement as any bona fide Acquisition Proposal (but with all of the percentages included in the definition of such term raised to 50.01% for purposes of this definition) made by a third party which was not solicited by the Company, any Company Subsidiary, any Company Representatives or any other Company affiliates and which, in the good faith judgment of the Company Board, taking into account, to the extent deemed appropriate by the Company Board, the various legal, financial and regulatory aspects of the proposal and the person making such proposal (A) if accepted, is reasonably likely to be consummated, (B) if consummated would, after receiving advice of the Company’s financial advisor, result in a transaction that is more favorable to the Company’s stockholders, from a financial point of view, than the Offer and the Proposed Merger as the same may be proposed by Parent to be amended in response thereto and as provided in the Merger Agreement and (C) is not subject to any financing condition.

The Merger Agreement requires the Company to advise immediately advise Parent of any inquiry received by it relating to any potential Acquisition Proposal and of the terms of any proposal or inquiry, including the identity of the person and its affiliates making the same, that it may receive in respect of any such potential Acquisition Proposal, or of any information requested from it or of any negotiations or discussions being sought to be initiated with it, will furnish to Purchaser a copy of any such proposal or inquiry, if it is in writing, or a written summary of any such proposal or inquiry (as well as of any additional information received by the Company with respect to an Acquisition Proposal), if it is not in writing and will keep Parent fully informed on a current basis with respect to the status of any such negotiations or discussions and any developments with respect to the foregoing.

Neither the Company Board nor any committee thereof will (A) withdraw or modify, or propose publicly to withdraw or modify, in a manner adverse to Parent, the approval or recommendation by the Company Board or such committee of the Offer and the Proposed Merger and the adoption and approval of the Merger Agreement, (B) approve or recommend, or propose publicly to approve or recommend, any Acquisition Proposal other than the Offer and the Proposed Merger, or (C) cause the Company to enter into any letter of intent, agreement in principle, acquisition agreement or other agreement related to any Acquisition Proposal other than the Offer and the Proposed Merger, provided, however, that the Company may (1) take and disclose to its stockholders a position contemplated by Rule 14d-9 or Rule 14e-2(a) promulgated under the Exchange Act with regard to an Acquisition Proposal (provided that the Company Board shall not withdraw or modify in an adverse manner its approval or recommendation of the Offer, the Proposed Merger or the Merger Agreement except as set forth below) or (2) in the event that a Superior Proposal is made and the Company Board determines in good faith, after consultation with outside counsel, that it would otherwise constitute a breach of its fiduciary duty to stockholders, withdraw or modify its recommendation of the Offer and the Proposed Merger prior to the consummation of the Offer, so long as the Company continues to comply with all other provisions of the Merger Agreement and so long as all the conditions to the Company’s right to terminate the Merger Agreement have

been satisfied (including the expiration of the two business day period described therein and the payment of all amounts required pursuant thereto).

Stock Options. Immediately prior to the Effective Time, each unexpired and unexercised option or similar rights to purchase Shares under any stock option plan of the Company, whether or not then exercisable or vested, will be cancelled.

Conditions to the Proposed Merger. The respective obligations of each party to consummate the Proposed Merger shall be subject to the satisfaction at or prior to the Effective Time of each of the following conditions:

(i) the Merger Agreement shall have been approved and adopted by the requisite vote of the stockholders of the Company, if required by applicable law;

(ii) Purchaser shall have accepted for payment and paid for Shares in an amount sufficient to meet the Minimum Condition and otherwise pursuant to the Offer in accordance with the terms of the Merger Agreement; and

(iii) the consummation of the Proposed Merger shall not be restrained, enjoined or prohibited by any order, judgment, decree, injunction or ruling (whether temporary, preliminary or permanent) of a court of competent jurisdiction or any other Governmental Entity and there shall not have been any statute, rule or regulation enacted, promulgated or deemed applicable to the Proposed Merger by any Governmental Entity which prevents the consummation of the Proposed Merger or has the effect of making the purchase of Shares illegal.

Termination. The Merger Agreement may be terminated, and the Proposed Merger may be abandoned, at any time prior to the Effective Time by action taken or authorized by the board of directors of the terminating party or parties, whether before or after approval of the Proposed Merger by the stockholders of the Company:

(i) by mutual written consent of Parent and the Company, by action of their respective boards of directors;

(ii) by the Company if Parent or Purchaser fails to have accepted for payment and paid for Shares pursuant to the Offer in accordance with the terms hereof and thereof on or before December 31, 2005; provided, however, that the Company may not terminate the Merger Agreement if the Company shall have (1) failed to fulfill any material obligation under the Merger Agreement, which failure has been the cause of, or resulted in, the failure of any condition to the Offer to have been satisfied on or before such date, or (2) otherwise materially breached the Merger Agreement;

(iii) by either the Company or Parent if the Offer is terminated or withdrawn pursuant to its terms without any Shares being purchased thereunder; provided, however, that neither the Company nor Parent may terminate the Merger Agreement if such party shall have materially breached the Merger Agreement;

(iv) by either the Company or Parent if any court of competent jurisdiction or other Governmental Entity shall have issued an order, decree or ruling or taken any other action permanently restraining, enjoining or otherwise prohibiting (A) the acceptance for payment of, or payment for, Shares pursuant to the Offer or (B) the Proposed Merger, and such order, decree, ruling or other action shall have become final and nonappealable (which order, decree, ruling or other action the party seeking to terminate the Merger Agreement shall have used its reasonable best efforts to resist, resolve or lift, as applicable);

(v) by Parent prior to the purchase of Shares pursuant to the Offer, if (A) the Company Board shall have withdrawn or adversely modified (including by amendment to the Schedule 14D-9), or failed upon Parent’s request to reconfirm, its approval or recommendation of the Offer, the Proposed Merger or the Merger Agreement (or determined to do so); (B) the Company Board shall have determined to recommend to the Company’s stockholders that they approve an Acquisition Proposal other than the Offer and the Proposed Merger or shall have determined to accept a Superior Proposal; or (C) a tender offer or exchange offer that, if successful, would result in any person or group becoming a beneficial owner of 20% or more of

the outstanding Shares is commenced (other than by Parent or an affiliate of Parent) and the Company Board fails to recommend that the Company’s stockholders not tender their Shares in such tender or exchange offer; (D) any person (other than Parent or an affiliate of Parent) or group becomes the beneficial owner of 20% or more of the outstanding Shares; or (E) the Company shall have furnished or caused to be furnished confidential information or data to, or engaged in negotiations or discussions with, another person other than pursuant to the Merger Agreement;

(vi) by the Company, if the Company Board determines to accept a Superior Proposal, but only after the Company (A) provides Parent with not less than two business days’ notice of its determination to accept such Superior Proposal, including all terms thereof, (B) within the not less than two business day period referred, the Company has and has caused its financial and legal advisors to negotiate with Parent to make such adjustments in the terms and conditions of the Merger Agreement with the goal of enabling the Company to proceed with the transactions contemplated by the Merger Agreement, (C) fulfills its obligations under the termination fee provisions of the Merger Agreement (provided that the Company’s right to terminate the Merger Agreement shall not be available if the Company is then in breach of the nonsolicitation provisions of the Merger Agreement), and (D) following such two business day period, the Company Board determines in good faith (i) that such proposal still constitutes a Superior Proposal (after giving effect to all of the concessions which may be offered by Parent pursuant to clause (B) above) and (ii) that, after receiving advice of outside counsel, it would constitute a breach of its fiduciary duties not to accept such Superior Proposal; or

(vii) by Parent, prior to the purchase of Shares pursuant to the Offer, if the Minimum Condition shall not have been satisfied by the Expiration Date of the Offer and on or prior to such Expiration Date the Company shall have received an Acquisition Proposal.

Termination Fee. If the Merger Agreement is terminated (A) pursuant to (v) or (vi) above, (B) pursuant to (vii) above and the Company either enters into a definitive agreement relating to or consummates such Acquisition Proposal (with, for purposes of this provision, all of the references to 20% changed to “at least 50%” in the definition of “Acquisition Proposal”) within 12 months of such termination, or (C) by Parent pursuant to (iii) above by reason of a failure of certain conditions to the Offer and the Company either enters into a definitive agreement relating to or consummates an Acquisition Proposal (with, for purposes of this provision, all of the references to 20% changed to “at least 50%” in the definition of “Acquisition Proposal”) within 12 months of such termination, then, in any such case, the Company shall pay to Parent an amount equal to $848,000.

Other Arrangements

The Support Agreements. We have entered into a separate Tender and Stockholder Support Agreement with each of the Significant Stockholders. Pursuant to the Support Agreements, the Significant Stockholders have agreed to tender and sell an aggregate of 61,912,000 Shares (representing approximately 37.5% of the outstanding Shares as of July 31, 2005) (the “Tender Shares”) owned by it to us pursuant to and in accordance with the terms of the Offer.

During the term of the Support Agreements, each Significant Stockholder has agreed not to (A) sell, transfer, pledge, encumber, assign or otherwise dispose of or enter into any contract, option or other arrangement or understanding with respect to the transfer by such Stockholder of, any Shares or offer any interest in any Shares thereof to any person other than pursuant to the terms of the Offer, the Merger or the Support Agreements, (B) enter into any voting arrangement or understanding, whether by proxy, power of attorney, voting agreement, voting trust or otherwise with respect to the Shares, or (C) take any action that would make any representation or warranty of such Significant Stockholder contained in its respective Support Agreement untrue or incorrect in any material respect or have the effect of preventing or disabling such Significant Stockholder from performing its obligations under its respective Support Agreement.

Under each Support Agreement, the Significant Stockholder has agreed (i) to tender the Tender Shares into the Offer on or before the initial date of expiration of such Offer, in each case, free and clear of any liens or other encumbrances except as disclosed herein or those arising from the Support Agreement and (ii) not to withdraw any Tender Shares so tendered so long as there is no (w) decrease in the Offer Price and the Offer Price is payable in cash, (x) decrease in the number of Shares sought to be purchased in the Offer, (y) condition imposed to the Offer other than those set forth in Annex I of the Merger Agreement and (z) amendment to any term of the Offer in any manner adverse to the holders of Shares.

During the term of the Support Agreements, the Significant Stockholders have agreed not to and have agreed not to authorize, permit or cause any of their respective directors, officers, employees, agents, representatives and advisors to directly or indirectly (A) solicit, initiate, encourage (including by way of furnishing non-public information) or facilitate any Acquisition Proposal or (B) participate in any way in discussions or negotiations with, or furnish any information to, any person in connection with, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or could reasonably be expected to lead to, any Acquisition Proposal, or otherwise cooperate in any way with, or participate in or assist, facilitate or encourage any effort or attempt by any other person to do or seek any of the foregoing. Each Significant Stockholder has agreed to promptly communicate to Parent, to the same extent as required by the Company pursuant to, and subject to the same conditions contained in, the Merger Agreement, the terms and other information concerning, any proposal, discussion, negotiation or inquiry and the identity of the party making such proposal or inquiry which such Significant Stockholder may receive in respect of any such Acquisition Proposal.

During the term of the Support Agreements, the Significant Stockholders have agreed to vote each of their respective Tender Shares at any meeting of the stockholders of the Company, however called, (A) in favor of the Merger and the Merger Agreement and the transactions contemplated thereby, and (B) against any action or agreement (other than the Merger and the other transactions contemplated by the Merger Agreement) that would impede, interfere with, delay, postpone or attempt to discourage the Merger, the Offer or the other transactions contemplated by the Merger Agreement and the Support Agreement, including, but not limited to:

(i) any Acquisition Proposal;

(ii) any action that is reasonably likely to result in a breach in any respect of any representation, warranty, covenant or any other obligation or agreement of the Company under the Merger Agreement or result in any of the conditions of the Offer not being fulfilled;

(iii) any extraordinary corporate transaction, such as a merger, consolidation or other business combination involving the Company or its subsidiaries;

(iv) a sale, lease or transfer of a material amount of assets of the Company and its subsidiaries or a reorganization, recapitalization, dissolution, winding up or liquidation of the Company and its subsidiaries;

(v) any change in the management or Company Board, except as otherwise agreed to in writing by Parent;

(vi) any material change in the present capitalization or dividend policy of the Company; and

(vii) any other material change in the Company’s corporate structure, business, certificate of incorporation or bylaws that is not agreed to by Parent in the exercise of Parent’s discretion.

These Significant Stockholders also irrevocably granted and appointed certain officers or directors of Parent their proxy and attorney-in-fact to vote their respective Tender Shares in favor of the Merger, the Merger Agreement and the transactions contemplated thereby, and against any other Acquisition Proposal.

Each Support Agreement terminates on the earlier of (A) 12 months after the date on which the Merger Agreement is terminated in accordance with its terms (except in certain situations upon which the Support Agreements will terminate immediately upon termination of the Merger Agreement), and (B) the Effective Time.

Non-Competition Agreements. We have entered into non-competition agreements (the “Non-Competition Agreements”) with each Significant Stockholder. Under the Non-Competition Agreements, each Significant Stockholder has agreed that for a period ending on the earlier of (1) the date of termination of the Merger Agreement or (2) the three-year anniversary of July 27, 2005, (the “Restricted Period”), he will not, engage, directly or indirectly, in any business anywhere in the world that manufactures, produces or supplies products or services of the kind manufactured, produced or supplied by Parent, any subsidiary of Parent engaged in the same business as Parent, the Company or any subsidiary of the Company as of the start of the Restricted Period. Each Significant Stockholder will not, without Parent’s prior written consent, directly or indirectly, own, manage, operate, join, control, lend money or render financial or other assistance to or participate in, as an officer, employee, partner, stockholder, consultant or otherwise, any individual, business or organization that competes with Parent, Parent’s business, the Company or any subsidiary of the Company in manufacturing, producing or supplying products or services of the kind manufactured, produced or supplied by the Company or any subsidiary of the Company as of the start of the Restricted Period.

In addition, each Significant Stockholder has agreed that during the Restricted Period, he will not produce or supply products or services of the kind manufactured, produced or supplied by Parent, any subsidiary of Parent, the Company or any subsidiary of the Company as of the start of the Restricted Period, call upon, solicit, advise or otherwise do or attempt to do, business with any customers of the Company or any subsidiary of the Company with whom the Company or any subsidiary of the Company had any dealings during the period of time in which the Significant Stockholder was a stockholder of the Company, or take away or interfere or attempt to interfere with any officers, employees, representatives or agents of Parent, any subsidiary of Parent, the Company or any subsidiary of the Company, or induce or attempt to induce any of them to leave the employ of Parent, any subsidiary of Parent, the Company or any subsidiary of the Company.

Confidentiality Agreement. On September 3, 2004, Xyratex Technology entered into a Mutual Non-Disclosure/Confidentiality Agreement with nStor Corporation for the purpose of sharing technical, business and financial information and to foster potentially mutually beneficial business relationships. The agreement provides that for a period beginning upon the receipt of confidential information (as defined in the agreement) and ending on the date that is three years following the last disclosure of confidential information pursuant to the agreement, the parties will not disclose any confidential information concerning the other party to any other person or use for its own benefit such confidential information, except as permitted under the agreement.

Convertible Preferred Stock Purchase Agreement. We have entered into a Convertible Preferred Stock Purchase Agreement with H. Irwin Levy pursuant to which Mr. Levy has agreed to sell, and we have agreed to purchase, the 9,100 shares (the “Preferred Shares”) of the Company’s Series M Preferred Stock owned by Mr. Levy. The purchase and sale will occur as promptly as practicable following our acquisition of greater than 90% of the outstanding Shares pursuant to the Offer and, if applicable, the Top-Up Option or otherwise. The purchase price for the Preferred Shares will be $3,822,000 plus accrued and unpaid dividends on the Preferred Shares through the closing date. As of August 3, 2005, the accrued and unpaid dividends equaled $253,055. The agreement would terminate upon the earlier to occur of (i) the termination of the Merger Agreement, (ii) if the Company gives us notice of a record date for a vote on an Acquisition Proposal (as defined in the Merger Agreement) other than the Merger Agreement in accordance with the Merger Agreement at least 13 business days prior to the date of such record date, the date that is such 13^th business day, and (iii) the mutual written agreement of the parties (at any time prior to the Closing).

License Agreement. Xyratex Technology has entered into a license agreement (the “License Agreement”) with nStor Corporation pursuant to which nStor Corporation grants to Xyratex Technology a non-exclusive, worldwide, perpetual, fee-bearing license to nStor Corporation’s software, source code, proprietary materials and intellectual property rights relating to its data storage solutions, including application-driven storage platforms, redundant array of independent disks controllers and storage management software. Under the License Agreement, Xyratex Technology has the option, but not the obligation, to exercise its license rights. In connection with the Merger Agreement, Xyratex Technology agreed to extend a $4.5 million loan to nStor

Corporation (the “Note”). In the event that the Merger Agreement is terminated, Xyratex Technology may elect to exercise its license rights under the License Agreement by paying certain additional fees to nStor Corporation.

Pursuant to the License Agreement, Xyratex Technology may exercise its license rights only under the following circumstances:

(a) The Merger Agreement is terminated as a result of the failure of the condition under the Merger Agreement that no change shall have occurred in the business, financial condition or results of operations of the Company or its subsidiaries that has or could reasonably be expected to have a materially adverse effect on the business of the Company and, at the option of Xyratex Technology, (i) the Note has been forgiven by Xyratex Technology, or (ii) the Note has not been repaid in full on or before March 31, 2006;

(b) The Merger Agreement is terminated as a result of the failure of the condition under the Merger Agreement that there shall have been validly tendered and not validly withdrawn prior to the date that is 20 business days after the commencement of the Offer to purchase all of the outstanding Shares of the Company which represents at least 88.1% of the total number of outstanding Shares on the date of purchase and the Note is not repaid in full on or before March 31, 2006; or

(c) The Merger Agreement is terminated as a result of (1) the Company’s breach of its representations and warranties set forth in the Merger Agreement, (2) the Company’s failure to perform in any material respect or to comply in any material respect with any of its material obligations, covenants or agreements under the Merger Agreement or any ancillary agreement thereto, (3) the Company’s failure to approve the Merger Agreement, (4) the Company’s approval of an acquisition proposal from a third party, (5) the Company’s disclosure of confidential information to a third party other than as permitted under the Merger Agreement, or (6) our election to terminate the Merger Agreement before the purchase of the Company’s Shares pursuant to the Offer and, at our option, (i) the Note has been forgiven by Xyratex Technology, or (ii) the Note has not been forgiven, but is not repaid in full on or before March 31, 2006.

In the event that the Merger Agreement is terminated under paragraphs (a) or (b) above and Xyratex Technology elects to exercise its rights under the License Agreement, it will be obligated to (i) advance any remaining principal amount of the Note; (ii) forgive the entire principal amount of the Note, plus all accrued interest thereon; and (iii) pay to the Company the additional sum of $6.5 million in six equal monthly payments of $1.0 million and one payment of $500,000 during the seven months immediately following the termination of the Merger Agreement.

In the event that the Merger Agreement is terminated under paragraph (c) above and Xyratex Technology elects to exercise its rights under the License Agreement, it will be obligated to (i) advance any remaining principal amount of the Note; (ii) forgive the entire principal amount of the Note, plus all accrued interest thereon; and (iii) pay to the Company the additional sum of $3,848,000 in four equal monthly payments of $962,000 during the four months immediately following the termination of the Merger Agreement. Notwithstanding the foregoing, the license fee of $3,848,000 will be paid to the Company only if the Company pays the Termination Fee (as defined in the Merger Agreement) to Xyratex Technology in accordance with the terms of the Merger Agreement. In the event that Company does not pay to Xyratex Technology the Termination Fee, the license fee of $3,848,000 will be reduced to a total of $3.0 million, payable to Company in three equal monthly payments of $1.0 million during the three months immediately following the termination of the Merger Agreement.

In the event that Xyratex Technology elects not to exercise its license rights under the License Agreement, it will incur no payment obligations to nStor Corporation.

Promissory Note. Xyratex Technology has entered into a promissory note pursuant to which it has agreed to loan to nStor Corporation up to $4.5 million. Xyratex Technology loaned $1.5 million of this amount to nStor Corporation on July 27, 2005, and, as long as the License Agreement between Xyratex Technology and the Company has not been terminated, will loan an additional $1.0 million to nStor Corporation on the 19th day of

each of August, September and October 2005. The promissory note bears interest at six percent per annum, and the total principal amount together with all accrued interest is due and payable on March 31, 2006.

Purpose of the Offer; Plans for the Company; Appraisal Rights

Purpose of the Offer

The purpose of the Offer is to acquire control of, and ultimately the entire equity interest in, the Company. The Offer, as the first step in the acquisition of the Company, is intended to facilitate the acquisition of the Company. The purpose of the Proposed Merger is to acquire all outstanding Shares not tendered and purchased pursuant to the Offer. If the Offer is successful, we intend to consummate the Proposed Merger as promptly as practicable.

Upon the acceptance for payment of and payment for the number of Shares which represents at least 88.1% (but less than 90%) of the total number of outstanding Shares on the date of purchase, Purchaser will be obligated pursuant to the terms of the Merger Agreement to exercise the Top-Up Option granted to it by the Company to purchase for $0.105 per share the lowest number of Shares that, when added to the number of Shares owned by Purchaser at the time of exercising our Top-Up Option, will constitute one share more than 90% of the outstanding Shares.

If we own 90% or more of the outstanding Shares, following consummation of the Offer, Purchaser intends to consummate the Proposed Merger as a “short-form” merger pursuant to Section 253 of the DGCL. Under such circumstances, neither the approval of any holder of Shares nor the Company’s board of directors would be required. Upon consummation of the Proposed Merger, the Company will become an indirect wholly owned subsidiary of Parent.

Plans for the Company

We believe that our acquisition of the Company will augment our strong lineup of storage technology and platform solutions.

If, following the consummation of the Offer, we own less than 90% of the outstanding Shares, the Company’s board of directors will be required to submit the Proposed Merger to the Company’s stockholders for approval at a stockholders’ meeting convened for that purpose in accordance with Delaware law. If the Minimum Condition is satisfied, we will, upon consummation of the Offer, have sufficient voting power to ensure approval of the Proposed Merger at the stockholders’ meeting without the affirmative vote of any other stockholder.

