BROCADE COMMUNICATIONS SYSTEMS
INC
FORM S-1/A
(Securities Registration Statement)
Filed 04/15/99
Address
Telephone
CIK
Symbol
SIC Code
Industry
Sector
Fiscal Year
1745 TECHNOLOGY DRIVE
SAN JOSE, CA 95110
(408) 333-8000
0001009626
BRCD
3577 - Computer Peripheral Equipment, Not Elsewhere Classified
Computer Storage Devices
Technology
10/25
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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 15, 1999
REGISTRATION NO. 333-74711
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
BROCADE COMMUNICATIONS SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CALIFORNIA (PRIOR TO
REINCORPORATION)
DELAWARE (AFTER REINCORPORATION)
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
7372
(PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER)
77-0409517
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
1901 GUADALUPE PARKWAY
SAN JOSE, CALIFORNIA 95131
(408) 487-8000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
GREGORY L. REYES
PRESIDENT AND CHIEF EXECUTIVE OFFICER
BROCADE COMMUNICATIONS SYSTEMS, INC.
1901 GUADALUPE PARKWAY
SAN JOSE, CALIFORNIA 95131
(408) 487-8000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
LARRY W. SONSINI
JOHN T. SHERIDAN
ALISANDE M. ROZYNKO
WILSON SONSINI GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304-1050
(650) 493-9300
GREGORY M. GALLO
DENNIS C. SULLIVAN
JEFFREY D. BALL
GRAY CARY WARE & FREIDENRICH LLP
400 HAMILTON AVENUE
PALO ALTO, CALIFORNIA 94301-1825
(650) 328-6561
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, as amended, check the following box. [ ]
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration number of the earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE
NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN
ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933, AS AMENDED OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses to be paid by the Registrant, other than underwriting discounts and commissions, in connection with
this offering. All amounts shown are estimates except for the registration fee and the NASD filing fee.
SEC registration fee........................................
NASD filing fee.............................................
Nasdaq National Market listing fee..........................
Blue sky qualification fees and expenses....................
Printing and engraving expenses.............................
Legal fees and expenses.....................................
Accounting fees and expenses................................
Director and officer liability insurance....................
Transfer agent and registrar fees...........................
Miscellaneous expenses......................................
AMOUNT TO
BE PAID
--------$ 11,510
4,640
5,000
-------$
========
* To be supplied by amendment.
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 145 of the Delaware General Corporation Law authorizes a court to award, or a corporation's board of directors to grant, indemnity to
officers, directors and other corporate agents under certain circumstances and subject to certain limitations. The Registrant's Certificate of
Incorporation and Bylaws provide that the Registrant shall indemnify its directors, officers, employees and agents to the full extent permitted
by the Delaware General Corporation Law, including in circumstances in which indemnification is otherwise discretionary under Delaware
law. In addition, the Registrant intends to enter into separate indemnification agreements with its directors, officers and certain employees
which would require the Registrant, among other things, to indemnify them against certain liabilities which may arise by reason of their status
as directors, officers or certain other employees. The Registrant also intends to maintain director and officer liability insurance, if available on
reasonable terms.
These indemnification provisions and the indemnification agreement to be entered into between the Registrant and its officers and directors
may be sufficiently broad to permit indemnification of the Registrant's officers and directors for liabilities (including reimbursement of
expenses incurred) arising under the Securities Act.
The Underwriting Agreement filed as Exhibit 1.1 to this Registration Statement provides for indemnification by the underwriters of the
Registrant and its officers and directors for certain liabilities arising under the Securities Act, or otherwise.
II-1
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since inception, we have issued and sold and issued the following unregistered securities:
1. On August 25, 1995, we sold 523,250 shares of our common stock to Kumar Malavalli, Paul R. Bonderson, Jr. and Seth D. Neiman, the
founders of the Company, for an aggregate purchase price of $52,325.
2. From inception through March 10, 1999, we granted stock options to purchase an aggregate of 7,656,468 shares of our common stock at
exercise prices ranging from $.025 to $5.00 per share to employees, consultants, directors and other service providers pursuant to our 1995
Equity Incentive Plan, our 1998 Equity Incentive Plan and our 1998 Executive Equity Incentive Plan.
3. From inception through March 10, 1999, we issued and sold an aggregate of 4,887,825 shares of our common stock to employees,
consultants, directors and other service providers for aggregate consideration of approximately $5,384,992 pursuant to exercise of options
granted under our 1995 Equity Incentive Plan, our 1998 Equity Incentive Plan and our 1998 Executive Equity Incentive Plan.
4. On August 28, 1995, we sold 1,425,000 shares of Series A Preferred Stock for $1.00 per share to a group of private investors for an
aggregate purchase price of $1,425,000.
5. On December 26, 1995, we issued two warrants to an equipment lease financing company to purchase 15,753 and 35,444 shares of our
Series A Preferred Stock at exercise prices of $4.50 and $1.00 per share, respectively.
6. On June 5, 1996, we sold 386,764 shares of our common stock, for $.05 per share to Bruce L. Bergman, the former President and Chief
Executive Officer of Brocade, for an aggregate purchase price of $19,338.20.
7. On June 17, 1996, we sold 816,250 shares of our Series B Preferred Stock for $4.00 per share to a group of private investors for an aggregate
purchase price of $3,265,000.
8. On July 16, 1996, we issued 32,813 shares of Common Stock at $.05 per share to a then-current officer of Brocade as partial commission in
connection with the Series B Preferred Stock financing.
9. On September 11, 1996, we issued a warrant to an equipment lease financing company to purchase 17,500 shares of our Series B Preferred
Stock at an exercise price of $4.00 per share.
10. On August 26, 1996, in connection with the lease of office space, we issued a warrant to a real property lessor to purchase 3,000 shares of
our Series C Preferred Stock at an exercise price of $3.00 per share.
11. On December 6, 1996, we sold 3,333,333 shares of our Series C Preferred Stock at $3.00 per share to a group of private investors for an
aggregate purchase price of $9,999,999.
12. On May 6, 1997, in connection with a sublease agreement, we issued a warrant to a sublessor of real property to purchase 20,000 shares of
our Series C Preferred Stock at an exercise price of $3.00 per share.
13. On June 13, 1997, in connection with a combined line of credit and equipment lease, we issued a warrant to a bank to purchase 25,000
shares of our Series C Preferred Stock at an exercise price of $3.00 per share.
II-2
14. On September 29, 1997, November 17, 1997 and December 3, 1997, we sold 3,660,900 shares of our Series D Preferred Stock for $5.78
per share to a group of private investors for an aggregate purchase price of $21,160,002. In addition, in connection with the Series D financing,
we issued warrants to purchase an aggregate of 296,881 shares of our Series D Preferred Stock at an exercise price of $6.78 per share.
15. On July 13, 1998, we issued 18,000 shares of Common Stock at $2.25 per share as partial compensation for the recruitment of the
Company's new president.
For additional information concerning these equity investment transactions, reference is made to the information contained under the caption
"Certain Transactions" in the form of prospectus included herein.
The sales of the above securities were deemed to be exempt from registration in reliance on Rule 701 promulgated under Section 3(b) under the
Securities Act as transactions pursuant to a compensatory benefit plan or a written contract relating to compensation, or in reliance on Section 4
(2) of the Securities Act or Regulation D promulgated thereunder as transactions by an issuer not involving any public offering. The recipients
of securities in each such transaction represented their intention to acquire the securities for investment only and not with a view to or for sale
in connection with any distribution thereof and appropriate legends were affixed to the share certificates and other instruments issued in such
transactions. All recipients either received adequate information about Brocade or had access, through employment or other relationships, to
such information.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS.
EXHIBIT
NUMBER
------1.1*
3.1**
3.2**
3.3**
3.4**
4.1*
4.2**
4.3**
4.4**
4.5**
4.6**
4.7
4.8**
5.1*
DESCRIPTION OF DOCUMENT
----------------------Form of Underwriting Agreement.
Amended and Restated Articles of Incorporation of the
Registrant.
Form of Amended and Restated Certificate of Incorporation to
be effective on the closing of the offering made pursuant to
this Registration Statement.
Bylaws of the Registrant.
Bylaws of the Registrant to be effective upon the closing of
the offering made pursuant to this Registration Statement.
Form of Registrant's Common Stock certificate.
Warrant to purchase shares of Series A Preferred Stock of
the Registrant issued to Venture Lending & Leasing, Inc.
First Amended and Restated Warrant to purchase shares of
Series A Preferred Stock of the Registrant issued to Venture
Lending & Leasing, Inc.
Warrant to purchase shares of Series B Preferred Stock of
the Registrant issued to Venture Lending & Leasing, Inc.
Warrant to purchase shares of Series C Preferred Stock of
the Registrant issued to Mason Calle De Luna L.P.
Warrant to purchase shares of Series C Preferred Stock of
the Registrant issued to Symmetricom, Inc.
Warrant to purchase shares of Series C Preferred Stock of
the Registrant issued to Imperial Bank.
Seventh Amended and Restated Investors' Rights Agreement
dated December 3, 1997.
Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
II-3
EXHIBIT
NUMBER
------10.1**
10.2**
10.3**
10.4**
10.5**
10.6
10.7
10.8**
10.9**
10.10**
10.11**
10.12**
10.13**
10.14+
10.15+
10.16+
10.17*
10.19
16.1**
23.1**
23.2*
24.1**
27.1**
DESCRIPTION OF DOCUMENT
----------------------Form of Indemnification Agreement to be entered into by the
Registrant with each of its directors and executive
officers.
1995 Equity Incentive Plan and forms of agreements
thereunder.
1998 Equity Incentive Plan and forms of agreements
thereunder.
1998 Executive Equity Incentive Plan and forms of agreements
thereunder.
1999 Employee Stock Purchase Plan.
1999 Director Option Plan and form of agreement thereunder.
1999 Stock Plan and forms of agreements thereunder.
Sublease between Symmetricom, Inc. and the Registrant dated
May 6, 1997.
Security and Loan Agreement between the Registrant and
Imperial Bank dated June 19, 1997.
Amendment to Loan Documents between the Registrant and
Imperial Bank dated January 30, 1998.
Second Amendment to Loan Documents between the Registrant
and Imperial Bank dated August 17, 1998.
Third Amendment to Loan Documents between the Registrant and
Imperial Bank dated December 15, 1998.
Master Equipment Lease Agreement between Venture Lending &
Leasing, Inc. and the Registrant dated September 5, 1996.
Master Purchase Agreement between Dell Products L.P. and the
Registrant dated November 1, 1998.
Purchase Agreement between Sequent Computer Systems, Inc.
and the Registrant.
Supplement No. 1 to Purchase Agreement between Sequent
Computer Systems, Inc. and the Registrant dated September
26, 1997.
OEM Agreement between Storage Technology Corporation and the
Registrant dated March 1, 1998.
Confidential Agreement and General Release of Claims between
Bruce J. Bergman, The Bergman Family Trust and the
Registrant dated September 23, 1998.
Letter of PricewaterhouseCoopers LLP, Independent
Accountants.
Consent of Arthur Andersen LLP, Independent Public
Accountants
Consent of Counsel (included in Exhibit 5.1.).
Power of Attorney (see page II-6 of the Registration
Statement).
Financial Data Schedule.
* To be filed by amendment.
** Previously filed.
+ Confidential treatment requested as to certain portions, which portions are omitted and filed separately with the Securities and Exchange
Commission.
(b) FINANCIAL STATEMENT SCHEDULES.
Schedule II -- Valuation and Qualifying Accounts.......
S-2**
Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the
consolidated financial statements or notes thereto.
II-4
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the Underwriters at the closing specified in the Underwriting Agreement
certificates in such denominations and registered in such names as required by the Underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification by the Registrant for liabilities arising under the Securities Act may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the provisions described in Item 14 above or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer, or controlling person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at the time shall
be deemed to be the initial bona fide offering thereof.
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Amendment No. 1 to the Registration Statement
on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Jose, County of Santa Clara, State of
California, on the 15th day of April 1999.
BROCADE COMMUNICATIONS SYSTEMS, INC.
By:
/s/ GREGORY L. REYES
-----------------------------------Gregory L. Reyes
President and Chief Executive
Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities and on the dates indicated:
SIGNATURE
--------*
-----------------------------------------Seth D. Neiman
TITLE
----Chairman of the Board
DATE
---April 15, 1999
/s/ GREGORY L. REYES
-----------------------------------------Gregory L. Reyes
President and Chief Executive Officer
(Principal Executive Officer)
April 15, 1999
/s/ B. CARL LEE
-----------------------------------------B. Carl Lee
Vice President, Finance and Chief
Financial Officer (Principal
Financial and Accounting Officer)
Director
April 15, 1999
*
-----------------------------------------Mark Leslie
Director
April 15, 1999
*
-----------------------------------------Larry W. Sonsini
Director
April 15, 1999
-----------------------------------------Neal Dempsey
*By: /s/ GREGORY L. REYES
------------------------------------Gregory L. Reyes, Attorney-in-fact
II-6
INDEX TO EXHIBITS
EXHIBIT
NUMBER
------1.1*
3.1**
3.2**
3.3**
3.4**
4.1*
4.2**
4.3**
4.4**
4.5**
4.6**
4.7
4.8**
5.1*
10.1**
10.2**
10.3**
10.4**
10.5**
10.6
10.7
10.8**
10.9**
10.10**
10.11**
10.12**
10.13**
10.14+
10.15+
10.16+
DESCRIPTION OF DOCUMENT
----------------------Form of Underwriting Agreement.
Amended and Restated Articles of Incorporation of the
Registrant.
Form of Amended and Restated Certificate of Incorporation to
be effective on the closing of the offering made pursuant to
this Registration Statement.
Bylaws of the Registrant.
Bylaws of the Registrant to be effective upon the closing of
the offering made pursuant to this Registration Statement.
Form of Registrant's Common Stock certificate.
Warrant to purchase shares of Series A Preferred Stock of
the Registrant issued to Venture Lending & Leasing, Inc.
First Amended and Restated Warrant to purchase shares of
Series A Preferred Stock of the Registrant issued to Venture
Lending & Leasing, Inc.
Warrant to purchase shares of Series B Preferred Stock of
the Registrant issued to Venture Lending & Leasing, Inc.
Warrant to purchase shares of Series C Preferred Stock of
the Registrant issued to Mason Calle De Luna L.P.
Warrant to purchase shares of Series C Preferred Stock of
the Registrant issued to Symmetricom, Inc.
Warrant to purchase shares of Series C Preferred Stock of
the Registrant issued to Imperial Bank.
Seventh Amended and Restated Investors' Rights Agreement
dated December 3, 1997.
Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
Form of Indemnification Agreement to be entered into by the
Registrant with each of its directors and executive
officers.
1995 Equity Incentive Plan and forms of agreements
thereunder.
1998 Equity Incentive Plan and forms of agreements
thereunder.
1998 Executive Equity Incentive Plan and forms of agreements
thereunder.
1999 Employee Stock Purchase Plan.
1999 Director Option Plan and form of agreement thereunder.
1999 Stock Plan and forms of agreements thereunder.
Sublease between Symmetricom, Inc. and the Registrant dated
May 6, 1997.
Security and Loan Agreement between the Registrant and
Imperial Bank dated June 19, 1997.
Amendment to Loan Documents between the Registrant and
Imperial Bank dated January 30, 1998.
Second Amendment to Loan Documents between the Registrant
and Imperial Bank dated August 17, 1998.
Third Amendment to Loan Documents between the Registrant and
Imperial Bank dated December 15, 1998.
Master Equipment Lease Agreement between Venture Lending &
Leasing, Inc. and the Registrant dated September 5, 1996.
Master Purchase Agreement between Dell Products L.P. and the
Registrant dated November 1, 1998.
Purchase Agreement between Sequent Computer Systems, Inc.
and the Registrant.
Supplement No. 1 to Purchase Agreement between Sequent
Computer Systems, Inc. and the Registrant dated September
26, 1997.
EXHIBIT
NUMBER
------10.17*
10.19
16.1**
23.1**
23.2*
24.1**
27.1**
DESCRIPTION OF DOCUMENT
----------------------OEM Agreement between Storage Technology Corporation and the
Registrant dated March 1, 1998.
Confidential Agreement and General Release of Claims between
Bruce J. Bergman, The Bergman Family Trust and the
Registrant dated September 23, 1998.
Letter of PricewaterhouseCoopers LLP, Independent
Accountants.
Consent of Arthur Andersen LLP, Independent Public
Accountants.
Consent of Counsel (included in Exhibit 5.1.).
Power of Attorney (see page II-6 of the Registration
Statement).
Financial Data Schedule.
* To be filed by amendment.
** Previously filed.
+ Confidential treatment requested as to certain portions, which portions are omitted and filed separately with the Securities and Exchange
Commission.
EXHIBIT 4.7
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE
REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE STOCK
Corporation:
Number of Shares:
Class of Stock:
Initial Exercise Price:
Issue Date:
Expiration Date:
Brocade Communications Systems, Inc., a California
corporation
25,000
Series C Preferred
$3.00 per share
June 13, 1997
June 13, 2002 (Subject to Article 4.1)
THIS WARRANT CERTIFIES THAT, in consideration of the payment of $1.00 and for other good and valuable consideration, IMPERIAL
BANK, or registered assignees ("Holder") is entitled to purchase the number of fully paid and nonassessable shares of the class of securities
(the "Shares") of the corporation (the "Company") at the initial exercise price per Share (the "Warrant Price") all as set forth above and as
adjusted pursuant to Article 2 of this Warrant, subject to the provisions and upon the terms and conditions set forth of this Warrant.
ARTICLE 1. EXERCISE
1.1 Method of Exercise. Holder may exercise this Warrant by delivering this Warrant and a duly executed Notice of Exercise in substantially
the form attached as Appendix 1 to the principal office of the Company. Unless Holder is exercising the conversion right set forth in Section
1.2, Holder shall also deliver to the Company a check for the aggregate Warrant Price for the Shares being purchased.
1.2 Conversion Right. In lieu of exercising this Warrant as specified in
Section 1.1, Holder may from time to time convert this Warrant, in whole or in part, into a number of Shares determined by dividing (a) the
aggregate fair market value of the Shares or other securities otherwise issuable upon exercise of this Warrant minus the aggregate Warrant
Price of such Shares by (b) the fair market value of one Share. The fair market value of the Shares shall be determined pursuant to Section 1.3.
1.3 Fair Market Value. If the Shares are traded regularly in a public market, the fair market value of the Shares shall be the closing price of the
Shares (or the closing price of the Company's stock into which the Shares are convertible) reported for the business day immediately before
Holder delivers its Notice of Exercise to the Company. If the Shares are not regularly traded in a public
Page 1 of 10
good faith judgment. The foregoing notwithstanding, if Holder advises the Board of Directors in writing that Holder disagrees with such
determination, then the Company and Holder shall promptly agree upon a reputable investment banking firm to undertake such valuation. In all
circumstances, such fees and expenses shall be shared equally between Company and Holder.
1.4 Delivery of Certificate and New Warrant. Promptly after Holder exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully exercised or converted and has not expired, a new Warrant
representing the Shares not so acquired.
1.5 Replacement of Warrants. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this
Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the
Company or, in the case of mutilation, or surrender and cancellation of this Warrant, the Company at its expense shall execute and deliver, in
lieu of this Warrant, a new warrant of like tenor.
1.6 Repurchase on Sale, Merger, or Consolidation of the Company.
1.6.1. "Acquisition". For the purpose of this Warrant, "Acquisition" means any sale, license, or other disposition of all or substantially all of the
assets (including intellectual property) of the Company, or any reorganization, consolidation, or merger of the Company where the holders of
the Company's securities before the transaction beneficially own less than 50% of the outstanding voting securities of the surviving entity after
the transaction.
1.6.2. Assumption of Warrant. If upon the closing of any Acquisition the successor entity assumes the obligations of this Warrant, then this
Warrant shall be exercisable for the same securities, cash, and property as would be payable for the Shares issuable upon exercise of the
unexercised portion of this Warrant as if such Shares were outstanding on the record date for the Acquisition and subsequent closing. The
Warrant Price shall be adjusted accordingly. The Company shall use reasonable efforts to cause the surviving corporation to assume the
obligations of this Warrant.
1.6.3. Nonassumption. If upon the closing of any Acquisition the successor entity does not assume the obligations of this Warrant and Holder
has not otherwise exercised this Warrant in full, then the unexercised portion of this Warrant shall be deemed to have been automatically
converted pursuant to
Section 1.2 and thereafter Holder shall participate in the acquisition on the same terms as other holders of the same class of securities of the
Company.
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a dividend on its common stock payable in common stock, or other
securities, subdivides the outstanding common stock into a greater amount of common stock, then upon exercise of this Warrant, for each
Share acquired, Holder shall receive, without cost to Holder, the total number and kind of securities to which Holder would
Page 2 of 10
have been entitled had Holder owned the Shares of record as of the date the dividend or subdivision occurred.
2.2 Reclassification, Exchange or Substitution. Upon any reclassification, exchange, substitution, or other event that results in a change of the
number and/or class of the securities issuable upon exercise or conversion of this Warrant, Holder shall be entitled to receive, upon exercise or
conversion of this Warrant, the number and kind of securities and property that Holder would have received for the Shares if this Warrant had
been exercised immediately before such reclassification, exchange, substitution, or other event. Such an event shall include any automatic
conversion of the outstanding or issuable securities of the Company of the same class or series as the Shares to common stock pursuant to the
terms of the Company's Articles of Incorporation upon the closing of a registered public offering of the Company's common stock. The
Company or its successor shall promptly issue to Holder a new Warrant for such new securities or other property. The new Warrant shall
provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article 2 including,
without limitation, adjustments to the Warrant Price and to the number of securities or property issuable upon exercise of the new Warrant. The
provisions of this Section 2.2 shall similarly apply to successive reclassifications, exchanges, substitutions, or other events.
2.3 Adjustments for Combinations, Etc. If the outstanding Shares are combined or consolidated, by reclassification or otherwise, into a lesser
number of shares, the Warrant Price shall be proportionately increased.
2.4 Adjustments for Diluting Issuances. The Warrant Price and the number of Shares issuable upon exercise of this Warrant shall be subject to
adjustment, from time to time, in the manner set forth on Exhibit A in the event of Diluting Issuances.
2.5 No Impairment. The Company shall not, by amendment of its Articles of Incorporation or through a reorganization, transfer of assets,
consolidation, merger, dissolution, issue, or sale of securities or any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed under this Warrant by the Company, but shall at all times in good faith assist in
carrying out all the provisions of this Article 2 and in taking all such action as may be necessary or appropriate to protect Holder's rights under
this Article against impairment. If the Company takes any action affecting the Shares or its common stock other than as described above that
adversely affects Holder's rights under this Warrant, the Warrant Price shall be adjusted downward and the number of Shares issuable upon
exercise of this Warrant shall be adjusted upward in such a manner that the aggregate Warrant Price of this Warrant is unchanged.
2.6 Certificate as to Adjustments. Upon each adjustment of the Warrant Price, the Company at its expense shall promptly compute such
adjustment, and furnish Holder with a certificate of its Chief Financial Officer setting forth such adjustment and the facts upon which such
adjustment is based. The Company shall, upon written request, furnish Holder a certificate setting forth the Warrant Price in effect upon the
date thereof and the series of adjustments leading to such Warrant Price.
Page 3 of 10
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 Representations and Warranties. The Company hereby represents and warrants to the Holder as follows:
(a) The initial Warrant Price referenced on the first page of this Warrant is not greater than the fair market value of the Shares as of the date of
this Warrant.
(b) All Shares which may be issued upon the exercise of the purchase right represented by this Warrant, and all securities, if any, issuable upon
conversion of the Shares, shall, upon issuance, be duly authorized, validly issued, fully paid and nonassessable, and free of any liens and
encumbrances except for restrictions on transfer provided for herein or under applicable federal and state securities laws.
3.2 Notice of Certain Events. If the Company proposes at any time (a) to declare any dividend or distribution upon its common stock, whether
in cash, property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of its stock any additional shares of stock of any class or series or other
rights;
(c) to effect any reclassification or recapitalization of common stock; (d) to merge or consolidate with or into any other corporation, or sell,
lease, license, or convey all or substantially all of its assets, or to liquidate, dissolve or wind up; or (e) offer holders of registration rights the
opportunity to participate in an underwritten public offering of the company's securities for cash, then, in connection with each such event, the
Company shall give Holder (1) at least 20 days prior written notice of the date on which a record will be taken for such dividend, distribution,
or subscription rights (and specifying the date on which the holders of common stock will be entitled thereto) or for determining rights to vote,
if any, in respect of the matters referred to in (c) and (d) above; (2) in the case of the matters referred to in
(c) and (d) above at least 20 days prior written notice of the date when the same will take place (and specifying the date on which the holders of
common stock will be entitled to exchange their common stock for securities or other property deliverable upon the occurrence of such event);
and (3) in the case of the matter referred to in (e) above, the same notice as is given to the holders of such registration rights.
3.3 Information Rights. So long as the Holder holds this Warrant ad/or any of the Shares, the Company shall deliver to the Holder (a) promptly
after mailing, copies of all communiques to the shareholders of the Company, (b) within ninety (90) days after the end of each fiscal year of the
Company, the annual audited financial statements of the Company certified by independent public accountants of recognized standing and (c)
within forty-five (45) days after the end of each of the first three quarters of each fiscal year, the Company's quarterly, unaudited financial
statements.
3.4 Registration Under Securities Act of 1933, as amended. The Company agrees that the Shares shall be subject to the registration rights set
forth on Exhibit B.
Page 4 of 10
ARTICLE 4. MISCELLANEOUS.
4.1 Term: Notice of Expiration. This Warrant is exercisable, in whole or in part, at any time and from time to time on or before the Expiration
Date set forth above. The Company shall give Holder written notice of Holder's right to exercise this Warrant in the form attached as Appendix
2 not more than 90 days and not less than 30 days before the Expiration Date. If the notice is not so given, the Expiration Date shall
automatically be extended until 30 days after the date the Company delivers the notice to Holder.
4.2 Legends. This Warrant and the Shares (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS
COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3 Compliance with Securities Laws on Transfer. This Warrant and the Shares issuable upon exercise this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be transferred or assigned in whole or in part without compliance with
applicable federal and state securities laws by the transferor and the transferee (including, without limitation, the delivery of investment
representation letters and legal opinions reasonably satisfactory to the Company). The Company shall not require Holder to provide an opinion
of counsel if the transfer is to an affiliate of Holder or if there is no material question as to the availability of current information as referenced
in Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e) in reasonable detail, the selling broker represents that it has
complied with Rule 144(f), and the Company is provided with a copy of Holder's notice of proposed sale.
4.4 Transfer Procedure. Subject to the provisions of Section 4.2, Holder may transfer all or part of this Warrant or the Shares issuable upon
exercise of this Warrant (or the securities issuable, directly or indirectly, upon conversion of the Shares, if any) by giving the Company notice
of the portion of the Warrant being transferred setting forth the name, address and taxpayer identification number of the transferee and
surrendering this Warrant to the Company for reissuance to the transferee(s) (and Holder, if applicable). Unless the Company is filing financial
information with the SEC pursuant to the Securities Exchange Act of 1934, the Company shall have the right to refuse to transfer any portion
of this Warrant to any person who directly competes with the Company.
