Download Annual Report, 2.44 MB - Xyratex

XYRATEX LTDNOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)(U.S. dollars and amounts in thousands, except per share data, unless otherwise stated)10. Ordinary Shares and Stock Option plans (Continued)The Xyratex Group Limited shares in issue after the private equity investment and prior to theIPO were subject to varying rights upon a sale, listing, or liquidation (a ‘‘conversion’’ event) as follows.On a conversion event a pro rata portion of class A preferred ordinary shares, class B preferredordinary shares and class C ordinary shares were to be effectively cancelled to achieve the followingreturns. Holders of class B preferred ordinary shares were to receive value of £4.51 per share beforeany other shareholders. The class A preferred ordinary shareholders were to receive the next £4.51 pershare. Any value remaining would next be distributed equally to holders of class A and B preferredordinary shares equal to a return of 10% per annum, accruing annually on £4.51 per share. Finally, anyfurther value would be transferred pro rata to all holders of Xyratex Group Limited shares. To theextent that holders of class B preferred ordinary shares received a return of more than 100% of theirinitial investment within twelve months of a conversion event, more than 150% between twelve and24 months from a conversion event, or 200% after 24 months from a conversion event, then 25% ofthe excess of the applicable return was to be transferred to class C shareholders.Share RepurchaseAs part of the private equity transaction described above the Company acquired 1,856 class Bshares and 805 class A shares at a cost of $18,939 in the year ended November 30, 2003.Employee Stock Purchase planThe Company introduced an employee stock purchase plan (the ‘‘ESPP’’) in May 2002, underwhich any eligible employee of the Company receives the rights to purchase the Company’s shares. Apurchase right entitles a participant to purchase at the end of each offering period, subsequent to theIPO each fiscal quarter, the number of common shares determined by dividing the participant’saccumulated payroll deductions in his or her plan account by the purchase price for that offeringperiod. Generally, the per share purchase price is 85% of the lower of the fair market value of onecommon share on the first trading day of the offering period or the fair market value of such a shareon the last trading day of the offering period. The payroll deductions may not exceed two hundreddollars per pay period per employee, and an employee may not purchase more than $25 of fair value ofshares in any annual period. The ESPP terminates in December 2021.Rights granted under the ESPP prior to the scheme of arrangement and IPO in June 2004 wereaccounted for as variable awards over junior stock. Compensation expense related to these stockpurchase rights was recognized when the transferability restrictions on the underlying Xyratex GroupLimited class A preferred ordinary shares to be issued upon exercise of these rights lapsed. Nocompensation expense arises in connection with this plan subsequent to the IPO. There were 29, 36and 27 shares awarded under this plan in the years ended November 30, 2005, 2004 and 2003,respectively.Restricted SharesRestricted share awards are awards of our common shares that will vest in accordance with termsand conditions established by the board of directors. The board of directors may impose whateverconditions to vesting it determines to be appropriate. For example, the board of directors may setF-28