Appraisal Rights

Appraisal rights are not available in the Offer. If the Proposed Merger is consummated, holders of Shares at the effective time of the merger who do not vote in favor of, or consent to, the Proposed Merger will have rights under Section 262 of the DGCL to demand appraisal of their Shares. Under Section 262, stockholders who demand appraisal and comply with the applicable statutory procedures will be entitled to receive a judicial determination of the fair value of their Shares, exclusive of any element of value arising from the accomplishment or expectation of the Proposed Merger, and to receive payment of that fair value in cash, together with a fair rate of interest, if any. Any such judicial determination of the fair value of Shares could be based upon factors other than, or in addition to, the price per Share to be paid in the Proposed Merger or the market value of the Shares. The value so determined could be more or less than the price per Share to be paid in the Proposed Merger.

The foregoing summary of Section 262 does not purport to be complete and is qualified in its entirety by reference to Section 262, which is attached hereto as Schedule II. Failure to follow the steps Section 262 requires for perfecting appraisal rights may result in the loss of those rights.

Effect of the Offer on the Market for the Shares; Stock Exchange Listing(s); Registration under the Exchange Act

The purchase of Shares by Purchaser pursuant to the Offer will reduce the number of Shares that might otherwise trade publicly and will reduce the number of holders of Shares, which could adversely affect the liquidity and market value of the remaining Shares held by the public.

Depending upon the number of Shares purchased pursuant to the Offer and the aggregate market value of any Shares not purchased pursuant to the Offer, the Shares may no longer meet the standards for continued listing on the American Stock Exchange and may be delisted from the American Stock Exchange. The published guidelines of the American Stock Exchange indicate that the American Stock Exchange would consider delisting the Shares if, among other things, (A) the number of Shares publicly held (exclusive of holdings of officers, directors, controlling shareholders or other family or concentrated holdings) is less than 200,000; (B) the total number of public shareholders is less than 300; or (C) the aggregate market value of Shares publicly held is less than $1.0 million for more than 90 consecutive days.

To the extent the Shares are delisted from the American Stock Exchange, the market for the Shares could be adversely affected. If the American Stock Exchange were to delist the Shares, it is possible that the Shares would continue to trade in the over-the-counter market and that price quotations for the Shares would be reported by other sources. The extent of the public market for the Shares and the availability of such quotations would, however, depend on the number of holders of Shares remaining at such time, the interest in maintaining a market in the Shares on the part of securities firms, the possible termination of registration of the Shares under the Exchange Act (as described below) and other factors. We cannot predict whether the reduction in the number of Shares that might otherwise trade publicly, if any, effected by the Offer would have an adverse or beneficial effect on the market price for or marketability of the Shares or whether it would cause future market prices to be greater or less than the price per Share to be paid in the Proposed Merger.

The Shares are currently “margin securities,” as such term is defined under the rules of the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”), which has the effect, among other things, of allowing brokers to extend credit on the collateral of such securities. Depending upon factors similar to those described above regarding listing and market quotations, following the Offer it is possible that the Shares might no longer constitute “margin securities” for purposes of the margin regulations of the Federal Reserve Board, in which event such Shares could no longer be used as collateral for loans made by brokers.

The Shares are currently registered under the Exchange Act. Such registration may be terminated upon application by the Company to the SEC if the Shares are not listed on a “national securities exchange” and there are fewer than 300 record holders. The termination of the registration of the Shares under the Exchange Act would substantially reduce the information required to be furnished by the Company to holders of Shares and to the SEC and would make certain provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b), the requirement of furnishing a proxy statement in connection with stockholders’ meetings and the requirements of Rule 13e-3 under the Exchange Act with respect to “going private” transactions, no longer applicable to the Shares. In addition, “affiliates” of the Company and persons holding “restricted securities” of the Company may be deprived of the ability to dispose of such securities pursuant to Rule 144 under the Securities Act. If registration of the Shares under the Exchange Act were terminated, the Shares would no longer be “margin securities” or be eligible for reporting on the American Stock Exchange.

Dividends and Distributions

If on or after the date of this Offer to Purchase, the Company should split, combine or otherwise change the Shares or its capitalization, acquire or otherwise cause a reduction in the number of outstanding Shares or issue or sell any additional Shares (other than Shares issued pursuant to and in accordance with the terms in effect on the date of this Offer to Purchase of employee stock options outstanding prior to such date), shares of any other class or series of capital stock, other voting securities or any securities convertible into, or options, rights, or

warrants, conditional or otherwise, to acquire, any of the foregoing, then, without prejudice to our rights under “—Conditions to the Offer,” we may, in our sole discretion, make such adjustments in the purchase price and other terms of the Offer as we deem appropriate including the number or type of securities to be purchased.

Conditions to the Offer

Notwithstanding any other provision of the Offer, we are not required to accept for payment or pay for any Shares, and we may terminate the Offer, if:

(1) prior to the Expiration Date, the Minimum Condition, in Parent’s reasonable discretion, has not been satisfied; or

(2) at any time on or after the date of the Merger Agreement and prior to the time of acceptance for payment or payment for any Shares, any of the following events occur:

(a) there shall be any action taken, or any statute, rule, regulation, legislation, interpretation, judgment, order or injunction enacted, enforced, promulgated, amended, issued or deemed applicable to the Offer by any court of competent jurisdiction or other competent governmental or regulatory authority which, in the reasonable judgment of Parent, directly or indirectly, (1) makes illegal or otherwise prohibits or materially delays consummation of the Offer or the Proposed Merger or seeks to obtain damages or make more costly the making of the Offer in a material way; (2) prohibits, or imposes any material limitations on, Parent’s or Purchaser’s ownership or operation of all or any portion of their or the Company’s businesses or assets which is material to the business of all such entities taken as a whole, or compels Parent or Purchaser to dispose of or hold separate any portion of their or the Company’s business or assets which is material to the business of all such entities taken as a whole, (3) imposes material limitations on the ability of Parent or Purchaser effectively to acquire or to hold or to exercise full rights of ownership of the Shares, including without limitation the right to vote such Shares on all matters properly presented to the Company’s stockholders, (4) seeks to require divestiture by Parent or Purchaser and any Share, or (5) otherwise materially adversely affect the Company or its subsidiaries;

(b) any change shall have occurred in the business, financial condition or results of operations of the Company of any its subsidiaries that has, or could reasonably be expected to, materially adversely affect the Company or its subsidiaries;

(c) there shall have been (1) a withdrawal or adverse modification, or failure upon Parent’s request to reconfirm, by the Company’s board of directors of its approval or recommendation of the Offer, the Proposed Merger or the Merger Agreement, (2) a determination by the Company’s board of directors to recommend to the Company’s stockholders that they approve an acquisition proposal other than the Offer and the Proposed Merger or accept a superior proposal, (3) a tender or exchange offer is commenced that, if successful, would result in any person or group (other than Parent or an affiliate of Parent) beneficially owning 20% or more of the outstanding Shares and the Company’s board of directors failed to recommend against the Company’s stockholders tendering their Shares in such a tender or exchange offer, (4) any person or group (other than Parent or an affiliate of Parent) becoming the beneficial owner of 20% or more of the outstanding Shares, or (5) a furnishing by the Company of confidential information or data to, or an engagement in negotiations or discussions with, another person other than pursuant to the Merger Agreement;

(d) the Company, Parent and Purchaser shall have reached an agreement that the Offer or the Merger Agreement be terminated, or the Merger Agreement shall have been terminated in accordance with its terms;

(e) there shall have been (1) representations and warranties of the Company contained in the Merger Agreement that are qualified by reference to a material adverse effect that were not true when made or at any time prior to the consummation of the Offer as if made at and as of such time (except for representations and warranties which speak as of a particular date, shall not be true as of such

particular date), or (2) representations and warranties of the Company contained in the Merger Agreement that are not qualified by reference to a material adverse effect that were not true when made or at any time prior to the consummation of the Offer as if made at and as of such time (except for representations and warranties which speak as of a particular date, shall not be true as of such particular date), except where such failure to be true would not have or not reasonably be expected to materially adversely affect the Company;

(f) the Company shall have failed to perform in any material respect or to comply in any material respect with any of the its material obligations, covenants or agreements under the Merger Agreement or any ancillary agreements;

(g) there shall have occurred, and continued to exist (1) any general suspension of trading in, or limitation on prices for, securities on the American Stock Exchange, (2) a commencement of a war, armed hostilities, acts of terrorism or other national or international crisis involving the United States or, in the case of any of the foregoing existing on the date of the Merger Agreement, a material acceleration or worsening that could reasonably be expected to materially adversely affect the Company or (3) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States or a material limitation (whether or not mandatory) by any United States or foreign governmental, administrative, judicial or regulatory authority on the extension of credit by banks or other lending institutions;

(h) there shall have been a failure to obtain any required approval, permit, authorization or consent, with respect to the Company, its subsidiaries or its business, of any other person or entity, the lack of which, individually or in the aggregate, has or could reasonably be expected to materially adversely affect the company;

(i) Todd Gresham shall not have agreed to continue to be employed by the Company on terms reasonably acceptable to Parent;

(j) the outstanding notes issued by the Company to the Company’s Chairman of the board of directors (or entities affiliated therewith) shall not have been amended and restated to provide for a four-year non-convertible term loan with quarterly payments of interest at the lesser of prime plus 100 basis points or 7% per annum; or

(k) the convertible promissory notes issued by the Company to Bernard Marden and Alan Miller shall not have been amended and restated to eliminate the conversion features of such promissory notes.

The foregoing conditions are for the benefit of Parent and Purchaser and may be asserted by Parent or Purchaser regardless of the circumstances giving rise to any such condition or may be waived by Parent or Purchaser in whole or in part at any time and from time to time in their reasonable discretion, in each case subject to the terms of the Merger Agreement. The failure by Parent or Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time prior to the Expiration Date. Any determination by Parent or Purchaser concerning the events described above will be final and binding on all parties.

Certain Legal Matters; Regulatory Approvals

General

We are not aware of any governmental license or regulatory permit that appears to be material to the Company’s business that might be adversely affected by our acquisition of Shares pursuant to the Offer or, except as set forth below, of any approval or other action by any government or governmental administrative or regulatory authority or agency, domestic or foreign, that would be required for our acquisition or ownership of Shares pursuant to the Offer. Should any such approval or other action be required, we currently contemplate that, such approval or other action will be sought. However, we do not intend to delay the purchase of Shares

tendered pursuant to the Offer pending the outcome of any action or the receipt of any such approval. There can be no assurance that any such approval or other action, if needed, would be obtained (with or without substantial conditions) or that if such approvals were not obtained or such other actions were not taken adverse consequences might not result to the Company’s business or certain parts of the Company’s business might not have to be disposed of, any of which could cause us to elect to terminate the Offer without the purchase of Shares thereunder. Our obligation under the Offer to accept for payment and pay for Shares is subject to certain conditions. See “—Conditions to the Offer.”

State Takeover Laws

Section 203 of the DGCL, in general, prohibits a Delaware corporation such as the Company from engaging in a “Business Combination” (defined as a variety of transactions, including mergers) with an “Interested Stockholder” (defined generally as a person that is the beneficial owner of 15% or more of a corporation’s outstanding voting stock) for a period of three years following the time that such person became an interested stockholder unless: (a) prior to the time such person became an interested stockholder, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder; (b) upon consummation of the transaction that resulted in the stockholder becoming an Interested Stockholder, the Interested Stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding stock held by directors who are also officers of the corporation and employee stock ownership plans that do not provide employees with the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or (c) on or subsequent to the date such person became an Interested Stockholder, the Business Combination is approved by the board of directors of the corporation and authorized at a meeting of stockholders, and not by written consent, by the affirmative vote of the holders of a least 66²/3% of the outstanding voting stock of the corporation not owned by the Interested Stockholder.

The Company’s board of directors has approved the Merger Agreement, the Support Agreements, the Offer, the Proposed Merger and the other transactions contemplated by the Merger Agreement and the Support Agreements for the purposes of Section 203 of the DGCL.

Section 203 provides that, during such three-year period, the corporation may not merge or consolidate with an Interested Stockholder or any affiliate or associate thereof, and also may not engage in certain other transactions with an Interested Stockholder or any affiliate or associate thereof, including, without limitation, (a) any sale, lease, exchange, mortgage, pledge, transfer or other disposition of assets (except proportionately as a stockholder of the corporation) having an aggregate market value equal to 10% or more of the aggregate market value of all assets of the corporation determined on a consolidated basis or the aggregate market value of all the outstanding stock of a corporation; (b) any transaction which results in the issuance or transfer by the corporation or by certain subsidiaries thereof of any stock of the corporation or such subsidiaries to the Interested Stockholder, except pursuant to a transaction which effects a pro rata distribution to all stockholders of the corporation; (c) any transaction involving the corporation or any subsidiaries thereof which has the effect of increasing the proportionate share of the stock of any class or series, or securities convertible into the stock of any class or series, of the corporation or any such subsidiary which is owned directly or indirectly by the Interested Stockholder (except as a result of immaterial changes due to fractional share adjustments); or (d) any receipt by the Interested Stockholder of the benefit (except proportionately as a stockholder of such corporation) of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation.

The foregoing description of Section 203 does not purport to be complete and is qualified in its entirety by reference to the provisions of Section 203.

The Company is incorporated under the laws of the State of Delaware and its operations are conducted throughout the United States. A number of states have adopted takeover laws and regulations that purport to be applicable to attempts to acquire securities of corporations that are incorporated in those states or that have

substantial assets, stockholders, principal executive offices or principal places of business in those states. To the extent that these state takeover statutes purport to apply to the Offer or the Proposed Merger, we believe that those laws conflict with U.S. federal law and are an unconstitutional burden on interstate commerce. In 1982, the Supreme Court of the United States, in Edgar v. MITE Corp., invalidated on constitutional grounds the Illinois Business Takeover Statute, which, as a matter of state securities law, made takeover of corporations meeting certain requirements more difficult. The reasoning in that decision is likely to apply to certain other state takeover statutes. In 1987, however, in CTS Corp. v. Dynamics Corp. of America, the Supreme Court of the United States held that the State of Indiana could as a matter of corporate law and, in particular, those aspects of corporate law concerning corporate governance, constitutionally disqualify a potential acquirer from voting on the affairs of a target corporation without the prior approval of the remaining stockholders, as long as those laws were applicable only under certain conditions. Subsequently, in TLX Acquisition Corp. v. Telex Corp., a federal district court in Oklahoma ruled that the Oklahoma statutes were unconstitutional insofar as they apply to corporations incorporated outside Oklahoma, because they would subject those corporations to inconsistent regulations. Similarly, in Tyson Foods, Inc. v. McReynolds, a federal district court in Tennessee ruled that four Tennessee takeover statutes were unconstitutional as applied to corporations incorporated outside Tennessee. This decision was affirmed by the United States Court of Appeals for the Sixth Circuit. In December 1988, a federal district court in Florida held, in Grand Metropolitan PLC v. Butterworth, that the provisions of the Florida Affiliated Transactions Act and Florida Control Share Acquisition Act were unconstitutional as applied to corporations incorporated outside of Florida. Furthermore, in 2005 in VantagePoint Venture Partners 1996 v. Examen, Inc., the Delaware Supreme Court affirmed the Delaware Court of Chancery’s decision refusing to apply provisions of California law which purport to govern the internal affairs of non-California corporations. The Delaware Supreme Court found that under the internal affairs doctrine, which is mandated by constitutional principles, the law of the state of incorporation applies.

Except as described herein, we have not attempted to comply with any state takeover statutes in connection with this Offer or the Proposed Merger. We reserve the right to challenge the validity or applicability of any state law allegedly applicable to the Offer or the Proposed Merger, and nothing in this Offer to Purchase nor any action that we take in connection with the Offer is intended as a waiver of that right. In the event that it is asserted that one or more takeover statutes apply to the Offer or the Proposed Merger, and it is not determined by an appropriate court that the statutes in question do not apply or are invalid as applied to the Offer or the Proposed Merger, as applicable, we may be required to file certain documents with, or receive approvals from, the relevant state authorities, and we might be unable to accept for payment or purchase Shares tendered in the Offer or be delayed in continuing or consummating the Offer. In that case, we may not be obligated to accept for purchase, or pay for, any Shares tendered. See “—Conditions to the Offer” for additional information

Appraisal Rights

Holders of Shares do not have appraisal rights as a result of the Offer. However, if the Proposed Merger is consummated, holders of Shares will have certain rights pursuant to the provisions of Section 262 of the DGCL to dissent and demand appraisal of their Shares in connection with the Proposed Merger. Under Section 262, dissenting stockholders who comply with the applicable statutory procedures will be entitled to receive a judicial determination of the fair value of their Shares, exclusive of any element of value arising from the accomplishment or expectation of the Proposed Merger, and to receive payment of such fair value in cash, together with a fair rate of interest, if any. Any such judicial determination of the fair value of the Shares could be based upon factors other than, or in addition to, the price per Share to be paid in the Proposed Merger or the market value of the Shares. The value so determined could be more or less than the price per Share to be paid in the Proposed Merger. The foregoing summary of Section 262 does not purport to be complete and is qualified in its entirety by reference to Section 262 attached hereto as Schedule II.

Delaware Law

The Proposed Merger also would need to comply with other applicable procedural and substantive requirements of Delaware law. Several decisions by Delaware courts have held that, in certain circumstances, a

controlling stockholder of a corporation involved in a merger has a fiduciary duty to the other stockholders that requires the merger to be fair to such other stockholders. In determining whether a merger is fair to minority stockholders, Delaware courts have considered, among other things, the type and amount of consideration to be received by the stockholders and whether there were fair dealings among the parties.

Fees and Expenses

Parent has retained MacKenzie Partners, Inc. to act as the Information Agent and Computershare Trust Company of New York to act as the Depositary in connection with the Offer. The Information Agent may contact holders of Shares by mail, telephone, telex, telegraph and personal interviews and may request brokers, dealers, banks, trust companies and other nominees to forward materials relating to the Offer to beneficial owners. The Information Agent and the Depositary each will receive customary compensation for their respective services, will be reimbursed for certain reasonable out-of-pocket expenses and will be indemnified against certain liabilities in connection therewith, including certain liabilities under the federal securities laws.

We will not pay any fees or commissions to any broker or dealer or any other person (other than the Information Agent and the Depositary) for soliciting tenders of Shares pursuant to the Offer. Brokers, dealers, commercial banks and trust companies will, upon request, be reimbursed by us for reasonable and necessary costs and expenses incurred by them in forwarding materials to their customers.

Miscellaneous.

The Offer is not being made to, nor will tenders be accepted from or on behalf of, holders of Shares in any jurisdiction in which the making of the Offer or acceptance thereof would not be in compliance with the laws of such jurisdiction. However, we may, in our discretion, take such action as we may deem necessary to make the Offer in any such jurisdiction and extend the Offer to holders of Shares in such jurisdiction.

No person has been authorized to give any information or make any representation on behalf of Parent or Purchaser not contained in this Offer to Purchase or in the Letter of Transmittal and, if given or made, such information or representation must not be relied upon as having been authorized.

We have filed with the SEC a Tender Offer Statement on Schedule TO, together with exhibits, pursuant to Rule 14d-3 of the General Rules and Regulations under the Exchange Act, furnishing certain additional information with respect to the Offer. The Schedule TO and any amendments thereto, including exhibits, may be examined and copies may be obtained from the offices of the SEC in the manner set forth in “—Certain Information Concerning the Company—Available Information.”

XYRATEX LTD

NORMANDY ACQUISITION CORPORATION

August 5, 2005

SCHEDULE I

DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND PURCHASER

The name, current principal occupation or employment and material occupations, positions, offices or employment for the past five years, of each director and executive officer of Parent are set forth below. References herein to “Parent” mean Xyratex Ltd. Unless otherwise indicated below, the business address of each director and officer is c/o Xyratex Ltd, Langstone Road, Havant PO9 1SA, United Kingdom. Where no date is shown, the individual has occupied the position indicated for the past five years. Unless otherwise indicated, each occupation set forth opposite an individual’s name refers to employment with Parent. Except as described herein, none of the directors and officers of Parent listed below has, during the past five years, (1) been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (2) been a party to any judicial or administrative proceeding that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws.


Name	Country of Citizenship	Title	Present Principal Occupation and Five Year Employment History
Steve Barber	United Kingdom	Chief Executive Officer and Director	Mr. Barber has served as Chief Executive Officer of Parent and its predecessor companies since February 2003. From March 2002 to February 2003, he served as President. From October 2000 to March 2002, Mr. Barber was Executive Vice President and Director of Business Development. He served as division president of Teleplan, an after sales services provider to the information technology and telecommunications industry, between June 1999 and October 2000.

Richard Pearce	United Kingdom	Chief Financial Officer	Mr. Pearce has served as Chief Financial Officer of Parent and its predecessor companies since September 2003. From 1994 to September 2003, he served as Treasurer and as Group Tax Manager.

Steve Thompson	United Kingdom	Chief Technology Officer	Mr. Thompson serves as Chief Technology Officer.

Will Leonard	United Kingdom	Executive Vice President, Integrated Systems Business Development	Mr. Leonard has served as Executive Vice President, Integrated Systems Business Development since November 2002, and has held a variety of senior management positions since 1994.

Adam Wray	United Kingdom	Executive Vice President, Storage Infrastructure	Mr. Wray has served as Executive Vice President, Storage Infrastructure since December 2001. Prior to December 2001, Mr. Wray served in several business management and engineering positions within Parent’s storage infrastructure business.

Andrew Sukawaty	United States	Chairman of the Board	Mr. Sukawaty has served as Chairman of the Board since October 2004, and was the Deputy Chairman of the Board from


Name	Country of Citizenship	Title	Present Principal Occupation and Five Year Employment History
			March 2004 to October 2004. He is Chairman of the Board of Directors and Chief Executive Officer of Inmarsat, a world-wide mobile satellite services provider. He is president of Cable Partners Europe LLC, a cable television services company, a non executive director of mmO2, a mobile telecommunications company, and a director of Powerwave Technologies, a wireless solutions company. He was formerly Chairman of Telenet, a Belgian cable television operator. He has previously held the offices of Chief Executive and President of Sprint PCS, a personal wireless service provider, Chief Executive Officer of NTL, a broadcast and telecommunications service provider, and Chief Operating Officer of Mercury One2One, a digital mobile service network.

Nic Humphries	United Kingdom	Director	Mr. Humphries has served as a director on the Board of Directors of Parent and its predecessor companies since September 2003. He is a general partner of HgCapital, a European private equity investment firm, and has been head of HgCapital’s Technology Practice since July 2001. Prior to joining HgCapital, Mr. Humphries was Managing Director of the European business of Geocapital Partners, a technology venture capital firm, and head of Technology and Telecoms at Barclays Private Equity, a mid-market private equity investment firm.