4.5 Notices. All notices and other communications from the Company to the Holder, or vice versa, shall be deemed delivered and effective
when given personally or mailed by first-class registered or certified mail, postage prepaid, at such address as may have been furnished to the
Company or the Holder, as the case may be, in writing by the Company or such Holder from time to time.
Page 5 of 10
4.6 Waiver. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by
the party against which enforcement of such change, waiver, discharge or termination is sought.
4.7 Attorneys' Fees. In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorneys' fees.
4.8 Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of California, without giving
effect to its principles regarding conflicts of law.
Brocade Communications Systems, Inc.
By: /s/ BRUCE J. BERGMAN
------------------------------------------Bruce J. Bergman
Its: President and Chief Executive Officer
By: /s/ B. CARL LEE
------------------------------------------B. Carl Lee
Its: Vice President and Chief Financial
Officer
Page 6 of 10
APPENDIX 1
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase 25,000 shares of the Series C Preferred Stock of Brocade Communications Systems, Inc. pursuant
to the terms of the attached Warrant, and tenders herewith payment of the purchase price of such shares in full.
1. The undersigned hereby elects to convert the attached Warrant into Shares/cash [strike one] in the manner specified in the Warrant. This
conversion is exercised with respect to ______________________ of the Shares covered by the Warrant.
[Strike paragraph that does not apply.]
2. Please issue a certificate or certificates representing said shares in the name of the undersigned or in such other name as is specified below:
Chief Financial Officer Controllers Department Imperial Bank
P.O. Box 92991
Los Angeles, CA 90009
3. The undersigned represents it is acquiring the shares solely for its own account and not as a nominee for any other party and not with a view
toward the resale or distribution thereof except in compliance with applicable securities laws.
IMPERIAL BANK
(Signature)
(Date)
Page 7 of 10
APPENDIX 2
NOTICE THAT WARRANT IS ABOUT TO EXPIRE
------------, -----Chief Financial Officer
Controllers Department
Imperial Bank
P.O. Box 92991
Los Angeles, CA 90009
Gentlepersons:
This is to advise you that the Warrant issued to you described below will expire on -------------.
Issuer:
Issue Date:
Class of Security Issuable:
Exercise Price Per Share:
Number of Shares Issuable:
Procedure for Exercise:
Please contact [name of contact person at (phone number)] with any questions you may have concerning exercise of the Warrant. This is your
only notice of pending expiration.
Brocade Communications Systems, Inc.
By:______________________
Its:_____________________
Page 8 of 10
EXHIBIT A
Anti-Dilution Provisions
In the event of the issuance (a "Diluting Issuance") by the Company, after the Issue Date of the Warrant, of securities at a price per share less
than the Warrant Price, then the number of shares of common stock issuable upon conversion of the Shares shall be adjusted in accordance
with those provisions (the "Provisions") of the Company's Articles (Certificate) of Incorporation which apply to Diluting Issuances.
Under no circumstances shall the aggregate Warrant Price payable by the Holder upon exercise of the Warrant increase as a result of any
adjustment arising from a Diluting Issuance.
Page 9 of 10
EXHIBIT B
Registration Rights
The Company agrees to grant the Holder such piggyback registration rights as are granted to certain investors of the company pursuant to
Sections 2.3 through
2.11 (as applicable) of the Series C Investors' Rights Agreement; and further, the Company covenants that it will use its best efforts to obtain an
amendment to the Series C Investors' Rights Agreement to effect the above grant of such piggyback registration rights by including Holder as a
party to the relevant sections of the Series C Investors' Rights Agreement, and Holder covenants that it will execute such an amended
agreement embodying the terms set forth in this Exhibit B.
Page 10 of 10
Exhibit 10.6
BROCADE COMMUNICATIONS SYSTEMS, INC.
1999 DIRECTOR OPTION PLAN
1. Purposes of the Plan. The purposes of this 1999 Director Option Plan are to attract and retain the best available personnel for service as
Outside Directors (as defined herein) of the Company, to provide additional incentive to the Outside Directors of the Company to serve as
Directors, and to encourage their continued service on the Board.
All options granted hereunder shall be nonstatutory stock options.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" means the common stock of the Company.
(d) "Company" means Brocade Communications Systems, Inc., a Delaware corporation.
(e) "Director" means a member of the Board.
(f) "Disability" means total and permanent disability as defined in section 22(e)(3) of the Code.
(g) "Employee" means any person, including officers and Directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a Director's fee by the Company shall not be sufficient in and of itself to constitute "employment" by the Company.
(h) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(i) "Fair Market Value" means, as of any date, the value of Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such
stock (or the closing bid, if no sales were reported) as quoted on such exchange or system
for the last market trading day prior to the time of determination as reported in The Wall Street Journal or such other source as the
Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a
Share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock for the last market trading day
prior to the time of determination, as reported in The Wall Street Journal or such other source as the Board deems reliable; or
(iii) In the absence of an established market for the Common Stock, the Fair Market Value thereof shall be determined in good faith by the
Board.
(j) "Inside Director" means a Director who is an Employee.
(k) "Option" means a stock option granted pursuant to the Plan.
(l) "Optioned Stock" means the Common Stock subject to an Option.
(m) "Optionee" means a Director who holds an Option.
(n) "Outside Director" means a Director who is not an Employee; provided, however, that the term "Outside Director" shall not include Mark
Leslie or Larry Sonsini until January 31, 2002.
(o) "Parent" means a "parent corporation," whether now or hereafter existing, as defined in Section 424(e) of the Code.
(p) "Plan" means this 1999 Director Option Plan.
(q) "Share" means a share of the Common Stock, as adjusted in accordance with Section 10 of the Plan.
(r) "Subsidiary" means a "subsidiary corporation," whether now or hereafter existing, as defined in Section 424(f) of the Internal Revenue Code
of 1986.
3. Stock Subject to the Plan. Subject to the provisions of Section 10 of the Plan, the maximum aggregate number of Shares which may be
optioned and sold under the Plan is 200,000 Shares (the "Pool"). The Shares may be authorized, but unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has terminated). Shares that have actually been issued under the Plan
shall not be returned to the Plan and shall not become available for future distribution under the Plan.
-2-
4. Administration and Grants of Options under the Plan.
(a) Procedure for Grants. All grants of Options to Outside Directors under this Plan shall be automatic and nondiscretionary and shall be made
strictly in accordance with the following provisions; provided, however, that the Board may, in its sole discretion, provide that certain Outside
Directors are not eligible to receive grants of Options for specified periods of time.
(i) No person shall have any discretion to select which Outside Directors shall be granted Options or to determine the number of Shares to be
covered by Options.
(ii) Each Outside Director shall be automatically granted an Option to purchase 2,500 Shares (the "First Option") on the date on which such
person first becomes an Outside Director, whether through election by the shareholders of the Company or appointment by the Board to fill a
vacancy; provided, however, that an Inside Director who ceases to be an Inside Director but who remains a Director shall not receive a First
Option.
(iii) Each Outside Director shall be automatically granted an Option to purchase 2,500 Shares (a "Subsequent Option") on the first day of each
quarter of each year provided he or she is then an Outside Director and if as of such date, he or she shall have served on the Board for at least
the preceding month.
(iv) Notwithstanding the provisions of subsections (ii) and (iii) hereof, any exercise of an Option granted before the Company has obtained
shareholder approval of the Plan in accordance with Section 16 hereof shall be conditioned upon obtaining such shareholder approval of the
Plan in accordance with Section 16 hereof.
(v) The terms of a First Option granted hereunder shall be as follows:
(A) the term of the First Option shall be ten (10)
years.
(B) the First Option shall be exercisable only while the Outside Director remains a Director of the Company, except as set forth in Sections 8
and 10 hereof.
(C) the exercise price per Share shall be 100% of the Fair Market Value per Share on the date of grant of the First Option.
(D) subject to Section 10 hereof, the First Option shall become exercisable as to one-hundred percent of the Shares subject to the First Option
on each anniversary of its date of grant, provided that the Optionee continues to serve as a Director on such dates.
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(vi) The terms of a Subsequent Option granted hereunder shall be as follows:
(A) the term of the Subsequent Option shall be ten
(10) years.
(B) the Subsequent Option shall be exercisable only while the Outside Director remains a Director of the Company, except as set forth in
Sections 8 and 10 hereof.
(C) the exercise price per Share shall be 100% of the Fair Market Value per Share on the date of grant of the Subsequent Option.
(D) subject to Section 10 hereof, the Subsequent Option shall become exercisable as to one-hundred percent of the Shares subject to the
Subsequent Option on each anniversary of its date of grant, provided that the Optionee continues to serve as a Director on such dates.
(vii) In the event that any Option granted under the Plan would cause the number of Shares subject to outstanding Options plus the number of
Shares previously purchased under Options to exceed the Pool, then the remaining Shares available for Option grant shall be granted under
Options to the Outside Directors on a pro rata basis. No further grants shall be made until such time, if any, as additional Shares become
available for grant under the Plan through action of the Board or the shareholders to increase the number of Shares which may be issued under
the Plan or through cancellation or expiration of Options previously granted hereunder.
5. Eligibility. Options may be granted only to Outside Directors. All Options shall be automatically granted in accordance with the terms set
forth in
Section 4 hereof.
The Plan shall not confer upon any Optionee any right with respect to continuation of service as a Director or nomination to serve as a Director,
nor shall it interfere in any way with any rights which the Director or the Company may have to terminate the Director's relationship with the
Company at any time.
6. Term of Plan. The Plan shall become effective upon the earlier to occur of its adoption by the Board or its approval by the shareholders of
the Company as described in Section 16 of the Plan. It shall continue in effect for a term of ten (10) years unless sooner terminated under
Section 11 of the Plan.
7. Form of Consideration. The consideration to be paid for the Shares to be issued upon exercise of an Option, including the method of
payment, shall consist of (i) cash, (ii) check, (iii) other shares which (x) in the case of Shares acquired upon exercise of an option, have been
owned by the Optionee for more than six (6) months on the date of surrender, and (y) have a Fair Market Value on the date of surrender equal
to the aggregate exercise price of the Shares as to which
-4-
said Option shall be exercised, (iv) consideration received by the Company under a cashless exercise program implemented by the Company in
connection with the Plan, or (v) any combination of the foregoing methods of payment.
8. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option granted hereunder shall be exercisable at such times as are set forth in Section
4 hereof; provided, however, that no Options shall be exercisable until shareholder approval of the Plan in accordance with Section 16 hereof
has been obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms
of the Option by the person entitled to exercise the Option and full payment for the Shares with respect to which the Option is exercised has
been received by the Company. Full payment may consist of any consideration and method of payment allowable under Section 7 of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company)
of the stock certificate evidencing such Shares, no right to vote or receive dividends or any other rights as a shareholder shall exist with respect
to the Optioned Stock, notwithstanding the exercise of the Option. A share certificate for the number of Shares so acquired shall be issued to
the Optionee as soon as practicable after exercise of the Option. No adjustment shall be made for a dividend or other right for which the record
date is prior to the date the stock certificate is issued, except as provided in Section 10 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.
(b) Termination of Continuous Status as a Director. Subject to
Section 10 hereof, in the event an Optionee's status as a Director terminates (other than upon the Optionee's death or Disability), the Optionee
may exercise his or her Option, but only within three (3) months following the date of such termination, and only to the extent that the
Optionee was entitled to exercise it on the date of such termination (but in no event later than the expiration of its ten (10) year term). To the
extent that the Optionee was not entitled to exercise an Option on the date of such termination, and to the extent that the Optionee does not
exercise such Option (to the extent otherwise so entitled) within the time specified herein, the Option shall terminate.
(c) Disability of Optionee. In the event Optionee's status as a Director terminates as a result of Disability, the Optionee may exercise his or her
Option, but only within twelve (12) months following the date of such termination, and only to the extent that the Optionee was entitled
-5-
to exercise it on the date of such termination (but in no event later than the expiration of its ten (10) year term). To the extent that the Optionee
was not entitled to exercise an Option on the date of termination, or if he or she does not exercise such Option (to the extent otherwise so
entitled) within the time specified herein, the Option shall terminate.
(d) Death of Optionee. In the event of an Optionee's death, the Optionee's estate or a person who acquired the right to exercise the Option by
bequest or inheritance may exercise the Option, but only within twelve (12) months following the date of death, and only to the extent that the
Optionee was entitled to exercise it on the date of death (but in no event later than the expiration of its ten (10) year term). To the extent that the
Optionee was not entitled to exercise an Option on the date of death, and to the extent that the Optionee's estate or a person who acquired the
right to exercise such Option does not exercise such Option (to the extent otherwise so entitled) within the time specified herein, the Option
shall terminate.
9. Non-Transferability of Options. The Option may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner
other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee.
10. Adjustments Upon Changes in Capitalization, Dissolution, Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the shareholders of the Company, the number of Shares covered by each
outstanding Option, the number of Shares which have been authorized for issuance under the Plan but as to which no Options have yet been
granted or which have been returned to the Plan upon cancellation or expiration of an Option, as well as the price per Share covered by each
such outstanding Option, and the number of Shares issuable pursuant to the automatic grant provisions of Section 4 hereof shall be
proportionately adjusted for any increase or decrease in the number of issued Shares resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued Shares effected
without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be
deemed to have been "effected without receipt of consideration". Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of Shares subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, to the extent that an Option has not been
previously exercised, it shall terminate immediately prior to the consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company with or into another corporation or the sale of substantially all of the assets
of the Company, outstanding Options may be assumed or equivalent options may be substituted by the successor corporation or a Parent or
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Subsidiary thereof (the "Successor Corporation"). If an Option is assumed or substituted for, the Option or equivalent option shall continue to
be exercisable as provided in Section 4 hereof for so long as the Optionee serves as a Director or a director of the Successor Corporation.
Following such assumption or substitution, if the Optionee's status as a Director or director of the Successor Corporation, as applicable, is
terminated other than upon a voluntary resignation by the Optionee, the Option or option shall become fully exercisable, including as to Shares
for which it would not otherwise be exercisable. Thereafter, the Option or option shall remain exercisable in accordance with Sections 8(b)
through (d) above.
If the Successor Corporation does not assume an outstanding Option or substitute for it an equivalent option, the Option shall become fully
vested and exercisable, including as to Shares for which it would not otherwise be exercisable. In such event the Board shall notify the
Optionee that the Option shall be fully exercisable for a period of thirty (30) days from the date of such notice, and upon the expiration of such
period the Option shall terminate.
For the purposes of this Section 10(c), an Option shall be considered assumed if, following the merger or sale of assets, the Option confers the
right to purchase or receive, for each Share of Optioned Stock subject to the Option immediately prior to the merger or sale of assets, the
consideration (whether stock, cash, or other securities or property) received in the merger or sale of assets by holders of Common Stock for
each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen
by the holders of a majority of the outstanding Shares). If such consideration received in the merger or sale of assets is not solely common
stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the
consideration to be received upon the exercise of the Option, for each Share of Optioned Stock subject to the Option, to be solely common
stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Common Stock
in the merger or sale of assets.
11. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend, alter, suspend, or discontinue the Plan, but no amendment, alteration,
suspension, or discontinuation shall be made which would impair the rights of any Optionee under any grant theretofore made, without his or
her consent. In addition, to the extent necessary and desirable to comply with any applicable law, regulation or stock exchange rule, the
Company shall obtain shareholder approval of any Plan amendment in such a manner and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been amended or terminated.
-7-
12. Time of Granting Options. The date of grant of an Option shall, for all purposes, be the date determined in accordance with Section 4
hereof.
13. Conditions Upon Issuance of Shares. Shares shall not be issued pursuant to the exercise of an Option unless the exercise of such Option and
the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, state securities laws, and the
requirements of any stock exchange upon which the Shares may then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require the person exercising such Option to represent and warrant at the time of
any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares, if,
in the opinion of counsel for the Company, such a representation is required by any of the aforementioned relevant provisions of law.
Inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the
failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.
14. Reservation of Shares. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.
15. Option Agreement. Options shall be evidenced by written option agreements in such form as the Board shall approve.
16. Shareholder Approval. The Plan shall be subject to approval by the shareholders of the Company within twelve (12) months after the date
the Plan is adopted. Such shareholder approval shall be obtained in the degree and manner required under applicable state and federal law and
any stock exchange rules.
-8-
BROCADE COMMUNICATIONS SYSTEMS, INC.
DIRECTOR OPTION AGREEMENT
Brocade Communications Systems, Inc., (the "Company"), has granted to (the "Optionee"), an option to purchase a total of [ ] shares of the
Company's Common Stock (the "Optioned Stock"), at the price determined as provided herein, and in all respects subject to the terms,
definitions and provisions of the Company's 1999 Director Option Plan (the "Plan") adopted by the Company which is incorporated herein by
reference. The terms defined in the Plan shall have the same defined meanings herein.
1. Nature of the Option. This Option is a nonstatutory option and is not intended to qualify for any special tax benefits to the Optionee.
2. Exercise Price. The exercise price is $_______ for each share of Common Stock.
3. Exercise of Option. This Option shall be exercisable during its term in accordance with the provisions of Section 8 of the Plan as follows:
(a) Right to Exercise.
(i) This Option shall become exercisable in installments cumulatively with respect to [ ] percent (%) of the Optioned Stock one year after the
date of grant, and as to an additional [ ] percent (%) of the Optioned Stock on each anniversary of the date of grant, so that one hundred percent
(100%) of the Optioned Stock shall be exercisable [ ] years after the date of grant; provided, however, that in no event shall any Option be
exercisable prior to the date the stockholders of the Company approve the Plan.
(ii) This Option may not be exercised for a fraction of a share.
(iii) In the event of Optionee's death, disability or other termination of service as a Director, the exercisability of the Option is governed by
Section 8 of the Plan.
(b) Method of Exercise. This Option shall be exercisable by written notice which shall state the election to exercise the Option and the number
of Shares in respect of which the Option is being exercised. Such written notice, in the form attached hereto as Exhibit A, shall be signed by the
Optionee and shall be delivered in person or by certified mail to the Secretary of the Company. The written notice shall be accompanied by
payment of the exercise price.
4. Method of Payment. Payment of the exercise price shall be by any of the following, or a combination thereof, at the election of the Optionee:
(a) cash;
(b) check; or
(c) surrender of other shares which (x) in the case of Shares acquired upon exercise of an Option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (y) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of
the Shares as to which said Option shall be exercised; or
(iv) delivery of a properly executed exercise notice together with such other documentation as the Company and the broker, if applicable, shall
require to effect an exercise of the Option and delivery to the Company of the sale or loan proceeds required to pay the exercise price.
5. Restrictions on Exercise. This Option may not be exercised if the issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable federal or state securities or other law or regulations, or if such
issuance would not comply with the requirements of any stock exchange upon which the Shares may then be listed. As a condition to the
exercise of this Option, the Company may require Optionee to make any representation and warranty to the Company as may be required by
any applicable law or regulation.
6. Non-Transferability of Option. This Option may not be transferred in any manner otherwise than by will or by the laws of descent or
distribution and may be exercised during the lifetime of Optionee only by the Optionee. The terms of this Option shall be binding upon the
executors, administrators, heirs, successors and assigns of the Optionee.
7. Term of Option. This Option may not be exercised more than ten (10) years from the date of grant of this Option, and may be exercised
during such period only in accordance with the Plan and the terms of this Option.
8. Taxation Upon Exercise of Option. Optionee understands that, upon exercise of this Option, he or she will recognize income for tax purposes
in an amount equal to the excess of the then Fair Market Value of the Shares purchased over the exercise price paid for such Shares. Since the
Optionee is subject to
Section 16(b) of the Securities Exchange Act of 1934, as amended, under certain limited circumstances the measurement and timing of such
income (and the commencement of any capital gain holding period) may be deferred, and the Optionee is advised to contact a tax advisor
concerning the application of
Section 83 in general and the availability a Section 83(b) election in particular in connection with the exercise of the Option. Upon a resale of
such Shares by the Optionee, any difference between the sale price and the Fair Market Value of the Shares on the date of exercise of the
Option, to the extent not included in income as described above, will be treated as capital gain or loss.
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DATE OF GRANT: ______________
BROCADE COMMUNICATIONS SYSTEMS, INC.,
a Delaware corporation
By:_________
Optionee acknowledges receipt of a copy of the Plan, a copy of which is attached hereto, and represents that he or she is familiar with the terms
and provisions thereof, and hereby accepts this Option subject to all of the terms and provisions thereof. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Board upon any questions arising under the Plan.
Dated: ____________________
Optionee
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EXHIBIT A
DIRECTOR OPTION EXERCISE NOTICE
Brocade Communications Systems, Inc.
1901 Guadalupe Parkway
San Jose CA 95131
Attention: Corporate Secretary
1. Exercise of Option. The undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase ______ shares of the Common
Stock
(the "Shares") of Brocade Communications Systems, Inc. (the "Company") under and pursuant to the Company's 1999 Director Option Plan
and the Director Option Agreement dated _______________ (the "Agreement").
2. Representations of Optionee. Optionee acknowledges that Optionee has received, read and understood the Agreement.
3. Federal Restrictions on Transfer. Optionee understands that the Shares must be held indefinitely unless they are registered under the
Securities Act of 1933, as amended (the "1933 Act"), or unless an exemption from such registration is available, and that the certificate(s)
representing the Shares may bear a legend to that effect. Optionee understands that the Company is under no obligation to register the Shares
and that an exemption may not be available or may not permit Optionee to transfer Shares in the amounts or at the times proposed by Optionee.
4. Tax Consequences. Optionee understands that Optionee may suffer adverse tax consequences as a result of Optionee's purchase or
disposition of the Shares. Optionee represents that Optionee has consulted with any tax consultant(s) Optionee deems advisable in connection
with the purchase or disposition of the Shares and that Optionee is not relying on the Company for any tax advice.
5. Delivery of Payment. Optionee herewith delivers to the Company the aggregate purchase price for the Shares that Optionee has elected to
purchase and has made provision for the payment of any federal or state withholding taxes required to be paid or withheld by the Company.
6. Entire Agreement. The Agreement is incorporated herein by reference. This Exercise Notice and the Agreement constitute the entire
agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Optionee
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with respect to the subject matter hereof. This Exercise Notice and the Agreement are governed by Delaware law except for that body of law
pertaining to conflict of laws.
Submitted by:
Accepted by:
OPTIONEE:
BROCADE COMMUNICATIONS SYSTEMS,
INC.
______________________________
By:______________________________
Its:_____________________________
Address: 1901 Guadalupe Parkway
San Jose CA 95131
Dated:______________________________
Dated:___________________________
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EXHIBIT 10.7
BROCADE COMMUNICATIONS SYSTEMS, INC.
1999 STOCK PLAN
1. Purposes of the Plan. The purposes of this 1999 Stock Plan are:
o to attract and retain the best available personnel for positions of substantial responsibility,
o to provide additional incentive to Employees, Directors and Consultants, and
o to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or Nonstatutory Stock Options, as determined by the Administrator at the time
of grant. Stock Purchase Rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees as shall be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the requirements relating to the administration of stock option plans under U. S. state corporate laws, U.S. federal
and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable
laws of any foreign country or jurisdiction where Options or Stock Purchase Rights are, or will be, granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a committee of Directors appointed by the Board in accordance with Section 4 of the Plan.
(f) "Common Stock" means the common stock of the Company.
(g) "Company" means Brocade Communications Systems, Inc., a Delaware corporation.
(h) "Consultant" means any person, including an advisor, engaged by the Company or a Parent or Subsidiary to render services to such entity.
(i) "Director" means a member of the Board.
(j) "Disability" means total and permanent disability as defined in Section 22(e)(3) of the Code.
(k) "Employee" means any person, including Officers and Directors, employed by the Company or any Parent or Subsidiary of the Company. A
Service Provider shall not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between
locations of the Company or between the Company, its Parent, any Subsidiary, or any successor. For purposes of Incentive Stock Options, no
such leave may exceed ninety days, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment
upon expiration of a leave of absence approved by the Company is not so guaranteed, on the 181st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory Stock
Option. Neither service as a Director nor payment of a director's fee by the Company shall be sufficient to constitute "employment" by the
Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(m) "Fair Market Value" means, as of any date, the value of Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such
stock (or the closing bid, if no sales were reported) as quoted on such exchange or system for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a
Share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the last market trading day
prior to the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or
(iii) In the absence of an established market for the Common Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(n) "Incentive Stock Option" means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code
and the regulations promulgated thereunder.
(o) "Nonstatutory Stock Option" means an Option not intended to qualify as an Incentive Stock Option.
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(p) "Notice of Grant" means a written or electronic notice evidencing certain terms and conditions of an individual Option or Stock Purchase
Right grant. The Notice of Grant is part of the Option Agreement.
(q) "Officer" means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(r) "Option" means a stock option granted pursuant to the Plan.
(s) "Option Agreement" means an agreement between the Company and an Optionee evidencing the terms and conditions of an individual
Option grant. The Option Agreement is subject to the terms and conditions of the Plan.
(t) "Option Exchange Program" means a program whereby outstanding Options are surrendered in exchange for Options with a lower exercise
price.
(u) "Optioned Stock" means the Common Stock subject to an Option or Stock Purchase Right.
(v) "Optionee" means the holder of an outstanding Option or Stock Purchase Right granted under the Plan.
(w) "Parent" means a "parent corporation," whether now or hereafter existing, as defined in Section 424(e) of the Code.
(x) "Plan" means this 1999 Stock Plan.
(y) "Restricted Stock" means shares of Common Stock acquired pursuant to a grant of Stock Purchase Rights under Section 11 of the Plan.
(z) "Restricted Stock Purchase Agreement" means a written agreement between the Company and the Optionee evidencing the terms and
restrictions applying to stock purchased under a Stock Purchase Right. The Restricted Stock Purchase Agreement is subject to the terms and
conditions of the Plan and the Notice of Grant.
(aa) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(bb) "Section 16(b) " means Section 16(b) of the Exchange Act.
(cc) "Service Provider" means an Employee, Director or Consultant.
(dd) "Share" means a share of the Common Stock, as adjusted in accordance with Section 13 of the Plan.
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(ee) "Stock Purchase Right" means the right to purchase Common Stock pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(ff) "Subsidiary" means a "subsidiary corporation", whether now or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 13 of the Plan, the maximum aggregate number of Shares which may be
optioned and sold under the Plan is [______________] Shares, plus an annual increase to be added on the first day of the Company's fiscal year
beginning in 2000 equal to the lesser of (i) 5,000,000 shares, (ii) 4% of the outstanding shares on such date or (iii) a lesser amount determined
by the Board. The Shares may be authorized, but unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes unexercisable without having been exercised in full, or is surrendered pursuant to an
Option Exchange Program, the unpurchased Shares which were subject thereto shall become available for future grant or sale under the Plan
(unless the Plan has terminated); provided, however, that Shares that have actually been issued under the Plan, whether upon exercise of an
Option or Right, shall not be returned to the Plan and shall not become available for future distribution under the Plan, except that if Shares of
Restricted Stock are repurchased by the Company at their original purchase price, such Shares shall become available for future grant under the
Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. The Plan may be administered by different Committees with respect to different groups of Service
Providers.