Jonathan Brooks	United Kingdom	Director	Mr. Brooks has served as a director on the Board of Directors since May 2004. Since 2002, he has assisted several venture capital-backed private equity companies in financial and strategic management. He is currently a director of Frontier Silicon Holdings Limited, a supplier of semiconductor technology for use in digital radio and television applications, and Chairman of Picochip Inc., a private equity backed company developing semiconductor solutions for Wimax applications. He is also a director of e2v Technologies plc, a sensor technology company. From 1995 to 2002, Mr. Brooks was Chief Financial Officer and a director of ARM Holdings PLC, a semiconductor equipment and services company.


Name	Country of Citizenship	Title	Present Principal Occupation and Five Year Employment History
Ernest Sampias	United States	Director	Mr. Sampias has served as a director on the Board of Directors since May 2004. He was appointed Senior Vice President and Chief Financial Officer for McDATA, a storage networking company, in June 2002. Mr. Sampias joined McDATA in September 2001 as Vice President Finance and Controller. Prior to joining McDATA, Mr. Sampias was with US West, a diversified communications company, for 15 years; his last assignment with US West was as Vice President and Chief Financial Officer of US West DEX (the Yellow Pages Directory subsidiary of US West).

Steve Sanghi	United States	Director	Mr. Sanghi has served as a director on the Board of Directors since May 2004. He currently serves as Director and President of Microchip Technology, Inc., a semiconductor equipment company, since his appointment in 1990, as CEO since 1991 and as Chairman of the Board of Directors since 1993.

The name and position with Purchaser of each director and officer of Purchaser are set forth below. The business address, Parent principal occupation or employment, five-year employment history and citizenship of each such person are set forth above.


Name		Title
Steve Barber		President, Chief Executive Officer and Director
Richard Pearce		Chief Financial Officer, Secretary and Director

SCHEDULE II

SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW

RIGHTS OF APPRAISAL

SECTION 262. APPRAISAL RIGHTS.

(a) Any stockholder of a corporation of this State who holds shares of stock on the date of the making of a demand pursuant to subsection (d) of this section with respect to such shares, who continuously holds such shares through the effective date of the merger or consolidation, who has otherwise complied with subsection (d) of this section and who has neither voted in favor of the merger or consolidation nor consented thereto in writing pursuant to §228 of this title shall be entitled to an appraisal by the Court of Chancery of the fair value of the stockholder’s shares of stock under the circumstances described in subsections (b) and (c) of this section. As used in this section, the word “stockholder” means a holder of record of stock in a stock corporation and also a member of record of a nonstock corporation; the words “stock” and “share” mean and include what is ordinarily meant by those words and also membership or membership interest of a member of a nonstock corporation; and the words “depository receipt” mean a receipt or other instrument issued by a depository representing an interest in one or more shares, or fractions thereof, solely of stock of a corporation, which stock is deposited with the depository.

(b) Appraisal rights shall be available for the shares of any class or series of stock of a constituent corporation in a merger or consolidation to be effected pursuant to §251 (other than a merger effected pursuant to §251(g) of this title), §252, §254, §257, §258, §263 or §264 of this title:

(1) Provided, however, that no appraisal rights under this section shall be available for the shares of any class or series of stock, which stock, or depository receipts in respect thereof, at the record date fixed to determine the stockholders entitled to receive notice of and to vote at the meeting of stockholders to act upon the agreement of merger or consolidation, were either (i) listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders; and further provided that no appraisal rights shall be available for any shares of stock of the constituent corporation surviving a merger if the merger did not require for its approval the vote of the stockholders of the surviving corporation as provided in subsection (f) of §251 of this title.

(2) Notwithstanding paragraph (1) of this subsection, appraisal rights under this section shall be available for the shares of any class or series of stock of a constituent corporation if the holders thereof are required by the terms of an agreement of merger or consolidation pursuant to §§251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock anything except:

a. Shares of stock of the corporation surviving or resulting from such merger or consolidation, or depository receipts in respect thereof;

b. Shares of stock of any other corporation, or depository receipts in respect thereof, which shares of stock (or depository receipts in respect thereof) or depository receipts at the effective date of the merger or consolidation will be either listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or held of record by more than 2,000 holders;

c. Cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a. and b. of this paragraph; or

d. Any combination of the shares of stock, depository receipts and cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a., b. and c. of this paragraph.

(3) In the event all of the stock of a subsidiary Delaware corporation party to a merger effected under §253 of this title is not owned by the parent corporation immediately prior to the merger, appraisal rights shall be available for the shares of the subsidiary Delaware corporation.

(c) Any corporation may provide in its certificate of incorporation that appraisal rights under this section shall be available for the shares of any class or series of its stock as a result of an amendment to its certificate of incorporation, any merger or consolidation in which the corporation is a constituent corporation or the sale of all or substantially all of the assets of the corporation. If the certificate of incorporation contains such a provision, the procedures of this section, including those set forth in subsections (d) and (e) of this section, shall apply as nearly as is practicable.

(d) Appraisal rights shall be perfected as follows:

(1) If a proposed merger or consolidation for which appraisal rights are provided under this section is to be submitted for approval at a meeting of stockholders, the corporation, not less than 20 days prior to the meeting, shall notify each of its stockholders who was such on the record date for such meeting with respect to shares for which appraisal rights are available pursuant to subsection (b) or (c) hereof that appraisal rights are available for any or all of the shares of the constituent corporations, and shall include in such notice a copy of this section. Each stockholder electing to demand the appraisal of such stockholder’s shares shall deliver to the corporation, before the taking of the vote on the merger or consolidation, a written demand for appraisal of such stockholder’s shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such stockholder’s shares. A proxy or vote against the merger or consolidation shall not constitute such a demand. A stockholder electing to take such action must do so by a separate written demand as herein provided. Within 10 days after the effective date of such merger or consolidation, the surviving or resulting corporation shall notify each stockholder of each constituent corporation who has complied with this subsection and has not voted in favor of or consented to the merger or consolidation of the date that the merger or consolidation has become effective; or

(2) If the merger or consolidation was approved pursuant to §228 or §253 of this title, then either a constituent corporation before the effective date of the merger or consolidation or the surviving or resulting corporation within 10 days thereafter shall notify each of the holders of any class or series of stock of such constituent corporation who are entitled to appraisal rights of the approval of the merger or consolidation and that appraisal rights are available for any or all shares of such class or series of stock of such constituent corporation, and shall include in such notice a copy of this section. Such notice may, and, if given on or after the effective date of the merger or consolidation, shall, also notify such stockholders of the effective date of the merger or consolidation. Any stockholder entitled to appraisal rights may, within 20 days after the date of mailing of such notice, demand in writing from the surviving or resulting corporation the appraisal of such holder’s shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such holder’s shares. If such notice did not notify stockholders of the effective date of the merger or consolidation, either (i) each such constituent corporation shall send a second notice before the effective date of the merger or consolidation notifying each of the holders of any class or series of stock of such constituent corporation that are entitled to appraisal rights of the effective date of the merger or consolidation or (ii) the surviving or resulting corporation shall send such a second notice to all such holders on or within 10 days after such effective date; provided, however, that if such second notice is sent more than 20 days following the sending of the first notice, such second notice need only be sent to each stockholder who is entitled to appraisal rights and who has demanded appraisal of such holder’s shares in accordance with this subsection. An affidavit of the secretary or assistant secretary or of the transfer agent of the corporation that is required to give either notice that such notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. For purposes of determining the stockholders entitled to receive either notice, each constituent corporation may fix, in advance, a record date that shall be not more than 10 days prior to the date the notice is given, provided, that if the notice is given on or after the effective date of the merger or consolidation, the record date shall be such effective date. If no record date is fixed and the notice is given prior to the effective date, the record date shall be the close of business on the day next preceding the day on which the notice is given.

(e) Within 120 days after the effective date of the merger or consolidation, the surviving or resulting corporation or any stockholder who has complied with subsections (a) and (d) hereof and who is otherwise

entitled to appraisal rights, may file a petition in the Court of Chancery demanding a determination of the value of the stock of all such stockholders. Notwithstanding the foregoing, at any time within 60 days after the effective date of the merger or consolidation, any stockholder shall have the right to withdraw such stockholder’s demand for appraisal and to accept the terms offered upon the merger or consolidation. Within 120 days after the effective date of the merger or consolidation, any stockholder who has complied with the requirements of subsections (a) and (d) hereof, upon written request, shall be entitled to receive from the corporation surviving the merger or resulting from the consolidation a statement setting forth the aggregate number of shares not voted in favor of the merger or consolidation and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. Such written statement shall be mailed to the stockholder within 10 days after such stockholder’s written request for such a statement is received by the surviving or resulting corporation or within 10 days after expiration of the period for delivery of demands for appraisal under subsection (d) hereof, whichever is later.

(f) Upon the filing of any such petition by a stockholder, service of a copy thereof shall be made upon the surviving or resulting corporation, which shall within 20 days after such service file in the office of the Register in Chancery in which the petition was filed a duly verified list containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached by the surviving or resulting corporation. If the petition shall be filed by the surviving or resulting corporation, the petition shall be accompanied by such a duly verified list. The Register in Chancery, if so ordered by the Court, shall give notice of the time and place fixed for the hearing of such petition by registered or certified mail to the surviving or resulting corporation and to the stockholders shown on the list at the addresses therein stated. Such notice shall also be given by 1 or more publications at least 1 week before the day of the hearing, in a newspaper of general circulation published in the City of Wilmington, Delaware or such publication as the Court deems advisable. The forms of the notices by mail and by publication shall be approved by the Court, and the costs thereof shall be borne by the surviving or resulting corporation.

(g) At the hearing on such petition, the Court shall determine the stockholders who have complied with this section and who have become entitled to appraisal rights. The Court may require the stockholders who have demanded an appraisal for their shares and who hold stock represented by certificates to submit their certificates of stock to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with such direction, the Court may dismiss the proceedings as to such stockholder.

(h) After determining the stockholders entitled to an appraisal, the Court shall appraise the shares, determining their fair value exclusive of any element of value arising from the accomplishment or expectation of the merger or consolidation, together with a fair rate of interest, if any, to be paid upon the amount determined to be the fair value. In determining such fair value, the Court shall take into account all relevant factors. In determining the fair rate of interest, the Court may consider all relevant factors, including the rate of interest which the surviving or resulting corporation would have had to pay to borrow money during the pendency of the proceeding. Upon application by the surviving or resulting corporation or by any stockholder entitled to participate in the appraisal proceeding, the Court may, in its discretion, permit discovery or other pretrial proceedings and may proceed to trial upon the appraisal prior to the final determination of the stockholder entitled to an appraisal. Any stockholder whose name appears on the list filed by the surviving or resulting corporation pursuant to subsection (f) of this section and who has submitted such stockholder’s certificates of stock to the Register in Chancery, if such is required, may participate fully in all proceedings until it is finally determined that such stockholder is not entitled to appraisal rights under this section.

(i) The Court shall direct the payment of the fair value of the shares, together with interest, if any, by the surviving or resulting corporation to the stockholders entitled thereto. Interest may be simple or compound, as the Court may direct. Payment shall be so made to each such stockholder, in the case of holders of uncertificated stock forthwith, and the case of holders of shares represented by certificates upon the surrender to the corporation of the certificates representing such stock. The Court’s decree may be enforced as other decrees in the Court of Chancery may be enforced, whether such surviving or resulting corporation be a corporation of this State or of any state.

(j) The costs of the proceeding may be determined by the Court and taxed upon the parties as the Court deems equitable in the circumstances. Upon application of a stockholder, the Court may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorney’s fees and the fees and expenses of experts, to be charged pro rata against the value of all the shares entitled to an appraisal.

(k) From and after the effective date of the merger or consolidation, no stockholder who has demanded appraisal rights as provided in subsection (d) of this section shall be entitled to vote such stock for any purpose or to receive payment of dividends or other distributions on the stock (except dividends or other distributions payable to stockholders of record at a date which is prior to the effective date of the merger or consolidation); provided, however, that if no petition for an appraisal shall be filed within the time provided in subsection (e) of this section, or if such stockholder shall deliver to the surviving or resulting corporation a written withdrawal of such stockholder’s demand for an appraisal and an acceptance of the merger or consolidation, either within 60 days after the effective date of the merger or consolidation as provided in subsection (e) of this section or thereafter with the written approval of the corporation, then the right of such stockholder to an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery shall be dismissed as to any stockholder without the approval of the Court, and such approval may be conditioned upon such terms as the Court deems just.

(l) The shares of the surviving or resulting corporation to which the shares of such objecting stockholders would have been converted had they assented to the merger or consolidation shall have the status of authorized and unissued shares of the surviving or resulting corporation.

OFFER TO PURCHASE FOR CASH

ALL OUTSTANDING SHARES OF COMMON STOCK

NSTOR TECHNOLOGIES, INC.

$0.105 NET PER SHARE

NORMANDY ACQUISITION CORPORATION,

AN INDIRECT WHOLLY OWNED SUBSIDIARY OF

XYRATEX LTD

The Letter of Transmittal and certificates for Shares and any other required documents should be sent to the Depositary at one of the addresses set forth below:

The Depositary for the Offer is:

LOGO


By Mail:	By Facsimile Transmission:	By Hand or Overnight Courier:

Computershare Trust Company of New York Wall Street Station P.O. Box 1010 New York, NY 10268-1010	For Eligible Institutions Only: (212) 701-7636 For Confirmation Only Telephone: (212) 701-7600	Computershare Trust Company of New York Wall Street Plaza 88 Pine Street, 19^th Floor New York, NY 10005

If you have questions or need additional copies of this Offer to Purchase and the Letter of Transmittal, you can call the Information Agent at its address and telephone number set forth below. You may also contact your broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Offer.

The Information Agent for the Offer is:

LOGO

105 Madison Avenue

New York, New York 10016

(212) 929-5500 (Call Collect)

Call Toll-Free (800) 322-2885

Email: proxy@mackenziepartners.com

EX-99.5 6 dex995.htm LETTER OF TRANSMITTAL Letter of Transmittal

Exhibit 5

LETTER OF TRANSMITTAL

TO TENDER SHARES OF COMMON STOCK

NSTOR TECHNOLOGIES, INC.

$0.105 NET PER SHARE

NORMANDY ACQUISITION CORPORATION,

AN INDIRECT WHOLLY OWNED SUBSIDIARY OF

XYRATEX LTD

THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, SEPTEMBER 2, 2005, UNLESS THE OFFER IS EXTENDED.

The Depositary for the Tender Offer is:

LOGO


By Mail:	By Facsimile Transmission:	By Hand or Overnight Courier:

Computershare Trust Company of New York Wall Street Station P.O. Box 1010 New York, NY 10268-1010	For Eligible Institutions Only: (212) 701-7636 For Confirmation Only Telephone: (212) 701-7600	Computershare Trust Company of New York Wall Street Plaza 88 Pine Street, 19th Floor New York, NY 10005

DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OR FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.

THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.

This Letter of Transmittal is to be used if certificates are to be forwarded herewith or, unless an Agent’s Message (as defined in the Offer to Purchase dated August 5, 2005 (the “Offer to Purchase”)) is utilized, if delivery of Shares (as defined below) is to be made by book-entry transfer to the Depositary’s account at The Depository Trust Company (the “Book-Entry Transfer Facility”) pursuant to the procedures set forth in “The Offer—Procedure for Tendering Shares” of the Offer to Purchase.


DESCRIPTION OF SHARES TENDERED
Name(s) and Address(es) of Registered Holder(s) (Please fill in, if blank, exactly as name(s) and Shares tendered appear(s) on Share certificate(s))	Shares Tendered (Attach additional list if necessary)
	Certificate Number(s)*	Total Number of Shares Represented by Certificate(s)*	Number of Shares Tendered**





	Total Shares
* Need not be completed by stockholders tendering by book-entry transfer. ** Unless otherwise indicated, it will be assumed that all Shares represented by any certificates delivered to the Depositary are being tendered. See Instruction 4.

Holders of outstanding shares of common stock, par value $0.05 per share (the “Shares”), of nStor Technologies, Inc. (the “Company”), whose certificates for such Shares (the “Share Certificates”) are not immediately available or who cannot deliver their Share Certificates and all other required documents to the Depositary on or prior to the Expiration Date as set forth in “The Offer—Terms of the Offer; Expiration Date” of the Offer to Purchase, or who cannot complete the procedure for book-entry transfer on a timely basis, must tender their Shares according to the guaranteed delivery procedure set forth in “The Offer—Procedure for Tendering Shares—Guaranteed Delivery” of the Offer to Purchase. See Instruction 2. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.

Lost Certificates

¨	I HAVE LOST MY CERTIFICATE(S) THAT REPRESENTED SHARES AND REQUIRE ASSISTANCE IN OBTAINING A REPLACEMENT CERTIFICATE(S). I UNDERSTAND THAT I MUST CONTACT REGISTRAR AND TRANSFER COMPANY TO OBTAIN INSTRUCTIONS FOR REPLACING LOST CERTIFICATES. SEE INSTRUCTION 9.

NOTE: SIGNATURES MUST BE PROVIDED BELOW.

PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY.

¨	CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE DEPOSITARY’S ACCOUNT AT THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:

Name of Tendering Institution

Account Number

Transaction Code Number

¨	CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:

Name(s) of Tendering Stockholder(s)

Date of Execution of Notice of Guaranteed Delivery

Name of Institution which Guaranteed Delivery

If delivery is by book-entry transfer:

Name of Tendering Institution

Account Number

Transaction Code Number

Ladies and Gentlemen:

The undersigned hereby tenders to Normandy Acquisition Corporation (“Purchaser”), a Delaware corporation and an indirect wholly owned subsidiary of Xyratex Ltd, a Bermuda corporation, the above-described shares of common stock, par value $0.05 per share (“Shares”), of nStor Technologies, Inc., a Delaware corporation (the “Company”), pursuant to Purchaser’s offer to purchase all of the outstanding Shares at $0.105 per Share, net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in the Offer to Purchase dated August 5, 2005 (the “Offer to Purchase”), receipt of which is hereby acknowledged, and in this Letter of Transmittal (which together, as each may be amended, supplemented or otherwise modified from time to time, constitute the “Offer”). Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to one or more of its affiliates the right to purchase Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve Purchaser of its obligations under the Offer or prejudice the undersigned’s rights to receive payment for Shares validly tendered and accepted for payment.

Upon the terms and subject to the conditions of the Offer (and if the Offer is extended or amended, the terms of any such extension or amendment) and effective upon acceptance for payment of and payment for the Shares tendered herewith, the undersigned hereby sells, assigns and transfers to, or upon the order of, Purchaser all right, title and interest in and to all the Shares that are being tendered hereby (and any and all other Shares or other securities issued or issuable in respect thereof on or after July 27, 2005 (collectively, the “Distributions”)) and appoints the Depositary the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares (and any Distributions), with full power of substitution and resubstitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (i) deliver certificates for such Shares (and any Distributions) or transfer ownership of such Shares (and any Distributions) on the account books maintained by the Book-Entry Transfer Facility, together, in any such case, with all accompanying evidences of transfer and authenticity, to or upon the order of Purchaser, (ii) present such Shares (and any Distributions) for transfer on the books of the Company and (iii) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares (and any Distributions), all in accordance with the terms and conditions of the Offer.

The undersigned hereby irrevocably appoints Steve Barber and Richard Pearce, individually, as the attorneys and proxies of the undersigned, each with full power of substitution, to exercise all voting and other rights of the undersigned in such manner as each such attorney and proxy or his substitute shall in his sole discretion deem proper, with respect to all of the Shares tendered hereby which have been accepted for payment by Purchaser prior to the time of any vote or other action (and any associated Distributions), at any meeting of stockholders of the Company (whether annual or special and whether or not an adjourned meeting), by written consent or otherwise. This proxy is irrevocable and is granted in consideration of, and is effective upon, the acceptance for payment of such Shares by Purchaser in accordance with the terms of the Offer. Such acceptance for payment shall revoke any other proxy or written consent granted by the undersigned at any time with respect to such Shares (and any associated Distributions), and no subsequent proxies will be given or written consents will be executed by the undersigned (and if given or executed, will not be deemed to be effective).

The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Shares tendered hereby (and any Distributions) and that when the same are accepted for payment by Purchaser, Purchaser will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claims. The undersigned will, upon request, execute and deliver any additional documents deemed by the Depositary or Purchaser to be necessary or desirable to complete the sale, assignment and transfer of the Shares tendered hereby (and any Distributions).

All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned, and any obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Except as stated in the Offer, this tender is irrevocable.

The undersigned understands that tenders of Shares pursuant to any one of the procedures described in “The Offer—Procedure for Tendering Shares” of the Offer to Purchase and the instructions hereto will constitute the

undersigned’s acceptance of the Offer and that Purchaser’s acceptance for payment of the Shares tendered will constitute a binding agreement between the undersigned and Purchaser upon the terms and subject to the conditions of the Offer. The undersigned recognizes that under certain circumstances set forth in the Offer to Purchase, Purchaser may not be required to accept for payment any of the Shares tendered hereby.

Unless otherwise indicated under “Special Payment Instructions,” please issue the check for the purchase price of any Share Certificates purchased, and return any Shares not tendered or not purchased, in the name(s) of the undersigned (and, in the case of Shares tendered by book-entry transfer, by credit to the account at the Book-Entry Transfer Facility). Similarly, unless otherwise indicated under “Special Delivery Instructions,” please mail the check for the purchase price of any Share Certificates purchased and any certificates for Shares not tendered or not purchased (and accompanying documents, as appropriate) to the undersigned at the address shown below the undersigned’s signature(s). In the event that both “Special Payment Instructions” and “Special Delivery Instructions” are completed, please issue the check for the purchase price of any Share Certificates purchased and return any Shares not tendered or not purchased in the name(s) of, and mail said check and any certificates to, the person(s) so indicated. The undersigned recognizes that Purchaser has no obligation, pursuant to the “Special Payment Instructions,” to transfer any Shares from the name of the registered holder(s) thereof if Purchaser does not accept for payment any of the Shares so tendered.