(ii) Section 162(m). To the extent that the Administrator determines it to be desirable to qualify Options granted hereunder as "performancebased compensation" within the meaning of Section 162(m) of the Code, the Plan shall be administered by a Committee of two or more
"outside directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder
shall be structured to satisfy the requirements for exemption under Rule 16b-3.
(iv) Other Administration. Other than as provided above, the Plan shall be administered by (A) the Board or (B) a Committee, which committee
shall be constituted to satisfy Applicable Laws.
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(b) Powers of the Administrator. Subject to the provisions of the Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and Stock Purchase Rights may be granted hereunder;
(iii) to determine the number of shares of Common Stock to be covered by each Option and Stock Purchase Right granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Option or Stock Purchase Right granted
hereunder. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Options or Stock Purchase
Rights may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any
restriction or limitation regarding any Option or Stock Purchase Right or the shares of Common Stock relating thereto, based in each case on
such factors as the Administrator, in its sole discretion, shall determine;
(vi) to reduce the exercise price of any Option or Stock Purchase Right to the then current Fair Market Value if the Fair Market Value of the
Common Stock covered by such Option or Stock Purchase Right shall have declined since the date the Option or Stock Purchase Right was
granted;
(vii) to institute an Option Exchange Program;
(viii) to construe and interpret the terms of the Plan and awards granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established
for the purpose of qualifying for preferred tax treatment under foreign tax laws;
(x) to modify or amend each Option or Stock Purchase Right (subject to Section 15(c) of the Plan), including the discretionary authority to
extend the post-termination exercisability period of Options longer than is otherwise provided for in the Plan;
(xi) to allow Optionees to satisfy withholding tax obligations by electing to have the Company withhold from the Shares to be issued upon
exercise of an Option or Stock Purchase Right that number of Shares having a Fair Market Value equal to the amount required to be withheld.
The Fair Market Value of the Shares to be withheld shall be determined on the date that
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the amount of tax to be withheld is to be determined. All elections by an Optionee to have Shares withheld for this purpose shall be made in
such form and under such conditions as the Administrator may deem necessary or advisable;
(xii) to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Option or Stock Purchase
Right previously granted by the Administrator;
(xiii) to make all other determinations deemed necessary or advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options or Stock Purchase Rights.
5. Eligibility. Nonstatutory Stock Options and Stock Purchase Rights may be granted to Service Providers. Incentive Stock Options may be
granted only to Employees.
6. Limitations.
(a) Each Option shall be designated in the Option Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock
Options are exercisable for the first time by the Optionee during any calendar year (under all plans of the Company and any Parent or
Subsidiary) exceeds $100,000, such Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order in which they were granted. The Fair Market Value of the Shares
shall be determined as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option or Stock Purchase Right shall confer upon an Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall they interfere in any way with the Optionee's right or the Company's right to
terminate such relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of Options:
(i) No Service Provider shall be granted, in any fiscal year of the Company, Options to purchase more than [_____] Shares.
(ii) In connection with his or her initial service, a Service Provider may be granted Options to purchase up to an additional [______] Shares
which shall not count against the limit set forth in subsection (i) above.
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(iii) The foregoing limitations shall be adjusted proportionately in connection with any change in the Company's capitalization as described in
Section 13.
(iv) If an Option is cancelled in the same fiscal year of the Company in which it was granted (other than in connection with a transaction
described in Section 13), the cancelled Option will be counted against the limits set forth in subsections (i) and (ii) above. For this purpose, if
the exercise price of an Option is reduced, the transaction will be treated as a cancellation of the Option and the grant of a new Option.
7. Term of Plan. Subject to Section 19 of the Plan, the Plan shall become effective upon its adoption by the Board. It shall continue in effect for
a term of ten (10) years unless terminated earlier under Section 15 of the Plan.
8. Term of Option. The term of each Option shall be stated in the Option Agreement. In the case of an Incentive Stock Option, the term shall be
ten (10) years from the date of grant or such shorter term as may be provided in the Option Agreement. Moreover, in the case of an Incentive
Stock Option granted to an Optionee who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Incentive Stock
Option shall be five (5) years from the date of grant or such shorter term as may be provided in the Option Agreement.
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the Shares to be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee described in paragraph (A) immediately above, the per Share exercise price shall be no
less than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based compensation" within the meaning of Section 162(m) of the Code, the
per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant.
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(iii) Notwithstanding the foregoing, Options may be granted with a per Share exercise price of less than 100% of the Fair Market Value per
Share on the date of grant pursuant to a merger or other corporate transaction.
(b) Waiting Period and Exercise Dates. At the time an Option is granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the Option may be exercised.
(c) Form of Consideration. The Administrator shall determine the acceptable form of consideration for exercising an Option, including the
method of payment. In the case of an Incentive Stock Option, the Administrator shall determine the acceptable form of consideration at the
time of grant. Such consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares acquired upon exercise of an option, have been owned by the Optionee for more than six
months on the date of surrender, and (B) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares
as to which said Option shall be exercised;
(v) consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan;
(vi) a reduction in the amount of any Company liability to the Optionee, including any liability attributable to the Optionee's participation in
any Company-sponsored deferred compensation program or arrangement;
(vii) any combination of the foregoing methods of payment; or
(viii) such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option granted hereunder shall be exercisable according to the terms of the Plan and
at such times and under such conditions as determined by the Administrator and set forth in the Option Agreement. Unless the Administrator
provides otherwise, vesting of Options granted hereunder shall be tolled during any unpaid leave of absence. An Option may not be exercised
for a fraction of a Share.
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An Option shall be deemed exercised when the Company receives: (i) written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised.
Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Option
Agreement and the Plan. Shares issued upon exercise of an Option shall be issued in the name of the Optionee or, if requested by the Optionee,
in the name of the Optionee and his or her spouse. Until the Shares are issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a shareholder shall
exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such
Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the
date the Shares are issued, except as provided in Section 13 of the Plan.
Exercising an Option in any manner shall decrease the number of Shares thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.
(b) Termination of Relationship as a Service Provider. If an Optionee ceases to be a Service Provider, other than upon the Optionee's death or
Disability, the Optionee may exercise his or her Option within such period of time as is specified in the Option Agreement to the extent that the
Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for three (3) months following the
Optionee's termination. If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the
unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time
specified by the Administrator, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a Service Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option Agreement to the extent the Option is vested on the date of termination
(but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in
the Option Agreement, the Option shall remain exercisable for twelve (12) months following the Optionee's termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to
the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified herein, the Option shall terminate, and
the Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service Provider, the Option may be exercised within such period of time as is specified in
the Option Agreement (but in no event
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later than the expiration of the term of such Option as set forth in the Notice of Grant), by the Optionee's estate or by a person who acquires the
right to exercise the Option by bequest or inheritance, but only to the extent that the Option is vested on the date of death. In the absence of a
specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following the Optionee's termination. If, at
the time of death, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall
immediately revert to the Plan. The Option may be exercised by the executor or administrator of the Optionee's estate or, if none, by the person
(s) entitled to exercise the Option under the Optionee's will or the laws of descent or distribution. If the Option is not so exercised within the
time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer to buy out for a payment in cash or Shares an Option previously granted based
on such terms and conditions as the Administrator shall establish and communicate to the Optionee at the time that such offer is made.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued either alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines that it will offer Stock Purchase Rights under the Plan, it shall
advise the offeree in writing or electronically, by means of a Notice of Grant, of the terms, conditions and restrictions related to the offer,
including the number of Shares that the offeree shall be entitled to purchase, the price to be paid, and the time within which the offeree must
accept such offer. The offer shall be accepted by execution of a Restricted Stock Purchase Agreement in the form determined by the
Administrator.
(b) Repurchase Option. Unless the Administrator determines otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of the purchaser's service with the Company for any reason
(including death or Disability). The purchase price for Shares repurchased pursuant to the Restricted Stock Purchase Agreement shall be the
original price paid by the purchaser and may be paid by cancellation of any indebtedness of the purchaser to the Company. The repurchase
option shall lapse at a rate determined by the Administrator.
(c) Other Provisions. The Restricted Stock Purchase Agreement shall contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Administrator in its sole discretion.
(d) Rights as a Shareholder. Once the Stock Purchase Right is exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon the records of the duly authorized transfer agent of the
Company. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Stock Purchase Right is
exercised, except as provided in Section 13 of the Plan.
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12. Non-Transferability of Options and Stock Purchase Rights. Unless determined otherwise by the Administrator, an Option or Stock Purchase
Right may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent
or distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee. If the Administrator makes an Option or Stock
Purchase Right transferable, such Option or Stock Purchase Right shall contain such additional terms and conditions as the Administrator
deems appropriate.
13. Adjustments Upon Changes in Capitalization, Dissolution, Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the shareholders of the Company, the number of shares of Common Stock
covered by each outstanding Option and Stock Purchase Right, and the number of shares of Common Stock which have been authorized for
issuance under the Plan but as to which no Options or Stock Purchase Rights have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option or Stock Purchase Right, as well as the price per share of Common Stock covered by each such
outstanding Option or Stock Purchase Right, shall be proportionately adjusted for any increase or decrease in the number of issued shares of
Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any
other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except
as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any
class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject
to an Option or Stock Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed transaction. The Administrator in its discretion may provide for an
Optionee to have the right to exercise his or her Option until ten (10) days prior to such transaction as to all of the Optioned Stock covered
thereby, including Shares as to which the Option would not otherwise be exercisable. In addition, the Administrator may provide that any
Company repurchase option applicable to any Shares purchased upon exercise of an Option or Stock Purchase Right shall lapse as to all such
Shares, provided the proposed dissolution or liquidation takes place at the time and in the manner contemplated. To the extent it has not been
previously exercised, an Option or Stock Purchase Right will terminate immediately prior to the consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option and Stock Purchase Right shall be assumed or an equivalent option or right substituted by the
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successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or
substitute for the Option or Stock Purchase Right, the Optionee shall fully vest in and have the right to exercise the Option or Stock Purchase
Right as to all of the Optioned Stock, including Shares as to which it would not otherwise be vested or exercisable. If an Option or Stock
Purchase Right becomes fully vested and exercisable in lieu of assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee in writing or electronically that the Option or Stock Purchase Right shall be fully vested and
exercisable for a period of fifteen (15) days from the date of such notice, and the Option or Stock Purchase Right shall terminate upon the
expiration of such period. For the purposes of this paragraph, the Option or Stock Purchase Right shall be considered assumed if, following the
merger or sale of assets, the option or right confers the right to purchase or receive, for each Share of Optioned Stock subject to the Option or
Stock Purchase Right immediately prior to the merger or sale of assets, the consideration (whether stock, cash, or other securities or property)
received in the merger or sale of assets by holders of Common Stock for each Share held on the effective date of the transaction (and if holders
were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided,
however, that if such consideration received in the merger or sale of assets is not solely common stock of the successor corporation or its
Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of
the Option or Stock Purchase Right, for each Share of Optioned Stock subject to the Option or Stock Purchase Right, to be solely common
stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Common Stock
in the merger or sale of assets.
14. Date of Grant. The date of grant of an Option or Stock Purchase Right shall be, for all purposes, the date on which the Administrator makes
the determination granting such Option or Stock Purchase Right, or such other later date as is determined by the Administrator. Notice of the
determination shall be provided to each Optionee within a reasonable time after the date of such grant.
15. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend, alter, suspend or terminate the Plan.
(b) Shareholder Approval. The Company shall obtain shareholder approval of any Plan amendment to the extent necessary and desirable to
comply with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration, suspension or termination of the Plan shall impair the rights of any
Optionee, unless mutually agreed otherwise between the Optionee and the Administrator, which agreement must be in writing and signed by
the Optionee and the Company. Termination of the Plan shall not affect the Administrator's ability to exercise the powers granted to it
hereunder with respect to Options granted under the Plan prior to the date of such termination.
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16. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the exercise of an Option or Stock Purchase Right unless the exercise of such
Option or Stock Purchase Right and the issuance and delivery of such Shares shall comply with Applicable Laws and shall be further subject to
the approval of counsel for the Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise of an Option or Stock Purchase Right, the Company may require the person
exercising such Option or Stock Purchase Right to represent and warrant at the time of any such exercise that the Shares are being purchased
only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required.
17. Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the
Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.
18. Reservation of Shares. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.
19. Shareholder Approval. The Plan shall be subject to approval by the shareholders of the Company within twelve (12) months after the date
the Plan is adopted. Such shareholder approval shall be obtained in the manner and to the degree required under Applicable Laws.
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BROCADE COMMUNICATIONS SYSTEMS, INC.
1999 STOCK PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
[Optionee's Name and Address]
You have been granted an option to purchase Common Stock of the Company, subject to the terms and conditions of the Plan and this Option
Agreement, as follows:
Grant Number
____________________________________
Date of Grant
____________________________________
Vesting Commencement Date
____________________________________
Exercise Price per Share
$___________________________________
Total Number of Shares Granted
____________________________________
Total Exercise Price
$___________________________________
Type of Option:
___
Incentive Stock Option
___
Nonstatutory Stock Option
Term/Expiration Date:
____________________________________
Vesting Schedule:
This Option may be exercised, in whole or in part, in accordance with the following schedule:
[25% of the Shares subject to the Option shall vest twelve months after the Vesting Commencement Date, and 1/48 of the Shares subject to the
Option shall vest each month thereafter, subject to the Optionee continuing to be a Service Provider on such dates].
Termination Period:
This Option may be exercised for three months after Optionee ceases to be a Service Provider. Upon the death or Disability of the Optionee,
this Option may be exercised for one year
after Optionee ceases to be a Service Provider. In no event shall this Option be exercised later than the Term/Expiration Date as provided
above.
II. AGREEMENT
A. Grant of Option.
The Plan Administrator of the Company hereby grants to the Optionee named in the Notice of Grant attached as Part I of this Agreement (the
"Optionee") an option (the "Option") to purchase the number of Shares, as set forth in the Notice of Grant, at the exercise price per share set
forth in the Notice of Grant (the "Exercise Price"), subject to the terms and conditions of the Plan, which is incorporated herein by reference.
Subject to Section 15(c) of the Plan, in the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this
Option Agreement, the terms and conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option ("ISO"), this Option is intended to qualify as an Incentive Stock Option under
Section 422 of the Code. However, if this Option is intended to be an Incentive Stock Option, to the extent that it exceeds the $100,000 rule of
Code Section 422(d) it shall be treated as a Nonstatutory Stock Option ("NSO").
B. Exercise of Option.
(a) Right to Exercise. This Option is exercisable during its term in accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option is exercisable by delivery of an exercise notice, in the form attached as Exhibit A (the "Exercise Notice"),
which shall state the election to exercise the Option, the number of Shares in respect of which the Option is being exercised (the "Exercised
Shares"), and such other representations and agreements as may be required by the Company pursuant to the provisions of the Plan. The
Exercise Notice shall be completed by the Optionee and delivered to [Title] of the Company. The Exercise Notice shall be accompanied by
payment of the aggregate Exercise Price as to all Exercised Shares. This Option shall be deemed to be exercised upon receipt by the Company
of such fully executed Exercise Notice accompanied by such aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of this Option unless such issuance and exercise complies with Applicable Laws. Assuming
such compliance, for income tax purposes the Exercised Shares shall be considered transferred to the Optionee on the date the Option is
exercised with respect to such Exercised Shares.
C. Method of Payment.
Payment of the aggregate Exercise Price shall be by any of the following, or a combination thereof, at the election of the Optionee:
1. cash; or
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2. check; or
3. consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan; or
4. surrender of other Shares which (i) in the case of Shares acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, AND (ii) have a Fair Market Value on the date of surrender equal to the aggregate Exercise Price
of the Exercised Shares; or
5. with the Administrator's consent, delivery of Optionee's promissory note (the "Note") in the form attached hereto as Exhibit C, in the amount
of the aggregate Exercise Price of the Exercised Shares together with the execution and delivery by the Optionee of the Security Agreement
attached hereto as Exhibit B. The Note shall bear interest at the "applicable federal rate" prescribed under the Code and its regulations at time
of purchase, and shall be secured by a pledge of the Shares purchased by the Note pursuant to the Security Agreement.
D. Non-Transferability of Option.
This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during
the lifetime of Optionee only by the Optionee. The terms of the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
E. Term of Option.
This Option may be exercised only within the term set out in the Notice of Grant, and may be exercised during such term only in accordance
with the Plan and the terms of this Option Agreement.
F. Tax Consequences.
Some of the federal tax consequences relating to this Option, as of the date of this Option, are set forth below. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE
SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
G. Exercising the Option.
1. Nonstatutory Stock Option. The Optionee may incur regular federal income tax liability upon exercise of a NSO. The Optionee will be
treated as having received compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the Fair Market Value of
the Exercised Shares on the date of exercise over their aggregate Exercise Price. If the Optionee is an Employee or a former Employee, the
Company will be required to withhold from his or her compensation or collect from Optionee and pay to the applicable taxing authorities an
amount in cash equal to a percentage of this compensation income at the time of exercise, and may refuse to
-3-
honor the exercise and refuse to deliver Shares if such withholding amounts are not delivered at the time of exercise.
2. Incentive Stock Option. If this Option qualifies as an ISO, the Optionee will have no regular federal income tax liability upon its exercise,
although the excess, if any, of the Fair Market Value of the Exercised Shares on the date of exercise over their aggregate Exercise Price will be
treated as an adjustment to alternative minimum taxable income for federal tax purposes and may subject the Optionee to alternative minimum
tax in the year of exercise. In the event that the Optionee ceases to be an Employee but remains a Service Provider, any Incentive Stock Option
of the Optionee that remains unexercised shall cease to qualify as an Incentive Stock Option and will be treated for tax purposes as a
Nonstatutory Stock Option on the date three (3) months and one (1) day following such change of status.
3. Disposition of Shares.
(a) NSO. If the Optionee holds NSO Shares for at least one year, any gain realized on disposition of the Shares will be treated as long-term
capital gain for federal income tax purposes.
(b) ISO. If the Optionee holds ISO Shares for at least one year after exercise and two years after the grant date, any gain realized on disposition
of the Shares will be treated as long-term capital gain for federal income tax purposes. If the Optionee disposes of ISO Shares within one year
after exercise or two years after the grant date, any gain realized on such disposition will be treated as compensation income (taxable at
ordinary income rates) to the extent of the excess, if any, of the lesser of (A) the difference between the Fair Market Value of the Shares
acquired on the date of exercise and the aggregate Exercise Price, or (B) the difference between the sale price of such Shares and the aggregate
Exercise Price. Any additional gain will be taxed as capital gain, short-term or long-term depending on the period that the ISO Shares were
held.
(c) Notice of Disqualifying Disposition of ISO Shares. If the Optionee sells or otherwise disposes of any of the Shares acquired pursuant to an
ISO on or before the later of (i) two years after the grant date, or (ii) one year after the exercise date, the Optionee shall immediately notify the
Company in writing of such disposition. The Optionee agrees that he or she may be subject to income tax withholding by the Company on the
compensation income recognized from such early disposition of ISO Shares by payment in cash or out of the current earnings paid to the
Optionee.
H. Entire Agreement; Governing Law.
The Plan is incorporated herein by reference. The Plan and this Option Agreement constitute the entire agreement of the parties with respect to
the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the
subject matter hereof, and may not be modified adversely to the Optionee's interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by the internal substantive laws, but not the choice of law rules, of Delaware.
-4-
I. NO GUARANTEE OF CONTINUED SERVICE.
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE
HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (AND NOT
THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES HEREUNDER). OPTIONEE
FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER
AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF
CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND
SHALL NOT INTERFERE WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S RELATIONSHIP
AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
By your signature and the signature of the Company's representative below, you and the Company agree that this Option is granted under and
governed by the terms and conditions of the Plan and this Option Agreement. Optionee has reviewed the Plan and this Option Agreement in
their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option Agreement and fully understands all
provisions of the Plan and Option Agreement. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations
of the Administrator upon any questions relating to the Plan and Option Agreement. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.
OPTIONEE:
BROCADE COMMUNICATIONS SYSTEMS, INC.
Signature
--------------------------------------By
-------------------------------Print Name
--------------------------------------Title
-------------------------------Residence Address
--------------------------------
-5-
CONSENT OF SPOUSE
The undersigned spouse of Optionee has read and hereby approves the terms and conditions of the Plan and this Option Agreement. In
consideration of the Company's granting his or her spouse the right to purchase Shares as set forth in the Plan and this Option Agreement, the
undersigned hereby agrees to be irrevocably bound by the terms and conditions of the Plan and this Option Agreement and further agrees that
any community property interest shall be similarly bound. The undersigned hereby appoints the undersigned's spouse as attorney-in-fact for the
undersigned with respect to any amendment or exercise of rights under the Plan or this Option Agreement.
Spouse of Optionee
EXHIBIT A
BROCADE COMMUNICATIONS SYSTEMS, INC.
1999 STOCK PLAN
EXERCISE NOTICE
Brocade Communications Systems, Inc.
1901 Guadalupe Parkway
San Jose CA 95131
Attention: Secretary
1. Exercise of Option. Effective as of today, ________________, _____, the undersigned ("Purchaser") hereby elects to purchase
______________ shares (the "Shares") of the Common Stock of Brocade Communications Systems, Inc. (the "Company") under and pursuant
to the Brocade Communications Systems, Inc. 1999 Stock Plan (the "Plan") and the Stock Option Agreement dated, _____ (the "Option
Agreement"). The purchase price for the Shares shall be $__, as required by the Option Agreement.
2. Delivery of Payment. Purchaser herewith delivers to the Company the full purchase price for the Shares.
3. Representations of Purchaser. Purchaser acknowledges that Purchaser has received, read and understood the Plan and the Option Agreement
and agrees to abide by and be bound by their terms and conditions.
4. Rights as Shareholder. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the Shares, no right to vote or receive dividends or any other rights as a shareholder shall exist with respect
to the Optioned Stock, notwithstanding the exercise of the Option. The Shares so acquired shall be issued to the Optionee as soon as practicable
after exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date of issuance,
except as provided in [Section 13] of the Plan.
5. Tax Consultation. Purchaser understands that Purchaser may suffer adverse tax consequences as a result of Purchaser's purchase or
disposition of the Shares. Purchaser represents that Purchaser has consulted with any tax consultants Purchaser deems advisable in connection
with the purchase or disposition of the Shares and that Purchaser is not relying on the Company for any tax advice.
6. Entire Agreement; Governing Law. The Plan and Option Agreement are incorporated herein by reference. This Agreement, the Plan and the
Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior
undertakings and agreements of the Company and Purchaser with respect to the subject matter hereof, and may not be modified adversely to
the Purchaser's interest except by means of a writing signed by the Company and Purchaser. This agreement is governed by the internal
substantive laws, but not the choice of law rules, of Delaware.
Submitted by:
Accepted by:
PURCHASER:
BROCADE COMMUNICATIONS SYSTEMS, INC.
------------------------------------Signature
---------------------------------------By
------------------------------------Print Name
---------------------------------------Its
Address:
Address:
_____________________________________
_____________________________________
_____________________________________
_____________________________________
Brocade Communications Systems, Inc.
1901 Guadalupe Parkway
San Jose CA 95131
---------------------------------------Date Received
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EXHIBIT B
SECURITY AGREEMENT
This Security Agreement is made as of __________, _____ between Brocade Communications Systems, Inc., a Delaware corporation
("Pledgee"), and _________________________ ("Pledgor").
Recitals
Pursuant to Pledgor's election to purchase Shares under the Option Agreement dated ________ (the "Option"), between Pledgor and Pledgee
under Pledgee's 1999 Stock Plan, and Pledgor's election under the terms of the Option to pay for such shares with his promissory note (the
"Note"), Pledgor has purchased _________ shares of Pledgee's Common Stock (the "Shares") at a price of $________ per share, for a total
purchase price of $__________. The Note and the obligations thereunder are as set forth in Exhibit C to the Option.
NOW, THEREFORE, it is agreed as follows:
1. Creation and Description of Security Interest. In consideration of the transfer of the Shares to Pledgor under the Option Agreement, Pledgor,
pursuant to the Delaware Commercial Code, hereby pledges all of such Shares (herein sometimes referred to as the "Collateral") represented by
certificate number ______, duly endorsed in blank or with executed stock powers, and herewith delivers said certificate to the Secretary of
Pledgee ("Pledgeholder"), who shall hold said certificate subject to the terms and conditions of this Security Agreement.
The pledged stock (together with an executed blank stock assignment for use in transferring all or a portion of the Shares to Pledgee if, as and
when required pursuant to this Security Agreement) shall be held by the Pledgeholder as security for the repayment of the Note, and any
extensions or renewals thereof, to be executed by Pledgor pursuant to the terms of the Option, and the Pledgeholder shall not encumber or
dispose of such Shares except in accordance with the provisions of this Security Agreement.
2. Pledgor's Representations and Covenants. To induce Pledgee to enter into this Security Agreement, Pledgor represents and covenants to
Pledgee, its successors and assigns, as follows:
(a) Payment of Indebtedness. Pledgor will pay the principal sum of the Note secured hereby, together with interest thereon, at the time and in
the manner provided in the Note.
(b) Encumbrances. The Shares are free of all other encumbrances, defenses and liens, and Pledgor will not further encumber the Shares without
the prior written consent of Pledgee.
(c) Margin Regulations. In the event that Pledgee's Common Stock is now or later becomes margin-listed by the Federal Reserve Board and
Pledgee is classified as a "lender" within the meaning of the regulations under
Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G"),
Pledgor agrees to cooperate with Pledgee in making any amendments to the Note or providing any additional collateral as may be necessary to
comply with such regulations.
3. Voting Rights. During the term of this pledge and so long as all payments of principal and interest are made as they become due under the
terms of the Note, Pledgor shall have the right to vote all of the Shares pledged hereunder.
4. Stock Adjustments. In the event that during the term of the pledge any stock dividend, reclassification, readjustment or other changes are
declared or made in the capital structure of Pledgee, all new, substituted and additional shares or other securities issued by reason of any such
change shall be delivered to and held by the Pledgee under the terms of this Security Agreement in the same manner as the Shares originally
pledged hereunder. In the event of substitution of such securities, Pledgor, Pledgee and Pledgeholder shall cooperate and execute such
documents as are reasonable so as to provide for the substitution of such Collateral and, upon such substitution, references to "Shares" in this
Security Agreement shall include the substituted shares of capital stock of Pledgor as a result thereof.
5. Options and Rights. In the event that, during the term of this pledge, subscription Options or other rights or options shall be issued in
connection with the pledged Shares, such rights, Options and options shall be the property of Pledgor and, if exercised by Pledgor, all new
stock or other securities so acquired by Pledgor as it relates to the pledged Shares then held by Pledgeholder shall be immediately delivered to
Pledgeholder, to be held under the terms of this Security Agreement in the same manner as the Shares pledged.