SPECIAL PAYMENT INSTRUCTIONS (See Instructions 6 and 7) To be completed ONLY if the check for the purchase price of Share Certificates purchased (less the amount of any federal income and back-up withholding tax required to be withheld) or certificates for Shares not tendered or not purchased are to be issued in the name of someone other than the undersigned.				SPECIAL DELIVERY INSTRUCTIONS (See Instructions 6 and 7) To be completed ONLY if the check for the purchase price of Share Certificates purchased (less the amount of any federal income and back-up withholding tax required to be withheld) or certificates for Shares not tendered or not purchased are to be mailed to someone other than the undersigned or to the undersigned at an address other than that shown below the undersigned’s signature(s).

Mail: ¨ check ¨ certificates to: Name: (Please Print) Address: Zip Code (Taxpayer Identification No.)				Mail: ¨ check ¨ certificates to: Name: (Please Print) Address: Zip Code (Taxpayer Identification No.)

SIGN HERE

(Signature(s) of Owners)

Dated

Name(s)

(Please Print)

Capacity (full title)

Address

(Include Zip Code)

Area Code and Telephone Number

(Must be signed by registered holder(s) exactly as name(s) appear(s) on Share Certificate(s) or on a security position listing or by person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, agent, officer of a corporation or other person acting in a fiduciary or representative capacity, please set forth full title and see Instruction 5.)

Guarantee of Signature(s)

(See Instructions 1 and 5)

Authorized Signature

Name

Title

(Please Type or Print)

Name of Firm

Address

(Include Zip Code)

Area Code and Telephone Number

Dated

FOR USE BY FINANCIAL INSTITUTIONS ONLY

FINANCIAL INSTITUTIONS: PLACE MEDALLION GUARANTEE IN SPACE ABOVE

THIS FORM MUST BE COMPLETED BY ALL TENDERING U.S. HOLDERS.

See “The Offer—United States Federal Income Tax Considerations” of the Offer to Purchase and the

enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9


PAYER’S NAME: Computershare Trust Company of New York
SUBSTITUTE Form W-9 Department of the Treasury Internal Revenue Service Payer’s Request for Taxpayer Identification Number and Certification	Name: Business name, if different from above: Check appropriate box: ¨ Individual/Sole proprietor ¨ Corporation ¨ Partnership ¨ Other
	*Part 1—Taxpayer Identification Number**—Provide your taxpayer identification number (“TIN”) in the box at right and certify by signing and dating below. If the account is in more than one name, see the enclosed Guidelines* to determine which number to provide. If you do not have a TIN, see the enclosed Guidelines for information on obtaining a number.	Social Security Number OR Employer Identification Number
	Part 2—Awaiting TIN ¨ Exempt ¨
	*Part 3—Certification*—Under penalties of perjury, I certify that: (1) I am a U.S. person (including a U.S. resident alien); (2) The number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued to me); and (3) I am not subject to backup withholding because: (a) I am exempt from backup withholding, (b) I have not been notified by the Internal Revenue Service (the “IRS”) that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding. Certification Instructions**—You must cross out item (3) above if you have been notified by the IRS that you are currently subject to backup withholding because of underreporting interest or dividends on your tax return and you have not been notified by the IRS that you are no longer subject to backup withholding.
	Signature Date Name Address City State Zip

YOU MUST COMPLETE THE FOLLOWING CERTIFICATION IF YOU ARE AWAITING (OR WILL SOON APPLY FOR) A TAXPAYER IDENTIFICATION NUMBER.

CERTIFICATION OF AWAITING TAXPAYER IDENTIFICATION NUMBER

I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and that I mailed or delivered, or intend to mail or deliver in the near future, an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office. I understand that, if I do not timely provide a correct taxpayer identification number, 28% of all reportable payments made to me will be withheld.

Signature Date:

INSTRUCTIONS

Forming Part of the Terms and Conditions of the Offer

1. Guarantee of Signatures. Except as otherwise provided below, all signatures on this Letter of Transmittal must be guaranteed by a financial institution (including most banks, savings and loan associations and brokerage houses) that is a member of a recognized Medallion Program approved by The Securities Transfer Association, Inc. or any other “Eligible Guarantor Institution” (as such term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended) (each an “Eligible Institution”). Signatures on this Letter of Transmittal need not be guaranteed (i) if this Letter of Transmittal is signed by the registered holder(s) of the Shares (which term, for purposes of this document, shall include any participant in the Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Shares) tendered herewith and such holder(s) has not completed the instruction entitled “Special Payment Instructions” on this Letter of Transmittal or (ii) if such Shares are tendered for the account of an Eligible Institution. See Instruction 5.

2. Delivery of Letter of Transmittal and Shares. This Letter of Transmittal is to be used if Share Certificates are to be forwarded herewith or, unless an Agent’s Message is utilized, if deliveries are to be made by book-entry transfer pursuant to the procedures set forth in “The Offer—Procedure for Tendering Shares” of the Offer to Purchase. Share Certificates for all physically delivered Shares, or a confirmation of a book-entry transfer into the Depositary’s account at the Book-Entry Transfer Facility of all Shares delivered electronically, as well as a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof) and any other documents required by this Letter of Transmittal, or an Agent’s Message in the case of a book-entry transfer, must be received by the Depositary at one of its addresses set forth on the front page of this Letter of Transmittal by the Expiration Date (as defined in the Offer to Purchase).

Stockholders whose Share Certificates are not immediately available, who cannot deliver their Share Certificates and all other required documents to the Depositary prior to the Expiration Date or who cannot complete the procedure for delivery by book-entry transfer on a timely basis, may tender their Shares pursuant to the guaranteed delivery procedure set forth in “The Offer—Procedure for Tendering Shares—Guaranteed Delivery” of the Offer to Purchase. Pursuant to such procedure: (a) such tender must be made by or through an Eligible Institution; (b) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by Purchaser, must be received by the Depositary prior to the Expiration Date; and (c) Share Certificates for all tendered Shares, in proper form for tender, or a confirmation of a book-entry transfer into the Depositary’s account at the Book-Entry Transfer Facility of all Shares delivered electronically, as well as a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof), and any other documents required by this Letter of Transmittal, must be received by the Depositary within three American Stock Exchange trading days after the date of execution of such Notice of Guaranteed Delivery.

The method of delivery of Shares and all other required documents is at the option and risk of the tendering stockholder. If certificates for Shares are sent by mail, registered mail with return receipt requested, properly insured, is recommended.

No alternative, conditional or contingent tenders will be accepted, and no fractional Shares will be purchased. By executing this Letter of Transmittal, the tendering stockholder waives any right to receive any notice of the acceptance for payment of the Shares.

3. Inadequate Space. If the space provided herein is inadequate, the Share Certificate numbers, the number of Shares evidenced by such Share Certificates and the number of Shares tendered should be listed on a separate signed schedule and attached hereto.

4. Partial Tenders (not applicable to stockholders who tender by book-entry transfer). If fewer than all the Shares represented by any certificate delivered to the Depositary are to be tendered, fill in the number of Shares which are to be tendered in the box entitled “Number of Shares Tendered.” In such case, a new certificate for the

remainder of the Shares represented by the old certificate will be sent to the person(s) signing this Letter of Transmittal, unless otherwise provided in the appropriate box on this Letter of Transmittal, as promptly as practicable following the expiration or termination of the Offer. All Shares represented by certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated.

5. Signatures on Letter of Transmittal; Stock Powers and Endorsements. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, the signature(s) must correspond with the name(s) as written on the face of the certificates without alteration, enlargement or any change whatsoever.

If any of the Shares tendered hereby are held of record by two or more persons, all such persons must sign this Letter of Transmittal.

If any of the Shares tendered hereby are registered in different names on different certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of certificates.

If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, no endorsements of certificates or separate stock powers are required unless payment of the purchase price is to be made, or Shares not tendered or not purchased are to be returned, in the name of any person other than the registered holder(s). Signatures on any such certificates or stock powers must be guaranteed by an Eligible Institution.

If this Letter of Transmittal is signed by a person other than the registered holder(s) of the Shares tendered hereby, certificates must be endorsed or accompanied by appropriate stock powers, in either case, signed exactly as the name(s) of the registered holder(s) appear(s) on the certificates for such Shares. Signature(s) on any such certificates or stock powers must be guaranteed by an Eligible Institution.

If this Letter of Transmittal or any certificate or stock power is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to Purchaser of the authority of such person so to act must be submitted.

6. Stock Transfer Taxes. Purchaser will pay any stock transfer taxes with respect to the sale and transfer of any Shares to it or its order pursuant to the Offer. If, however, payment of the purchase price is to be made to, or Shares not tendered or not purchased are to be returned in the name of, any person other than the registered holder(s), or if a transfer tax is imposed for any reason other than the sale or transfer of Shares to Purchaser pursuant to the Offer, then the amount of any stock transfer taxes (whether imposed on the registered holder(s), such other person or otherwise) will be deducted from the purchase price unless satisfactory evidence of the payment of such taxes, or exemption therefrom, is submitted herewith.

7. Special Payment and Delivery Instructions. If the check for the purchase price of any Shares purchased is to be issued, or any Shares not tendered or not purchased are to be returned, in the name of a person other than the person(s) signing this Letter of Transmittal or if the check or any certificates for Shares not tendered or not purchased are to be mailed to someone other than the person(s) signing this Letter of Transmittal or to the person(s) signing this Letter of Transmittal at an address other than that shown above, the appropriate boxes on this Letter of Transmittal should be completed. Stockholders tendering Shares by book-entry transfer may request that Shares not purchased be credited to such account at the Book-Entry Transfer Facility as such stockholder may designate under “Special Payment Instructions.” If no such instructions are given, any such Shares not purchased will be returned by crediting the account at the Book-Entry Transfer Facility designated above.

8. Substitute Form W-9. Under United States federal income tax laws, the Depositary will be required to withhold a portion of the amount of any payments made to certain stockholders pursuant to the Offer. In order to

avoid such backup withholding, each tendering stockholder, and, if applicable, each other payee, must provide the Depositary with such stockholder’s or payee’s correct taxpayer identification number and certify that such stockholder or payee is not subject to such backup withholding by completing the Substitute Form W-9. In general, if a stockholder or payee is an individual, the taxpayer identification number is the Social Security number of such individual. If the Depositary is not provided with the correct taxpayer identification number, the stockholder or payee may be subject to a $50 penalty imposed by the Internal Revenue Service. For further information concerning backup withholding and instructions for completing the Substitute Form W-9 (including how to obtain a taxpayer identification number if you do not have one and how to complete the Substitute Form W-9 if Shares are held in more than one name), consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.

Certain stockholders or payees (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order to satisfy the Depositary that a foreign individual qualifies as an exempt recipient, such stockholder or payee must submit a statement, signed under penalties of perjury, attesting to that individual’s exempt status, on a properly completed Form W-8, or successor form. Such statements can be obtained from the Depositary.

Failure to complete the Substitute Form W-9 will not, by itself, cause Shares to be deemed invalidly tendered, but may require the Depositary to withhold a portion of the amount of any payments made pursuant to the Offer. Backup withholding is not an additional federal income tax. Rather, the federal income tax liability of a person subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained provided that the required information is furnished to the Internal Revenue Service. NOTE: FAILURE TO COMPLETE AND RETURN THE SUBSTITUTE FORM W-9 MAY RESULT IN BACKUP WITHHOLDING OF A PORTION OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.

9. Mutilated, Lost, Stolen or Destroyed Certificates. Any holder of a certificate(s) which represented Shares whose certificate(s) has been mutilated, lost, stolen, or destroyed should (i) complete this Letter of Transmittal and check the appropriate box above and (ii) contact Registrar and Transfer Company immediately by calling (800) 368-5948. Registrar and Transfer Company will provide such holder with all necessary forms and instructions to replace any mutilated, lost, stolen or destroyed certificates. The holder may also be required to give the Company a bond as indemnity against any claim that may be made against it with respect to the certificate(s) alleged to have been mutilated, lost, stolen or destroyed. However, there can be no assurances that such mutilated, lost, stolen or destroyed certificates will be replaced prior to the expiration date of the Offer.

10. Waiver of Conditions. Subject to the terms and conditions of the Merger Agreement (as defined in the Offer to Purchase), the conditions of the Offer may be waived, in whole or in part, by Parent or Purchaser, in its reasonable discretion, at any time and from time to time, in the case of any shares tendered.

11. Requests for Assistance or Additional Copies. Requests for assistance or additional copies of the Offer to Purchase and this Letter of Transmittal may be obtained from the Information Agent at its address or telephone number set forth on the back cover of this Letter of Transmittal.

IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A MANUALLY SIGNED FACSIMILE THEREOF) OR AN AGENT’S MESSAGE TOGETHER WITH SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS, OR THE NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION DATE.

(DO NOT WRITE IN THE SPACES BELOW)

Date Received

Accepted by

Checked by

Shares

Surrendered

Shares

Tendered

Shares

Accepted

Check

No.

Amount

of Check

Shares

Returned

Certificate

No.

Block
No.

—–

Net

—–

Delivery Prepared By

Checked By

Date

Any questions and requests for assistance may be directed to the Information Agent at its address and telephone numbers listed below. Additional copies of the Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be obtained from the Information Agent at its address and telephone numbers listed below. Holders of Shares may also contact their broker, dealer, commercial bank or trust company or other nominee for assistance concerning the Offer.

The Information Agent for the Offer is:

LOGO

105 Madison Avenue

New York, New York 10016

(212) 929-5500 (Call Collect)

Call Toll-Free (800) 322-2885

Email: proxy@mackenziepartners.com

EX-99.6 7 dex996.htm MUTUAL NON-DISCLOSURE/CONFIDENTIALITY AGREEMENT Mutual Non-Disclosure/Confidentiality Agreement

Exhibit 6

MUTUAL NON-DISCLOSURE/CONFIDENTIALITY AGREEMENT

This Mutual Non-Disclosure/Confidentiality Agreement is entered into on 2 September, 2004, by and between nStor Corporation, Inc. (“nStor”), a Delaware (USA) Corporation, and Xyratex Technology Limited, Langstone Technology Park, Langstone Road, Havant, Hampshire PO9 1SA a company incorporated in England (‘Xyratex’) (collectively the ‘Parties’) for the purpose of sharing technical, business and financial information to foster potential mutually beneficial business relationships.

1. Confidential Information. Confidential Information does not need to be marked as such and is defined as any and all technical, business financial and other information belonging to either party, including but not limited to products, descriptions, drawings, bills of material, assembly drawings, compositions, business plans, financial information, trade secrets, know how, inventions, manufacturing techniques and processes, marketing and sales processes and techniques, customer lists, price lists, suppliers, current and future product developments.

Confidential Information shall not include information, technical data or knowledge which:

is already known to the Receiving Party;

is or becomes publicly known through no wrongful act of the Receiving Party;

is rightfully received from a third party without restrictions and without breach of this Agreement;

is independently developed by the Receiving Party;

is approved for release by written authorization of the disclosing party; or

if orally disclosed by one party to the other and within thirty (30) days after the oral disclosure, the disclosing party does not so identify it in writing as Confidential Information. Neither party will disclose to third parties or fail to treat as Confidential Information any information received orally from the disclosing party unless the disclosing party fails for thirty (30) days after such disclosure to identify the information disclosed as being confidential or proprietary.

2. Term. This Agreement shall commence when executed and continue for a period of one (1) year. The Parties agree that from the date of first receipt, and for a period of three (3) years following the last disclosure of Confidential Information, the party receiving the Confidential Information (the “Receiving Party”) shall not disclose the Confidential Information to any other person, or entity, or use for its own benefit except as provided in this Agreement and shall use the same degree of care to avoid publication or dissemination of such information as it does for its own confidential information which it does not desire to have published or disseminated. These efforts shall specifically include document control measures, such as numbered copies and sign out logs, and imposing on all employees, agents and other representatives of the Receiving Party restrictions at least as strict as required by this Agreement.

3. Marking. All information disclosed under this Agreement is deemed Confidential Information whether or not it is so marked. It is the intent of the Parties to mark information as confidential and/or proprietary prior to release to the Receiving Party. However, such markings may be overlooked and or disclosed verbally or visually and shall not diminish the value of its confidentiality.

4. Return of Confidential Information. All Confidential Information and any copies and extracts thereof shall be promptly returned to the disclosing party or at any time within thirty (30) days of receipt of a written request by the disclosing party for the return of such Confidential Information. If authorized by the disclosing party, such Confidential Information may be destroyed by the Receiving Party if such destruction is certified by the Receiving Party to the satisfaction of the disclosing party.

5. No License Granted. Nothing contained in this Agreement shall be construed as granting or conferring any rights by license, express, implied or otherwise, for any information, discovery or improvements made, conceived, or acquired after the date of this Agreement, or for any invention, discovery, or improvement made, conceived, or acquired after the date of this Agreement, or for any invention, discovery, or improvement made, conceived or acquired prior to the date of this Agreement.

6. Limitation on Use and Disclosure of Confidential Information. Confidential Information shall be used solely for the purpose of sharing technical, business and financial information to foster potential mutually beneficial business relationships.

(a)

Confidential Information shall not be copied or reproduced by the Receiving Party, except for such copies as may be reasonably required for accomplishment of the purposes stated herein;

(b)

Confidential Information shall be disclosed only to employees, agents, and other parties of the Receiving Party who have a “need to know” in connection with the purposes stated herein; and

(c)

This Agreement shall not restrict the disclosure or use of information that:

(i)

was in the public domain at the time of disclosure or thereafter enters the public domain through no breach of this Agreement by the Receiving Party;

(ii)

was, at the time of the receipt by the Receiving Party, otherwise known to the Receiving Party without restrictions as to the use or disclosure;

(iii)

becomes known to the Receiving Party from a source other than the disclosing party without breach of this Agreement by the Receiving Party; or

(iv)

is developed independently by the Receiving Party and without reliance upon the Confidential Information disclosed herein.

7. Trading Limitations. The Parties’ will comply with any applicable United States securities laws.

8. Arbitration and Equitable Relief.

(a)

Arbitration. Except as provided herein, the Parties agree that any dispute or controversy arising out of or relating to any interpretation, construction, performance or breach of this Agreement shall be settled by arbitration to be held in San Diego County, California, USA in accordance with the Commercial Arbitration Rules then in effect for the American Arbitration Association. The arbitrator may grant injunctions or other relief in such dispute or controversy. In the event of arbitration, the Parties may undertake a reasonable amount of discovery. The decision of the arbitrator shall be final, conclusive and binding on the parties to the arbitration. Judgement may be entered on the arbitrator’s decision in any court having jurisdiction.

(b)

Equitable Remedies. The Parties agree that it would be impossible or inadequate to measure and calculate damages from any breach of the covenants set forth herein. Accordingly, the Parties agree that if in the event of a breach of the covenants contained in this Agreement, the affected party will have available, in addition to any other right or remedy available, the right to obtain an injunction from a court of competent jurisdiction restraining such breach or threatened breach and to specify performance of any such provision of the Agreement. The Parties further agree that no bond or other security shall be required in obtaining such equitable relief and the Parties hereby consent to the issuance of such injunction and to the ordering of specific performance.

9. Legal Expenses. If any action or proceeding is brought for enforcement of this Agreement, or because of an alleged or actual dispute, breach, default, or misrepresentation in connection with any of the provisions of this Agreement, the successful or prevailing party shall be entitled to recover reasonable attorney’s fees and other costs incurred in such action or proceeding in addition to any other relief to which it may be entitled.

10. General Provisions.

(a)

Governing Law. This Agreement shall be governed by the laws of the United States of America, State of California.

(b)

Severability. If one or more of the provisions in this Agreement is deemed void by law, then the remaining provisions will continue in full force and effect.

(c)

Successor and Assigns. This Agreement will be binding upon the successors and/or assignees of the Parties.

(d)

Headings. All headings used herein are intended for reference purposes only and shall not affect the interpretation or validity of this Agreement.

11. Obligations. Neither party has an obligation under this Agreement to purchase any service or item from the other party. Neither party has an obligation under this Agreement to offer for sale or license products using or incorporating the Confidential Information. Either party may, at its sole discretion, offer products for sale or license using its own information but not the Confidential Information of the other and may modify or discontinue sales at

any time. This Agreement shall not constitute, create, give effect to, or otherwise imply a joint venture, pooling arrangement, partnership, or formal business organization of any kind, nor shall it constitute, create, give effect to, or otherwise imply an obligation or commitment on the part of either party to submit a proposal to or perform a contract with the other party. Nothing herein shall be construed as providing for the sharing of profits or losses arising out of the efforts of either or both parties. Neither party will be liable to the other party for any costs, expense, risks, or liabilities arising out of the other party’s efforts in connection with this Agreement.

12. Entire Understanding. This Agreement contains the entire understanding between the Parties concerning the subject matter hereof, superseding all prior contemporaneous communications, agreements and understandings between the Parties with respect to the disclosure and protection of Confidential Information. The rights and obligations of the Parties shall be limited to those expressly set forth herein.


nStor Corporation, Inc.		Xyratex Technology Limited

/s/ Steve Aleshire		/s/ Matt Cornell
Authorized Signature		Authorized Signature

		Matt Cornell

Steve Aleshire
Print Name		Print Name

		Executive VP – Storage Systems

COO
Title		Title

September 3, 2004		9/3/04
Date		Date

EX-99.7 8 dex997.htm NOTICE OF GUARANTEED DELIVERY Notice of Guaranteed Delivery

Exhibit 7

NOTICE OF GUARANTEED DELIVERY

TO TENDER SHARES OF COMMON STOCK

NSTOR TECHNOLOGIES, INC.

$0.105 NET PER SHARE

NORMANDY ACQUISITION CORPORATION,

AN INDIRECT WHOLLY OWNED SUBSIDIARY OF

XYRATEX LTD

THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, SEPTEMBER 2, 2005, UNLESS THE OFFER IS EXTENDED.

This form, or a form substantially equivalent to this form, must be used to accept the Offer (as defined below) if certificates evidencing shares of common stock, par value $0.05 per share (the “Shares”), of nStor Technologies, Inc., a Delaware corporation (the “Company”), are not immediately available, or if the procedure for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach Computershare Trust Company of New York (the “Depositary”) on or prior to the Expiration Date (as defined in the Offer to Purchase, dated August 5, 2005 (the “Offer to Purchase”)). This Notice of Guaranteed Delivery may be delivered by hand or facsimile transmission or mailed to the Depositary. See “The Offer—Procedure for Tendering Shares” of the Offer to Purchase.

The Depositary for the Offer is:

LOGO


By Mail:	By Facsimile Transmission:	By Hand or Overnight Courier:

Computershare Trust Company of New York Wall Street Station P.O. Box 1010 New York, NY 10268-1010	For Eligible Institutions Only: (212) 701-7636 For Confirmation Only Telephone: (212) 701-7600	Computershare Trust Company of New York Wall Street Plaza 88 Pine Street, 19^th Floor New York, NY 10005

DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS LISTED ABOVE, DOES NOT CONSTITUTE A VALID DELIVERY.