6. Default. Pledgor shall be deemed to be in default of the Note and of this Security Agreement in the event:
(a) Payment of principal or interest on the Note shall be delinquent for a period of 10 days or more; or
(b) Pledgor fails to perform any of the covenants set forth in the Option or contained in this Security Agreement for a period of 10 days after
written notice thereof from Pledgee.
In the case of an event of Default, as set forth above, Pledgee shall have the right to accelerate payment of the Note upon notice to Pledgor, and
Pledgee shall thereafter be entitled to pursue its remedies under the Delaware Commercial Code.
-2-
7. Release of Collateral. Subject to any applicable contrary rules under Regulation G, there shall be released from this pledge a portion of the
pledged Shares held by Pledgeholder hereunder upon payments of the principal of the Note. The number of the pledged Shares which shall be
released shall be that number of full Shares which bears the same proportion to the initial number of Shares pledged hereunder as the payment
of principal bears to the initial full principal amount of the Note.
8. Withdrawal or Substitution of Collateral. Pledgor shall not sell, withdraw, pledge, substitute or otherwise dispose of all or any part of the
Collateral without the prior written consent of Pledgee.
9. Term. The within pledge of Shares shall continue until the payment of all indebtedness secured hereby, at which time the remaining pledged
stock shall be promptly delivered to Pledgor, subject to the provisions for prior release of a portion of the Collateral as provided in paragraph 7
above.
10. Insolvency. Pledgor agrees that if a bankruptcy or insolvency proceeding is instituted by or against it, or if a receiver is appointed for the
property of Pledgor, or if Pledgor makes an assignment for the benefit of creditors, the entire amount unpaid on the Note shall become
immediately due and payable, and Pledgee may proceed as provided in the case of default.
11. Pledgeholder Liability. In the absence of willful or gross negligence, Pledgeholder shall not be liable to any party for any of his acts, or
omissions to act, as Pledgeholder.
12. Invalidity of Particular Provisions. Pledgor and Pledgee agree that the enforceability or invalidity of any provision or provisions of this
Security Agreement shall not render any other provision or provisions herein contained unenforceable or invalid.
13. Successors or Assigns. Pledgor and Pledgee agree that all of the terms of this Security Agreement shall be binding on their respective
successors and assigns, and that the term "Pledgor" and the term "Pledgee" as used herein shall be deemed to include, for all purposes, the
respective designees, successors, assigns, heirs, executors and administrators.
14. Governing Law. This Security Agreement shall be interpreted and governed under the internal substantive laws, but not the choice of law
rules, of Delaware.
-3-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
"PLEDGOR"
----------------------------------------------Signature
----------------------------------------------Print Name
Address:
---------------------------------------------------------------------------
"PLEDGEE"
Brocade Communications Systems, Inc.
a Delaware corporation
-----------------------------------------------
Signature
Print Name
Title
"PLEDGEHOLDER"
Secretary of Brocade Communications Systems, Inc.
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EXHIBIT C
NOTE
$_____________________ [City, State]
-------------, ----FOR VALUE RECEIVED, _______________ promises to pay to Brocade Communications Systems, Inc, a Delaware corporation (the
"Company"), or order, the principal sum of _______________________ ($_____________), together with interest on the unpaid principal
hereof from the date hereof at the rate of _______________ percent (____%) per annum, compounded semiannually.
Principal and interest shall be due and payable on __________, _____. Payment of principal and interest shall be made in lawful money of the
United States of America.
The undersigned may at any time prepay all or any portion of the principal or interest owing hereunder.
This Note is subject to the terms of the Option, dated as of ________________. This Note is secured in part by a pledge of the Company's
Common Stock under the terms of a Security Agreement of even date herewith and is subject to all the provisions thereof.
The holder of this Note shall have full recourse against the undersigned, and shall not be required to proceed against the collateral securing this
Note in the event of default.
In the event the undersigned shall cease to be an employee, director or consultant of the Company for any reason, this Note shall, at the option
of the Company, be accelerated, and the whole unpaid balance on this Note of principal and accrued interest shall be immediately due and
payable.
Should any action be instituted for the collection of this Note, the reasonable costs and attorneys' fees therein of the holder shall be paid by the
undersigned.
BROCADE COMMUNICATIONS SYSTEMS, INC.
1999 STOCK PLAN
NOTICE OF GRANT OF STOCK PURCHASE RIGHT
Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Notice of Grant.
[Grantee's Name and Address]
You have been granted the right to purchase Common Stock of the Company, subject to the Company's Repurchase Option and your ongoing
status as a Service Provider (as described in the Plan and the attached Restricted Stock Purchase Agreement), as follows:
Grant Number
_________________________
Date of Grant
_________________________
Price Per Share
$________________________
Total Number of Shares Subject
to This Stock Purchase Right
_________________________
Expiration Date:
_________________________
YOU MUST EXERCISE THIS STOCK PURCHASE RIGHT BEFORE THE EXPIRATION DATE OR IT WILL TERMINATE AND YOU
WILL HAVE NO FURTHER RIGHT TO PURCHASE THE SHARES. By your signature and the signature of the Company's representative
below, you and the Company agree that this Stock Purchase Right is granted under and governed by the terms and conditions of the [Plan
name] and the Restricted Stock Purchase Agreement, attached hereto as Exhibit A-1, both of which are made a part of this document. You
further agree to execute the attached Restricted Stock Purchase Agreement as a condition to purchasing any shares under this Stock Purchase
Right.
GRANTEE:
BROCADE COMMUNICATIONS SYSTEMS, INC.
-------------------------------Signature
------------------------------------By
-------------------------------Print Name
------------------------------------Title
EXHIBIT A-1
1999 STOCK PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Restricted Stock Purchase
Agreement.
WHEREAS the Purchaser named in the Notice of Grant, (the "Purchaser") is an Service Provider, and the Purchaser's continued participation is
considered by the Company to be important for the Company's continued growth; and
WHEREAS in order to give the Purchaser an opportunity to acquire an equity interest in the Company as an incentive for the Purchaser to
participate in the affairs of the Company, the Administrator has granted to the Purchaser a Stock Purchase Right subject to the terms and
conditions of the Plan and the Notice of Grant, which are incorporated herein by reference, and pursuant to this Restricted Stock Purchase
Agreement (the "Agreement").
NOW THEREFORE, the parties agree as follows:
1. Sale of Stock. The Company hereby agrees to sell to the Purchaser and the Purchaser hereby agrees to purchase shares of the Company's
Common Stock (the "Shares"), at the per Share purchase price and as otherwise described in the Notice of Grant.
2. Payment of Purchase Price. The purchase price for the Shares may be paid by delivery to the Company at the time of execution of this
Agreement of cash, a check, or some combination thereof.
3. Repurchase Option.
(a) In the event the Purchaser ceases to be a Service Provider for any or no reason (including death or disability) before all of the Shares are
released from the Company's Repurchase Option (see Section 4), the Company shall, upon the date of such termination (as reasonably fixed
and determined by the Company) have an irrevocable, exclusive option (the "Repurchase Option") for a period of sixty (60) days from such
date to repurchase up to that number of shares which constitute the Unreleased Shares (as defined in Section 4) at the original purchase price
per share (the "Repurchase Price"). The Repurchase Option shall be exercised by the Company by delivering written notice to the Purchaser or
the Purchaser's executor (with a copy to the Escrow Holder) AND, at the Company's option, (i) by delivering to the Purchaser or the
Purchaser's executor a check in the amount of the aggregate Repurchase Price, or (ii) by canceling an amount of the Purchaser's indebtedness to
the Company equal to the aggregate Repurchase Price, or (iii) by a combination of (i) and (ii) so that the combined payment and cancellation of
indebtedness equals the aggregate
Repurchase Price. Upon delivery of such notice and the payment of the aggregate Repurchase Price, the Company shall become the legal and
beneficial owner of the Shares being repurchased and all rights and interests therein or relating thereto, and the Company shall have the right to
retain and transfer to its own name the number of Shares being repurchased by the Company.
(b) Whenever the Company shall have the right to repurchase Shares hereunder, the Company may designate and assign one or more
employees, officers, directors or shareholders of the Company or other persons or organizations to exercise all or a part of the Company's
purchase rights under this Agreement and purchase all or a part of such Shares. If the Fair Market Value of the Shares to be repurchased on the
date of such designation or assignment (the "Repurchase FMV") exceeds the aggregate Repurchase Price of such Shares, then each such
designee or assignee shall pay the Company cash equal to the difference between the Repurchase FMV and the aggregate Repurchase Price of
such Shares.
4. Release of Shares From Repurchase Option.
(a) ___________________________ percent (______%) of the Shares shall be released from the Company's Repurchase Option [one year]
after the Date of Grant and __________________ percent (______%) of the Shares [at the end of each month thereafter], provided that the
Purchaser does not cease to be a Service Provider prior to the date of any such release.
(b) Any of the Shares that have not yet been released from the Repurchase Option are referred to herein as "Unreleased Shares."
(c) The Shares that have been released from the Repurchase Option shall be delivered to the Purchaser at the Purchaser's request (see
Section 6).
5. Restriction on Transfer. Except for the escrow described in Section 6 or the transfer of the Shares to the Company or its assignees
contemplated by this Agreement, none of the Shares or any beneficial interest therein shall be transferred, encumbered or otherwise disposed of
in any way until such Shares are released from the Company's Repurchase Option in accordance with the provisions of this Agreement, other
than by will or the laws of descent and distribution.
6. Escrow of Shares.
(a) To ensure the availability for delivery of the Purchaser's Unreleased Shares upon repurchase by the Company pursuant to the Repurchase
Option, the Purchaser shall, upon execution of this Agreement, deliver and deposit with an escrow holder designated by the Company (the
"Escrow Holder") the share certificates representing the Unreleased Shares, together with the stock assignment duly endorsed in blank, attached
hereto as Exhibit A-2. The Unreleased Shares and stock assignment shall be held by the Escrow Holder, pursuant to the Joint Escrow
Instructions of the Company and Purchaser attached hereto as Exhibit A-3, until such time as the Company's
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Repurchase Option expires. As a further condition to the Company's obligations under this Agreement, the Company may require the spouse of
Purchaser, if any, to execute and deliver to the Company the Consent of Spouse attached hereto as Exhibit A-4.
(b) The Escrow Holder shall not be liable for any act it may do or omit to do with respect to holding the Unreleased Shares in escrow while
acting in good faith and in the exercise of its judgment.
(c) If the Company or any assignee exercises the Repurchase Option hereunder, the Escrow Holder, upon receipt of written notice of such
exercise from the proposed transferee, shall take all steps necessary to accomplish such transfer.
(d) When the Repurchase Option has been exercised or expires unexercised or a portion of the Shares has been released from the Repurchase
Option, upon request the Escrow Holder shall promptly cause a new certificate to be issued for the released Shares and shall deliver the
certificate to the Company or the Purchaser, as the case may be.
(e) Subject to the terms hereof, the Purchaser shall have all the rights of a shareholder with respect to the Shares while they are held in escrow,
including without limitation, the right to vote the Shares and to receive any cash dividends declared thereon. If, from time to time during the
term of the Repurchase Option, there is (i) any stock dividend, stock split or other change in the Shares, or (ii) any merger or sale of all or
substantially all of the assets or other acquisition of the Company, any and all new, substituted or additional securities to which the Purchaser is
entitled by reason of the Purchaser's ownership of the Shares shall be immediately subject to this escrow, deposited with the Escrow Holder and
included thereafter as "Shares" for purposes of this Agreement and the Repurchase Option.
7. Legends. The share certificate evidencing the Shares, if any, issued hereunder shall be endorsed with the following legend (in addition to any
legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS UPON TRANSFER AND
RIGHTS OF REPURCHASE AS SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY
OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
8. Adjustment for Stock Split. All references to the number of Shares and the purchase price of the Shares in this Agreement shall be
appropriately adjusted to reflect any stock split, stock dividend or other change in the Shares that may be made by the Company after the date
of this Agreement.
9. Tax Consequences. The Purchaser has reviewed with the Purchaser's own tax advisors the federal, state, local and foreign tax consequences
of this investment and the transactions
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contemplated by this Agreement. The Purchaser is relying solely on such advisors and not on any statements or representations of the Company
or any of its agents. The Purchaser understands that the Purchaser (and not the Company) shall be responsible for the Purchaser's own tax
liability that may arise as a result of the transactions contemplated by this Agreement. The Purchaser understands that Section 83 of the Internal
Revenue Code of 1986, as amended (the "Code"), taxes as ordinary income the difference between the purchase price for the Shares and the
Fair Market Value of the Shares as of the date any restrictions on the Shares lapse. In this context, "restriction" includes the right of the
Company to buy back the Shares pursuant to the Repurchase Option. The Purchaser understands that the Purchaser may elect to be taxed at the
time the Shares are purchased rather than when and as the Repurchase Option expires by filing an election under Section 83(b) of the Code
with the IRS within 30 days from the date of purchase. The form for making this election is attached as Exhibit A-5 hereto.
THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE RESPONSIBILITY AND NOT THE COMPANY'S TO
FILE TIMELY THE ELECTION UNDER SECTION
83(b), EVEN IF THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON THE
PURCHASER'S BEHALF.
10. General Provisions.
(a) This Agreement shall be governed by the internal substantive laws, but not the choice of law rules of Delaware. This Agreement, subject to
the terms and conditions of the Plan and the Notice of Grant, represents the entire agreement between the parties with respect to the purchase of
the Shares by the Purchaser. Subject to Section 15(c) of the Plan, in the event of a conflict between the terms and conditions of the Plan and the
terms and conditions of this Agreement, the terms and conditions of the Plan shall prevail. Unless otherwise defined herein, the terms defined
in the Plan shall have the same defined meanings in this Agreement.
(b) Any notice, demand or request required or permitted to be given by either the Company or the Purchaser pursuant to the terms of this
Agreement shall be in writing and shall be deemed given when delivered personally or deposited in the U.S. mail, First Class with postage
prepaid, and addressed to the parties at the addresses of the parties set forth at the end of this Agreement or such other address as a party may
request by notifying the other in writing.
Any notice to the Escrow Holder shall be sent to the Company's address with a copy to the other party hereto.
(c) The rights of the Company under this Agreement shall be transferable to any one or more persons or entities, and all covenants and
agreements hereunder shall inure to the benefit of, and be enforceable by the Company's successors and assigns. The rights and obligations of
the Purchaser under this Agreement may only be assigned with the prior written consent of the Company.
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(d) Either party's failure to enforce any provision of this Agreement shall not in any way be construed as a waiver of any such provision, nor
prevent that party from thereafter enforcing any other provision of this Agreement. The rights granted both parties hereunder are cumulative
and shall not constitute a waiver of either party's right to assert any other legal remedy available to it.
(e) The Purchaser agrees upon request to execute any further documents or instruments necessary or desirable to carry out the purposes or
intent of this Agreement.
(f) PURCHASER ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO SECTION 4 HEREOF IS
EARNED ONLY BY CONTINUING SERVICE AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (AND NOT THROUGH
THE ACT OF BEING HIRED OR PURCHASING SHARES HEREUNDER). PURCHASER FURTHER ACKNOWLEDGES AND
AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET
FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE
PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH PURCHASER'S
RIGHT OR THE COMPANY'S RIGHT TO TERMINATE PURCHASER'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME,
WITH OR WITHOUT CAUSE.
By Purchaser's signature below, Purchaser represents that he or she is familiar with the terms and provisions of the Plan, and hereby accepts
this Agreement subject to all of the terms and provisions thereof. Purchaser has reviewed the Plan and this Agreement in their entirety, has had
an opportunity to obtain the advice of counsel prior to executing this Agreement and fully understands all provisions of this Agreement.
Purchaser agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising
under the Plan or this Agreement. Purchaser further agrees to notify the Company upon any change in the residence indicated in the Notice of
Grant.
DATED: ---------------------------PURCHASER:
Brocade Communications Systems, Inc.
----------------------------------Signature
---------------------------------By
----------------------------------Print Name
---------------------------------Title
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EXHIBIT A-2
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, __________________________, hereby sell, assign and transfer unto (__________) shares of the Common Stock
of Brocade Communications Systems, Inc. standing in my name of the books of said corporation represented by Certificate No. _____ herewith
and do hereby irrevocably constitute and appoint ___________ to transfer the said stock on the books of the within named corporation with full
power of substitution in the premises.
This Stock Assignment may be used only in accordance with the Restricted Stock Purchase Agreement (the "Agreement")
between________________________ and the undersigned dated ______________, _____.
Dated: _______________, _____
Signature:______________________________
INSTRUCTIONS: Please do not fill in any blanks other than the signature line. The purpose of this assignment is to enable the Company to
exercise the Repurchase Option, as set forth in the Agreement, without requiring additional signatures on the part of the Purchaser.
EXHIBIT A-3
JOINT ESCROW INSTRUCTIONS
--------, -Corporate Secretary
Brocade Communications Systems, Inc.
1901 Guadalupe Parkway
San Jose CA 95131
Dear __________:
As Escrow Agent for both Brocade Communications Systems, Inc., a Delaware corporation (the "Company"), and the undersigned purchaser of
stock of the Company (the "Purchaser"), you are hereby authorized and directed to hold the documents delivered to you pursuant to the terms
of that certain Restricted Stock Purchase Agreement ("Agreement") between the Company and the undersigned, in accordance with the
following instructions:
1. In the event the Company and/or any assignee of the Company (referred to collectively as the "Company") exercises the Company's
Repurchase Option set forth in the Agreement, the Company shall give to Purchaser and you a written notice specifying the number of shares
of stock to be purchased, the purchase price, and the time for a closing hereunder at the principal office of the Company. Purchaser and the
Company hereby irrevocably authorize and direct you to close the transaction contemplated by such notice in accordance with the terms of said
notice.
2. At the closing, you are directed (a) to date the stock assignments necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate evidencing the shares of stock to be transferred, to the Company or its
assignee, against the simultaneous delivery to you of the purchase price (by cash, a check, or some combination thereof) for the number of
shares of stock being purchased pursuant to the exercise of the Company's Repurchase Option.
3. Purchaser irrevocably authorizes the Company to deposit with you any certificates evidencing shares of stock to be held by you hereunder
and any additions and substitutions to said shares as defined in the Agreement. Purchaser does hereby irrevocably constitute and appoint you as
Purchaser's attorney-in-fact and agent for the term of this escrow to execute with respect to such securities all documents necessary or
appropriate to make such securities negotiable and to complete any transaction herein contemplated, including but not limited to the filing with
any applicable state blue sky authority of any required applications for consent to, or notice of transfer of, the securities. Subject to the
provisions of this paragraph 3, Purchaser shall exercise all rights and privileges of a shareholder of the Company while the stock is held by you.
4. Upon written request of the Purchaser, but no more than once per calendar year, unless the Company's Repurchase Option has been
exercised, you shall deliver to Purchaser a certificate or certificates representing so many shares of stock as are not then subject to the
Company's Repurchase Option. Within 90 days after Purchaser ceases to be a Service Provider, you shall deliver to Purchaser a certificate or
certificates representing the aggregate number of shares held or issued pursuant to the Agreement and not purchased by the Company or its
assignees pursuant to exercise of the Company's Repurchase Option.
5. If at the time of termination of this escrow you should have in your possession any documents, securities, or other property belonging to
Purchaser, you shall deliver all of the same to Purchaser and shall be discharged of all further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are specifically set forth herein and may rely and shall be protected in
relying or refraining from acting on any instrument reasonably believed by you to be genuine and to have been signed or presented by the
proper party or parties. You shall not be personally liable for any act you may do or omit to do hereunder as Escrow Agent or as attorney-infact for Purchaser while acting in good faith, and any act done or omitted by you pursuant to the advice of your own attorneys shall be
conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law, and are hereby expressly authorized to comply with and obey orders, judgments
or decrees of any court. In case you obey or comply with any such order, judgment or decree, you shall not be liable to any of the parties hereto
or to any other person, firm or corporation by reason of such compliance, notwithstanding any such order, judgment or decree being
subsequently reversed, modified, annulled, set aside, vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity, authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called for hereunder.
10. You shall not be liable for the outlawing of any rights under the statute of limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. You shall be entitled to employ such legal counsel and other experts as you may deem necessary properly to advise you in connection with
your obligations hereunder, may rely upon the advice of such counsel, and may pay such counsel reasonable compensation therefor.
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12. Your responsibilities as Escrow Agent hereunder shall terminate if you shall cease to be an officer or agent of the Company or if you shall
resign by written notice to each party. In the event of any such termination, the Company shall appoint a successor Escrow Agent.
13. If you reasonably require other or further instruments in connection with these Joint Escrow Instructions or obligations in respect hereto,
the necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with respect to the delivery and/or ownership or right of possession of the
securities held by you hereunder, you are authorized and directed to retain in your possession without liability to anyone all or any part of said
securities until such disputes shall have been settled either by mutual written agreement of the parties concerned or by a final order, decree or
judgment of a court of competent jurisdiction after the time for appeal has expired and no appeal has been perfected, but you shall be under no
duty whatsoever to institute or defend any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail with postage and fees prepaid, addressed to each of the other parties
thereunto entitled at the following addresses or at such other addresses as a party may designate by ten days' advance written notice to each of
the other parties hereto.
COMPANY:
Brocade Communications Systems, Inc.
1901 Guadalupe Parkway
San Jose CA 95131
PURCHASER:
ESCROW AGENT:
Corporate Secretary
Brocade Communications Systems, Inc.
1901 Guadalupe Parkway
San Jose CA 95131
16. By signing these Joint Escrow Instructions, you become a party hereto only for the purpose of said Joint Escrow Instructions; you do not
become a party to the Agreement.
17. This instrument shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and permitted assigns.
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18. These Joint Escrow Instructions shall be governed by, and construed and enforced in accordance with, the internal substantive laws, but not
the choice of law rules, of Delaware.
Very truly yours,
Brocade Communications Systems, Inc.
By
Title
PURCHASER:
Signature
Print Name
ESCROW AGENT:
Corporate Secretary
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EXHIBIT A-4
CONSENT OF SPOUSE
I, ____________________, spouse of ___________________, have read and approve the foregoing Restricted Stock Purchase Agreement (the
"Agreement"). In consideration of the Company's grant to my spouse of the right to purchase shares of Brocade Communications Systems, Inc.,
as set forth in the Agreement, I hereby appoint my spouse as my attorney-in-fact in respect to the exercise of any rights under the Agreement
and agree to be bound by the provisions of the Agreement insofar as I may have any rights in said Agreement or any shares issued pursuant
thereto under the community property laws or similar laws relating to marital property in effect in the state of our residence as of the date of the
signing of the foregoing Agreement.
Dated: _______________, _____
Signature of Spouse
EXHIBIT A-5
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended, to include in taxpayer's
gross income for the current taxable year the amount of any compensation taxable to taxpayer in connection with his or her receipt of the
property described below:
1. The name, address, taxpayer identification number and taxable year of the undersigned are as follows:
NAME:
TAXPAYER:
SPOUSE:
TAXPAYER:
SPOUSE:
ADDRESS:
IDENTIFICATION NO.:
TAXABLE YEAR:
2. The property with respect to which the election is made is described as follows: shares (the "Shares") of the Common Stock of Brocade
Communications Systems, Inc. (the "Company").
3. The date on which the property was transferred is: , .
4. The property is subject to the following restrictions:
The Shares may be repurchased by the Company, or its assignee, upon certain events. This right lapses with regard to a portion of the Shares
based on the continued performance of services by the taxpayer over time.
5. The fair market value at the time of transfer, determined without regard to any restriction other than a restriction which by its terms will
never lapse, of such property is:
$---------------.
6. The amount (if any) paid for such property is:
$---------------.
The undersigned has submitted a copy of this statement to the person for whom the services were performed in connection with the
undersigned's receipt of the above-described property. The transferee of such property is the person performing the services in connection with
the transfer of said property.
The undersigned understands that the foregoing election may not be revoked except with the consent of the Commissioner.
Dated: _________________, ____ __________________________________ Taxpayer
The undersigned spouse of taxpayer joins in this election.
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Dated: _________________, ____ __________________________________
Spouse of Taxpayer
EXHIBIT 10.14
DELL SOFTWARE LICENSE AGREEMENT
This is a legal agreement between you, the user, and Dell Products, L.P. By opening the software packet(s), you agree to be bound by the terms
of this agreement. If you do not agree to these terms, promptly return all software items (disks, written materials, and packaging) for a full
refund.
You may use one copy of the software on only one computer at a time. If you have multiple licenses for the software, you may use as many
copies at any time as you have licenses. "Use" means loaded in temporary memory or permanent storage on the computer. Installation on a
network server solely for distribution to other computers is not "use", if you have a separate license for each computer to which the software is
distributed. If users will exceed the number of licenses, you must have a reasonable process to assure that the number of persons using the
software concurrently does not exceed the number of licenses.
The software is protected by United States copyright laws and international treaties. You may make one copy of the software solely for backup
or archival purposes or transfer it to a single hard disk provided you keep the original solely for backup or archival purposes. You may not rent
or lease the software or copy the written materials accompanying the software, but you may transfer the software and all accompanying
materials on a permanent basis, if you retain no copies and the recipient agrees to the terms, hereof. Any transfer must include the most recent
update and all prior versions. You may not reverse engineer, decompile or disassemble the software. If the package contains 3.5" and 5.25"
disks, you may use only the disks appropriate for your computer. You may not use the disks on another computer or network, or loan, rent,
lease, or transfer them to another user except as permitted by this agreement.
LIMITED WARRANTY
Dell warrants that the software disks are free from defects in materials and workmanship under normal use for ninety (90) days from the date
you receive them. This warranty is limited to you and is not transferable. Any implied warranties are limited to 90 days. Some jurisdictions do
not allow limits on the duration of an implied warranty, so this limitation may not apply to you. The entire liability of Dell and its suppliers,
and your exclusive remedy, shall be
(a) return of the price paid for the software or (b) replacement of any disk that does not meet this warranty which is sent with a return
authorization number to Dell, at your cost and risk. This limited warranty is void if any disk damage has resulted from accident, abuse,
misapplication, or service or modification by someone other than Dell. Any replacement disk is warranted for the remaining original warranty
period or 30 days, whichever is longer. Dell does not warrant that the functions of the software will meet your requirements or that operation of
the software will be uninterrupted or error free. You assume responsibility for selecting the software to achieve your intended results, and for
the use and results obtained from the software. Dell disclaims all other warranties, express or implied, including but not limited to implied
warranties of merchantability and fitness for a particular purpose, for the software and all accompanying written materials. This limited
warranty gives you specific legal rights. You may have others, which vary from jurisdiction to jurisdiction.
In no event shall Dell or its suppliers be liable for any damages whatsoever (including, without limitation, damages for loss of business profits,
business interruption, loss of business information, or other pecuniary loss) arising out of use or inability to use the software, even if advised of
the possibility of such damages. Because some jurisdictions do not allow an exclusion or limitation of liability for consequential or incidental
damages, the above limitation may not apply to you.
U.S. GOVERNMENT RESTRICTED RIGHTS
The software and documentation are provided with Restricted Rights. Use, duplication or disclosure by the Government is subject to
restrictions as set forth in subparagraph (c)(1)(ii) of the Rights in Technical Data and Computer Software clause at DFARS 252.227-7013 or
subparagraphs (c)(1) and (2) of the Commercial Computer Software-Restricted Rights at 48 CFR 52.227-19, as applicable.
Contractor/manufacturer is Dell Products, L.P., One Dell Way, Round Rock, TX 78682. This license is effective until terminated. It will
terminate upon the conditions set forth above or if you fail to comply with any term hereof. Upon termination, you agree that the software and
accompanying materials, and all copies thereof, will be destroyed. This agreement is governed by the laws of the State of Texas. You
acknowledge that you have read this agreement, you understand it, you agree to be bound by its terms, and that this is the complete and
exclusive statement of the agreement between you and Dell regarding the software.
This Master Purchase Agreement (this "Agreement") by and between Brocade Communications Systems, Inc. ("BROCADE(R)"), a
corporation registered in California and located for the purposes of this Agreement at 1901 Guadalupe Parkway, San Jose, California 95131
and Dell Products L.P., a Texas limited partnership ("Dell") located at One Dell Way, Round Rock, Texas 78682, is effective as of November
1, 1998 ("Effective Date"). Dell Computer Corporation ("DCC") and any of its corporate subsidiaries or Affiliates may purchase Products (as
defined hereafter) and enjoy the benefits of this Agreement, but all liabilities and obligations incurred by Dell, DCC, or any of DCC's
subsidiaries or Affiliates under this Agreement will be the sole responsibility of Dell. This Master Purchase Agreement and its Schedules are
hereinafter collectively referred to as the "Agreement."
1.0 Introduction
This Agreement sets forth the only terms and conditions under which Dell shall purchase products from BROCADE. For the purpose of this
Agreement, products include any software and/or documentation that accompany the products (hereinafter collectively referred to as
"Products"). The terms and conditions of this Agreement shall apply to all purchase orders ("Dell PO(s)") issued by Dell for the purchase of
Products. In the event of any conflict between the terms of Dell PO(s) or BROCADE order acknowledgment(s) and this Agreement, the terms
of this Agreement will prevail. Any additional terms contained in Dell PO(s) or BROCADE order acknowledgment(s) shall not be binding
unless accepted by the other party in writing.
2.0 Term and Termination
The initial term of this Agreement shall be [*] beginning on the Effective Date. This Agreement will automatically renew for additional oneyear terms unless one party informs the other of its intent to let the Agreement expire at least one hundred and twenty (120) days before the end
of the then current term. Either party may terminate this Agreement upon written notice based on the material breach of the other party,
provided that the party alleged to be in material breach receives thirty (30) days written notice stating the cause and an additional thirty (30)
days to cure.
3.0 Price
3.1 The initial price for each Product purchased hereunder shall be agreed to by the parties and included in the applicable Schedule. The unit
price for each Product will be reviewed on a quarterly basis or as otherwise required by Dell as a result of competitive pressures in quarterly
business review meetings ("QBRs"). Product prices shall not be increased unless mutually agreed to by the parties. If prices are changed, the
applicable Schedule shall be updated to reflect the new price. Worldwide prices will be negotiated between BROCADE and Dell Worldwide
Procurement at Dell's corporate headquarters in Austin, Texas.
3.2 Dell expects material cost reductions to be worked aggressively by BROCADE. BROCADE shall review with Dell, on an ongoing basis, a
value chain analysis for each Product and all costs associated with manufacturing each Product. [*] All prices shall be in United States dollars.
Prices set forth in this Agreement include all charges for Product(s) except for [*] charges. Dell shall pay all such [*] charges to the extent such
charges are listed as a separate line item in BROCADE's invoices. Dell shall not be responsible for any duties, fees, taxes or other charges (i)
that BROCADE fails to disclose on its on invoices for Product(s), (ii) which are imposed on BROCADE's net income, or (iii) for which Dell
has submitted an appropriate exemption certificate or other equivalent documentation for taxing jurisdictions outside of the United States
("Exemption Documentation"). Dell shall pay BROCADE all additional taxes that result from any failure by Dell to provide appropriate
Exemption Documentation. Additionally, it is necessary for Dell to determine its business exposure resulting from the volatility of some
foreign
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*Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.
currencies. The currency content from the various elements of Product cost are required. To the extent available from BROCADE's third party
contract manufacturer, this currency content shall be broken out by labor, material, overhead and profit as a percentage of the total Product
cost. BROCADE shall use commercially reasonable efforts to provide a complete currency content analysis for 'A' items on a quarterly basis.
A typical example of a currency analysis for a component purchased from a Korean company, manufactured in Taiwan, using Japanese,
Korean and Malaysian components might show foreign content in at least four (4) currencies, as follows:
Element
------Material
Labor and Overhead
Profit
Currency Content
---------------Japanese yen (15%), Korean Won (12%) and Malaysian Ringgit (32%)
New Taiwan Dollar (12%)
Korean Won (55%)
3.3 BROCADE represents and warrants that the prices for Products shall not be less favorable than prices applicable to sales by BROCADE to
any other customer purchasing like quantities of substantially comparable products. If at any time during the term of this Agreement
BROCADE accords to any other such customer more favorable prices, BROCADE shall immediately offer to sell the Products to Dell at
equivalent prices accorded to such other customer.
4.0 Payment
4.1 Payment for Dell PO(s) with Dell's European Manufacturing Facility ("EMF") will be made [*] end of month from the later of the date of
BROCADE'S invoice or receipt of the Products by Dell.
4.2 For Dell PO(s) issued by all other Dell manufacturing locations, payment will be made [*] from the later of the date of BROCADE'S
invoice or receipt of Products by Dell.
4.3 In the event taxes are required to be withheld by any foreign taxing entity on payments due BROCADE, Dell will deduct such taxes from
any amount owed BROCADE and pay them to the appropriate taxing authority. Dell will provide BROCADE a receipt for such taxes.
4.4 All will be in U.S. dollars unless the parties otherwise agree.
5.0 Delivery of Products
5.1 The parties recognize that Products may be provided to Dell in two ways: (1) from an [*] or (2) directly to Dell without use of [*]. The
parties recognize that some terms and conditions will be the same in both situations and others terms may vary depending on the method by
which Dell receives the Products. The parties, therefore, agree that the applicable provisions shall be as follows:
5.2 Provisions applicable to Products whether or not [*] is used:
5.2.1 [*] BROCADE agrees to fill all accepted Dell POs and will use commercially reasonable efforts to reduce the lead-time for Products
during the term of this Agreement. Time is of the essence for all deliveries. BROCADE shall not ship Products to Dell that were manufactured
in locations not approved in advance and in writing by Dell.
5.2.2 BROCADE will handle, pack, mark, and ship the Products in accordance with Dell's packing and labeling specifications as set forth in
Schedules D, E and F attached hereto (and as modified by Dell from time to time). Dell may inspect each delivery of Products and perform
those tests it deems necessary to determine if the Products are acceptable. Dell shall inspect the Products within thirty (30) days of delivery to
Dell. Dell shall be deemed to have accepted the Products only in the event that Dell: (i) fails to accept or reject the Products on or before the
expiration of the thirty (30) day inspection period, (ii) explicitly accepts the Products in writing, or (iii) delivers the Products to any customer.
Dell's acceptance of any Products shall in no way be construed as a representation by Dell that Dell has completely tested the Products or that
such Products comply with their specifications or conform to any other warranties made by BROCADE under this Agreement. Dell's
acceptance of any Product shall in no way negate any warranty provided under this Agreement or affect any other provision of this Agreement.
Dell's remedy in the event of non-acceptance is a warranty return for credit. Except as expressly set forth in this Agreement, any
3 of 16
*Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.
expenditures or commitments by BROCADE in anticipation of Dell's requirements shall be at BROCADE'S sole risk and expense.
5.3 Delivery to Dell [*]:
5.3.1 Unless Dell specifically requests that Product be delivered directly to Dell, all Products delivered under this Agreement to Dell shall [*]
BROCADE agrees to establish [*] requested by Dell as volume thresholds per location are met as agreed by the parties. In advance of
establishing [*] to handle inventory requirements for AMF. In advance of establishing [*] BROCADE has agreed to support inventory
requirements for these regions from the [*] is to be used to support particular [*] held by BROCADE.
5.3.2 Delivery shall take place Deliver Duty Unpaid ("DDU") (Incoterms 1990) [*] upon withdrawal of Product(s) by Dell from [*] with the
exception of [*] Deliveries to Dell's manufacturing location from [*] shall take place [*].
5.3.3 BROCADE agrees to maintain [*] in quantities equal to [*] unless otherwise agreed to in writing by the applicable Dell region. For the
first four (4) weeks of operation, the [*]. After four (4) weeks of operation, [*]. The parties will work together to determine the appropriate [*]
required for End of Life ("EOL") situations. BROCADE agrees to replenish the [*] in accordance with Section 6.1, and additionally will make
commercially reasonable efforts to ensure the required [*] is on hand at all times. Dell and BROCADE will meet periodically for an [*]. At this
meeting [*] at both Dell and BROCADE will be reviewed, along with any changes in Dell [*].
5.3.4 On approximately a monthly basis, Dell will provide rolling six (6) month forecasts of projected purchases of Products for AMF, EMF,
APCC, CCC and possibly other [*] locations, but any such forecasts provided by Dell are for planning purposes only and do not constitute a
commitment of any type by Dell. No later than [*] after receipt of the Dell six (6) month forecast, BROCADE agrees to [*] for a rolling six (6)
month period (current month plus five). [*] In the event that the Dell forecast is in apparent conflict with the Dell orders received by
BROCADE (including reschedule and cancellation signals), the parties agree to meet promptly upon BROCADE's request to discuss the
apparent conflict with the intent of resolving the inconsistency. Such meeting shall include the Dell commodity manager or appropriate
functional equivalent.
5.3.5 Dell will transmit Dell PO(s) by facsimile or other agreed upon means, on a monthly basis, to cover Dell's forecasted requirements for the
next [*]. Such Dell PO(s) will be continually updated to reflect Dell's next [*] forecast. All orders shall be in writing, shall reference this
Agreement and shall contain (as a minimum) the following information: price, part number, quantity of each Product required, delivery date
and [*]. BROCADE will send Dell an acknowledgement within [*] of receipt of the Dell PO. In order to request particular shipments of
Product(s) [*] Dell shall issue written orders authorizing BROCADE to [*] Dell's transmission of a [*] is BROCADE'S only authorization to
deliver Products to Dell and invoice Dell for the part numbers and quantities set forth in the [*]. Title and risk of loss for all Products shall
remain with BROCADE until the Products are [*].
5.4 Delivery directly to Dell without using [*]. If Dell authorizes BROCADE to deliver Product directly from BROCADE to Dell without
using [*] the following terms shall apply:
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5.4.1 Dell will transmit a Dell PO by facsimile or other agreed upon means, on a monthly basis, to cover Dell's forecasted requirements for the
next [*]. All orders shall be in writing, shall reference this Agreement and shall contain (at a minimum) the following information: price, part
number, quantity of each Product required, delivery date and [*] BROCADE will send Dell an acknowledgement within [*] of receipt of the
Dell PO. BROCADE will then schedule delivery of each Product to the [*] on the delivery date listed in the Dell PO. Delivery will not be
deemed to be complete until Products have been actually delivered to the [*] BROCADE shall not make deliveries more than [*] earlier than
the delivery date listed in the Dell PO. If Products are delivered more than [*] early, Dell may: [*]. If only a portion of the Products are
available for shipment to meet the delivery date, BROCADE will notify Dell and ship the available Products unless otherwise directed by Dell.
[*]
5.4.2 Dell's transmission of a Dell PO is BROCADE'S only authorization to deliver Products to Dell and invoice Dell for the part numbers and
quantities set forth in the Dell PO. Dell's obligation to furnish Dell POs in advance of delivery does not affect, in any way, [*] on a line item
basis, as set forth in
Section 6.0 of this Agreement. [*]
6.0 Reschedule and Cancellation
6.1 Reschedule In (Increase). Dell shall be permitted to increase the quantities scheduled to be delivered [*] without cost or liability for
quantities of Product(s) as set forth in the tables below, with the limitation that each line item on an individual Dell PO may be subject to
increase only [*]. Both parties acknowledge that the SilkWorm(TM) Express product will be used for early time-to-market, and will be short
lived. The expected launch date for SilkWorm(TM) Express is January 15, 1999, [*]. For the SilkWorm(TM) Express Product, increase of
orders by Dell shall be permitted as follows:
Days from planned
delivery to [*]
0 - 30
Increase Amount
[*]
31 - 45
46 - 60
61 - 90
91+
[*] increase of orders by Dell shall be permitted as follows:
Days from planned
delivery to [*]
0 - 14
Increase Amount
[*]
15 - 30
31 - 60
61 - 90
91+
By way of example, if on January 1 Dell wanted to increase the quantities scheduled to be delivered on January 31 (31 days notice),
BROCADE agrees to increase the originally scheduled delivery quantity by a minimum of [*] Throughout this Agreement, any reference to
days means calendar days unless otherwise specified.
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has been requested with respect to the omitted portions.
6.2 Reschedule Out (Push Out). Dell shall be permitted to extend the delivery date for orders without cost or liability for quantities of Product
(s) as set forth in the tables below, with the limitation that (a) for the SilkWorm(TM) Express product, delivery dates for each line item on an
individual Dell PO may be [*] and (b) for all other products, delivery dates for each line item on an individual Dell PO may be [*].
For the SilkWorm(TM) Express Product, Dell may extend delivery dates for orders as follows:
Days from planned
delivery to [*]
0 - 30
31 - 45
46 - 60
61 - 90
91+
Reschedule Amount
[*]
[*] Dell may extend delivery dates for orders as follows:
Days from planned
delivery to [*]
0 - 14
15 - 30
31 - 60
61+
Reschedule Amount
[*]
6.3 Cancellation:
6.3.1 Dell may cancel Dell PO(s), in whole or in part. Dell's liability, if any, for Dell POs cancelled under the terms of this Agreement shall be
limited to BROCADE's [*] for the percentage of Product(s) applicable as set forth below.
[*] BROCADE must document BROCADE'S [*] as a result of Dell's cancellation to be entitled to [*]. Furthermore, for the SilkWorm(TM)
Express Product, the costs should be [*].
Days from planned
delivery to [*]
0 - 30
31 - 45
46 - 60
61 - 90
91+
Cancellation
Amount
[*]
[*] cancellation of orders by Dell shall be permitted as follows:
Days from planned
delivery to [*]
0 - 30
31 - 60
61+
Cancellation
Amount
[*]
6.3.2 If Dell terminates individual Dell PO(s) in whole or in part because BROCADE'S quality does not meet the agreed to Quality Goals (as
defined in
Section 12.1) set forth in Schedule B, Dell may terminate any or all outstanding Dell PO(s) without liability or charge.
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has been requested with respect to the omitted portions.
6.3.3 BROCADE acknowledges and agrees that the liabilities set forth herein represent Dell's sole liability for the cancellation of Dell PO(s) in
accordance with the terms of this Agreement and represents the sole and exclusive remedies of BROCADE for cancellation of Dell PO(s) in
accordance with the terms of this Agreement.
7.0 Software, Documentation and Trademarks
7.1 BROCADE agrees to provide Dell with Product documentation for use in the sale and support of Products that Dell is purchasing
("Documentation"). The BROCADE Documentation (in English) shall be provided in hard copy and FrameMaker source format unless
otherwise requested by Dell. Dell may modify, reproduce and distribute the Documentation in hard copy or softcopy form as well as in
electronic form on Dell's website or bulletin boards in connection with the sale and support of the Product. BROCADE agrees to provide
updates as they become available, in the same format. If Dell modifies and introduces errors into such Documentation, BROCADE has no
liability for such errors.
7.2 Software License
7.2.1 BROCADE hereby grants to Dell a non-exclusive, worldwide, revocable except as expressly provided in Section 7.2.4, royalty-free right
and license, under all copyrights, patents, patent applications, trade secrets and other necessary intellectual property rights of BROCADE, to (i)
use, execute, and display all device drivers, firmware and software of BROCADE used in the operation and support of the Product, [*] or
backup copies of the same (collectively the "Software"), in object code form, in conjunction with, or for use with Products,
(ii) distribute or license the Software, in object code form, as part of, in conjunction with, or for use with Products sold or leased by Dell to end
users, and (iii) authorize, license and sublicense third parties to do any, some or all of the foregoing. Dell shall distribute the Software to end
users pursuant to Dell's end user license agreement, attached hereto as Schedule I, as updated by Dell from time to time.
7.2.2 Dell shall have no right to (i) modify or adapt the Software for other products or create derivative works of the Software, (ii) decompile,
reverse engineer, or disassemble the Software for purposes of designing similar products, or (iii) use or distribute the Software other than in
connection with the use or distribution of the Products.
7.2.3 Dell agrees that the foregoing licenses do not grant any title or other right of ownership to the Software and that BROCADE owns and
shall continue to own all right, title and interest in and to the Software.
7.2.4 Upon any termination or expiration of this Agreement, Dell's rights set forth in this Section 7.2 shall terminate except as follows: (i) end
users shall be permitted continued use of the Software in conjunction with the operation of the Products so long as they are not in breach of
Dell's end user license agreement attached hereto as Schedule I, and (ii) Dell shall retain a nonexclusive, worldwide license to use and execute
the then-current version of the Software internally (in object code form only) for the sole purpose of assisting Dell end users with the
maintenance of the Products purchased from Dell.
7.3 During the term of this Agreement, BROCADE grants to Dell a nonexclusive, worldwide, royalty-free and non-transferable license to use
the BROCADE trademarks, service marks and trade names used by BROCADE in connection with the advertising, promotion and distribution
of the Products ("Marks"). This license does not include the right to sublicense the use of the Marks. Dell shall use reasonable efforts to ensure
that Dell's use of the Marks is in compliance with BROCADE's trademark usage guidelines, as provided to Dell by BROCADE from time to
time. In addition, Dell agrees that the nature and quality of any materials created or distributed by Dell bearing the Marks shall be of a similar
quality as that of Dell's other products. Upon BROCADE's written request, Dell shall supply BROCADE with specimens of any requested
materials bearing the Marks. If BROCADE reasonably determines that any materials bearing the Marks fail to conform to such quality
standards, BROCADE shall promptly so notify Dell and Dell and BROCADE shall mutually agree upon a plan of corrective action. Dell
acknowledges that BROCADE is the sole and exclusive owner of the Marks, and Dell agrees that it will do nothing inconsistent with such
ownership, either during the term of this Agreement or afterwards. Dell's use of the Marks shall inure to the benefit of and be on behalf of
BROCADE. Upon termination or expiration of this Agreement for any reason, Dell immediately will cease use of the Marks, except as
necessary (i) to distribute and service remaining Products as provided for under this Agreement, or (ii) for Dell to exercise the rights granted in
Section 16 of this Agreement.
8.0 Product Withdrawal
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has been requested with respect to the omitted portions.
8.1 Except for the transition from the SilkWorm(TM) Express Product to [*] BROCADE will provide Dell with at least one hundred and eighty
(180) days prior written notice for all Products prior to the last date of manufacture of a Product; PO(s) may be placed up to [*] prior to such
last date of manufacture. For the transition from the SilkWorm(TM) Express Product to [*] BROCADE will provide Dell with at least [*] prior
written notice prior to the last date of manufacture of the SilkWorm(TM) Express Product; PO(s) may be placed up to [*] prior to such last date
of manufacture. For purposes of this Section 8.1, the "Rescheduling In" provisions at Section 6.1 shall not apply in the final [*] of the written
notice period. However, BROCADE agrees to use commercially reasonable efforts to support any Dell upside requirements during this period.
Subject to Product availability, BROCADE will accept Dell PO(s) for Products to be withdrawn [*] Dell agrees to use commercially reasonable
efforts to qualify and release the [*].
8.2 Spare parts and repair capability for the Products shall be retained by BROCADE for [*] from the last date of manufacture. If spares or
repairs are not available during such [*] period, BROCADE will use best commercial efforts to provide similar product with equivalent or
better functionality. BROCADE shall allow Dell to make a final last time spares buy in order to provide support for such Products. [*]
9.0 Warranties
9.1 BROCADE represents and warrants on an ongoing basis that:
(a) Dell will acquire good and marketable title to the Products, and that all Products will be free and clear of all liens, claims, encumbrances
and other restrictions;
(b) all Products will be new and unused unless Dell requests Refurbished Products in writing. If Dell requests Refurbished Products, the
Refurbished Products will be provided to Dell clearly marked as such ("Refurbished Products" shall mean Products that contain used or
repaired parts);
(c) all Products will be [*] and will conform to BROCADE'S Product specifications (attached as Schedule H) and specifications provided by
Dell attached as Schedules D (packaging), E (labeling) and F (barcode labeling), : (i) for a period of [*] from the date of delivery to Dell for the
Gigabit Interface Converter components ("GBICs") of Products, or as extended thereafter in accordance with BROCADE's warranty terms with
any qualified supplier of GBICs, and (ii) for a period of [*] from the date of delivery to Dell for all other Products and components. [*]
BROCADE agrees to use first-in first-out (FIFO) method for finished goods. The foregoing warranties do not cover BROCADE Products that
were subjected to misuse, abuse, improper repair, or unusual physical or electrical stress;
(d) it has all the necessary rights and licenses in the Products necessary to allow Dell to distribute and resell Products without restriction or
additional charge;
(e) the Products shall be able to accurately process date data (including, but not limited to, calculating, comparing, and sequencing) between the
twentieth and twenty-first centuries; and
(f) BROCADE's own internal systems including, but not limited to, manufacturing systems shall be able to accurately process date data
(including, but not limited to, calculating, comparing, and sequencing) between the twentieth and twenty-first centuries.
9.2 If Dell determines that any Product unit does not conform to the foregoing warranties ("Non-complying Product"), BROCADE will
provide, within [*] of receipt of Non-complying Product, (i) an initial failure analysis of the Non-complying Brocade manufactured Product,
and/or (ii) failure verification of a GBIC product. For line rejects or failures identified by Dell at its distribution centers or manufacturing
locations, Dell [*] of the Non-complying Products. [*] shall be applied no later than [*] after Dell's notice of noncompliance, and will take [*]
from Dell or the BROCADE RMA. For Non-complying Product which has been sent to a customer, BROCADE shall (at Dell's sole option)
either (a) repair or replace such Product with new or Refurbished Product within
[*]
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*Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.
following receipt by BROCADE for return to Dell for service spares, or (b) [*] of the Non-complying Products [*]. In the event Dell requests
the return of repaired or reworked Products, BROCADE shall ensure that such Products are clearly marked as repaired or reworked, and
separated from new Product. In order to facilitate the return of such Non-complying Products, BROCADE will issue Return Material
Authorizations ("RMAs") in [*] for each Dell manufacturing facility. When a manufacturing facility has [*] BROCADE will issue [*] of Dell's
request (limited to business days). In addition to BROCADE'S obligation to conduct an initial failure analysis, BROCADE agrees to [*].
BROCADE also agrees to provide a failure analysis of the defective Product unit to the component level within [*] of receipt of the Product
unit, with a goal of providing such component level analysis within [*]. Non-complying Products may be returned to BROCADE by Dell or
Dell's service partners. If the parties determine that there are excessive No Trouble Found returns from Dell's service partners, Dell and
BROCADE agree to address this issue.
9.3 Dell agrees to use commercially reasonable efforts to verify field failures before returning Non-complying Product to BROCADE for repair
or replacement. The parties will work together to ensure that Dell and its service providers have the tools and expertise required to investigate
and troubleshoot failures in the field. In the event that BROCADE has reasonable cause to believe that Dell's verification process has allowed
an excessive number of No Trouble Found ("NTF") Products to be returned to BROCADE, then BROCADE shall contact Dell and Dell agrees
to examine its process and shall work to reduce NTF Products. BROCADE shall notify Dell in the event that NTF returns exceed [*] of all
Product(s) purchased by Dell within [*] and provide Dell with copies of all test reports and documentation related to BROCADE's testing of
such Product(s). Dell shall have [*] from the date such notice and documentation is provided to Dell to examine test reports and documentation
related to NTF returns and to cure any such excessive NTF returns. Dell agrees to pay all undisputed NTF charges as set out in Schedule A for
subsequent NTF rates exceeding [*] over a given [*] period. Disputed NTF charges shall be submitted to the dispute resolution procedures as
stated in Section 19.1.
9.4 All Non-complying Products returned by Dell to BROCADE will be shipped at BROCADE'S risk and expense including packing and
freight charges to and from BROCADE. Non-complying Product will be returned by Dell in appropriate packaging to protect the Product.
[*]
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has been requested with respect to the omitted portions.
[*]
9.6 During the term of this Agreement, any repair and reconditioning of any product not covered by warranty shall be subject to BROCADE's
then-standard out of warranty prices, terms, and conditions as set forth in Schedule A.
9.7 THE FOREGOING WARRANTIES, TERMS OR CONDITIONS ARE EXCLUSIVE AND ARE IN LIEU OF ALL OTHER
WARRANTIES, TERMS OR CONDITIONS, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, STATUTORY
OR OTHERWISE, INCLUDING WARRANTIES OF MERCHANTABILITY, NONINFRINGEMENT, AND FITNESS FOR A
PARTICULAR PURPOSE.
10.0 Indemnification
10.1 BROCADE agrees to defend, indemnify and hold harmless Dell, DCC, DCC's subsidiaries or Affiliates and their respective directors,
officers, employees, agents, customers and distributors from and against any and all claims, actions, demands, legal proceedings, liabilities,
damages, losses, judgments, authorized settlements, costs and expenses, including, without limitation, reasonable attorney's fees, arising out of
or in connection with any claims or actions by third parties alleging:
(i) infringement by BROCADE and/or Product(s) of [*];
(ii) that a Product provided under this Agreement has caused bodily injury (including death) or has damaged real or tangible personal property;
(iii) a cause of action arising out of or relating to BROCADE'S provision of repaired Products that contain used or refurbished parts that are not
clearly and conspicuously labeled as such;
(iv) a cause of action based on any violation by BROCADE of any governmental laws, rules, ordinances or regulations; and/or
(v) a cause of action by or on behalf of BROCADE'S subcontractors, materialmen, suppliers, employees or agents.
"Affiliate" means, with respect to any party, any other party that, directly or indirectly controls or is controlled by or is under common control
with such party. For purposes of this definition, "control" shall mean the possession, directly or indirectly, of the power to direct or cause the
direction of management or policies of such party, whether through the ownership of voting securities or by contract or agency or such similar
arrangement.
10.2 In the event of any such claims, BROCADE's indemnity option is contingent upon Dell's obligation to: (1) promptly notify BROCADE,
(2) cooperate with BROCADE in the defense thereof, and (3) not settle any such claims without BROCADE'S prior written consent, which
BROCADE shall not unreasonably withhold unless such settlement could expose BROCADE to additional liability to Dell or third parties or
otherwise adversely affect the operation of BROCADE's business.