This Notice of Guaranteed Delivery is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an “Eligible Guarantor Institution” under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal.

Ladies and Gentlemen:

The undersigned hereby tenders to Normandy Acquisition Corporation (“Purchaser”), a Delaware corporation and an indirect wholly owned subsidiary of Xyratex Ltd, a Bermuda corporation, upon the terms and subject to the conditions set forth in the Offer to Purchase dated August 5, 2005 (the “Offer to Purchase”) and the related Letter of Transmittal (which together, as each may be amended, supplemented or otherwise modified from time to time, constitute the “Offer”), receipt of which is hereby acknowledged, the number of Shares specified below pursuant to the guaranteed delivery procedure set forth in “The Offer—Procedure for Tendering Shares” of the Offer to Purchase.


				SIGN HERE


Certificate Numbers (if available)				Signature


¨ Check here if Shares will be tendered by book-entry transfer				(Name(s)) (Please Print) Name of Tendering Institution


Number of Shares tendered				Address


Account Number				Zip Code


				Area Code and Telephone Number

GUARANTEE

(Not to be used for signature guarantee)

The undersigned, a firm which is a bank, broker, dealer, credit union, savings association or other entity which is a member in good standing of a recognized Medallion Program approved by the Securities Transfer Association, Inc. or any other “Eligible Guarantor Institution” (as such term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended), guarantees (a) that the above named person(s) own(s) the Shares tendered hereby within the meaning of Rule 14e-4 under the Securities Exchange Act of 1934, (b) that such tender of Shares complies with Rule 14e-4 and (c) to deliver to the Depositary of the Shares tendered hereby, in proper form of transfer, or a Book-Entry Confirmation (as defined in the Offer to Purchase), together with a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof) with any required signature guarantees, or an Agent’s Message (as defined in the Offer to Purchase) in the case of a book-entry delivery, and any other required documents within three American Stock Exchange trading days of the date hereof.

(Name of Firm)

(Authorized Signature)

(Name)

(Address)

(Zip Code)

(Area Code and Telephone Number)

DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE OF GUARANTEED DELIVERY. SHARE CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.

EX-99.8 9 dex998.htm LETTERS TO BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES, AND OTHER Letters to Brokers, Dealers, Commercial Banks, Trust Companies, and Other

Exhibit 8

OFFER TO PURCHASE FOR CASH

ALL OUTSTANDING SHARES OF COMMON STOCK

NSTOR TECHNOLOGIES, INC.

$0.105 NET PER SHARE

NORMANDY ACQUISITION CORPORATION,

AN INDIRECT WHOLLY OWNED SUBSIDIARY OF

XYRATEX LTD

THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, SEPTEMBER 2, 2005, UNLESS THE OFFER IS EXTENDED.

August 5, 2005

To Brokers, Dealers, Commercial Banks,

Trust Companies and Other Nominees:

This letter relates to the offer being made by Xyratex Ltd, a Bermuda corporation (“Parent”), through Normandy Acquisition Corporation, a Delaware corporation and an indirect wholly owned subsidiary of Parent (“Purchaser” and together with Parent, “Xyratex”), to purchase all of the issued and outstanding common stock, par value $0.05 per share (the “Shares”), of nStor Technologies, Inc., a Delaware corporation (the “Company”), at a price of $0.105 per Share net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in Xyratex’s Offer to Purchase dated August 5, 2005 (the “Offer to Purchase”) and the related Letter of Transmittal (which together, as each may be amended, supplemented or otherwise modified from time to time, constitute the “Offer”).

For your information and for forwarding to your clients for whom you hold Shares registered in your name or in the name of your nominee, we are enclosing the following documents:

1. Offer to Purchase dated August 5, 2005;

2. Letter of Transmittal for your use and for the information of your clients (including Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 providing information relating to back-up federal income tax withholding);

3. Notice of Guaranteed Delivery to be used to accept the Offer if the Shares and all other required documents cannot be delivered to Computershare Trust Company of New York (“the Depositary”) by the Expiration Date (as defined in the Offer to Purchase);

4. A form of letter which may be sent to your clients for whose accounts you hold Shares registered in your name or in the name of your nominee, with space provided for obtaining such clients’ instructions with regard to the Offer;

5. The letter to stockholders of the Company from Todd Gresham, the Chief Executive Officer and President of the Company, accompanied by the Company’s Solicitation/Recommendation Statement on Schedule 14D-9 filed with the Securities and Exchange Commission by the Company, which includes the recommendation of the Board of Directors of the Company (the “Board of Directors”) that stockholders accept the Offer and tender their Shares to Xyratex pursuant to the Offer; and

6. Return envelope addressed to the Depositary.

THIS OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT VALIDLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF SHARES WHICH REPRESENTS AT LEAST 88.1% OF THE TOTAL NUMBER OF OUTSTANDING SHARES ON THE DATE OF PURCHASE. THE OFFER IS SUBJECT TO OTHER CONDITIONS DESCRIBED IN “THE OFFER—CONDITIONS TO THE OFFER” OF THE OFFER TO PURCHASE. THE OFFER IS NOT SUBJECT TO ANY FINANCING CONDITION.

WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, SEPTEMBER 2, 2005, UNLESS THE OFFER IS EXTENDED.

The Offer is being made pursuant to the Agreement and Plan of Merger, dated as of July 27, 2005 (the “Merger Agreement”), among the Company, Parent and Purchaser. The Merger Agreement provides for, among other things, the making of the Offer by Purchaser, and further provides that, as soon as practicable following consummation of the Offer, Purchaser will be merged with and into the Company (the “Proposed Merger”) with the Company continuing as the surviving corporation and an indirect wholly owned subsidiary of Parent.

The Board of Directors at a meeting of the Company’s Board of Directors held on July 26, 2005 (1) determined that the Merger Agreement and the transactions contemplated thereby, including each of the Offer and the Proposed Merger are advisable, fair to and in the best interests of the Company and the holders of Shares, (2) approved and declared the advisability of the Merger Agreement and the transactions contemplated thereby, including the Offer and the Proposed Merger, and (3) recommended that the holders of Shares accept the Offer.

Purchaser will not pay any fees or commissions to any broker or dealer or other person (other than the Information Agent) for soliciting tenders of Shares pursuant to the Offer. Purchaser will, however, upon request, reimburse brokers, dealers, commercial banks and trust companies for reasonable and necessary costs and expenses incurred by them in forwarding materials to their customers. Purchaser will pay all stock transfer taxes applicable to its purchase of Shares pursuant to the Offer, subject to Instruction 6 of the Letter of Transmittal.

In order to accept the Offer, a duly executed and properly completed Letter of Transmittal and any required signature guarantees, or an Agent’s Message (as defined in the Offer to Purchase) in connection with a book-entry delivery of Shares, together with certificates representing the Shares tendered or timely confirmation of the book-entry transfer of such Shares, and any other required documents, should be sent to the Depositary by 12:00 midnight, New York City time, on Friday, September 2, 2005.

Any inquiries you may have with respect to the Offer should be addressed to, and additional copies of the enclosed materials may be obtained from, the Information Agent or the Depositary at the addresses and telephone numbers set forth on the back cover of the Offer to Purchase.

Very truly yours,

XYRATEX LTD

NORMANDY ACQUISITION CORPORATION

NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU AS THE AGENT OF PURCHASER, PARENT, THE INFORMATION AGENT OR THE DEPOSITARY, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN.

EX-99.9 10 dex999.htm LETTER TO CLIENTS Letter to Clients

Exhibit 9

OFFER TO PURCHASE FOR CASH

ALL OUTSTANDING SHARES OF COMMON STOCK

NSTOR TECHNOLOGIES, INC.

$0.105 NET PER SHARE

NORMANDY ACQUISITION CORPORATION,

AN INDIRECT WHOLLY OWNED SUBSIDIARY OF

XYRATEX LTD

THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, SEPTEMBER 2, 2005, UNLESS THE OFFER IS EXTENDED.

August 5, 2005

To Our Clients:

Enclosed for your consideration are the Offer to Purchase dated August 5, 2005 and the related Letter of Transmittal (which together, as each may be amended, supplemented or otherwise modified from time to time, constitute the “Offer”) in connection with the offer by Xyratex Ltd, a Bermuda corporation (“Parent”), through Normandy Acquisition Corporation, a Delaware corporation and an indirect wholly owned subsidiary of Parent (“Purchaser” and together with Parent, “Xyratex”), to purchase for cash all of the issued and outstanding common stock, par value $0.05 per share (the “Shares”), of nStor Technologies, Inc., a Delaware corporation (the “Company”), at a purchase price of $0.105 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase and the related Letter of Transmittal.

We are the holder of record of Shares held for your account. A tender of such Shares can be made only by us as the holder of record and pursuant to your instructions. The Letter of Transmittal is furnished to you for your information only and cannot be used by you to tender Shares held by us for your account.

We request instructions as to whether you wish us to tender any or all of the Shares held by us for your account, upon the terms and subject to the conditions set forth in the Offer to Purchase and the Letter of Transmittal.

Your attention is directed to the following:

1. The tender price is $0.105 per Share, net to you in cash.

2. The Offer is being made for all of the outstanding Shares.

3. The Offer is conditioned upon, among other things, there being validly tendered and not validly withdrawn prior to the expiration of the Offer that number of Shares which represents at least 88.1% of the total number of outstanding Shares on the date of purchase. The Offer is subject to certain other conditions described in “The Offer—Conditions to the Offer” of the Offer to Purchase. The Offer is not subject to any financing condition.

4. The Offer is being made pursuant to the Agreement and Plan of Merger, dated as of July 27, 2005 (the “Merger Agreement”), among the Company, Parent and Purchaser. The Merger Agreement provides for, among other things, the making of the Offer by Xyratex, and further provides that, as soon as practicable following consummation of the Offer, Purchaser will be merged with and into the Company (the “Proposed Merger”) with the Company continuing as the surviving corporation and an indirect wholly owned subsidiary of Parent.

5. The Board of Directors of the Company at a meeting of the Company’s Board of Directors held on July 26, 2005, (1) determined that the Merger Agreement and the transactions contemplated thereby, including each of the Offer and the Proposed Merger are advisable, fair to and in the best interests of the Company and the holders of Shares, (2) approved and declared the advisability of the Merger Agreement and the transactions contemplated thereby, including the Offer and the Proposed Merger, and (3) recommended that the holders of Shares accept the Offer.

6. The Offer and withdrawal rights expire at 12:00 midnight, New York City time, on Friday, September 2, 2005, unless the Offer is extended.

7. Any stock transfer taxes applicable to a sale of Shares to the Purchaser will be borne by Purchaser, except as otherwise provided in Instruction 6 of the Letter of Transmittal.

If you wish to have us tender any or all of your Shares, please so instruct us by completing, executing, detaching and returning to us the instruction form on the detachable part hereof. An envelope to return your instructions to us is enclosed. If you authorize tender of your Shares, all such Shares will be tendered unless otherwise specified on the detachable part hereof. Your instructions should be forwarded to us in ample time to permit us to submit a tender on your behalf by the expiration of the Offer.

Payment for Shares purchased pursuant to the Offer will in all cases be made only after timely receipt by Computershare Trust Company of New York (the “Depositary”) of (a) certificates representing the Shares tendered or timely confirmation of the book-entry transfer of such Shares into the account maintained by the Depositary at The Depository Trust Company (the “Book-Entry Transfer Facility”), pursuant to the procedures set forth in “The Offer—Procedure for Tendering Shares” of the Offer to Purchase, (b) the Letter of Transmittal, properly completed and duly executed, with any required signature guarantees or an Agent’s Message (as defined in the Offer to Purchase), in connection with a book-entry delivery, and (c) any other documents required by the Letter of Transmittal. Accordingly, payment may not be made to all tendering stockholders at the same time depending upon when certificates for or confirmations of book-entry transfer of such Shares into the Depositary’s account at the Book-Entry Transfer Facility are actually received by the Depositary.

INSTRUCTIONS WITH RESPECT TO

OFFER TO PURCHASE FOR CASH

ALL OUTSTANDING SHARES OF COMMON STOCK

NSTOR TECHNOLOGIES, INC.

$0.105 NET PER SHARE

NORMANDY ACQUISITION CORPORATION,

AN INDIRECT WHOLLY OWNED SUBSIDIARY OF

XYRATEX LTD

The undersigned acknowledge(s) receipt of your letter enclosing the Offer to Purchase dated August 5, 2005 (the “Offer to Purchase”) and the related Letter of Transmittal, in connection with the offer by Parent through Purchaser to purchase all of the shares of common stock, $0.05 par value per share (the “Shares”), of nStor Technologies, Inc. (the “Company”), at a purchase price of $0.105 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase and the related Letter of Transmittal.

This will instruct you to tender the number of Shares indicated below held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Offer to Purchase and the related Letter of Transmittal.


Number of Shares to be Tendered:				SIGN HERE



Shares*
				Signature(s)

Dated
				Please type or print name(s)


				Please type or print address


				Area Code and Telephone Number


				Taxpayer Identification or
				Social Security Number

*	Unless otherwise indicated, it will be assumed that all Shares held by us for your account are to be tendered.

EX-99.10 11 dex9910.htm FORM W-9 GUIDLINES Form W-9 Guidlines

Exhibit 10

GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER

ON SUBSTITUTE FORM W-9

Guidelines for determining the proper taxpayer identification number to provide to the payer—Social Security Numbers have nine digits separated by two hyphens (i.e., 000-00-0000). Employer Identification Numbers have nine digits separated by only one hyphen (i.e., 00-0000000). The table below will help you determine the number to give the payer.


For this type of account:	Give the SOCIAL SECURITY number of—	For this type of account:	Give the EMPLOYER IDENTIFICATION number of—
1. An individual’s account	The individual	8. Sole proprietorship or single-member limited liability company (“LLC”) that is disregarded as separate from its member	The owner(4)

2. Two or more individuals (joint account)	The actual owner of the account or, if combined funds, the first individual on the account(1)	9. A valid trust, estate or pension trust	The legal entity(5)

3. Husband and wife (joint account)	The actual owner of the account or, if joint funds, the first individual on the account(1)	10. Corporation or LLC that has elected to be taxed as a corporation	The corporation or LLC

4. Custodian account of a minor (Uniform Gift to Minors Act)	The minor(2)	11. Religious, charitable, or educational organization	The organization

5. Adult and minor (joint account)	The adult or, if the minor is the only contributor, the minor(1)	12. Partnership or multiple member LLC that has not elected to be taxed as a corporation	The partnership or LLC

6. Account in the name of guardian or committee for a designated ward, minor, or incompetent person	The ward, minor, or incompetent person(3)	13. Association, club, or other tax-exempt organization	The organization

7. a. The usual revocable savings trust account (grantor is also trustee)	The grantor-trustee(1)	14. A broker or registered nominee	The broker or nominee

b. So-called trust account that is not a legal or valid trust under state law	The actual owner(1)	15. Account with the Department of Agriculture in the name of a public entity (such as a state or local government, school district, or prison) that receives agricultural program payments	The public entity

(1)	List first and circle the name of the person whose number you furnish. If only one person on a joint account has a social security number, that person’s number must be furnished

(2)	Circle the minor’s name and furnish the minor’s social security number.

(3)	Circle the ward’s, minor’s or incompetent person’s name and furnish such person’s social security number.

(4)	You must show your individual name, but you may also enter your business or “doing business as” name. You may use either your social security number or employer identification number (if you have one).

(5)	List first and circle the name of the legal entity, either a trust, estate, or pension trust. Do not furnish the taxpayer identification number of the personal representative or trustee unless the legal entity itself is not designated in the account title.

NOTE: If no name is circled when there is more than one name, the number will be considered that of the first name listed.

GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9

Page 2

Obtaining a Number

If you do not have a taxpayer identification number (“TIN”) or if you do not know your number, obtain Form SS-5 (Application for Social Security Card) or Form SS-4 (Application for Employer Identification Number) at the local office of the Social Security Administration or the Internal Revenue Service (the “IRS”) and apply for a number. In addition, you must check the box marked “Awaiting TIN” in Part 2 of Substitute Form W-9 and sign and date the “Certification of Awaiting Taxpayer Identification Number” at the bottom of the form. If you do not timely provide a TIN, a portion of all reportable payments made to you will be withheld.

Section references in these guidelines refer to sections under the Internal Revenue Code of 1986, as amended.

Payees specifically exempted from backup withholding include:

•

An organization exempt from tax under Section 501(a), an individual retirement account (IRA), or a custodial account under Section 403(b)(7), if the account satisfies the requirements of Section 401(f)(2).

•

The United States, a state thereof, the District of Columbia or a possession of the United States, or a political subdivision or agency or instrumentality of any the foregoing.

•

An international organization or any agency or instrumentality thereof.

•

A foreign government or any political subdivision, agency or instrumentality thereof.

Payees that may be exempt from backup withholding include:

•

A corporation.

•

A financial institution.

•

A dealer in securities or commodities required to register in the United States, the District of Colombia, or a possession of the United States.

•

A real estate investment trust.

•

A common trust fund operated by a bank under Section 584(a).

•

An entity registered at all times during the tax year under the Investment Company Act of 1940, as amended.

•

A middleman known in the investment community as a nominee or custodian.

•

A futures commission merchant registered with the Commodity Futures Trading Commission.

•

A foreign central bank of issue.

•

A trust exempt from tax under Section 664 or a non-exempt trust described in a Section 4947.

Payments of dividends and patronage dividends not generally subject to backup withholding include:

•

Payments to nonresident aliens subject to withholding under Section 1441.

•

Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident alien partner.

•

Payments of patronage dividends where the amount received is not paid in money.

•

Payments made by certain foreign organizations.

•

Section 404(k) payments made by an ESOP.

Payments of interest not generally subject to backup withholding include:

•

Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer’s trade or business and you have not provided your correct taxpayer identification number to the payer.

•

Payments of tax-exempt interest (including exempt-interest dividends under Section 852).

•

Payments described in Section 6049(b)(5) to nonresident aliens.

•

Payments on tax-free covenant bonds under Section 1451.

•

Payments made by certain foreign organizations.

•

Mortgage or student loan interest paid to you.

EXEMPT PAYEES DESCRIBED ABOVE SHOULD COMPLETE AND RETURN SUBSTITUTE FORM W-9 TO AVOID POSSIBLE ERRONEOUS BACKUP WITHHOLDING. Exempt payees should furnish their TIN, check the box labeled “Exempt” in Part 2 and sign and date the form. If you are a foreign person, you must submit the appropriate IRS Form W-8 signed under penalty of perjury attesting to foreign status. Such forms may be obtained from Computershare Trust Company of New York or at www.irs.gov.

Certain payments other than interest, dividends, and patronage dividends, which are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under Sections 6041,6041A, 6045, 6050A and 6050N.

Privacy Act Notice.—Section 6109 requires most recipients of dividend, interest, or certain other income to give taxpayer identification numbers to payers who must report the payments to the IRS. The IRS uses the numbers for identification purposes and to help verify the accuracy of tax returns. The IRS may also provide this information to the Department of Justice for civil and criminal litigation and to cities, states and the District of Columbia to carry out their tax laws. The IRS may also disclose this information to other countries under a tax treaty, or to Federal and state agencies to enforce Federal non-tax criminal laws and to combat terrorism. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold a portion of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply.

Penalties

(1) Penalty for Failure to Furnish Taxpayer Identification Number.—If you fail to furnish your correct taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect.

(2) Civil Penalty for False Information With Respect to Withholding.—If you make a false statement with no reasonable basis that results in no imposition of backup withholding, you are subject to a penalty of $500.

(3) Criminal Penalty for Falsifying Information.—Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment.

(4) Misuse of Taxpayer Identification Numbers.—If the requester discloses or uses taxpayer identification numbers in violation of federal law, the requester may be subject to civil and criminal penalties.

FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE IRS

EX-99.11 12 dex9911.htm JOINT PRESS RELEASE Joint Press Release

Exhibit 11

Xyratex to acquire nStor

Significantly broadens opportunities for Xyratex in the Entry Level RAID market

Acquisition expected to be Accretive to Non-GAAP EPS in Fiscal 2006

Havant, UK — July 28, 2005 — Xyratex Ltd (Nasdaq: XRTX) and nStor Technologies, Inc (AMEX: NSO), today announced that they have signed a definitive merger agreement providing for Xyratex to acquire all of the outstanding shares of nStor in a transaction valued at approximately $21.2 million. The boards of directors of both companies have approved the merger agreement. For Xyratex, the acquisition of nStor augments the company’s already strong lineup of storage technology and platform solutions. The acquisition of nStor will combine Xyratex’s industry-leading expertise in high volume, high availability storage system enclosure design with nStor’s extensive experience and value-added RAID Controller and Storage Solution software providing a highly scalable set of offerings to meet customer requirements.

Under the terms of the merger agreement, Normandy Acquisition Corp, an indirect wholly owned subsidiary of Xyratex Ltd, will make a tender offer to purchase all of the outstanding shares of nStor’s common stock at a cash purchase price of $0.105 per share. The tender offer will be subject to certain conditions, including the tender of at least 88.1% of nStor’s shares of common stock. The tender offer is expected to commence on or about August 3, 2005 and is expected to be followed by a second step merger in which those shares not tendered will be converted into the right to receive the same $0.105 per share in cash. Stockholders representing approximately 37.5% of the outstanding shares have entered into support agreements under which they agreed, among other things, to tender their shares and, if necessary, to vote their shares in favor of the proposed merger.

“This proposed acquisition will strengthen Xyratex’s proven technology in the critical area of Entry Level RAID controller technology,” said Steve Barber, CEO of Xyratex. “This emerging high growth segment presents an exciting new opportunity for Xyratex. We believe that the combination of Xyratex’s existing intellectual property base with nStor’s Raid and software technology enables us to extend our leadership position and acquire new customers and positions us well for future growth.”

Xyratex defines the Entry Level RAID Storage Systems market segment to cover all External Storage Systems which have an end user price band up to $15,000. Using data provided by IDC, Xyratex estimates that the market opportunity for this segment is approximately $1.9 billion in 2005 growing to over $6.3 billion in 2008.

nStor has invested significantly to develop its leading-edge low cost storage systems product range. This includes Storage Solution technology and dual active RAID controllers developed around a stable firmware core. A key element of Xyratex’s business strategy is to expand its technology base to incorporate more captive RAID controller technology into its product offerings within the External Storage Systems market.

“This business combination gives us the opportunity to significantly expand our activities within the storage market and complement our global strategy to provide cost effective storage solutions to OEM and Solutions Integrator customers,” said Todd Gresham, CEO of nStor. “We believe moving forward with Xyratex will allow us to fully leverage our market and technology competencies to bring additional value to our combined customer sets.”

A conference call to discuss the acquisition of nStor will be broadcast live via the internet at http://www.xyratex.com/investors on Friday, July 29, 2005 at 5:30 a.m. Pacific Time/8:30 a.m. Eastern Time. You can also access the conference call by dialing (866) 543-6408 in the United States and (617) 213-8899 outside of the United States, passcode 67763097.

The press release will be posted to the company web site www.xyratex.com.

A replay will be available through August 5, 2005 following the live call by dialing (888) 286-8010 in the United States and (617) 801-6888 outside the United States, replay code 41444498.

Additional Information

This press release is neither an offer to purchase nor a solicitation of an offer to sell shares of nStor. nStor stockholders are advised to read the tender offer statement and the solicitation /recommendation statement regarding the acquisition referenced in the press release, which will be filed with the Securities and Exchange Commission upon the commencement of the tender offer. The tender offer statement (including an offer to purchase, letter of transmittal and related tender offer documents) and the solicitation/recommendation statement will contain important information which should be read carefully before any decisions are made with respect to the offer. nStor stockholders may obtain a free copy of the tender offer statement and the solicitation/recommendation statement when they are available and copies of other documents filed by Xyratex and nStor with the SEC at the SEC’s web site at www.sec.gov. The tender offer statement and the solicitation/recommendation statement and these other documents may also be obtained by nStor stockholders without cost to them from Xyratex and nStor.

Safe Harbor Statement

This press release contains forward–looking statements that involve risks and uncertainties. These forward-looking statements include statements regarding future results or financial performance of Xyratex, including statements relating to the acquisition of nStor, strengthening Xyratex’s position in the storage market and enabling Xyratex to build future storage and disk cleaning products. Such statements are just predictions and involve risks and uncertainties such that actual results and performance may differ materially. Factors that might cause such a difference include successful integration of NStor’s assets and employees into Xyratex, building future disk cleaning products, Xyratex’s inability to compete successfully in the competitive and rapidly changing marketplace, failure to retain key employees, cancellation or delay of projects and continued adverse general economic conditions in the U.S. and internationally. These risks and other factors include those listed under “Risk Factors” and elsewhere in Xyratex’s Annual Report on Form 20-F as filed with the Securities and Exchange Commission (File No. 000-50799). In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” or the negative of these terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.

About nStor

Headquartered in Carlsbad, Calif., nStor Technologies, Inc. is a developer of data storage solutions that are ideally suited for both large enterprises as well as small to mid-sized businesses. nStor’s flagship controller technology and StorView software form the foundation for the OneStor and NexStor family of turnkey solutions that support Microsoft Windows, Linux, UNIX and Macintosh operating environments. Designed for storage-intensive environments and mission-critical applications, nStor’s products are offered in various architectures including Fibre Channel, SCSI and SATA and are focused on addressing customers’ business needs and applications. nStor markets its storage solutions through a global network of OEM partners and systems integrators. For more information, visit www.nstor.com.

Contacts:

nStor Marketing & Alliances

Lisa Hart

Tel: +1 (760) 683-2516

Email: lhart@nstor.com

Website: www.nstor.com

About Xyratex

Xyratex is a leading provider of enterprise data storage subsystems and storage process technology. Xyratex designs and manufactures enabling technology that provides OEM and disk drive manufacturer customers with data storage products to support high-performance storage and data communication networks. Xyratex has over 20 years of experience in research and development relating to disk drives, storage systems and high-speed communication protocols.

Founded in 1994 in an MBO from IBM, and with headquarters in the UK, Xyratex has an established global base with R&D and operational facilities in Europe, the United States and South East Asia.

Contacts:

Xyratex Investor Relations

Brad Driver

Tel: +1 (408) 325-7260

Email: bdriver@us.xyratex.com

Website: www.xyratex.com

Xyratex Public Relations

Curtis Chan

CHAN & ASSOCIATES, INC.

Tel: +1 (714) 447-4993

Email: cj_chan@chanandassoc.com

EX-99.12 13 dex9912.htm SUMMARY ADVERTISEMENT Summary Advertisement

Exhibit 12

THIS ANNOUNCEMENT IS NEITHER AN OFFER TO PURCHASE NOR A SOLICITATION OF AN OFFER TO SELL SHARES. THE OFFER IS MADE SOLELY BY THE OFFER TO PURCHASE DATED AUGUST 5, 2005 AND THE RELATED LETTER OF TRANSMITTAL, AND ANY AMENDMENTS, SUPPLEMENTS OR OTHER MODIFICATIONS THERETO, AND IS BEING MADE TO ALL HOLDERS OF SHARES. PURCHASER IS NOT AWARE OF ANY JURISDICTION WHERE THE MAKING OF THE OFFER IS PROHIBITED BY ADMINISTRATIVE OR JUDICIAL ACTION PURSUANT TO ANY VALID STATUTE. IF PURCHASER BECOMES AWARE OF ANY VALID STATUTE PROHIBITING THE MAKING OF THE OFFER OR THE ACCEPTANCE OF SHARES PURSUANT THERETO, PURCHASER WILL MAKE A GOOD FAITH EFFORT TO COMPLY WITH SUCH STATUTE. IF, AFTER SUCH GOOD FAITH EFFORT, PURCHASER CANNOT COMPLY WITH SUCH STATUTE, THE OFFER WILL NOT BE MADE TO (NOR WILL TENDERS BE ACCEPTED FROM OR ON BEHALF OF) THE HOLDERS OF SHARES IN SUCH JURISDICTION. IN ANY JURISDICTION WHERE THE SECURITIES, BLUE SKY OR OTHER LAWS REQUIRE THE OFFER TO BE MADE BY A LICENSED BROKER OR DEALER, THE OFFER SHALL BE DEEMED TO BE MADE ON BEHALF OF PURCHASER BY ONE OR MORE REGISTERED BROKERS OR DEALERS LICENSED UNDER THE LAWS OF SUCH JURISDICTION.

NOTICE OF OFFER TO PURCHASE FOR CASH

ALL OUTSTANDING SHARES OF COMMON STOCK

NSTOR TECHNOLOGIES, INC.

$0.105 NET PER SHARE

NORMANDY ACQUISITION CORPORATION,

AN INDIRECT WHOLLY OWNED SUBSIDIARY OF

XYRATEX LTD

THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, SEPTEMBER 2, 2005, UNLESS THE OFFER IS EXTENDED.

Normandy Acquisition Corporation, a Delaware corporation (“Purchaser”) and an indirect wholly owned subsidiary of Xyratex Ltd, a Bermuda corporation (“Parent”), is offering to purchase all outstanding shares of common stock, par value $0.05 per share (the “Shares”), of nStor Technologies, Inc., a Delaware corporation (the “Company”), at a price of $0.105 per Share, net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in the Offer to Purchase dated August 5, 2005 (the “Offer to Purchase”) and in the related Letter of Transmittal (which together, as each may be amended, supplemented or otherwise modified from time to time, constitute the “Offer”). Purchaser is offering to acquire the Shares as a first step in acquiring the entire equity interest in the Company. Following the consummation of the Offer, Purchaser intends to effect the Proposed Merger described below.

THIS OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT VALIDLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF SHARES WHICH REPRESENTS AT LEAST 88.1% OF THE TOTAL NUMBER OF OUTSTANDING SHARES ON THE DATE OF PURCHASE (THE “MINIMUM CONDITION”). THE OFFER IS SUBJECT TO OTHER CONDITIONS DESCRIBED IN “THE OFFER—CONDITIONS TO THE OFFER” OF THE OFFER TO PURCHASE.

The conditions to the Offer may be waived, in whole or in part, by Parent or Purchaser, in its reasonable discretion, any time and from time to time, in the case of any Shares tendered. The offer is not subject to any financing condition.

practicable following consummation of the Offer, Purchaser will be merged with and into the Company (the “Proposed Merger”) with the Company continuing as the surviving corporation and an indirect wholly owned subsidiary of Parent. Pursuant to the Merger Agreement, at the effective time of the Proposed Merger (the “Effective Time”), each Share outstanding immediately prior to the Effective Time (other than Shares held by Parent, Purchaser, any wholly owned subsidiary of Parent or Purchaser, in the treasury of the Company or by any wholly owned subsidiary of the Company, all of which will be canceled and retired and shall cease to exist, and Shares held by the Company’s stockholders, if any, who properly exercise their appraisal rights under the Delaware General Corporation Law) will be cancelled and retired and shall be converted into the right to receive $0.105 per share in cash, net without interest. The purpose of the Offer is for Purchaser to acquire no less than 88.1% of the Shares as the first step in Parent acquiring the entire equity interest in the Company. The purpose of the Proposed Merger is to acquire all outstanding Shares not tendered and purchased pursuant to the Offer.

The Proposed Merger is subject to the satisfaction or waiver of certain conditions, including, if required, the approval and adoption of the Merger Agreement by the affirmative vote of the holders of a majority of the outstanding Shares. If the Minimum Condition is satisfied and Purchaser acquires Shares pursuant to the Offer, Purchaser would have sufficient voting power to approve the Proposed Merger without the affirmative vote of any other stockholder of the Company. In addition, in order to facilitate a short-form merger following the completion of the Offer, if the Minimum Condition is met and Purchaser accepts for payment pursuant to the Offer at least 88.1% but less than 90% of the Shares then outstanding, Purchaser has agreed to purchase, and the Company has agreed to sell to Purchaser, additional Shares equal to an amount that, when added to the Shares that Purchaser already owns at the time the option is exercised, will constitute one Share more than 90% of the Shares then outstanding (assuming the exercise of all exercisable options to purchase Shares with an exercise price less than $0.105 per share), at a price of $0.105 per Share. The Company has also agreed, if required, to cause a meeting of its stockholders to be held as promptly as practicable following consummation of the Offer for the purpose of considering and taking action upon the Proposed Merger and the Merger Agreement. Purchaser will vote all Shares that it acquires in the Offer in favor of the approval and adoption of the Merger Agreement. The Merger Agreement is more fully described in the Offer to Purchase.

THE COMPANY’S BOARD OF DIRECTORS (1) DETERMINED THAT THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING EACH OF THE OFFER AND THE PROPOSED MERGER ARE ADVISABLE, FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND THE HOLDERS OF SHARES, (2) APPROVED AND DECLARED THE ADVISABILITY OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE PROPOSED MERGER AND (3) RECOMMENDED THAT THE HOLDERS OF SHARES ACCEPT THE OFFER.

As a condition to and an inducement for Parent and Purchaser entering into the Merger Agreement, three of the Company’s largest stockholders, Barry S. Halperin, H. Irwin Levy and Bernard Marden (each a “Significant Stockholder”), have entered into Tender and Stockholder Support Agreements with Parent and Purchaser pursuant to which the Significant Stockholders have, subject to certain limitations, (i) agreed to tender approximately 37.5% of the issued and outstanding Shares into the Offer, (ii) agreed not to withdraw any Shares tendered in the Offer, (iii) agreed to vote such tendered Shares in favor of the Proposed Merger and Merger Agreement and against any acquisition proposal other than the Proposed Merger and (iv) granted to certain officers or directors of Parent an irrevocable proxy to vote such Shares in favor of the Proposed Merger, the Merger Agreement and the transactions contemplated by the Merger Agreement.

To tender Shares, the tendering stockholder must deliver the certificates representing the Shares to be tendered together with a completed Letter of Transmittal to Computershare Trust Company of New York, the depositary for the Offer (the “Depositary”), not later than the time the Offer expires. If the Shares are held in “street name” by the tendering stockholder’s broker, dealer, commercial bank, trust company or other nominee, such nominee can tender the Shares through The Depository Trust Company. If the tendering stockholder cannot deliver everything required to make a valid tender to the Depositary prior to the expiration date of the Offer, the tendering stockholder may still be able to tender the Shares for a limited amount of additional time by having a broker, bank or other fiduciary which is a member of the Securities Transfer Agents Medallion Program or other eligible institution

guarantee that the missing items will be received by the Depositary within three American Stock Exchange trading days after the expiration of the Offer. However, the Depositary must receive the missing items within that three trading day period. For additional information, see “The Offer—Procedure for Tendering Shares” of the Offer to Purchase.

For purposes of the Offer, Purchaser shall be deemed to have accepted for payment tendered Shares when, as and if Purchaser gives oral or written notice of its acceptance to the Depositary. Purchaser will pay for Shares accepted for payment pursuant to the Offer by depositing the purchase price with the Depositary. The Depositary will act as agent for all tendering stockholders for the purpose of receiving payments from Purchaser and transmitting such payments to tendering stockholders whose Shares have been accepted for payment. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE FOR SHARES PURSUANT TO THE OFFER, REGARDLESS OF ANY DELAY IN MAKING SUCH PAYMENT. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (1) certificates for such Shares (or of a confirmation of a book-entry transfer of such Shares into the Depositary’s account at the Book-Entry Transfer Facility), (2) a properly completed and duly executed Letter of Transmittal and (3) any other required documents. Accordingly, payment may be made to tendering stockholders at different times if delivery of the Shares and other required documents occurs at different times.

Subject to the terms of the Merger Agreement and applicable law, if, at any Expiration Date (as defined in “The Offer—Terms of the Offer; Expiration Date” of the Offer to Purchase), any of the conditions to the Offer are not satisfied or waived by Parent or Purchaser, Purchaser may, but shall not be required to, extend the Offer. Any extension will be followed as promptly as practicable by public announcement to be made no later than 9:00 a.m. New York City time, on the next business day after the previously scheduled Expiration Date. Subject to the terms of the Offer and the Merger Agreement and the satisfaction or waiver of all the conditions to the Offer as of any Expiration Date, Purchaser will accept for payment and pay for all Shares validly tendered and not validly withdrawn pursuant to the Offer as soon as reasonably practicable after such Expiration Date.

Tendering stockholders who are record owners of their Shares and tender directly to the Depositary will not be obligated to pay brokerage fees or commissions or, except as otherwise provided in Instruction 6 of the Letter of Transmittal, stock transfer taxes on the sale of Shares pursuant to the Offer. Stockholders who hold their Shares through a broker or other nominee should consult such institution as to whether any charges will apply. Purchaser will pay all charges and expenses of the Depositary and MacKenzie Partners, Inc., which is acting as the information agent (the “Information Agent”), incurred in connection with the Offer.

The receipt of cash consideration in the Offer or Proposed Merger will be a taxable transaction for United States federal income tax purposes.

Purchaser does not currently intend to include a subsequent offering period in the Offer, although it reserves the right to do so. Pursuant to Rule 14d-7 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Purchaser will not offer withdrawal rights during a subsequent offering period to Shares tendered during a subsequent offering period or to Shares tendered in the Offer and accepted for payment. Purchaser will pay the same consideration to stockholders tendering Shares in the Offer or in a subsequent offering period, if it includes one.

Tendering stockholders may withdraw tenders of Shares made pursuant to the Offer at any time prior to the Expiration Date. Thereafter, such tenders are irrevocable, except that they may be withdrawn after October 4, 2005 unless such Shares are accepted for payment as provided in the Offer to Purchase. If Purchaser extends the period of time during which the Offer is open, is delayed in accepting for payment or paying for Shares pursuant to the Offer for any reason, or is unable to accept Shares for payment pursuant to the Offer for any reason, then, without prejudice to Purchaser’s rights under the Offer, the Depositary may, on Purchaser’s behalf, retain all Shares tendered, and such Shares may not be withdrawn except as otherwise provided in the Offer to Purchase. Any such delay will be accompanied by an extension of the Offer to the extent required by law.

notice of withdrawal with (except in the case of Shares tendered by an Eligible Guarantor Institution) signatures guaranteed by an Eligible Guarantor Institution must be submitted prior to the release of such Shares. In addition, such notice must specify, in the case of Shares tendered by delivery of certificates, the name of the registered holder (if different from that of the tendering stockholder) and the serial numbers shown on the particular certificates evidencing the Shares to be withdrawn or, in the case of Shares tendered by book-entry transfer, the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares. Withdrawals may not be rescinded, and Shares withdrawn will thereafter be deemed not validly tendered for purposes of the Offer. However, withdrawn Shares may be re-tendered by again following one of the procedures described in “The Offer—Procedure for Tendering Shares” of the Offer to Purchase at any time prior to the Expiration Date.

Purchaser will determine, in its sole discretion, all questions as to the form and validity (including time of receipt) of any notice of withdrawal, and its determination shall be final and binding. None of Parent, Purchaser, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defect or irregularity in any notice of withdrawal or waiver of any such defect or irregularity or incur any liability for failure to give any such notification.

The Company has provided Purchaser with, or caused to be provided to Purchaser, the Company’s stockholder list and security position listings for the purpose of disseminating the Offer to holders of Shares. The Offer to Purchase, the related Letter of Transmittal and other related materials are being mailed to record holders of Shares whose names appear on the Company’s stockholder list and will be furnished, for subsequent transmittal to beneficial owners of Shares, to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the stockholder list or, if applicable, who are listed as participants in a clearing agency’s security position listing.

The information required to be disclosed by Exchange Act Rule 14d-6(d)(1) is contained in the Offer to Purchase and is incorporated herein by reference.

THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER.

Questions and requests for assistance or for copies of the Offer to Purchase, the related Letter of Transmittal, and other related materials, may be directed to the Information Agent as set forth below, and copies will be furnished promptly at Purchaser’s expense. No fees or commissions will be paid to brokers, dealers or other persons (other than the Information Agent) for soliciting tenders of Shares pursuant to the Offer.

THE INFORMATION AGENT FOR THE OFFER IS:

LOGO

105 Madison Avenue

New York, New York 10016

(212) 929-5500 (Call Collect)

Call Toll-Free (800) 322-2885

Email: proxy@mackenziepartners.com

August 5, 2005

EX-99.13 14 dex9913.htm FORM OF NON-COMPETITION AGREEMENT Form of Non-Competition Agreement

Exhibit 13

FORM OF

NON-COMPETITION AGREEMENT

THIS NON-COMPETITION AGREEMENT, dated as of •, 2005 (this “Agreement”), is by and among Xyratex Ltd, a Bermuda corporation (“Parent”), Normandy Acquisition Corporation, a Delaware corporation and a wholly-owned Subsidiary of Parent (the “Purchaser”), and • (the “Stockholder”).

WHEREAS, Parent, Purchaser and nStor Technologies, Inc., a Delaware corporation (the ”Company”), propose to enter into an Agreement and Plan of Merger, dated as of •, 2005 (as the same may be amended or supplemented from time to time, the “Merger Agreement”), which provides, among other things, that Purchaser will make a cash tender offer (the “Offer”) for all of the outstanding capital stock of the Company and, after expiration of the Offer, will merge with and into the Company (the “Merger”), in each case upon the terms and subject to the conditions in the Merger Agreement (with all capitalized terms used but not defined herein having the meanings set forth in the Merger Agreement);

WHEREAS, the Company is engaged in the business of providing electronic storage solutions (including storage services and applications) that secure and protect information (the “Business”); and

1. Non-Competition.

(a) For a period commencing on the date hereof and ending on the earlier of (i) termination of the Merger Agreement or (ii) the three-year anniversary of the date hereof (the “Restricted Period”), the Stockholder shall not engage, directly or indirectly, in any business anywhere in the world that manufactures, produces or supplies products or services of the kind manufactured, produced or supplied by Parent, any Subsidiary of Parent set forth on Annex A hereto that is engaged in the Business, the Company or any Company Subsidiary as of the date hereof or, without the prior written consent of Parent, directly or indirectly, own an interest in, manage, operate, join, control, lend money or render financial or other assistance to or participate in as an officer, employee, partner, stockholder, consultant or otherwise, any Person that competes with Parent, the Business, the Company or any Company Subsidiary in manufacturing, producing or supplying products or services of the kind manufactured, produced or supplied by the Company or any Company Subsidiary as of the date hereof; provided, however, that, (i) ownership of

securities having no more than five percent of the outstanding voting power of any competitor which are listed on any national securities exchange shall not be deemed to be in violation of this Agreement as long as the Person owning such securities has no other connection or relationship with such competitor and (ii) ownership of securities or equity interests in any investment company, mutual fund, equity fund, diversified portfolio company or other mutual pooled investment (each, an “Investment Company”), shall not be deemed to be in violation of this Agreement as long as the Person owning such securities has no active participation in the management of such Investment Company.

(b) As a separate and independent covenant, the Stockholder agrees with Parent and Purchaser that, for a period of three years following the date hereof, the Stockholder will not in any way, directly or indirectly, for the purpose of conducting or engaging in any business that manufacturers, produces or supplies products or services of the kind manufactured, produced or supplied by Parent any Subsidiary of Parent set forth in Annex A hereto that is engaged in the Business, the Company or any Company Subsidiary as of the date hereof, call upon, solicit, advise or otherwise do, or attempt to do, business with any customers of the Company or any Company Subsidiary with whom the Company or any Company Subsidiary had any dealings during the period of time in which the Stockholder was a stockholder of the Company or take away or interfere or attempt to interfere with any customer, trade, business or patronage of Parent, any Subsidiary of Parent set forth in Annex A hereto that is engaged in the Business, the Company or any Company Subsidiary, or interfere with or attempt to interfere with any officers, employees, representatives or agents of Parent, any Subsidiary of Parent, the Company or any Company Subsidiary, or induce or attempt to induce any of them to leave the employ of Parent, any Subsidiary of Parent, the Company or any Company Subsidiary or violate the terms of their contracts, or any employment arrangements, with Parent, any Subsidiary of Parent, the Company or any Company Subsidiary; provided, however, that the foregoing will not prohibit (i) a general solicitation to the public of general advertising or (ii) the Stockholder from purchasing consumer products sold, manufactured or produced by any customer of the Company or any Company Subsidiary.

(c) The Restricted Period shall be extended by the length of any period during which the Stockholder is in breach of the terms of this Section 1.