10.3 In addition to BROCADE'S obligations and liabilities above, if an infringement claim is made or appears likely to be made about a
Product, BROCADE shall, at BROCADE's option, [*].
10.4 THE FOREGOING PROVISIONS OF THIS SECTION 10.0 STATE DELL'S SOLE AND EXCLUSIVE REMEDY FOR ANY
ALLEGED INFRINGEMENT BY THE PRODUCTS OF ANY THIRD PARTY PROPRIETARY RIGHTS OF ANY KIND.
11.0 Liability
EXCEPT FOR BROCADE'S OBLIGATIONS AND LIABILITIES UNDER SECTION 10.0
("INDEMNIFICATION"), OR BREACH BY EITHER PARTY OF CONFIDENTIALITY UNDER THE NDA,
NEITHER PARTY SHALL BE LIABLE FOR ANY LOST PROFITS, LOST SAVINGS OR ANY OTHER
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has been requested with respect to the omitted portions.
INCIDENTAL, INDIRECT, PUNITIVE OR CONSEQUENTIAL DAMAGES, WHETHER BASED ON A BREACH OF CONTRACT,
TORT (INCLUDING NEGLIGENCE), PRODUCTS LIABILITY OR OTHERWISE, UNDER ANY PART OF THIS AGREEMENT EVEN
IF ADVISED OR AWARE OF THE POSSIBILITY OF SUCH DAMAGES. EXCEPT FOR BROCADE'S OBLIGATIONS AND
LIABILITIES UNDER SECTION 10.0 ("INDEMNIFICATION") OR BREACH OF CONFIDENTIALITY UNDER THE NDA, EITHER
PARTY'S TOTAL LIABILITY TO THE OTHER UNDER THIS AGREEMENT FROM ALL CAUSES OF ACTION OF ANY KIND WILL
BE LIMITED TO THE [*].
12.0 Quality, Product Safety, Regulatory Compliance and Engineering Changes
12.1 [*] BROCADE agrees to meet or exceed the quality requirements set forth herein and in the applicable Schedule (the "Quality Goals"),
except with respect to GBICs. If BROCADE fails to achieve the Quality Goals, BROCADE shall promptly put into place a corrective action
plan to be agreed upon with Dell to bring quality performance back in line with the Quality Goals. In the event that BROCADE fails to meet
the Quality Goals, after written notice to BROCADE with a
[*] cure period, Dell may cancel any outstanding orders without penalty, notwithstanding any other provision in this Agreement. If BROCADE
fails to meet the Quality Goals due to BROCADE fault, then BROCADE and Dell will agree [*] relating to repair or replacement for Product
outside of such Quality Goals; provided however that nothing in this Section shall in any way derogate the warranty provision at Section 9 or
the [*] at Section 9.5. With respect to GBICs, in the event of a non-compliance with the Quality Goals, BROCADE agrees to use all reasonable
efforts to work with its GBIC supplier(s) to determine the cause of such non-compliance under the terms of this Section 12.1 and to agree on a
plan of corrective action therefor. [*].
12.2 In the event either BROCADE or Dell becomes aware of any information which reasonably supports a conclusion that a hazard may exist
in any Product and the defect could cause death or bodily injury to any person or property damage (a "Hazard"), the party becoming aware of
this information shall notify the other of the Hazard. Whenever possible, notification to the other party shall precede notice to any
governmental agency, unless required by law. BROCADE and Dell shall promptly exchange all relevant data and then, if practical, as promptly
as possible, meet to review and discuss the information, tests, and conclusions relating to the alleged Hazard. At this meeting the parties shall
discuss the bases for any action, including a recall, and the origin or causation of the alleged Hazard. [*] Each party shall, on request, provide to
the other reasonable assistance in (i) determining how best to deal with the Hazard; and
(ii) preparing for and making any presentation before any governmental agency which may have jurisdiction over Hazards involving Products.
12.3 BROCADE is responsible for obtaining and maintaining all U.S. and foreign regulatory approvals for the Product(s), as specified by Dell
in Schedule G and as required for BROCADE's standard products. Additionally, BROCADE will assist Dell in addressing problems with its
Products that contribute to a Dell system's failure to meet any regulatory requirement due to BROCADE Products being integrated into the Dell
system.
12.4 Engineering Changes
12.4.1 BROCADE agrees to notify Dell of all Product changes. BROCADE shall provide [*] notice of changes that affect the Product's
(including Software or drivers) form, fit or function to allow Dell to evaluate such changes. Dell shall respond to such proposed changes within
[*] of receiving notice from BROCADE. In the event that Dell fails to respond within such period, BROCADE should use commercially
reasonable efforts to contact appropriate representatives at Dell to determine Dell's response and otherwise may deem such changes to be
accepted by Dell. Notwithstanding the foregoing, any changes that materially affect the Products (including Software or drivers) form, fit or
function require Dell's written consent in the form of an agreed to Engineering Change Order ("ECO").
12.4.2 BROCADE may issue notice of "Mandatory Changes," which are changes required to satisfy governmental standards, for safety, or to
guarantee continuity of supply. BROCADE will make all commercially reasonable
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has been requested with respect to the omitted portions.
efforts to provide Dell with [*] prior written notice of Mandatory Changes prior to implementing such changes, and will notify Dell not more
than
[*] after BROCADE becomes aware of the need to make a proposed change (with the exception of potential safety and hazard issues which
require immediate notification). [*]
13.0 Compliance
13.1
Since Dell transacts business with the United States government,
BROCADE must comply with applicable laws and Federal Acquisition
Regulations ("FAR") clauses. BROCADE therefore represents and warrants
that it will comply with the following FAR clauses, and other
provisions of the Code of Federal Regulations, as applicable, which
are hereby incorporated by reference into this Agreement:
(1)
(2)
Era
(3)
(4)
FAR 52.222-26 "Equal Opportunity" (except for subparagraph (c))
FAR 52.222-35 "Affirmative Action for Special Disabled and Vietnam
Veterans"
FAR 52.222-26 "Affirmative Action for Handicapped Workers"
FAR 52.219-8 "Utilization of Small, Small Disadvantaged and
Women-Owned Small Business Concerns"
(5) 40 C.F.R. Section 60-1.4(a) "Equal Opportunity Clause'
(6) 40 C.F.R. Section 60-1.7 "Reports and other Required Information"
(7) 40 C.F.R. Section 60-1.40 "Affirmative Action Compliance Program"
In addition, BROCADE represents and warrants that it will comply with all applicable requirements of 33 U.S.C. Section 1251 "Federal Water
Pollution Control Act" and 42 U.S.C. Section 7401 "Clean Air Act". BROCADE represents and warrants that none of the items listed in
paragraph (a) of FAR 52.209-5 "Certificate Regarding Debarment, Suspension, Proposed Debarment and Other Responsibility Matters" exist
with respect to BROCADE or any of BROCADE's "principals" as that term is defined by FAR 52.209-5. BROCADE further represents and
warrants that it will comply with the prohibition on the use of convict labor as set forth in FAR 52.222-3 "Convict Labor."
In the event that Dell licenses any Software to the U.S. Government, Dell shall identify such Software to the Government as "commercial
computer software" developed exclusively at private expense, and, in accordance with FAR Section 12.212 or Defense FAR Supplement
Section 227.7202, as applicable, Dell shall license the Software to the Government in accordance with the terms of the End User license
attached as Schedule I ("Software License Agreement").
13.2 The parties, at their expense, will comply with all applicable laws, orders and regulations of any governmental authority with jurisdiction
over their activities in connection with this Agreement and will furnish to each other any information required to enable a party to comply with
applicable laws related to the Products.
13.3 In the event that Dell licenses any Software to the U.S. Government, Dell shall identify such Software to the Government as "commercial
computer software" developed exclusively at private expense, and, in accordance with FAR Section 12.212 or Defense FAR Supplement
Section 227.7202, as applicable, Dell shall license the Software to the Government in accordance with the terms of the End User license
attached as Schedule I ("Software License Agreement").
14.0 Import/Export Requirements
14.1 BROCADE will certify to, and mark Products and packaging with, the country of origin for each Product so as to satisfy the requirements
of customs authorities of the country of receipt and any other applicable laws. If any Products are imported, Dell will be the importer of record.
BROCADE and Dell shall comply with all import and export laws and regulations and maintain appropriate import and export documentation.
At Dell's request, BROCADE shall make available for inspection and audit all import and export documentation for Product(s) sold under this
Agreement. At Dell's request, BROCADE shall also provide an appropriate Export Control Classification Number ("ECCN") for all Product(s)
sold hereunder.
14.2 BROCADE shall not, directly or indirectly, export, re-export or tranship Products in violation of any applicable U.S. export control laws
and regulations or any other applicable export control laws promulgated and administered by the government of any country having jurisdiction
over the parties or the transactions contemplated herein.
15.0 Assignment and Merger
*Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.
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[*] either party may assign this Agreement to a successor entity in the event of a Change of Control. A 'Change of Control' shall mean any of
the following events: (i) the direct or indirect sale or exchange of all or substantially all of the stock of a corporation (or partnership interests of
a partnership) where the stockholders of such corporation (or partners of such partnership) before such sale or exchange do not retain, directly
or indirectly, at least a majority of the beneficial interest in the voting stock or other interest of the successor entity; (ii) a merger in which the
shareholders or partners of a corporation or partnership before the merger do not retain, directly or indirectly, at least a majority of the
beneficial interest in the voting stock or other interest of the successor entity; or (iii) the sale, exchange, or transfer of all or substantially all of a
corporation's or partnership's assets (other than a sale, exchange, or transfer to one or more entities where the shareholders of the corporation or
partners of the partnership before such sale, exchange or transfer retain, directly or indirectly, at least a majority of the beneficial interest in the
voting interests in the entity to which the assets were transferred). Subject to this Section 15.0, this Agreement will bind and inure to the benefit
of the parties and their respective successors and permitted assigns.
16.0 [*]
16.2 [*]
*Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.
13 of 16
[*]
17.0 Capacity Constraints
On a quarterly basis, or as requested by Dell, BROCADE agrees to provide ramping and capacity plans ("Capacity Plan") to Dell (in a format
acceptable to Dell) to ensure continuity of supply. This Capacity Plan shall include percent available capacity and utilization. In the event that
BROCADE's total manufacturing production exceeds [*] of available capacity, BROCADE agrees to put in place the additional manufacturing
capacity required to achieve and maintain a [*] manufacturing upside capability to the current Dell forecast [*].
18.0 New Products
18.1 During the term of this Agreement, BROCADE agrees to offer to sell to Dell all standard products developed, manufactured, distributed
or sold by BROCADE to (or for) any other customer. If Dell agrees to purchase such products, such sale will be pursuant to the terms and
conditions of this Agreement (to the extent that such products are similar to products covered by this Agreement). [*] In the event BROCADE
and Dell co-develop a product, a separate contract addendum is required, specifying points of ownership and limitations to distribution.
18.2 Prior to offering for sale any new Standard Product, BROCADE will [*] consult with Dell and allow Dell to place Dell PO(s) for such
new Standard Product [*]. Prior to the addition of a new Standard Product to a Schedule, the parties will mutually agree on a new product
program schedule which will include the appointment of business and technical contacts for each party to monitor compatibility issues and
product release issues with Dell systems. BROCADE agrees that Dell will receive [*] of all new products that are added to this Agreement
pursuant to BROCADE'S standard [*]. As used herein, "Standard Product" shall mean and include all products of BROCADE which are being
developed or have been developed for the purpose of distributing and selling such products to customers except those products for which NRE
funds, technology, or other development contributions are made by a third party for the specific purpose of developing such product.
18.3 Prior to the general availability of Dell's systems containing any new BROCADE product, BROCADE shall provide mutually agreed upon
training to Dell for sales, customer support and technical support at prices as stated in Schedule A.
18.4 BROCADE agrees to include Dell systems as mutually agreed in test and development for all applicable new products. Dell will be
consulted and given the opportunity to provide input in all hardware and software technology roadmaps for all applicable new products.
18.5 Except for SilkWorm(TM) Express, BROCADE shall provide to Dell the applicable manufacturing, customer, and field diagnostics for
Dell's testing and evaluation at least [*] prior to Dell's shipment of a new Product. For SilkWorm(TM) Express, BROCADE shall provide such
information to Dell as soon as possible.
19.0 General
19.1 In the event a dispute or claim between the parties on any matter is not resolved by the parties within [*] of an initial notice from either
party to the other party regarding the dispute, the dispute or claim shall be escalated first to the OEM Business Manager of Dell ESG Storage
and the Director of OEM Sales of BROCADE. If these individuals are unable to resolve the dispute or claim within
[*] of such escalation, resolution of the dispute or claim shall be escalated to the Director of OEM Business of Dell ESG Storage and the Vice
President of Worldwide Sales of BROCADE, who shall have [*] to resolve such dispute or claim before action is brought by either party.
Either party may initiate the escalation procedure of this Section by written notice to the other party which notice shall be without prejudice to
the invoking party's rights to any other remedy permitted hereunder. The parties will use commercially reasonable efforts to arrange meetings
or telephone conferences, as needed, at mutually convenient times and places, to facilitate negotiations between the parties. Unless otherwise
*Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.
14 of 16
agreed in writing, the parties shall be required to invoke the escalation procedures of this Section prior to the initiation of a lawsuit against the
other party relating to this Agreement, except if the rights of such party would be materially prejudiced by delay in the filing of such lawsuit.
19.2 Nothing in this Agreement shall prevent Dell, DCC or any of DCC's Affiliates or subsidiaries from purchasing or obtaining products
similar to the Products from any other supplier, including competitors of BROCADE.
19.3 The provisions of Sections 7.2.4, 8.0 "Product Withdrawal", 9.0 "Warranties", 10.0 "Indemnification", 11.0 "Liability", 12.2, and 12.3,
16.0
[*] "New Products" and 19.0 General", shall survive any termination or expiration of this Agreement and shall continue to bind the parties and
their permitted successors and assigns.
19.4 Except as expressly permitted herein, neither party will use the name of the other or quote the opinion of any employee of the other in any
advertising or otherwise without first obtaining the prior written consent of the other; such consent shall not be unreasonably withheld.
19.5 Any confidential information that will be disclosed by either party related to this Agreement shall be disclosed pursuant to the terms and
conditions of the 98060301 Non-disclosure Agreement between the parties. The terms and conditions of this Agreement shall be deemed to be
confidential information. Notwithstanding the terms of the Non-disclosure Agreement, (i) BROCADE agrees that Dell may provide
information related to BROCADE'S technology roadmaps to certain Dell customers provided such Dell customers have executed a nondisclosure agreement with Dell that requires the customer not to disclose the information to a third party, and (ii) Dell agrees that BROCADE
may disclose information relating to this Agreement, including without limitation, a copy of this Agreement (which has had the pricing and
other strategic terms redacted) to third parties as required by law or as is necessary to comply with disclosure requirements of the Securities
Exchange Commission. BROCADE shall use reasonable efforts to protect the confidentiality of specific information before public disclosures
under subsection (ii) are made, including making appropriate redactions to any information provided. BROCADE agrees to provide Dell with
reasonable advance notice of any such disclosure and to confer with Dell in good faith regarding the scope of such disclosure.
19.6 BROCADE will maintain accurate and legible records and will grant to Dell reasonable access to and copies of, any information
reasonably requested by Dell with respect to BROCADE'S performance under this Agreement (including quality programs and test
documentation). BROCADE'S obligation to maintain records under this provision is limited to BROCADE'S maintaining records in
accordance with BROCADE'S normal course of business. This provision does not impose any obligation on BROCADE to institute new or
different document retention procedures. BROCADE represents that it is BROCADE'S standard practice to maintain its records for a period of
[*]. Dell may send a representative in its place with BROCADE'S consent and BROCADE agrees not to unreasonably withhold such consent.
19.7 Except as may be otherwise provided in this Agreement, the rights or remedies of the parties hereunder are not exclusive, and either party
shall be entitled alternatively or cumulatively, subject to the other provisions of this Agreement, and as allowed by the applicable laws
governing this Agreement, to any other remedy available at law or in equity.
19.8 Neither party is an agent or employee of the other or has any authority to assume or create any obligation or liability of any kind on behalf
of the other.
19.9 No waiver of any term or condition is valid unless in writing and signed by authorized representatives of both parties, and will be limited
to the specific situation for which it is given. No amendment or modification to this Agreement shall be valid unless set forth in writing and
signed by authorized representatives of both parties. No other action or failure to act (including inspection, failure to inspect, acceptance of late
deliveries, or acceptance of or payment for any Products) will constitute a waiver of any rights.
19.10 This agreement will be governed by the laws of the state of [*] The parties expressly disclaim the applicability of the United Nations
Convention on the International Sale of Goods. Any cause of action brought by BROCADE against Dell under this Agreement shall be filed by
BROCADE in and submitted to the jurisdiction of a federal or state court in [*]. Any cause of action brought by Dell against BROCADE under
this Agreement shall be filed by Dell in and submitted to the jurisdiction of a federal or state court in [*].
*Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.
15 of 16
19.11 Any notice required or permitted by this Agreement shall be in writing and delivered by certified or registered mail, return receipt
requested, postage prepaid and addressed as follows or to such other addresses as may be designated by notice from one party to the other, all
such notices being effective on the date received or, if mailed as set above, three (3) days after the date of mailing:
If to Dell:
Dell Products L.P.
One Dell Way
Round Rock, Texas 78682
Attention: Vice President, Worldwide Procurement
cc: General Counsel
If to BROCADE:
BROCADE Communications Systems, Inc.
1901 Guadalupe Parkway
San Jose, California 95131
Attention: Chief Financial Officer
19.12 Whenever possible, each provision of this Agreement will be interpreted in such a manner as to be effective and valid under applicable
law, but if any provision of this Agreement is found to violate a law, it will be severed from the rest of the Agreement and ignored and a new
provision deemed added to this Agreement to accomplish to the extent possible, the intent of the parties as evidenced by the provision so
severed. The term "including" means "including without limitation." The headings used in this Agreement have no legal effect.
19.13 Neither party will be liable for any delay in performing under this Agreement to the extent such delay is caused by government action,
inclement weather, fire, explosion, floods, riots, civil disturbance, earthquakes, other natural disasters or other similar reasons where failure to
perform is beyond the control and not caused by the negligence of the non-performing party. Such delay, however, shall only be excused for
the period during which such condition continues.
19.14 Dell does not guarantee that its marketing, if any, of the Product(s) will be successful. There is no minimum purchase obligation under
this Agreement. Dell may distribute/sell the Products on a standalone basis or in conjunction with a system sale or lease.
19.15 This Agreement, its attached Schedules and Specifications set forth the entire agreement and understanding of the parties relating to the
subject matter contained herein, and merges all prior discussions and agreements, both oral and written, between the parties. Each party agrees
that use of pre-printed forms, such as purchase orders or acknowledgments, is for convenience only and all terms and conditions stated thereon,
except for information requested or allowed by this Agreement, are void and of no effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the day
and year first written herein.
BROCADE:
DELL:
By: /s/ GREG REYES
-------------------------------Greg Reyes
By: /s/ MICHAEL LAMBERT
--------------------------------Michael Lambert
Title: President and CEO
Systems Group
Title: Senior Vice President,
Enterprise
Date: 1-17-99
-----------------------------
Date: 12/18/98
-------------------------------
16 of 16
SCHEDULE A TO AGREEMENT NUMBER BRO-001
PRODUCT DESCRIPTION AND PRICING
SCHEDULE A TO AGREEMENT NO. BRO-001
REV. 12.9.1.
Product Description and Pricing
PRODUCT
------1. SilkWorm Express
2. SilkWorm Express
BROCADE PART NUMBER
------------------DL-0880-0002
DL-0880-0003
3. SilkWorm Express-FRU DL-0880-0004
DELL PART NUMBER
---------------5829D-X00-01
7829D-X00-01
6410P-X00-00
DESCRIPTION
----------6FL port, 2G port, 4 SWL GBIC, ICu GBIC with Web
Tools and Zoning enabled
PRICE
----[*]
6FL port, 2G port, 5 Cu GBIC with Web Tools and
Zoning enabled
[*]
6FL port, 2G port, O GBIC with Web Tools and Zoning
enabled
[*]
4. Cu GBIC - FRU
DL-1017
TBD
1 Cu GBIC, 1 extraction tool, single pack
[*]
5. SWL GBIC - FRU
DL-1006
TBD
1 SWL Optical GBIC, 1 extraction tool, single pack
[*]
6. FL Port Card - FRU
X1015-04
TBD
FL Port Card, O GBIC, single pack
[*]
7. G Port Card - FRU
X1003-03
TBD
G Port Card, O GBIC, single pack
[*]
8. Cu GBIC - FRU
TBD
TBD
4 Cu GBIC, 1 extraction tool, four pack
[*]
9. SWL GBIC - FRU
TBD
TBD
4 SWL Optical GBIC, 1 extraction tool, four pack
[*]
[*]
TBD
TBD
TBD
[*]
OUT OF WARRANTY REPAIR:
FL Port Card
G Port Card
SilkWorm Express-less GBIC
[*]
[*]
[*]
1. CPU Board [*]
2. Mother board [*]
3. Enclosure/power supply [*]
4. Hourly rate [*] (subject to change based on current standard rates) [*]
*Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.
CHARGES FOR EXCESSIVE UNDISPUTED NTF (NO-TROUBLE-FOUND) RETURNS:
[*] per switch (8 hours testing [*]) if Brocade returns retested Product to Dell. If Dell returns NTF Product for credit, the NTF charge will be
[*] plus the difference between the then-current price of a switch (credit return) and the price of the switch FRU (without GBICs).
WARRANTY ADVANCE EXCHANGE PRICE:
[*] (return unit must be received by Brocade within [*]
PRODUCT LEADTIME:
Leadtime for Product, including FRUs is [*] ARO, if forecasted, [*] without forecast.
[*]
NOTE:
Pricing to be reviewed by the parties on at least a [*] basis. This Schedule will be revised accordingly to reflect current pricing, products and/or
services offered.
*Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.
SCHEDULE A.1
[*]
# OF PALLETS
-----------1
Per Unit
cost
---[*]
# of Units
---------16
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
Total
----[*]
2
32
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
3
48
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
4
64
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
5
80
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
6
96
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
7
112
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
8
128
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
9
144
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
10
160
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
11
176
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
12
192
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
13
208
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
14
224
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
15
240
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
[*]
DEFINITIONS:
[*]
[*]
[*]
[*]
*Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.
3
IN WITNESS WHEREOF, the parties hereto have caused this Schedule A to be executed by their duly authorized representatives as of the day
and year first written herein.
BROCADE:
DELL:
BROCADE:
DELL:
By: /s/ GREG REYES
-------------------------------(Authorized Signature)
By: /s/ MICHAEL LAMBERT
--------------------------------(Authorized Signature)
Title: President and CEO
Systems Group
Title: Senior Vice President,
Enterprise
Date: 1-17-99
-----------------------------
Date: 12/18/98
-------------------------------
SCHEDULE B TO AGREEMENT NUMBER BRO-001
FIBRE CHANNEL SWITCH PRODUCT QUALITY PLAN
DELL
FC SWITCH
PRODUCT
QUALITY PLAN
Revision 0.2
Prepared by
Tim Killworth
11/11/98
TABLE OF CONTENTS
1
1.0
FC SWITCH QUALITY PLAN REVISION HISTORY ...........................
4
2.0
REVIEW AND SIGNATURES..............................................
Area ..............................................................
4
4
3.0
INTRODUCTION ......................................................
4
4.0
QUALITY GOALS FY99 ................................................
5
5.0
APPLICABLE DOCUMENTS AND AMENDMENTS ...............................
5
6.0
QUALITY PROGRAM MANAGEMENT ........................................
5
6.1
Organization ...............................................
5
6.2
6.3
Quality Planning ...........................................
6.2.1 Design ..............................................
6.2.1.1 Development ................................
6.2.1.2 Prototype ..................................
6.2.2 Production ..........................................
6.2.2.1 Eval Test ..................................
6.2.2.2 Pilot ......................................
6.2.2.3 Launch .....................................
Metric Goals and Analysis ..................................
5
5
5
5
6
6
6
6
6
6.4
Training/Certifications ....................................
6
CONTROL OF PURCHASES ..............................................
6
7.1
Procurement Control ........................................
7.1.1 General Comments ....................................
7.1.2 Development .........................................
7.1.3 Prototype ...........................................
6
6
6
7
7.2
Approved Suppliers .........................................
7
7.3
Incoming Quality Assurance .................................
7.3.1 First Article Inspection ............................
7.3.2 IQA Instructions ....................................
7
7
7
DESIGN AND MANUFACTURING CONTROL ..................................
7
8.1
Process Capability .........................................
7
8.2
Commodity Analysis .........................................
7
8.3
Pilot build ................................................
7
8.4
Cycle time improvements ....................................
8
7.0
8.0
2
9.0
8.5
Work Instruction Review ....................................
8
8.6
Quality Levels .............................................
8
8.7
Defect Containment .........................................
8
8.8
Escalation Path ............................................
8
8.9
Defect Root Cause analysis .................................
8
8.10
Preventative Corrective Actions ............................
8
8.11
Material Review Board (MRB) ................................
8
8.12
Out of Box Experience (OBE) ................................
8
8.13
Stop Build/Ship Criteria ...................................
9
8.14
Statistical Process Control and Analysis ...................
9
8.15
Tooling/Test Equipment .....................................
9
8.16
PM/Calibration Process .....................................
9
8.17
Design Changes .............................................
9
RISKS .............................................................
9
9.1
DFMEA Issues ...............................................
9
9.2
PFMEA Issues ...............................................
9
9.3
System Management Issues ...................................
10
3
FC SWITCH QUALITY PLAN
1.0 FC SWITCH QUALITY PLAN REVISION HISTORY
REVISION
-------0.0
BY
-Tim Killworth
DATE
---10-21-98
DESCRIPTION
----------Initial Draft
0.1
Tim Killworth
11/11/98
Added FY 00 quarterly measurement TBD to section
4.0 and added page breaks
0.2
Tim Killworth
11/16/98
Added FY00 Q1 & Q2 measurements to section 4.0
2.0 REVIEW AND SIGNATURES
Area
---WW Enterprise System Group (ESG)
Storage Division - Quality Mgr.
Signature
--------Randy Printz
WW Enterprise System Group (ESG)
Storage Division - NPO/Quality/Program Mgr.
Randy Printz
3.0 INTRODUCTION
This Quality plan is a structured method of defining and establishing the steps necessary to assure that a product meets or exceeds the
customer's expectations. The main topics will be used in the overall product schedule to assure systemic quality implementation. The Quality
plan also provides a summary description of the systems used in minimizing process and product variations while maintaining focus on
improving the business objectives of Initial Field Incident Rate (IFIR), Defects per Hundred Units (DPHU) and overall customer satisfaction. A
cross functional team approach is used with members from all strategic disciplines; including the supplier.
4
4.0 QUALITY GOALS FY99
FC Switch:
---------IFIR:
FY 99-Q4
-------[*]
FY00-Q1
------[*]
FY00-Q2
------[*]
FY00-Q3
------TBD
FY00-Q4
------TBD
5.0 APPLICABLE DOCUMENTS AND AMENDMENTS
ISO 9001 and 9002.
6.0 QUALITY PROGRAM MANAGEMENT
6.1 Organization The Storage Systems organization operates under the direction of the Enterprise Systems Group, and Regional Business units.
To ensure appropriate attention, metric responsibilities for the regions are shared at Enterprise Systems Group (ESG) Storage Division level
while the individual regions are ultimately responsible for monitoring trends and improvements. All improvements are shared on a world wide
scope.
6.2 Quality Planning The Quality Planning Process is designed to assure a comprehensive and critical review of the engineering requirements
and other related technical information. At this process stage, a preliminary feasibility analysis will be made to assess the potential problems
that occur during manufacturing and field deployment. The scope of this plan will assume that Dell will receive the fully configured and
assembled product marked with the Dell logo and packed in Dell boxes as designated in the business agreement. The supplier will ensure
product integrity. Dell will ship the already boxed units.
6.2.1
Design
6.2.1.1 Development
Review concept to estimate impact on IFIR relating to
prior programs. Identify any new key products and process
characteristics and performance tracking systems. Assist
supplier in performing benchmark studies and initiate
DFMEA and DFM/DFS where applicable.
6.2.1.2 Prototype
Improve metric targets from lessons learned. Finalize
performance tracking methodology. Initiate PFMEA using the
previous DFMEA as a baseline. Identify gages/test
equipment. Initiate preliminary process capability study.
*Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.
5
6.2.2
Production
6.2.2.1 Eval Test
Characterize special product and processes for the
testing, quality, and defect reporting/prevention
systems. Issue control plan to document these and quantify
test performance. Finalize process capability study.
6.2.2.2 Pilot
Plan for production system integration. Schedule time,
hardware and testing requirements including compatibility
will Dell products and software.
6.2.2.3 Launch Risks identified in the D/PFMEA have been
assessed. Metrics have been adjusted accordingly. Quality
Measurement System improvements identified.
6.3 Metric Goals and Analysis Metrics for IFIR, and M&W will be established by the Quality function of the ESG Storage Division
organization. These will take in account similarities from historical products along with variables relating to new technology and lessons
learned improvements.
6.4 Training/Certifications New technologies and special processes will be targeted for training. JIT training will be scheduled with Customer
Support, Field Service, manufacturing and Engineering. Specialized positions necessary for the product may be established with necessary
training and position certifications provided to the personnel. Training for third party maintainers for on-site installation and implementation is
necessary.
7.0 CONTROL OF PURCHASES
7.1 Procurement Control
7.1.1 General Comments Supplier Quality responsibility for FC Switch (all regions) will be supported out of World Wide Supplier Quality
Engineering, which is under the direction of Procurement and will assume responsibility Secondary Storage in Q3, FY 1999. World Wide
Suppler Quality Engineering Charter of Expectations that define quality system, manufacturing, and test process requirements are flowed down
to the supplier. The Supplier shall comply with all the requirements contained in the Charter of Expectations. Review the drawings and
specifications then formulate the supplier quality system requirements invoked at the supplier and provide a level of control class/type of
commodity. Ex: design change submittal, test procedures, Pareto listings, inspection plans, etc.
7.1.2 Development Review concept to estimate impact on IFIR and DPHU relating to prior programs. Identify any new key products and
process characteristics and performance tracking systems. Perform benchmark studies. Assist suppliers with DFMEA and DFM/DFS
6
7.1.3 Prototype Improve metric targets from lessons learned. Finalize performance tracking methodology. Assist suppliers with PFMEA.
Identify gages/test equipment.
7.2 Approved Suppliers Facility and system conformance/capability studies performed Supplier Survey performed after approval of business
contract. Quality system and document assurance of delivered product quality. Maintain approved status; periodic quality system audits.
7.3 Incoming Quality Assurance
7.3.1 First Article Inspection First Article Inspection shall be performed by the Supplier on all or any parts integrated into the top level
assembly and including Top Level Assembly. Additionally, WWSQE will review first article documentation and perform a complete first
article inspection of the top level assembly to verify a compliance with engineering intent and processes. Quality Engineering will identify
candidates for FAI. An inspection plan will document the necessary inspection criteria. Any inspection discrepancies will be coordinated with
Design Engineering and the supplier. All discrepancies will be resolved prior to launch.
7.3.2 IQA Instructions Incoming Inspection Plan will document the part's inspection plan and level. This will determine whether the part should
be dock to stock, FAI, etc.
8.0 DESIGN and MANUFACTURING CONTROL
* All items listed under the section DESIGN AND MANUFACTURING CONTROL [*]
* Supplier shall also adhere to stipulations specified in the WWSQE Charter of Expectations
8.1 Process Capability Processes will be reviewed for capabilities to support the new products. A PFMEA will be based on the DFMEA
previously used in the design phase. Capability analysis will include but not limited to: WI, bitmaps, hardware flow, Doc Box kiting, MRB and
overall system routing with the overall goal directed to process improvements. This will be used as one of the basis for the metrics forecasting
models.
8.2 Commodity Analysis Each major part will be reviewed for impact to production flow, installation process, failure rates and special handling
processes. This will be used as one of the basis for the metrics forecasting models.
8.3 Pilot build Select quantities and configurations are built and tested using the manufacturing environment. This type of build is used to
verify the readiness of the manufacturing process. All failures during this phase will be applied to the DFMEA or PFMEA for analysis to
determine root cause, C/A or risk assessment.
*Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.
7
8.4 Cycle time improvements
Key time related processes will be monitored for baselines. Benchmark studies from other LOBs will be reviewed. Select processes or steps
will be the focus for performance improvements. Ex: RMA cycle time, Testing time.
8.5 Work Instruction Review Instruction for activities affecting the product quality will be reviewed for scope, content and context. This will
include text and bitmap based instructions for accomplishing inspection and managing hardware activities. Responsibility of implementation
and control is documented in the ISO procedures.
8.6 Quality Levels Key metrics are monitored for adverse trends. Daily and weekly failures are monitored for early warning trends. Over the
day, three failures of the same type will cause the issue to escalate per the escalation process.
8.7 Defect Containment To prevent further Line Rejects, steps will be taken to isolate or contain the circumstance/part that caused the reject.
This will include the following processes: Stop Build, Stock Purge, MRB impound, etc. The scope includes visibility in all stock, revolver, and
supplier locations; including materials in transit.
8.8 Escalation Path Steps are in place in the event adverse trends are seen or if more than three repeat failures occur in the same day. The first
level is to contact Manufacturing Quality Engineering. Circumstances will be analyzed to decide further escalation. Depending on root cause,
the second escalation level is to contact Storage Systems Quality Engineering. They will direct a detailed analysis to address containment and
further problem solving steps. The final escalation is to issue a stop ship/build.
8.9 Defect Root Cause analysis Analysis for individual commodities have different documented trigger points. System failure rates will be
tracked and monitored on a weekly basis by Storage Systems Quality Engineering. When the analysis extends to a vendor provided item (i.e.
HD's), Supplier Quality Engineering involves the supplier, assuring root cause analysis occurs at the earliest point.
8.10 Preventative Corrective Actions Corrective action implementation is dependent on recurring defect trends and the defect's severity. Once
root cause has been established, prevention steps are identified, reviewed by Quality Engineering, documented, and implemented. Periodic
review assures the action's effectiveness or need for more.
8.11 Material Review Board (MRB) The MRB is responsible to assure nonconforming hardware is segregated from normal production
materials. Discrepant material found during the manufacturing cycle is to be conspicuously tagged for subsequent MRB impound. The MRB
will evaluate and disposition the discrepancies.
8.12 Out of Box Experience (OBE) A sampling of units will be unpacked after being received by Dell for inspection purposes. Documented
OBE procedures will specify the steps necessary for the inspected systems. In the event of a finding, closed loop corrective actions will occur.
8
8.13 Stop Build/Ship Criteria During the root cause analysis, if a defective condition will adversely the customer's quality level, a decision for
containment is made. Manufacturing, Quality and management considers the defect's impact and reaches a consensus for hardware disposition.
Stop ship deals with defects that can be contained via the manufacturing process; stop ship addresses all stock, both work in process and at the
revolver.
8.14 Statistical Process Control and Analysis The majority of tests will be one hundred percent in accordance with the automated testing
process. SPC is used to specify control limits on these test processes and help identify instances for further investigation.
8.15 Tooling/Test Equipment Hardware necessary for product verification will be controlled to reduce process variability. This will include
screen stations, flash stations, network connections, Final Test and Hi-Pot stations. Location monitoring will establish trends for process
improvements. Calibration schedules will be maintained for specific equipment and calibrations maintained by Process Engineering.
Computer software will be maintained by Quality/Test and Manufacturing Engineering. Code certification and control will be the responsibility
of Test Engineering.
8.16 PM/Calibration Process Systems requiring periodic adjustments or susceptible to performance degradation will be assigned a schedule for
periodic maintenance. Systems requiring close tolerance activities, i.e. torque or voltage measurements, will be calibrated and identified with a
calibration label. Optimum recalibration frequencies will be assigned along with recall dates. Recalibration dates will be reviewed by
manufacturing and audited by Quality.
8.17 Design Changes The supplier will ensure advance notification to Dell of design changes consistent with the business contract.
8.18 Failure/Corrective Analysis The supplier will ensure returned failure/corrective analysis within the time specified in the business contract.
9.0 RISKS
9.1 DFMEA Issues Any issues remaining unresolved or not forwarded to the PFMEA will be assigned a rating according to the standard
FMEA process. Trend analysis will determine need to forward lessons learned into future products. These will be documented during the
product's post mortem.
9.2 PFMEA Issues Any issues remaining unresolved will be assigned a rating according to the standard FMEA process. Trend analysis will
determine need to forward lessons learned into future products. These will be documented during the product's post mortem.
9
9.3 System Management Issues
System issues will be documented during the product's post mortem. Analysis will determine need to forward lessons learned into future
products.
10
SCHEDULE C TO AGREEMENT NUMBER BRO-001
DELL SERVICE OEM REQUIREMENTS
PROJECT: FIBRE CHANNEL SWITCH
DELL SERVICE OEM
REQUIREMENTS
PROJECT: FC-Switch
Date: November 19, 1998
Revision 1.2
Furnished By:
Rob Tahamtan
DELL Customer Service and Support Engineering (512) 728-0364 Rob_Tahamtan@DELL.com
DELL Service OEM Requirements
The following is a conceptual framework regarding service requirements for Product(s). DELL and BROCADE agree to meet and work
cooperatively to identify additional items and further define the service requirements below. To the extent any of the provisions below conflict
with the Agreement, the Agreement shall take precedence.
1 BROCADE FIELD SERVICE COMMITMENT
1.1 BROCADE shall provide a [*] from date of BROCADE shipment to DELL, return to factory warranty on all parts and labor on FC-Switch
with exception of GBICs. GBICs warranty is limited to [*] from date of BROCADE shipment to DELL. BROCADE shall also provide to
DELL a pass-through warranty as defined in
Section "9" of the Agreement.
1.1.1 All FRUs are new or remanufactured Products.
1.2 BROCADE shall provide replacement parts -including: hardware, firmware, software, training material, diagnostics and technical support
as described in section 4.0 - for [*] from the last date of manufacture, as stated in Section "8.2" of the Agreement.
1.3 BROCADE shall provide worldwide technical support through identified personnel via BROCADE's paging system. (See Section 4.0)
1.4 BROCADE shall provide master copy of service installation and trouble-shooting guides, included in DELL User's Guide, to DELL for all
Product(s) sold to/by DELL as normally available from BROCADE. It is DELL's responsibility to supply Service manuals to DELL Service
Providers (DSPs)
1.5 BROCADE shall provide listing of recommended field replaceable parts on Products sold to DELL.
1.5.1
BROCADE shall provide estimated repair times (or
MTTR) for the FRU list. These estimates should cover
the time required to replace each FRU and verify the
fix.
FRU
--CU-GBIC or SW-GBIC
Switch (excluding GBICs)
MTTR
---[*]
[*]
*Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.
1.6 BROCADE shall provide timely Product updates (firmware, release notes, and technical bulletins) to DELL by permitting DELL access to
BROCADE's web site.
1.7 BROCADE shall provide user-friendly diagnostics, as mutually agreed up on, to DELL. DELL may distribute these diagnostics to DSPs.
1.7.1
Diagnostics should reflect DELL name or no reference
to either company.
1.7.2
BROCADE grants DELL the right to use FC-Switch
embedded diagnostics [*].
1.7.3
BROCADE shall make available the "Web Tools" and
"Zoning" software Products, and other software
Products as mutually agreed, to DELL as licensable
Products.
1.7.4
DELL has selected not to license the optional SES
Product.
1.8 BROCADE shall provide sustaining engineering for all BROCADE Product(s) sold to DELL for the specified warranty period of the
Products.
1.9 BROCADE shall provide a detailed RMA process/procedures for defective/returned Product. DELL shall return defective parts for credit
for the then-current purchase price during warranty period without verification by DELL Service Logistics. (See
Section 9.0 of the Agreement).
1.10 BROCADE shall provide DELL Level III engineers with access to the BROCADE service web site for immediate access to current
information pertaining to BROCADE's serviceability, Product updates, software updates, upgrades and patches. BROCADE shall inform
DELL Level III personnel of software updates and upgrades via an email. It is DELL's responsibility to obtain the software from the
BROCADE web site.
1.11 Provided that DELL POs are received [*] prior to RTS, BROCADE shall deliver to DELL all requested FRUs [*] prior to DELL's RTS. If
DELL POs are not placed within this specified lead time, BROCADE shall make commercially reasonable efforts to supply FRUs within the
requested time frame.
1.12 BROCADE shall provide FRUs, which shall be priced as defined in Schedule "A" of the Agreement. (Emergency expedited FRUs shall be
provided at additional cost.)
1.12.1
DELL requests FRUs to be individually packaged and
labeled in accordance with DELL packaging
specification, as outlined in Schedule "D" to the
Agreement.
1.12.2
Orders for FRUs shall receive the same priority and
lead time as orders for manufacturing.
*Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.
1.13 BROCADE shall use commercially reasonable resources to resolve/cure all quality problems discovered by DELL or DELL customers in
a timely manner. (See Section 4.5) These problems shall be restricted to DELL tested and DELL released configurations.
1.14 BROCADE shall provide DELLsupport/services as specified in the Escalation Section of this document, Section 4.
1.15 BROCADE defines roles of technical support engineers as described in the table below.
Level One
Technical Support
Engineer
Level 1 support is the first line, direct
End User contact, most likely via a
telephone call handling group provided by
DELL.
-
Level One support includes:
First contact direct DELL/End User
interaction
- Information collection and analysis
- Identification of whether the problem
is known and has a known solution
- Troubleshooting and problem
reproduction
- Problem report administration and
tracking
DELL end user customers do not contact
BROCADE directly for questions related to
BROCADE's Products.
Level Two
Technical Support
Engineer
Level 2 support is "technical support"
provided by DELL personnel. Level 2 is
typically where the Product "experts"
reside and serve as the escalation point
for Level 1. Level 2 is expected to
resolve all known problems, installation
and configuration issues, assist in
firmware or driver updates at the End
User site, search BROCADE posted
Technical Notes and other technical
information supplied that shall assist
in providing problem resolutions. All
pertinent data should be entered in the
DELL problem tracking database.
Should the Level 2 analyst be unable to
resolve a problem, either because of
lack of expertise, exhausted
troubleshooting knowledge, or expiration
of the allotted Level 2 resolution time,
they may escalate the problem to Level 3
for resolution. Level 2 shall continue
to work with Level 3 to accomplish
resolution. Level 2 shall communicate
all resolutions back to the End User.
Escalations should be presented to
BROCADE engineers in the form of a
problem tracking data base record with
all pertinent configuration detail and
failure information or symptoms
documented.
In an effort to maintain an efficient
support organization and crisp exchange
of information, DELL shall limit the
number of support personnel (Level 2)
authorized to contact BROCADE (Level 3)
to a total of 8.
Level Three
Technical Support
Engineer
Both DELL and BROCADE provide level 3
support. BROCADE System Engineers (SE)
and/or Technical Support Engineers
(TSE). Level 3 is the first point of
contact for technical issues between
BROCADE and DELL. Once a problem is
escalated to Level 3, BROCADE shall
utilize commercially reasonable
resources to resolve such problem within
DELL tested and DELL released
configurations.
Prior to escalating to Level 3, it is
expected that DELL shall provide the
following information and documentation:
Any error information from the
device connected to the switch
and from the switch.
All names and revisions of
hardware equipment.
All firmware revisions of the
drivers.
Any log files from the devices
connected to the switch.
Any trace file from the
devices connected to the
switch.
The configuration information
of the equipment being used.
Assigned Level 3 support personnel (SE
and/or TSE) can be contacted via direct
dial, email to an established "support"
alias, web site initiated input, and by
calling BROCADE's 1-888-ATFIBRE support
number. Direct access to BROCADE support
personnel shall be possible during
normal BROCADE business hours (8 AM to 5
PM PST, M-F). Emergency situations are
handled via 7 X 24 pager coverage at 1888-ATFIBRE (1-888-283-4273).
2
DELL FIELD SERVICE COMMITMENT.
2.1
DELL shall agree to BROCADE's definition of Technical Support
Engineers in Section 1.17.
2.2
DELL shall agree to provide first, second, and third level
support to DELL's worldwide customer base as described in
Section 4.
3
2.3
DELL shall identify DELL Level III engineering to BROCADE for
direct interface with BROCADE level III staff.
2.4
DELL shall maintain appropriate stocking levels to support
service demand in order to reduce FRU expedite occurrences
TRAINING REQUIREMENTS
3.1
BROCADE shall provide to DELL a complete set of training
classes for proper installation and resolution of field
failures (one class not to exceed one week, and each class not
to exceed twelve (12) persons for [*] for the fee schedule as
defined in the table below. BROCADE shall provide additional
Product training for DELL personnel and DELL designated DSPs
worldwide at BROCADE's standard charge and terms. Fees and [*]
in the table below are one time quotes only for these specific
instances as listed.
Brief course
description
----------Courses 1, 2
and 3 as
described in
BROCADE's
published
material
Switch provided
by:
--------------BROCADE
[*]
DELL
international
instructors
Courses 1, 2
and 3 as
described in
BROCADE's
published
material
DELL Level I
& II
engineers
Courses 1, 2
and 3 as
described in
BROCADE's
published
material
Audience
-------DELL
instructors
Free*
and DELL
Level III
engineers
Duration
-------3-5 days,
[*]
-------[*]
Price
----[*]
BROCADE shall
provide the
required number
of switches (up to
6) for training to
DELL. [*]
3-5 days
[*]
[*]
DELL
3-5 days
[*]
[*]
*Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.
DELL Level I
& II
engineers
(Japan)
Courses 1, 2
and 3 as
described in
BROCADE's
published
material
BROCADE shall
provide the
required number
of switches (up to
6) for training to
DELL. [*]
3-5 days
[*]
[*]
3.2 Training materials shall be made available in "master-copy" format and licensed to DELL. BROCADE shall provide updates to such
training materials as available for the life of the Products.
4. TECHNICAL SUPPORT AND ESCALATIONS
4.1 DELL supports their worldwide end user base through a number of regional support centers.
4.1.1
These centers are staffed with Level I and Level II
engineers and operated on a 7 day, 24 hour basis.
4.1.2
DELL's Level III Server Product Support is located in
Austin, Texas and is currently available on a 5 day,
9 hour per day basis.
4.1.2.1
At the time of this writing the Server
Product Support group is managed by Patricia
Westerfield. Patricia can be reached via:
Phone - 512-728-4260
Pager - 888-857-9801
email - pat_westerfield@DELL.com
4.2 BROCADE's DELL Engineers shall take calls primarily from the DELL Level III Server Product Support group located in Austin. There
shall be no charges for support delivered according to these parameters during the Product warranty period as defined in Section 1.1. Charges
may apply in situations as defined in
Section 4.3.2.
4.2.1
BROCADE shall provide support on DELL tested and DELL
released configurations
4.2.2
DELL shall provide BROCADE with representative
equipment sufficient to test and duplicate escalated
problems/issues.
4.3 DELL and BROCADE agree to following technical support call handling flow:
*Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.
[CHART]
4.3.1
DELL shall follow the standard escalation processes,
during normal working hours. That is: a DELL Level
II, to DELL Level III, to BROCADE Level III
escalation path shall be followed.
4.3.2
For after hours Severity One problems, selected DELL
Level II engineers as specified by DELL from time to
time (up to two per region) in Americas, Europe, Asia
and Japan shall escalate to BROCADE Level III
directly. After hours in this context is based on the
Austin, Texas location of DELL's Level III group,
which is in the Central Time Zone. Such escalations
are limited to [*] per month per region. Escalations
exceeding [*] per month shall be billable at the rate
of [*] per incident. Escalations for non-Severity One
problems shall be billed at the rate of [*] for the
[*] incident and [*]. Dell shall provide an open
purchase order to BROCADE for the invoicing of these
billable services.
4.3.3
DELL Level II engineers shall be responsible for
updating DELL Level III engineers on any after hours
activity that took place directly with BROCADE.
4.3.4
Designated Level II engineers shall be identified by
DELL management to escalate directly to BROCADE after
hours. These names shall be communicated to BROCADE
so that any calls from those individuals shall be
properly handled.
4.4 BROCADE shall provide DELL with the following response times:
Priority 1
Priority 2
System down
Degraded system operation
[*]
[*]
4.5 BROCADE shall provide DELL with the following escalation time lines and process:
*Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.
4.5.1
Escalations from DELL shall generally come from DELL
Level III engineers but under certain conditions as
covered in Section 4.3.2 may be initiated by DELL
Level II engineers.
4.5.2
During normal BROCADE hours of 8 A.M. to 5 P.M.,
Monday through Friday, PDT, and excluding BROCADE
observed holidays, the first escalation request to
BROCADE should be to the BROCADE assigned Level III
engineer. This person can be reached by pager at
1-888-397-1728. At the present time this contact is
Tom Kirchner.
4.5.3
The BROCADE Level III engineer shall normally respond
to the initial request within 30 minutes during
normal BROCADE business hours. A call shall be opened
and a call number assigned through the BROCADE call
tracking database.
4.5.4
Calls shall be worked between the BROCADE Level III
engineer and the DELL escalation engineer until the
problem is resolved. For Severity 1 problems the
BROCADE Level III engineer shall gather information,
perform problem analysis and trouble shooting, and
work this problem for no more than four hours. After
this time the call shall be escalated from the
BROCADE Level III engineer to the internal BROCADE
Technical Support Engineering ("TSE") group to apply
more resources.
4.5.5
The TSE group shall analyze the available data and
provide a resolution or escalate this problem to
BROCADE's development engineering group within four
hours. The call record shall be updated by the TSE
along with this request for additional resources. If
this time frame is missed the Director of BROCADE
Engineering is automatically notified by the BROCADE
call handling tool. The Director shall then ensure
that this issue is escalated to the next level and
track until resolved.
4.5.6
An Engineering resource shall be assigned to work
with the TSE resource within two hours of the
escalation being issued.
4.5.7
DELL shall be contacted by the TSE and the
engineering escalation engineer within two hours of
the BROCADE internal escalation as described in
Section 4.5.5 to further assess the problem, collect
data, and either resolve the issue or further develop
a plan for resolution.
4.5.8
Resources shall be assigned on a continuing basis
until the escalation is closed. Note: the escalation
can be closed when DELL is satisfied with BROCADE's
response and plan of action - which may not coincide
with the final problem resolution (bug fix, patch,
etc.) The maximum time to resolve a Severity 1 issue
is five working days.
4.5.9
The TSE resource requesting escalation shall
facilitate needed communication with DELL and
required exchange of data or equipment as appropriate
in the course of problem resolution on an as needed
basis.
4.5.10
ALL escalated calls require daily updates through the
BROCADE call handling tool. Any report not updated by
the end of the business day shall result in a
warning flag message being sent to the assigned
escalation engineer, to the Director of BROCADE
Engineering, the VP of Engineering, and the VP of
Sales.
4.5.11
If this escalation issue is not resolved within five
working days the Director of BROCADE Engineering and
the VP of Engineering shall apply all resources and
actions as necessary to further expedite resolution
of this issue.
4.5.12
In general the following chart specifies BROCADE
severity levels and service objective goals.
Severity
-------1
Definition
---------BROCADE Product is completely nonfunctional, or deemed a safety hazard, situation
has high impact on development or delivery
efforts. Installation problems.
Service Objective
----------------Respond to initial request within
[*] during normal
BROCADE business hours, and
[*] for non-business hours.
Resources applied until a
solution or acceptable workaround is found.
Resolution Time
--------------Less than [*]
(A work around to be
implemented within
[*]
2
BROCADE Product is functionally impaired,
has substantially degraded performance but is
not completely dysfunctional. There are no
available work-arounds. Situation has medium
impact on DELL activity
Resources applied continuously,
during business hours, until a
solution or work-around is found.
Less than [*]
(A work around to be
implemented within [*]
3
BROCADE Product or advertised functionality
may be slightly impaired but is operational, has
low to no impact on DELL activity, and there
are work-arounds available.
Resources applied on a priority
basis, until a solution or a workaround is found.
Next maintenance
release or [*]
whichever is less.
4
Generic questions, and enhancement requests.
Answer generic questions or
provide path to answers within
reasonable time frames. The
BROCADE web site shall be the
prime repository for this type of
information. Enhancement
requests shall be reviewed and
implemented in the next major
release, where feasible, or to
meet specific commitments
made.
[*] for generic
questions.
Enhancement requests
are processed on a case
by case basis.
*Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.
DELL SOFTWARE LICENSE AGREEMENT
This is a legal agreement between you, the user, and Dell Products, L.P. By opening the software packet(s), you agree to be bound by the terms
of this agreement. If you do not agree to these terms, promptly return all software items (disks, written materials, and packaging) for a full
refund.
You may use one copy of the software on only one computer at a time. If you have multiple licenses for the software, you may use as many
copies at any time as you have licenses. "Use" means loaded in temporary memory or permanent storage on the computer. Installation on a
network server solely for distribution to other computers is not "use", if you have a separate license for each computer to which the software is
distributed. If users will exceed the number of licenses, you must have a reasonable process to assure that the number of persons using the
software concurrently does not exceed the number of licenses.
The software is protected by United States copyright laws and international treaties. You may make one copy of the software solely for backup
or archival purposes or transfer it to a single hard disk provided you keep the original solely for backup or archival purposes. You may not rent
or lease the software or copy the written materials accompanying the software, but you may transfer the software and all accompanying
materials on a permanent basis, if you retain no copies and the recipient agrees to the terms, hereof. Any transfer must include the most recent
update and all prior versions. You may not reverse engineer, decompile or disassemble the software. If the package contains 3.5" and 5.25"
disks, you may use only the disks appropriate for your computer. You may not use the disks on another computer or network, or loan, rent,
lease, or transfer them to another user except as permitted by this agreement.