(d) The Stockholder acknowledges that the covenants of the Stockholder set forth in this Agreement are an essential element of the transactions contemplated by the Merger Agreement and that, but for the agreement of the Stockholder to comply with these covenants, Parent and Purchaser would not have entered into the Merger Agreement. The Stockholder acknowledges that the agreements contained herein are independent covenants that shall not be affected by performance or nonperformance of the Merger Agreement by Parent or Purchaser. The Stockholder has had the opportunity to independently consult with his counsel regarding whether the covenants contained herein are reasonable and proper.

2. Specific Performance. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with

their specific terms or were otherwise breached. The parties accordingly agree that, in addition to any other remedy that may be available at law or equity, the parties shall be entitled to the remedy of specific performance of such provisions and to an injunction or injunctions and/or such other equitable relief as may be necessary to prevent breaches of this Agreement, without the necessity of (i) posting bond or other security or (ii) proving actual damages. If any party shall fail to perform its obligations under this Agreement, the non-breaching party shall be entitled to receive from the breaching party all reasonable fees and expenses, including reasonable attorneys’ fees, which may be incurred by the non-breaching party to enforce the provisions of this Agreement.

3. General Provisions.

(a) Amendments. This Agreement may not be modified, altered, supplemented or amended except by an instrument in writing signed by each of the parties hereto.

(b) Notice. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally or sent by overnight courier (providing proof of delivery) to Parent or Purchaser in accordance with Section 8.3 of the Merger Agreement and to the Stockholder at the Stockholder’s address set forth in Annex B hereto (or to such other address as any party may have furnished to the other parties in writing in accordance herewith).

(f) Governing Law; Consent to Jurisdiction. This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. All parties to this Agreement hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be

brought only in the Chancery Court of the State of Delaware (the “Delaware Court”), and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement or any of the transactions contemplated hereby, (iii) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court, and (iv) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum or is subject to a jury trial. A prevailing party in any action or proceeding arising out of or in connection with this Agreement or any of the transactions contemplated hereby shall be entitled to reimbursement of its attorneys’ fees and costs incurred in such action or proceeding by the other party.

(g) Costs and Expenses. Whether or not the Offer or the Merger is consummated, except as otherwise expressly set forth in Section 2 or Section 3(f) of this Agreement, all costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such expenses.

(h) Assignment. This Agreement shall not be assigned by operation of law or otherwise without the prior written consent of the Stockholder or Purchaser and Parent, as the case may be; provided that Purchaser or Parent may assign, in its respective sole discretion its rights and obligations hereunder to any direct or indirect Company Subsidiary of Parent.

(i) Severability. If any covenant set forth in this Agreement is determined by any court to be unenforceable by reason of its extending for too great a period of time or over too great a geographic area, or by reason of its being too extensive in any other respect, such covenant shall be interpreted to extend only for the longest period of time and over the greatest geographic area, and to otherwise have the broadest application, as shall be enforceable and the parties hereto agree to negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner. The invalidity or unenforceability of any particular provision of this Agreement shall not affect the other provisions hereof, which shall continue in full force and effect.

IN WITNESS WHEREOF, Parent, Purchaser and the Stockholder have caused this Agreement to be duly executed as of the date first written above.


XYRATEX LTD

By:
Name:
Title:

NORMANDY ACQUISITION CORPORATION

By:
Name:
Title:

STOCKHOLDER


Name:

Annex A

Xyratex Group Limited

Xyratex Holdings Inc.

Xyratex International Inc.

Xyratex Technology Limited

Xyratex (Malaysia) Sdn Bhd

Xyratex (Singapore) Limited

Xyratex Technology (Wuxi) Co. Ltd

EX-99.14 15 dex9914.htm CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT Convertible Preferred Stock Purchase Agreement

Exhibit 14

CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT

This Convertible Preferred Stock Purchase Agreement (this “Agreement”), is dated as of July 27, 2005 by and among Xyratex Ltd, a Bermuda corporation (the “Parent”), Normandy Acquisition Corporation (the “Purchaser”) and H. Irwin Levy (the “Seller”).

R E C I T A L S

A. The Seller holds 9,100 shares of Series M Convertible Preferred Stock (the “Shares”) of nStor Technologies, Inc., a Delaware corporation (the “Company”).

B. The Purchaser is a party to the Agreement and Plan of Merger among the Parent, the Purchaser and the Company, dated of equal date herewith (the “Merger Agreement”).

C. In connection with the transactions contemplated by the Merger Agreement, the Purchaser desires to purchase from the Seller, and the Seller desires to sell to the Purchaser, the Shares, pursuant to the terms and conditions set forth in this Agreement.

D. Capitalized terms used but not defined herein have the meanings set forth for such terms in the Merger Agreement.

NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged by each of the parties to this Agreement, the parties agree as follows:

1. Purchase and Sale of the Shares.

1.1. General. On the terms and subject to the conditions set forth in this Agreement and upon the representations and warranties made herein by each of the parties to the other, on the Closing Date (as hereinafter defined), the Seller shall convey, assign, transfer and deliver to the Purchaser, and the Purchaser shall purchase and acquire from the Seller, the Shares, for the Purchase Price (as defined below).

1.2. Closing. The closing of the transaction contemplated hereby (the “Closing”) shall occur as promptly as practicable following the Purchaser’s acquisition of greater than 90 percent of the outstanding shares of the Company’s common stock pursuant to the Offer and, if applicable, the Top-up Option or otherwise. The date of closing is referred to herein as the “Closing Date.”

1.3. Purchase Price. The purchase price to be paid by the Purchaser for the Shares will be $3,822,000 plus accrued and unpaid dividends on the Shares through the Closing Date (the “Purchase Price”).

1.4. Delivery of Documents. At the Closing, the Seller shall deliver or cause to be delivered to the Purchaser a certificate or certificates representing the Shares registered in its name, duly endorsed (or accompanied by duly executed stock powers), and the Purchaser shall deliver or cause to be delivered to the Seller the Purchase Price.

2. Representations, Warranties and Covenants.

2.1. Representations of the Seller. The Seller hereby represents and warrants to the Purchaser as follows:

(a) Authority. The Seller is an individual residing in the state of Florida and has the power and capacity to, and is competent to, execute and deliver this Agreement, to perform his obligations under this Agreement and to consummate the transactions contemplated by this Agreement. This Agreement has been duly executed by the Seller and constitutes the legal, valid and binding obligations of the Seller enforceable against the Seller in accordance with its terms, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and general equitable principles.

(b) No Conflicts or Violation. None of the execution, delivery and performance of this Agreement, the consummation of the transactions contemplated hereby or compliance by the Seller with any provisions hereof, will (i) violate (with or without the giving of notice or the lapse of time or both), conflict with, or result in any violation of or default under, any agreement, indenture or other instrument to which the Seller is a party or may be bound, (ii) violate any judgment, decree, order or award of any court, governmental body or other authority to which the Seller is subject or (iii) violate any statute, regulation, ordinance or code of any foreign, federal, state or local government or other governmental department or agency.

(c) No Consents Required. No application, notice, order, registration, qualification, waiver, consent, approval or other action (collectively “Consent”) is required to be filed, given, obtained or taken by virtue of the execution, delivery and performance of this Agreement by the Seller or the consummation of the transactions contemplated hereby by the Seller.

(d) Title to Shares. The Seller is the record and beneficial owner of the Shares, with good and marketable title thereto, free and clear of all liens, claims, charges, pledges, proxies, security interests, or any encumbrance whatsoever, and, except as provided in this Agreement, there are no outstanding purchase agreements, options, warrants or other rights of any kind whatsoever entitling any person to purchase an interest in any Shares or restricting the transfer of the Shares.

(e) Brokers and Finders. The Seller has not employed any broker or finder who will seek compensation from the Seller, and the Seller has not otherwise entered into any arrangement regarding the payment of any brokerage fees, commissions or finder’s fees in connection with the sale of the Shares that will result in any liability on the part of the Purchaser.

2.2. Representations of the Parent and the Purchaser. Each of the Parent and the Purchaser, jointly and severally, hereby represents and warrants to the Seller as follows:

(a) Authority. Each of the Parent and the Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, and each of the Parent and the Purchaser has all necessary power and authority to execute and deliver this Agreement and to perform the obligations to be performed by the Parent and the Purchaser hereunder. The execution, delivery and performance of this Agreement by the Parent and the Purchaser and the purchase of the Shares by the Purchaser pursuant hereto have been duly authorized. This Agreement has been duly executed and delivered by the Parent and the Purchaser and constitutes the legal, valid and binding obligations of the Parent and the Purchaser enforceable against the Parent and the Purchaser in accordance with its terms, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and general equitable principles.

(b) No Conflicts or Violation. None of the execution, delivery and performance of this Agreement, the consummation of the transactions contemplated hereby or compliance by the Parent or the Purchaser with any provisions hereof, will (i) conflict with or violate any provision of the organizational documents of the Parent or the Purchaser, (ii) violate (with or without the giving of notice or the lapse of time or both), conflict with, or result in any violation of or default under, any agreement, indenture or other instrument to which the Parent or the Purchaser is a party or may be bound, (iii) violate any judgment, decree, order or award of any court, governmental body or other authority to which the Parent or the Purchaser is subject or (iv) violate any statute, regulation, ordinance or code of any foreign, federal, state or local government or other governmental department or agency.

(c) No Consents Required. No Consent is required to be filed, given, obtained or taken by virtue of the execution, delivery and performance of this Agreement by the Parent or the Purchaser or the consummation of the transactions contemplated hereby by the Parent or the Purchaser.

(d) Brokers and Finders. The Purchaser has not employed any broker or finder who will seek compensation from the Seller, and the Purchaser has not

otherwise entered into any arrangement regarding the payment of any brokerage fees, commissions or finder’s fees in connection with the purchase of the Shares that will result in any liability on the part of the Seller.

2.3 Covenants.

(a) Other than as provided in this Agreement, the Seller agrees not to (i) sell, transfer, pledge, encumber, assign or otherwise dispose of (collectively, “Transfer”), or enter into any contract, option or other arrangement or understanding with respect to the Transfer of, any of the Shares or offer any interest in the Shares to any person other than pursuant to the terms of the Merger Agreement or this Agreement, (ii) enter into any voting arrangement or understanding, whether by proxy, power of attorney, voting agreement, voting trust or otherwise with respect to the Shares other than pursuant to this Agreement or a Support Agreement or (iii) exercise any conversion, liquidation or other payment rights under the terms of the Certificate of Designation of Series M Convertible Preferred Stock of the Company.

(b) The Seller agrees to permit the Company and the Parent or the Purchaser to publish and disclose in any documents required to be filed with the Securities and Exchange Commission its identity and ownership of the Shares and the nature of the understandings under this Agreement.

3. Conditions of Closing.

3.1. The Parent’s and the Purchaser’s Conditions to Closing. The obligations of the Parent and the Purchaser under this Agreement are subject to and conditioned upon the satisfaction at Closing of each of the following conditions (unless waived by the Parent or the Purchaser in writing):

(a) Representations and Warranties. All representations and warranties of the Seller contained in this Agreement shall be true and correct in all material respects at and as of the Closing Date.

(b) Performance. The Seller shall have performed and complied in all material respects with all agreements and conditions required by this Agreement to be performed or complied with by it on or prior to the Closing Date, including execution and delivery of the documents contemplated by this Agreement.

(c) Tender Offer. The Purchaser shall have acquired greater than 90 percent of the outstanding shares of the Company’s common stock pursuant to the Offer and, if applicable, the Top-Up Option or otherwise.

3.2. The Seller’s Conditions to Closing. The obligations of the Seller under this Agreement are subject to and conditioned upon the satisfaction at Closing of each of the following conditions (unless waived by the Seller in writing):

(a) Representations and Warranties. All representations and warranties of the Parent and the Purchaser contained in this Agreement shall be true and correct in all material respects at and as of the Closing Date.

(b) Performance. The Parent and the Purchaser shall have performed and complied in all material respect with all agreements and conditions required by this Agreement to be performed or complied with by it on or prior to the Closing Date, including execution and delivery of the documents contemplated by this Agreement.

4. General.

4.1. Indemnification. (a) The Seller agrees to indemnify and hold harmless the Parent and the Purchaser and each of their representatives and affiliates (each a “Purchaser Indemnified Party”) against any and all liabilities incurred by any Purchaser Indemnified Party arising out of, or resulting from any breach of any representation, warranty or covenant made by the Seller in this Agreement or any other certificate or document delivered by the Seller pursuant to this Agreement.

(b) In the event a party intends to make a claim for indemnification hereunder (the “Indemnitee”), such party shall notify the other party (the “Indemnitor”) of the claim in writing promptly (but in no event later than 30 days) after receiving written notice of any action, lawsuit, proceeding, investigation or other claim against it (if by a third party) or discovering the liability, obligation or facts giving rise to such claim for indemnification, describing the claim, the amount thereof (if known and quantifiable), and the basis thereof, provided that the failure to so notify the Indemnitor shall not relieve the Indemnitor of its obligations hereunder except to the extent such failure shall have actually prejudiced the Indemnitor. The Indemnitor shall be entitled to assume and control (with counsel of its choice) the defense of the action, lawsuit, proceeding, investigation or other claim giving rise to Indemnitee’s claim for indemnification at the option and expense of the Indemnitor by sending written notice of its election to do so within 15 days after receiving written notice of such claim from the Indemnitee as aforesaid; provided, however, that:

(i) The Indemnitee shall be entitled to participate in the defense of such claim and to employ counsel of its choice for such purpose, the fees and expenses of such separate counsel which shall be borne by the Indemnitee;

(ii) If the Indemnitor elects to assume the defense of

any such claim, the Indemnitor shall only be entitled to compromise or settle such claim if either (x) such settlement provides an unconditional release of the Indemnitee with respect to such claim and requires the payment of monetary damages only or (y) the Indemnitor obtains the prior written consent of the Indemnitee (which consent shall not be unreasonably withheld); and

(iii) If the Indemnitor shall not have assumed the defense of such claim within the 15-day period set forth above, the Indemnitee may assume the defense of such action, lawsuit, proceeding, investigation or such other claim with counsel selected by it at the expense of the Indemnitor.

4.2. Termination. This Agreement shall terminate upon the earlier to occur of (i) the termination of the Merger Agreement, (ii) if the Company gives the Parent and the Purchaser notice of a record date for a vote on an Acquisition Proposal other than the Merger Agreement in accordance with the Merger Agreement at least 13 business days prior to the date of such record date, the date that is such 13^th business day, or (iii) the mutual written agreement of the parties hereto (at any time prior to the Closing). This Agreement may be terminated by any party hereto if the Closing shall not have occurred prior to December 31, 2005; provided that this right to terminate this Agreement shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of or a substantial contributor to the failure of the Closing to occur on or before such date. Upon any such termination, this Agreement shall become null and void and no party hereto shall have any liability hereunder; provided that no party shall be relieved of liability for breach of its representation, warranties or covenants hereunder which prevents such party from Closing.

4.3. Notices. All notices given pursuant to this Agreement shall be in writing and shall be deemed delivered and received (i) if personally delivered or delivered by telecopy with electronic confirmation, when actually received by the party to whom sent, (ii) if sent by nationally recognized overnight delivery service, one day after such notice is sent, or (iii) if delivered by mail, at the close of business on the third business day next following the date when mailed, postage prepaid, registered or certified mail, return receipt requested, addressed as follows:

If to the Seller:

H. Irwin Levy

1601 Forum Place, Suite 500

West Palm Beach, FL 33401

Fax: (561) 640-3160

With copy to:

Greenberg Traurig, P.A.

401 E. Las Olas Blvd., Suite 401

Ft. Lauderdale, FL 33301

Fax: (954) 765-1477

Attention: Donn Beloff

If to the Parent or the Purchaser, as set forth in the Merger Agreement.

or to such other address as any party hereto shall have designated by notice in writing to the other party.

4.4. Further Assurances. Each party hereto shall at any time, and from time to time, both before and after the Closing Date, upon request of another party hereto, execute, acknowledge and deliver all such further assignments, transfers, conveyances or other documents or instruments, and take all such further action, as may be reasonably requested by such other party to carry out the intent of this Agreement and to transfer and vest title to the Shares as contemplated herein.

4.5. Entire Agreement. This Agreement (including the agreements, exhibits and schedules referred to herein or delivered pursuant hereto, which are a part hereof for all purposes) constitutes the entire agreement between the parties with respect to the subject matter hereof and can be amended, supplemented or changed, and any provision hereof can be waived, only by a written instrument making specific reference to this Agreement and duly executed by the party to be bound thereby. This Agreement supersedes all prior agreements and understandings between the parties with respect to the transactions contemplated hereby.

4.6. Assignability. The Purchaser may assign its rights and obligations under this Agreement; provided, however, that any such assignment shall not relieve the Purchaser of its obligations hereunder. The Seller may not assign its rights or obligations hereunder without the prior written consent of the Purchaser and any attempt to do so shall be of no force or effect. This Agreement shall be binding upon and inure to the benefit of each party hereto and their respective heirs, successors and assigns.

4.7. Captions. The captions of the various sections and articles contained in this Agreement are for reference purposes only and shall not be deemed in any manner to affect the meaning or interpretation of any of the provisions of this Agreement.

4.8. Severability. If any provision of this Agreement or in any document referred to herein shall be determined to be illegal, void or unenforceable, all other provisions of this Agreement or in any other document referred to herein shall not be affected and shall remain in full force and effect.

4.9. Applicable Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of the State of Delaware without regard to conflicts of laws principles.

4.10. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, and all of which together shall constitute one and the same instrument.

4.11. Survival. The warranties, representations, covenants and agreements contained in this Agreement shall survive the execution and delivery of this Agreement and the Closing of the transactions contemplated hereby.

* * *

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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


NORMANDY ACQUISITION CORPORATION

By:		/s/ Steve Barber
Name:		Steve Barber
Title:		President

XYRATEX LTD

By:		/s/ Steve Barber
Name:		Steve Barber
Title:		Director

		/s/ H. Irwin Levy
		H. Irwin Levy

EX-99.15 16 dex9915.htm INTELLECTUAL PROPERTY LICENSE AGREEMENT Intellectual Property License Agreement

Exhibit 15

INTELLECTUAL PROPERTY LICENSE AGREEMENT

THIS INTELLECTUAL PROPERTY LICENSE AGREEMENT (“Agreement”) is made and entered into as of July 27, 2005 (the “Effective Date”) by and between XYRATEX TECHNOLOGY LIMITED, a company incorporated under the laws of England (“Licensee”) and nSTOR CORPORATION, INC., a Delaware corporation (“Licensor”).

A. Licensee’s parent company, Xyratex Limited, and Licensor’s parent company, nStor Technologies, Inc. have entered into an agreement and plan of merger dated as of the date hereof (the “Merger Agreement”) pursuant to which Xyratex Limited or a wholly-owned subsidiary of Xyratex Limited will acquire the Intellectual Property Rights (defined below) that are the subject of this Agreement;

B Licensee has provided a loan to Licensor as specified in the promissory note dated the date hereof (the “Note”) in furtherance of the parties’ objectives under the Merger Agreement; and

C. Licensor has agreed to license the Intellectual Property Rights to Licensee in accordance with the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration of the mutual promises set forth herein, Licensee and Licensor hereby agree as follows:

ARTICLE 1: DEFINITIONS

1.1	“Affiliate” shall mean any company that controls, is controlled by, or is under common control with Licensee or its successor entity.

1.2

“Confidential Information” shall mean any and all technical and non-technical information that is identified at the time of disclosure to be proprietary or confidential information of the disclosing party, including tooling, formulae, bills of material, know-how, designs, schematics, techniques, software code, mask works, technical documentation, plans or any other information relating to any research project, work in process, future development, scientific, engineering, manufacturing, marketing or business plan or financial or personnel matter relating to the disclosing party, or its present or future products, sales, suppliers, customers, employees, investors or business, whether in written, oral, graphic or electronic form.

1.3

“Documentation” shall mean the items of user documentation with respect to the Software provided to Licensee or to be provided to pursuant to the Agreement, including but not limited to the description of the functional, operational and design characteristics of the Software and the items of programming, systems and data base documentation.

1.4	“Effective Time” shall mean the closing date specified in the Merger Agreement.

1.5	“Improvements” shall mean any improvements, discoveries, developments, modifications or derivative works, whether or not patentable.

1.6

“Intellectual Property Rights” shall mean all Licensor Patents and Applications and Software, copyright rights, moral rights, trade secret rights, mask work rights, and all other intellectual and industrial property rights (excluding trade marks and service marks), whether or not registered or perfected, anywhere in the world, and all registrations, initial applications, renewals, extensions, continuations, divisions or reissues for any of the foregoing.

1.7	“Licensor Materials” shall mean the specifications, schematics, technical information, bills of materials, instructions, records, drawings, data sheets, reports, hardware, firmware and other materials and technology listed in Exhibit A.

1.8

“Licensor Patents and Applications” shall mean all unexpired U.S. and foreign patents and patent applications, and any related continuations, continuations in part, reissues, re-examinations, renewals, extensions and divisions thereof. “Licensor Patents and Applications” includes those patents and applications listed in Schedule 3.15.1(i) of the Merger Agreement.

1.9	“Merger” shall have the meaning set forth in the Merger Agreement.

1.10	“Software” shall mean the computer software programs and files, as listed in Exhibit A hereto to be provided to Licensee by Licensor pursuant to this Agreement and Licensor’s Documentation, which may be delivered to Licensee by or on behalf of Licensor.

1.11

“Source Code” shall mean the human readable source code version of the Software including, but not limited to, all corresponding source documentation, all developer’s notes, specifications, flow diagrams, release notes and build procedures, and any tools necessary to execute the build procedures or otherwise create the Software from the source code version of the Software.

ARTICLE 2: SCOPE OF LICENSES

2.1

Grant of License to Software and Source Code. Subject to Section 7.1 and Article 8 hereof, Licensor hereby grants to Licensee and its Affiliates a worldwide, non-exclusive, fully paid-up, royalty-free, perpetual, irrevocable license, with right of sublicense, under and to all of Licensor’s Intellectual Property Rights embodied in or arising from the Licensor Patents and Applications, Software, Source Code, Licensor Materials and Documentation, to: (i) use, install, reproduce, modify and improve or have improved, make derivative works of, distribute (through multiple tiers of distribution), transmit and display the Software, or have improved and operate the Software by any number of users, on any number of computers, and at any number of sites and to use the Documentation and Licensor Materials in any manner subject to the terms and conditions of this Agreement; (ii) use, modify, enhance, translate, convert, recompile, upgrade and otherwise prepare derivative works of the Source Code; and (iii) make (including the

right to practice methods, processes and procedures), have made for Licensee and Licensee’s Affiliates, use, lease, sell, offer for sale and import products. Notwithstanding the foregoing, Licensor does not grant Licensee a license to use or otherwise practice any patents prosecuted by Licensor after the Effective Time that do not constitute a continuation, continuation in part, reissue, re-examination, renewal, extension or division of the patents and applications listed in Schedule 3.15.1(i) of the Merger Agreement.

ARTICLE 3: DELIVERY; INSTALLATION; TRAINING

3.1	Promptly upon execution of this Agreement, Licensor shall deliver the Software, Source Code, Licensor Materials and Documentation to Licensee and provide Licensee with reasonable assistance with respect to the installation of the Software on Licensee’s computer systems.

3.2

Upon delivery of Software, Licensor shall deliver to Licensee at least one (1) electronic and one (1) hard copy of all generally available Documentation for such Software and Licensor Materials sufficient to enable Licensee personnel to use and to fully understand the functionality, use and operation of such Software. Licensor agrees that Licensee may copy the Documentation and Licensor Materials in order to satisfy its own reasonable internal requirements.

3.3	The Documentation specified above shall include detailed program code and documentation relating to the development, maintenance and use of the Source Code.

ARTICLE 4: WARRANTIES

4.1

Subject to Section 9.3 hereof, Licensor warrants to Licensee that: (i) Licensor has all rights necessary to provide the Software, Source Code, Documentation and Licensor Materials to Licensee and to perform the services as specified in this Agreement and warrants that such Software, Source Code, Documentation, Licensor Materials and services are free of all liens, claims, encumbrances and other restrictions, except as otherwise set forth in the Merger Agreement; (ii) the Software, Source Code, Documentation, Licensor Materials and services furnished by Licensor and Licensee’s use of the same hereunder do not violate or infringe the rights of any third party or the laws or regulations of any governmental or judicial authority; (iii) Licensee shall be entitled to use and enjoy the benefit of the Software, Source Code, Documentation Licensor Materials and services, subject to and in accordance with this Agreement; (iv) Licensee’s use and possession of the Software, Source Code, Documentation, Licensor Materials and services hereunder shall not be adversely affected, interrupted or disturbed by Licensor or any entity asserting a claim under or through Licensor; (v) Licensor has all rights necessary to grant the licenses to Licensee as set forth in Article 2; and (vi) Licensee’s exercise of its rights under this Agreement will not violate the proprietary or Intellectual Property Rights of any third party.

4.2	EXCEPT AS SPECIFICALLY PROVIDED IN THIS AGREEMENT, LICENSOR MAKES NO OTHER WARRANTIES, EXPRESSED OR IMPLIED, AND

SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. LICENSEE MAKES NO EXPRESS OR IMPLIED WARRANTIES WITH RESPECT TO ANY MATTER.

ARTICLE 5: INTELLECTUAL PROPERTY INDEMNIFICATION

5.1

Licensor shall indemnify, defend and hold Licensee, its Affiliates, officers, directors, employees, consultants and customers harmless from and against any and all liabilities, losses, damages, costs and expenses (including reasonable attorneys’ fees) arising out of or resulting from any claim, action, suit or proceeding alleging infringement, breach, contravention, misuse or misappropriation of any Intellectual Property Rights or proprietary rights, including, without limitation, trademarks, service, marks, patents, copyrights, trade secrets or any similar proprietary rights, based upon the Software, Source Code, Documentation, or Licensor Materials or services furnished hereunder by Licensor or based on Licensee’s (including its respective directors, officers, employees and agents) use thereof. Licensor, at its sole cost, shall have the right to conduct the defense of any such claim or action and all negotiations for its settlement or compromise, unless otherwise mutually agreed to in writing; provided, that any such settlement or compromise shall not be made without Licensee’s consent (which consent shall not be unreasonably withheld) and shall include an unconditional release of Licensee from all liability arising out of or in relation to such action and any transactions or conduct in connection therewith.

5.2

If any Software, Source Code, Documentation and/or Licensor Materials or services become, or in Licensor’s opinion are likely to become, the subject of any such claim or action, then, Licensor, at its sole expense, may either: (i) procure for Licensee the right to continue using the same as contemplated hereunder; (ii) modify the same to render the same non-infringing (provided such modification does not adversely affect Licensee’s use as contemplated hereunder); or (iii) replace the same with equally suitable, functionally equivalent, compatible, non-infringing Software, Documentation, Licensor Materials and/or services.

ARTICLE 6: CONFIDENTIAL INFORMATION

6.1

All Confidential Information exchanged between the parties pursuant to this Agreement shall not be distributed, disclosed, or disseminated in any way or form by the receiving party to anyone except its own employees who have a reasonable need to know such Confidential Information and who have been advised of the confidential nature and required to observe the terms and conditions hereof; nor shall Confidential Information be used by the receiving party for its own purpose, except for the purposes of exercising its rights or fulfilling its obligations under this Agreement. Neither party shall communicate or otherwise disclose to the other, during the term of this Agreement, confidential or proprietary information of third parties. Upon request of the disclosing party, copies and embodiments of the disclosing party’s Confidential Information shall be promptly returned to the disclosing party by the receiving party, unless such copies are required to support existing customers under the terms of this Agreement.

6.2	Upon termination of this Agreement, for any reason, each party shall promptly return to the other party all Confidential Information provided by the other party, including all copies thereof, unless such copies are required to support existing customers under the terms of this Agreement.

ARTICLE 7: TERM AND TERMINATION

7.1	TERM. Licensee agrees that it may exercise its rights under this license only in the event that:

(a) The Merger Agreement is terminated as a result of the failure of condition (B) in Annex I of the Merger Agreement and, at the option of Licensee (i) the Note has been forgiven by Licensee or (ii) the Note has not been repaid in full on or before March 31, 2006;

(b) The Merger Agreement is terminated as a result of the failure of the Minimum Condition (as defined in the Merger Agreement) and the Note is not repaid in full on or before March 31, 2006; or

(c) The Merger Agreement is terminated pursuant to Sections 7.1.3 (if the termination resulted from a failure of the conditions set forth in Sections (E) or (F) in Annex I of the Merger Agreement), 7.1.5, 7.1.6 or 7.1.7 thereof and, at the option of Licensee (i) the Note has been forgiven by Licensee, or (ii) the Note has not been repaid in full on or before March 31, 2006.

7.2

TERMINATION. Licensee may terminate this Agreement upon 30 days’ written notice to Licensor. Licensor shall not be entitled to rescind this Agreement or to revoke or terminate any of the rights licensed to Licensee hereunder or to enjoin, restrain, or otherwise impair Licensee’s or its Affiliates’ exercise or exploitation of such rights. For any material breach by Licensee of this Agreement, Licensor shall give written notice of such breach to Licensee and shall be limited to a remedy in an action at law for damages, if any.

ARTICLE 8: LICENSE FEE.

8.1

In the event that Licensee exercises its rights hereunder pursuant to the provisions of Section 7.1(a) or 7.1(b) hereof, Licensee shall: (i) advance any remaining principal amount of the Note; (ii) forgive the entire principal amount of the Note, plus all accrued interest thereon; and (iii) pay to Licensor a one-time, non-recurring license fee of $6,500,000 in six equal monthly payments of $1,000,000 and one payment of $500,000 during the seven months immediately following the termination of the Merger Agreement.

8.2

In the event that the Licensee exercises its rights hereunder pursuant to the provisions of Section 7.1(c) hereof, Licensee shall: (i) advance any remaining principal amount of the Note; (ii) forgive the entire principal amount of the Note, plus all accrued interest thereon; and (iii) pay to Licensor a one-time, non-recurring license fee of $3,848,000 in four equal monthly payments of $962,000 during the four months immediately following the termination of the Merger Agreement. Notwithstanding the foregoing, in the event that Licensee exercises its rights hereunder pursuant to the provisions of Section 7.1(c) hereof, the license fee of $3,848,000 will be paid to Licensor only if Licensor pays the Termination Fee (defined in the Merger Agreement) to Licensee in accordance with the terms of the Merger Agreement. In the event that Licensor does not pay to Licensee the Termination Fee, the license fee of $3,848,000 shall be reduced to a total of $3,000,000, payable to Licensor in three equal monthly payments of $1,000,000 during the three months immediately following the termination of the Merger Agreement.

8.3

If Licensee fails to pay any amount due under Section 8.1 or Section 8.2 above thirty (30) days following the due date, Licensee agrees to pay Licensor, in addition to the payment then owing, a sum equal to the lower amount of one and one-half percent (1¹/2%) of the payment or the maximum amount allowed by law for each month, and any portion thereof, that the payment is delinquent. Licensee shall not be deemed to be in default of its payment obligations under Section 8.1 or Section 8.2 above unless the applicable license fee payment remains unpaid for ninety (90) days following the applicable due date.

8.4

In the event that Licensee terminates this Agreement at any time before the final monthly payment of the license fee is due as applicable under Section 8.1 or Section 8.2, Licensee shall not be obligated to make any further payments to Licensor following the date of such termination and Licensor shall not be obligated to reimburse Licensee license fees paid to Licensor or principal advanced to Licensor pursuant to the Note prior to the date of termination.

8.5

It is expressly understood and agreed that the licensee fees set forth in Sections 8.1 and 8.2 above shall not be due or paid to Licensor unless and until Licensee exercises its rights under Article 2 hereof. In the event that Licensee declines to exercise such rights, the Note, plus all accrued interest thereon, shall be due and payable to Licensee in accordance with its terms. Nothing in Article 7 or this Article 8 shall be construed as requiring or obligating Licensee to exercise its rights under Article 2 hereof.

ARTICLE 9: ADDITIONAL TERMS

9.1

LIMITATION OF LIABILITY: SUBJECT TO ARTICLE 5 HEREOF, EACH PARTY’S LIABILITY TO THE OTHER OR ANY OTHER PERSON OR ENTITY FOR DIRECT DAMAGES, REGARDLESS OF THE FORM OF ACTION, SHALL BE LIMITED TO THE TOTAL DOLLAR AMOUNT PAID OR THERETOFORE REQUIRED TO HAVE BEEN PAID BY LICENSEE PURSUANT TO THIS AGREEMENT AND IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE

OTHER PARTY OR ANY OTHER PERSON OR ENTITY FOR LOST PROFITS OR FOR SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR THE SUBJECT MATTER HEREOF, REGARDLESS OF THE FORM OF ACTION, WHETHER OR NOT SUCH PARTY HAS BEEN INFORMED OF, OR OTHERWISE MIGHT HAVE ANTICIPATED, THE POSSIBILITY OF SUCH DAMAGES. NOTWITHSTANDING THE FOREGOING, NO LIMITATION ON EITHER PARTY’S LIABILITY SHALL APPLY TO (i) DAMAGES RESULTING FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH PARTY OR INTENTIONAL BREACH OF THIS AGREEMENT, (ii) DAMAGES ARISING IN RESPECT OF CLAIMS UNDER ARTICLES 5 OR 6 OF THIS AGREEMENT, OR (iii) CLAIMS FOR PERSONAL INJURY OR PROPERTY DAMAGE CAUSED BY THE NEGLIGENCE OF SUCH PARTY, ITS EMPLOYEES, AGENTS OR SUBCONTRACTORS.

9.2

FORCE MAJEURE: In no event shall either party be liable to the other for any delay or failure to perform hereunder, which delay or failure to perform is due to causes beyond the control of said party, including, but not limited to: acts of God; acts of the public enemy; acts of the government of the United States of America or any State, territory or political division of the United States of America, or of the District of Columbia; fires; floods; epidemics; quarantine restrictions; strikes (not involving employees, subcontractors or agents of the party whose performance is delayed or prevented); acts of terrorism; riots; and freight embargoes. Notwithstanding the foregoing, in every case the delay or failure to perform must be beyond the control and without the fault or negligence of the party claiming excusable delay and such affected party shall take steps to mitigate the effect and length of such force majeure event. Performance times under this Agreement shall be considered extended for a period of time equivalent to the time lost because of any delay which is excusable under this Section.

9.3

NON-EXTENSION OF EXCLUSIVE LICENSES: In contemplation of the Merger Agreement, Licensor agrees not to extend the term of any exclusive licenses granted by Licensor prior to the date hereof beyond June 30, 2006 (the “Exclusive Licenses”) at any time before the Effective Time and, if the Merger does not close, until Licensor repays the Note and all applicable interest thereon to Licensee on or before March 31, 2006. If Licensor has not repaid the Note by March 31, 2006, Licensor also agrees not to extend the term of the Exclusive Licenses. Nothing in this Section 9.3 shall be construed as limiting Licensor’s ability to grant non-exclusive licenses or to transfer its rights to third parties (subject to this Agreement) under the Licensor Patents and Applications or to the Software and Source Code. For so long as the exclusivity provisions of the any Exclusive License remain in effect, Licensee agrees not to exercise its rights under Section 2.1 in a manner inconsistent with the restrictions set forth in any such Exclusive Licenses.

9.4	SECTION 365(n): All rights and licenses granted under or pursuant to this Agreement by Licensor to Licensee are, and shall otherwise be deemed to be, for purposes of Section 365(n) of the United States Bankruptcy Code (the “Code”), licenses to rights to

“Intellectual Property” as defined in the Code. The parties agree that Licensee shall retain and may fully exercise all of its rights and elections under the Code. The parties further agree that, in the event of the commencement of bankruptcy proceeding by or against Licensor under the Code, Licensee shall be entitled to retain all of its rights under this Agreement (including all rights granted to Licensee under Article 2 hereof).

9.5

NOTICES: All notices shall be in writing and deemed effective when delivered personally or mailed, first class mail, postage prepaid, or delivered by reputable overnight carrier, or provided by facsimile with confirmation of receipt to each party’s last-provided address, to the attention of the undersigned. Each party may change the address(es) or addressee(s) for notice hereunder upon written notice to the other. All notices shall be deemed given and sufficient in all respects.

9.6

ADVERTISING OR PUBLICITY: Except as required by law or stock exchange rule, neither party shall use the name of the other party or any of its Affiliates or of any officer or employee of the other party or any of its Affiliates, or any trade name, trademark, service mark or symbol of the other party or any of its Affiliates, or any likeness thereof or marks similar thereto, or refer to or identify the other party or any of its Affiliates in advertising, brochures, publicity releases, promotional or marketing correspondence to others or other written material without, in each case, securing the prior written consent of such other party.

9.7

FAVORABLE PROVISIONS: Licensor warrants that the terms (including pricing) of this Agreement are comparable to or better than the terms (including pricing) offered by Licensor to any of its similarly situated commercial customers of equal or lesser size for comparable Software or services. If Licensor offers more favorable terms (including pricing) to such commercial customers during the term of this Agreement, such terms shall also be made available to Licensee within thirty (30) days from the execution of such agreement.

9.8

ASSIGNMENT: Neither party may assign this Agreement, and/or its obligations hereunder without the prior written consent of the other party, which shall not be unreasonably withheld; provided, however, that Licensee may assign this Agreement and/or any of its rights hereunder upon written notice to Licensor, but without requiring the consent of Licensor, to any Affiliate, or to Licensee’s successor pursuant to a merger, consolidation or sale, or to an entity which acquires all or substantially all of the business or business unit of Licensee relating to this Agreement. This Agreement shall be binding upon and shall inure to the benefit of the parties’ respective successors and permitted assigns. Any assignment in violation of the foregoing shall be null and void, and of no force or effect.

9.9

GOVERNING LAW, FORUM SELECTION: This Agreement shall be governed by, and construed in accordance with the laws of the State of California without regard to its conflict of laws principles that would result in the application of another jurisdiction’s laws. The parties expressly waive and disclaim the applicability of the United Nations Convention on the International Sale of Goods. The parties hereto irrevocably consent to the exclusive jurisdiction of and venue in the applicable federal and/or California state courts located in the county of Santa Clara County, State of California, U.S.A.

9.10

MODIFICATION, AMENDMENT, SUPPLEMENT AND WAIVER: No modification, course of conduct, amendment, supplement to or waiver of this Agreement, any Exhibit, or any provision hereof shall be binding upon the parties unless made in writing and duly signed by authorized representatives of both parties. At no time shall any failure or delay by either party in enforcing any provisions, exercising any option, or requiring performance of any provisions, be construed to be a waiver of same.

9.11

SEVERABILITY: In the event any one or more of the provisions of this Agreement shall for any reason be held to be invalid, illegal or unenforceable, the remaining provisions of this Agreement shall be unimpaired, and the invalid, illegal or unenforceable provisions shall be replaced by a provision, which, being valid, legal and enforceable, comes closest to the intention of the parties underlying the invalid, illegal or unenforceable provision.

9.12	CUMULATIVE REMEDIES: Except as expressly provided to the contrary herein, all remedies set forth in this Agreement are cumulative, and not exclusive of any other remedies of a party at law or in equity, statutory or otherwise.

9.13	HEADINGS: Headings are for reference and shall not affect the meaning of any of the provisions of this Agreement.

9.14

ATTORNEYS’ FEES: The prevailing party in any legal action brought by one party against the other shall be entitled, in addition to any other rights and remedies it may have, to reimbursement for its expenses incurred thereby, including court costs and reasonable attorneys’ fees. Notwithstanding the foregoing, in the event that Licensor brings any legal action asserting any claims or causes of action other than breach of Licensee’s payment obligations under Article 8 hereof (“Excluded Claims”), Licensor shall not be entitled to recover from Licensee any part of the court costs and attorneys’ fees incurred by Licensor in prosecuting, or attributable to the prosecution of, Excluded Claims.

9.15	SURVIVAL. The provisions of Articles 1, 4, 5, 6, 7, 8 and 9 of this Agreement shall survive any termination of this Agreement.

9.16

ENTIRE AGREEMENT: The Exhibits to this Agreement are incorporated by this reference and shall constitute part of this Agreement. This Agreement constitutes the entire agreement between the parties and supersedes all previous agreements, promises, proposals, representations, understanding and negotiations, whether written or oral, between the parties respecting the subject matter hereof.

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the Effective Date.



Licensor: nSTOR CORPORATION, INC.		Licensee: XYRATEX TECHNOLOGY LIMITED

By:	/s/ Jack Jaiven	By:	/s/ Steve Barber
Name:	Jack Jaiven	Name:	Steve Barber

Title:	VP / CFO	Title:	CEO

EX-99.16 17 dex9916.htm PROMISSORY NOTE Promissory Note

Exhibit 16

PROMISSORY NOTE


$4,500,000		Carlsbad, California

July 27, 2005

FOR VALUE RECEIVED, the undersigned, nStor Corporation Inc., a Delaware corporation (the “Company”), promises to pay Xyratex Technology Limited (“Holder”), the principal amount of Four Million Five Hundred Thousand Dollars ($4,500,000), or such lesser amount as may have been advanced hereunder, with interest from the date hereof on the unpaid principal balance hereunder at the rate of six percent (6.00%) per annum (on the basis of a 360-day year and the actual number of days elapsed). Of the total principal amount, One Million Five Hundred Thousand Dollars ($1,500,000) shall be advanced to the Company on the date hereof and, if and only if the License Agreement between Holder and the Company has not been terminated, then an additional One Million Dollars ($1,000,000) shall be advanced to the Company on the 19^th day of each of August, September and October 2005. The total principal amount advanced under this promissory note (this “Note”) together with all accrued interest on such principal amount shall be due and payable on March 31, 2006. Any payment made under this Note shall first be applied to repay interest which has accrued hereunder, and the remainder, if any, shall be applied to reduce the principal amount outstanding hereunder.

1. Payments. All amounts due hereunder shall be payable in lawful money of the United States of America at San Jose, California, or at such other place as Holder shall designate in writing for such purpose from time to time. If a payment hereunder otherwise would become due and payable on a Saturday, Sunday or legal holiday, the due date thereof shall be extended to the next succeeding business day, and interest shall be payable thereon during

such extension. Upon payment in full of all principal and interest payable hereunder, this Note shall be surrendered to the Company for cancellation. This Note may be prepaid in whole or in part. Notwithstanding anything to the contrary in this Note, the Company shall not be obligated to make any payments of principal or interest hereunder, and this Note shall be automatically canceled, if (i) Xyratex Ltd is required to close the acquisition of nStor Technologies, Inc. contemplated under the Merger Agreement dated the date hereof among such parties and Normandy Acquisition Corporation pursuant to the terms thereof for a period of greater than ten (10) business days and (ii) notwithstanding such requirement, Xyratex Ltd nevertheless refuses to close such acquisition.

2. Default. Each of the following events and occurrences shall constitute an Event of Default under this Note (each, and “Event of Default”):

(a) The failure to pay any principal of or interest on this Note when and as the same shall become due and payable whether at maturity, upon acceleration or otherwise; or

(b) (i) the liquidation of the Company or the Company’s parent corporation (the “Company Entities”), (ii) the appointment of a receiver or similar officer for either of the Company Entities, (iii) an assignment by either of the Company Entities for the benefit of its creditors, (iv) entry by either of the Company Entities into an agreement for the composition, extension or readjustment of all or substantially all of its obligations or (v) the filing of a petition in bankruptcy by or against either of the Company Entities under any bankruptcy or debtors’ law for its relief or reorganization.

If an Event of Default occurs and is continuing, then this Note, including accrued interest hereon and all accrued interest on overdue principal and interest, shall forthwith mature

and become due and payable immediately without presentment, demand, protest, notice of dishonor and all other demands and notices of any kind, all of which are hereby expressly waived. No delay or failure by Holder in the exercise of any right or remedy shall constitute a waiver thereof, and no single or partial exercise by Holder hereof of any right or remedy shall preclude other or future exercise thereof or the exercise of any other right or remedy.

3. Waiver. No waiver or modification of any of the terms of this Note shall be valid or binding unless set forth in a writing specifically referring to this Note and signed by a duly authorized officer of Holder, and then only to the extent specifically set forth therein.

4. Severability. In the event that any one or more provisions of this Note shall be held to be illegal, invalid or otherwise unenforceable, the same shall not affect any other provision of this Note, and the remaining provisions of this Note shall remain in full force and effect.

5. Governing Law. This Note shall be governed by, and construed in accordance with, the laws of the State of California applicable to agreements between California residents to be performed wholly-within California, without regard to conflicts of laws principles.

IN WITNESS WHEREOF, the parties have caused this Note to be duly executed the day and year first above written.


nStor Corporation Inc.

By:		/s/ Jack Jaiven
		Vice President

By:		/s/ Orilla F. Floyd
		Secretary

Agreed and accepted:

Xyratex Technology Limited


By:		/s/ Steve Barber

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