LIMITED WARRANTY
Dell warrants that the software disks are free from defects in materials and workmanship under normal use for ninety (90) days from the date
you receive them. This warranty is limited to you and is not transferable. Any implied warranties are limited to 90 days. Some jurisdictions do
not allow limits on the duration of an implied warranty, so this limitation may not apply to you. The entire liability of Dell and its suppliers,
and your exclusive remedy, shall be
(a) return of the price paid for the software or (b) replacement of any disk that does not meet this warranty which is sent with a return
authorization number to Dell, at your cost and risk. This limited warranty is void if any disk damage has resulted from accident, abuse,
misapplication, or service or modification by someone other than Dell. Any replacement disk is warranted for the remaining original warranty
period or 30 days, whichever is longer. Dell does not warrant that the functions of the software will meet your requirements or that operation of
the software will be uninterrupted or error free. You assume responsibility for selecting the software to achieve your intended results, and for
the use and results obtained from the software. Dell disclaims all other warranties, express or implied, including but not limited to implied
warranties of merchantability and fitness for a particular purpose, for the software and all accompanying written materials. This limited
warranty gives you specific legal rights. You may have others, which vary from jurisdiction to jurisdiction.
In no event shall Dell or its suppliers be liable for any damages whatsoever (including, without limitation, damages for loss of business profits,
business interruption, loss of business information, or other pecuniary loss) arising out of use or inability to use the software, even if advised of
the possibility of such damages. Because some jurisdictions do not allow an exclusion or limitation of liability for consequential or incidental
damages, the above limitation may not apply to you.
U.S. GOVERNMENT RESTRICTED RIGHTS
The software and documentation are provided with Restricted Rights. Use, duplication or disclosure by the Government is subject to
restrictions as set forth in subparagraph (c)(1)(ii) of the Rights in Technical Data and Computer Software clause at DFARS 252.227-7013 or
subparagraphs (c)(1) and (2) of the Commercial Computer Software-Restricted Rights at 48 CFR 52.227-19, as applicable.
Contractor/manufacturer is Dell Products, L.P., One Dell Way, Round Rock, TX 78682. This license is effective until terminated. It will
terminate upon the conditions set forth above or if you fail to comply with any term hereof. Upon termination, you agree that the software and
accompanying materials, and all copies thereof, will be destroyed. This agreement is governed by the laws of the State of Texas. You
acknowledge that you have read this agreement, you understand it, you agree to be bound by its terms, and that this is the complete and
exclusive statement of the agreement between you and Dell regarding the software.
SCHEDULE D TO AGREEMENT NUMBER BRO-001
DELL INBOUND PACKAGING STANDARDS
PART NUMBER 11500
DELL COMPUTER CORPORATION
INBOUND PACKAGING STANDARDS PN- 11500
REV A06
Page 1
REV
--A00-00
A01-00
A02-00
A02-01
A03-00
A04-00
A05-00
A06-00
ECO
--1285
2182
3650
11401
15031
15031
DESCRIPTION
----------Release for procurement use.
Revise and update.
Correct spelling and revise wording.
Update description to conform to Naming Standard.
Update rack height requirements.
Incorporate reference of PN 00121 for test method.
Update and revise spec to include line ready packaging
requirements. - JB 12/15/95
Tighten palletization methods and add pictorials. - JB
02/27/96
Page 2
DATE
---08/10/87
02/28/89
07/05/90
10/19/93
12/13/94
12/13/94
APPROVED
----------- ---Pete Genix
Pete Genix
Rita Maloy
Greg Peden
Pete Genix
TABLE OF CONTENTS
1.
PURPOSE
2.
GENERAL SUPPLIER RESPONSIBILITIES
3.
COMPLIANCE
4.
DEFINITIONS.
5.
PACKAGING CRITERIA
6.
LINE READY PACKAGING
7.
PALLETIZATION REQUIREMENTS
8.
MARKING AND IDENTIFICATION
9.
LABELING REQUIREMENTS
10.
PACKING LIST
Page 3
1.0 PURPOSE
This Dell Computer Corporation (DCC) Specification defines for our suppliers packaging requirements that might be specific for Dell
Computer Corporation. The goal of this document is to specify DCC's requirements for receiving; packaging protection; warehouse; safety and
line ready usage.
2.0 GENERAL SUPPLIER RESPONSIBILITIES
2.1 COMMUNICATIONS
2.1.2 Vendors shall communicate packaging assumptions to Dell Computer Corporation in quote, including factors such as cost, box
dimensions, weight, quantity per box and internal packaging descriptions.
2.1.2 This communication shall be coordinated through DCC purchasing.
2.1.3 Vendors shall communicate any modifications to packaging that might be mutually beneficial.
2.1.4 Vendors shall provide packaging drawings and specifications when available.
2.2 PRODUCT PROTECTION
2.2.1 All shipments to DCC must be packaged and/or palletized so that both containers and contents arrive at DCC free from damage.
2.2.2 Pallet loads received by DCC may be broken down into their individual containers to be reshipped. These individual containers may
require a packaging test to verify the performance of the suppliers packaging during testing per Dell's Packaged Product Test Procedure.
Part Number 00121.
2.3 LEGAL It is the suppliers obligation to ensure that packaging and palletizing comply with all applicable laws and regulations including:
Rail Regulations: Uniform Freight Classification, Rule 41.
Truck Regulations: National Motor Freight Classification, Item 222.
Air Regulations: International Air Transportation Association
Page 4
3.0 COMPLIANCE
3.1 IN THE EVENT OF NON-COMPLIANCE DCC RESERVES THE RIGHT TO:
3.1.1 Reject and return any shipments received that are improperly packaged or identified.
3.1.2 Charge the supplier for the cost of labor and materials for any repackaging resulting from the non-compliance with DCC specifications.
3.1.3 Remove from it's list of approved suppliers, any who repeatedly fail to comply with the DCC Packaging requirements.
4.0 DEFINITIONS ASTM - American Society of Testing and Materials Line Ready - Part prepared for use on production line. Michelman - A
coating process used in the corrugated industry to reduce abrasion.
O.D. - Outside Dimensions
Unitized Load - Two or more containers secured to a pallet or shipping base.
5.0 PACKAGING CRITERIA
5.1 CONTAINER INTEGRITY All containers must comply with the National Motor Freight Classification rules, items 222 and 222-1 for all
packaged product received by DCC.
5.2 CUBE EFFICIENCY Container selection shall consider the amount of space the product occupies, the number of cartons per pallet load,
and the number of pallets per trailer/sea container.
Page 5
PACKAGING CRITERIA (CONTINUED)
5.3 ELECTROSTATIC SENSITIVE PARTS
5.3.1 Shall be packaged as defined in Military Specification 1696 for Class One parts with a 1000 Volt sensitivity or below.
5.3.2 These parts shall be received in containers which provide electrostatic field shielding properties per standard EIA-541.
5.3.3 Static shielding bags shall have the following electrical surface resistivity properties (ohms/square) SURFACE RESISTIVITY (Outside
Layer) between 10 7 & 10 12 (+/-10%) SURFACE RESISTIVITY (Inside Layer) 10 7 or less (+/-10%) SURFACE RESISTIVITY (Metalized
Layer) 10 3 or less (+/-10%)
5.4 MECHANICALLY HANDLED LOADS
Refer to Palletization Requirements in Section 6.0.
5.5 MANUALLY HANDLED PACKAGES Gross weight of the package shall not exceed 50 pounds. Packages with gross weight under 35
pounds is preferred.
5.6 PARTS CLEANLINESS All parts will be clean prior to packaging. Cleanliness of the part is not to be degraded by the packaging materials
or any of it's components.
5.7 PARTS INTEGRITY
5.7.1 Parts shipped on different purchase orders must be packaged separately and marked accordingly.
5.7.2 Each different part number item must be packed in it's own discrete package and identified. Refer to Markings and Identification in
Section 7.0.
5.8 PACKAGING CLOSURES The packaging closure must maintain interior cleanliness and ensure that contents remain intact and damage
free during shipping and handling.
Page 6
6.0 LINE READY PACKAGING DCC in writing a contract may specify that "line ready packaging" is requested. The ideal is to have
packaging and sub-packaging that flow through DCC's manufacturing process without any unboxing or modification to assembly areas.
6.1 GENERAL GUIDELINES
6.1.1 Internal packaging should be designed to allow for minimal material handling and secondary detrashing upon product removal.
6.1.2 Components should not be individually wrapped or bagged unless sensitive to cosmetic or electrostatic discharge.
6.1.3 Donnage should be minimized.
6.1.4 Reusable packaging should be considered when applicable.
6.1.5 Designs should have minimal adhesion of two dissimilar materials (foam and corrugated) to allow for ease of recycling.
6.1.6 Boxes to be manually handled should be smaller than roughly 24" x 20" x 20". If the box is larger then it should be broken into smaller
sub-boxes or sub-packs.
6.2 LARGE PALLETIZED BULK CONTAINERS
6.2.1 These containers shall consists of a design that allows for one lid to be removed for access to all parts inside.
6.2.2 The height of the palletized load shall not exceed 48 inches (including pallet).
6.2.3 Pallet shall be a standard 40 x 48 pallet with a 48 x 48 pallet acceptable. Other pallet designs will need approval to insure they are
compatible with DCC's internal transport devices.
6.3 BULK BOXES
6.3.1 Bulk boxes should weight no more than 35 pounds (50 pounds absolute maximum).
6.3.2 Boxes shall have Dell part number and part quantity on each of the width panels.
6.3.3 Bags shall be used for abrasion protection as a last resort. Other anti-abrasion measures should be considered first such as coatings on
corrugated.
6.3.4 Box shall be designed so that parts will not be damaged if box is opened by a knife.
6.3.5 Ideal box size is 24 x 20 x 18 or smaller.
6.3.6 Ideally lids should be designed so that they can be removed in a one step process.
Page 7
LINE PACKAGING (CONTINUED)
6.4 PIECE PART BOXES
6.4.1 Small piece part boxes shall easily countable quantities inside (10, 50., 100, etc...).
6.4.2 Boxes shall have Dell part number and part quantity on each width panel.
7.0 PALLETIZATION
7.1 REQUIREMENTS
7.1.1 Palletization is required for all orders that occupy more than 50% of a pallet load or exceeds 50 pounds per package.
7.1.2 Load Height Maximum: 60 inches including pallet(s)
7.1.3 Load Weight Maximum: 1000 pounds gross palletized load
7.1.4 Leaning, bulging, and pallet loads with overhang are not acceptable.
7.1.5 Standard 40 X 48 inch pallets are preferred, 42 X 48 inch and 48 X 48 inch pallets are acceptable.
7.1.6 All pallets must be constructed with runner and stringer boards and have four way entry, pallets with corner blocks or cones are
unacceptable. Pallets without bottom runners are also unacceptable.
7.1.7 All palletized loads shall have a corrugated slip sheet between the boxes and the top runners to aid in load distribution.
[CHART]
Page 8
PALLETIZATION (CONTINUED)
7.2 STACKING
7.2.1 Packaging shall be designed to withstand double stacking of two similar pallets and must pass National Motor Freight Rule 180. . A "Do
Not Stack" label does not absolve the suppliers of their responsibility for proper packaging.
7.2.2 The top surface of the pallet load shall be flat to permit stacking for both carrier and warehouse requirements.
7.3 MIXTURE OF PRODUCT.
7.3.1 Shipments of a given part number must be consolidated on the same pallet.
7.3.2 Different part numbers, as well as different purchase orders, can be consolidated in a bulk shipper with a single bill of lading if each part
number group is individually packaged and labeled properly.
7.4 BANDING
7.4.1 Two-way banding using metallic or polyester material is required for all purchase orders that call out banding of loads.
7.4.2 Angle boards or edge protectors are required under bands to maintain individual container's integrity, as well as the pallet's.
[CHART]
Page 9
PALLETIZATION (CONTINUED)
7.5 STRETCHWRAPPED LOADS
7.5.1 Shrink films or stretch wraps must adequately secure the load to the pallet. The film must have adequate tack to prevent loose ends from
hanging off the load.
7.5.2 Angle boards shall be used on the four vertical corners to prevent the corrugated from collapsing due to stretchwrap pressure.
[CHART]
7.5.3 There shall be a minimum of three spiral wraps per unitized load.
7.6 COMBINATION PALLETIZATION METHODS Some commodity managers may require both banding and stretchwrap as a requirement.
If both are required then all requirements in both sections apply. (I.E. angle boards shall be required on all four vertical edges and well as the
horizontal banded edges.
7.6 TESTING Palletization loads to be tested per the Dell Packaging Specification 00121.
8.0 MARKING AND IDENTIFICATION Supplier shipments routed by common carriers must be accurately described on the bill of lading
with the appropriate package description, as required by the National Motor Freight Classification.
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9.0 LABELING REQUIREMENTS
9.1 REQUIREMENTS Receipt and storage of materials, requires that incoming loads be easily and quickly identified. All shipping containers
must be identified with an "Outer Package Label" as specified in the "Electronic Industries Association Shipping and Receiving Bar Code
Label Standard," available from Dell Computer Corporation's Procurement and Receiving Departments.
9.2 EXCEPTIONS
Exceptions for OEM products will have superseding requirements as
outlined by each commodity's contract/specification requirements.
10.0
PACKING LISTS
10.1
REQUIREMENTS
10.1.1 One packing list is required with each shipment, as it specifies
the contents of the shipment received.
10.1.2 The preferred location of the packing list is on the outside of
the shipping container, positioning it on the side or end, not on top.
Securely affix a transparent envelope or tape such that the packing list
is visible and protected from damage.
10.1.3 When the packing list is enclosed on the inside of a carton, that
carton must be identified with a "Packing List Enclosed" label.
10.1.4 All packing lists must contain the following information:
Name and Address of Supplier
Dell Computer Corporation Part Number
Purchase Order Number
Name and Address of Receiving Location
Number of pieces shipped
Description of Material
Shipping Date
Case Number
Page 11
SCHEDULE E TO AGREEMENT NUMBER BRO-001
DELL SUPPLIER LABELING SPECIFICATION
PART NUMBER 13190
DELL
SUPPLIER
LABELING
SPECIFICATION
DELL Part No. 13190
Rev. A09-00
PROPRIETARY NOTE
THIS ITEM IS THE PROPERTY OF DELL COMPUTER CORP. AUSTIN, TEXAS AND CONTAINS CONFIDENTIAL AND TRADE
SECRET INFORMATION. THIS ITEM MAY NOT BE TRANSFERRED FROM THE CUSTODY OF DELL COMPUTER CORP.,
EXCEPT AS AUTHORIZED BY DELL COMPUTER CORP. AND THEN ONLY BY WAY OF LOAN FOR LIMITED PURPOSES. IT
MUST NOT BE REPRODUCED IN WHOLE OR IN PART AND MUST BE RETURNED TO DELL COMPUTER CORP. UPON
REQUEST AND IN ALL EVENTS UPON COMPLETION OF THE PURPOSE OF THE LOAN. NEITHER THIS ITEM NOR THE
INFORMATION IT CONTAINS MAY BE USED BY OR DISCLOSED TO PERSONS NOT HAVING A NEED FOR SUCH USE OR
DISCLOSURE CONSISTENT WITH THE PURPOSE OF THE LOAN WITHOUT PRIOR WRITTEN CONSENT OF DELL COMPUTER
CORPORATION.
LABELING SPECIFICATION
CONTENTS
SCOPE
4
4
4
4
Purpose
Application
Subassembly (Parts) Classes
BARCODE DEFINITIONS
5
GENERAL LABEL REQUIREMENTS
6
Subassembly (Parts) Labels
Subassembly (Parts) Label Content
Type A Label
Type B Label
Type C Label
Type D Label
Twenty Digit Barcode
DELL Part Number
Manufacturer's Identification
Seven Character Date Code/Sequence Number Combination
Date Code
Sequence Number
DELL Part Number
Revision (Rev) Level Barcode
Label Placement
Code Density and Dimension
Code Height
Intercharacter Gap
Quiet Zones
Spacing Between Barcode and HRI
Spacing Between Edge Of Label and HRI
Readability and Printing Requirements
Subassembly (Parts) Label Material Requirements
Non-PCB/PWA (Label Types A and B Only)
Face Stock Characteristics
Adhesive Characteristics
PCB/PWA Labels (Label Type C Only)
Face Stock Characteristics
Adhesive Characteristics
Durability
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9
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12
12
13
Electronic Industries Association (EIA) Shipping/Receiving Label
13
EIA Label
EIA Label Content
EIA Label Location
Code Density and Dimension
Code Height
Intercharacter Gap
Quiet Zones
Spacing Between Barcode and HRI
Spacing Between Edge of Label and HRI
Height of Human Readable Interpretation
Readability and Printing Requirements
EIA Label Material Requirements
13
13
15
15
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15
15
15
15
15
16
16
2
Face Stock Characteristics
Adhesive Characteristics
Durability
Sample Electronics Industry Association (EIA) Labels
ISO Country Codes
16
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3
LABELING SPECIFICATION
SCOPE
1.1 PURPOSE:
The purpose of this document is to specify the characteristics, standards and requirements for electronic subassembly (parts) labels (referred to
as PPID {piece part identification}) and EIA labels by suppliers to DELL Computer Corporation.
1.2 APPLICATION:
This document shall apply whenever label marking and reading are employed on shipping containers and electronic subassemblies used in
DELL products and when shipping components to DELL.
1.3 SUBASSEMBLY (PARTS) CLASSES:
This document shall apply to each of the following subassembly classes as indicated by DELL Computer Corporation.
- AC Adapters
- Add on Cards (all types)
- CD ROM's
- Controller Cards
- Tape Drives
- Floppy Drives
- Hard Drives
- PCMCIA Card Interfaces
- Keyboards
- Monitors
- PCB/PWA's (motherboards, risers, backplanes, and {as indicated by procurement}, cache cards, daughter cards, and other PCB's)
- Portable Batteries
- Power Supplies
- Docking Modules/Port Replicators
- Thermal Monitoring Cards
- Selected notebook components
4
- 2.1 BARCODE DEFINITIONS:
BAR - The darker element of a barcode.
BARCODE - An array of rectangular bars and spaces in a predetermined pattern.
BARWIDTH - The perpendicular distance across a bar measured from a point on one edge to a point on the opposite edge. Each point will be
defined as having a reflectance that is 50% of the difference between the background and bar reflectances.
BINARY - Pertaining to a characteristic or property involving a selection, choice or condition in which there are two possibilities. BINARY
CODE - A code which makes use of exactly two distinct characters, usually 0 (zero) or 1 (one).
CHARACTER - Letter, digit or other special form that is used as part of the organization, control or representation of data. A character is often
in the form of a spatial arrangement of adjacent or connected strokes.
CODE 128 - A variable length, alpha-numeric encoding the full ASCII 128 character set. Every character is made up of 11 modules containing
three bars and three spaces. Bar and space width is one, two three, or four modules. Three different start characters are used to select one of
three character sets, including a high-density numeric arrangement that can encode two numeric digits in each character.
CODE DENSITY - The number of characters that can appear per unit of length, normally expressed in characters per inch (CPI). ELEMENT A generic term used to refer to either a bar or a space. HUMAN READABLE INTERPRETATION (HRI) - The exact interpretation of the
encoded barcode data presented in a human readable font.
INTERCHARACTER GAP - The space between the last element of one character and the first element of the adjacent character of a discrete
barcode. MARGIN (QUIET ZONE) - The area immediately preceding the start character and following the stop character, which contains no
markings. SPACE - The lighter element of a barcode. START AND STOP CHARACTER - A distinct character represented by an asterisk (*),
used at the beginning and end of each 3 of 9 barcode which provides initial timing references and direction of read information to the coding
logic. The asterisk start and stop code is an integral part of, and peculiar to, the 3 of 9 barcode. SYMBOL - A complete barcode containing
margins, start character, data characters, check digit (if any) and a stop character. UNIT SIZE - The bar width of a narrow element. The narrow
bar and the narrow space are equal in the 3 of 9 barcode. 3 OF 9 BARCODE - a variable length, discrete, self-checking, bi-directional
alphanumeric barcode. Its character set contains 43 meaningful characters: 0 - 9, A - Z, -, ., $, /, +, % and space. Each character is composed of
nine elements: five bars and four spaces. Three of the nine elements are wide (binary value 1), and six elements of narrow (binary value 0). An
additional common character, asterisk (*) is used for both start and stop delimiters.
5
LABELING SPECIFICATION
GENERAL LABEL REQUIREMENTS
3.1
SUBASSEMBLY (PPID) LABELS
3.1.1
SUBASSEMBLY (PPID) LABEL CONTENT
Subassemblies (see Scope for commodities specified as subassemblies)
shall be labeled with one of the following three types of barcode labels as indicated in the DELL Specification Control Drawings. The Label
Type must be assigned by DELL Procurement Group for all parts. Every label must fit on the part without affecting functionality or
cosmetically mar the look of the finished DELL product (see below for detail technical specifications).
TYPE A LABEL
This barcode label will be applied to most parts on label stock 2.0 inches (50.8 mm) wide by .5 inch (12.7 mm) high using a wide to narrow
element ratio of 3 to 1. The narrow element must be a minimum of 5 mils (.127 mm). This is a 12.5 CPI bar code. This is the preferred label for
all parts (except motherboards), and is recommended unless the manufacturer is incapable of printing or scanning a label printed with this
density bar code. Approval to use an alternative label is to be obtained in writing from DELL via contract or Purchase Order. (Special note:
Upon specific approval from Dell, this label may be produced in a smaller size using Code 128 rather than Code 39. This approval is intended
only for parts that are too small for a 2" label, such as certain notebook components)
[GRAPHIC]
TYPE B LABEL
For manufacturers not having equipment capable of printing or scanning the standard size label (Type A above), a label up to 3.25 inches (79.4
mm) wide by .5 inch (12.7 mm) high will be permitted, provided the component size permits and it does not interfere with the operation or
finished look of the component. When the narrow element exceeds width of 6.6 mils (.167 mm), a 2 to 1 or 2.5 to 1 ratio may be used. DELL
discourages the use of this label unless it is absolutely necessary. The bar code densities can, for a label wider than 2 inches, range down to as
low as 7.7 CPI which requires a label to be at least 3.125 inches long to have acceptable quiet zones. A bar code density of 10.4 CPI requires a
2.375 inch (60.3 mm) long minimum label. This density is achieved with a 300 DPI printer using a 6.6 mil (2 dot) narrow element at a 2.5 to 1
ratio.
6
[GRAPHIC]
TYPE C (2 PART) LABEL
For subassemblies, such as boards, that do not have sufficient surface area to affix a Type A or Type B label without interfering with the
performance or finished look of the part. Use a 3 to 1 ratio where the narrow element must be a minimum of 5 mils (.127 mm). The Type C
label may only be used with the written permission of DELL via contract or Purchase Order. The Rev label may have the human readable type
above, below, or to the left of the bar code, provided it all fits on the label, with minimum quiet zones on either side of the bar code.
[GRAPHIC]
TYPE D LABEL
For items which require a country of origin label for customs, a Type D label may be used. Use a 4 to 2 ratio where the narrow element must be
a minimum of 5 mils (.127 mm). The Rev must have the human readable type below or to the left of the bar code with minimum quiet zones on
either side of the bar code. The country of origin, of the form "MADE IN XXXXX," on one or two lines, must be located immediately to the
left of the Rev bar code while maintaining minimum quiet zones. The area to the left of the country of origin may be used by the vendor for
additional information, such as special handling icons, provided that such information does not interfere with the readability of the human
readable code denoting the Dell Part Number or the country of origin text. For portable hard disk drives the label must be located within the
position window shown below.
7
[GRAPHIC]
Parts labels will be made up of three general physical areas: the Twenty Digit Barcode, the DELL Part Number and the Rev Level.
TWENTY DIGIT BAR CODE A bar code message, containing the sequence of Dell Part Number, Supplier's Identification Number and
location code, and a serial number consisting of a Date code and a sequence number (see definitions below), consisting of CODE 3 of 9
symbols enclosed between start and stop character codes with Human Readable Interpretation (HRI) directly below. The bar code shall not
include any dashes (-) or other information besides that specifically mentioned above. The HRI will separate the Manufacturer ID number, the
Date Code and the sequence number with a minus sign (-). The Dell part number will be printed in human readable form separately from the
other information contained within the bar code (except on Type C labels, where the text string may be
8
continuous, and will have DP/N as the leading text.) Note: In special circumstances, Code 128 will be approved, but cannot be used without
specific approval.
DELL PART NUMBER Eight alphanumeric characters assigned by DELL to identify the part. In the event that the Dell part number is 5 characters, three leading zeros
shall be used to fill out the 8 spaces designated for the DELL part number. The DP/N will be provided on the purchase order placed for the
parts.
MANUFACTURER'S IDENTIFICATION Five numeric (currently, may be alphanumeric in the future) characters naming the supplier of the part and the location of the manufacturing
plant, to be supplied by DELL Procurement. The first four characters shall represent the base supplier number. The fifth character shall be a
numeric character representing the manufacturing plant, and shall be issued by DELL procurement as requested by supplier, one per
manufacturing location.
SEVEN CHARACTER DATE CODE/SEQUENCE NUMBER COMBINATION The first 3 characters of this component of the bar code shall
represent the year, month and day of manufacture. The last four shall be a sequence number. The first character shall be a number representing
the last digit of the year of manufacture (1995 would be a 5). The second character shall represent the month per the table below. The third
character shall represent the day of manufacture beginning with a 1 through 9, and then with the letters A through V representing the 10th
through 31st of a month per the table below.
DATE CODE - A three character field used to identify the date a part was manufactured, or the date Dell received the part (If a part label had
to be generated by Dell). This date code is made up of a one character code for year (0-9), a one character code for month, and a one character
code for day.
The following tables apply to the Date Code:
Month codes
January
February
March
April
May
June
1
2
3
4
5
6
July
August
September
October
November
December
7
8
9
A
B
C
Day Codes
1st
2nd
3rd
4th
5th
6th
1
2
3
4
5
6
11th
12th
13th
14th
15th
16th
B
C
D
E
F
G
21st
22nd
23rd
24th
25th
26th
9
L
M
N
O
P
Q
31st
V
7th
8th
9th
10th
7
8
9
A
17th
18th
19th
20th
H
I
J
K
27th
28th
29th
30th
R
S
T
U
SEQUENCE NUMBER
A four character field used in conjunction with the Dell Part Number, the MFG ID and the MFG Date Code to provide the detail necessary to
uniquely identify an individual part.
Suppliers will be allowed the use of characters 0-9, A-O in the first position of the sequence number, with no restrictions on the 2nd through
4th positions. The use of the characters P through Z in the first position of the sequence number is reserved for use internally by Dell, for labels
that Dell prints itself. When Dell prints its own labels (not applicable to suppliers), the first position will be used to identify where the part was
received, as outlined below:
"P" & "Q"
"R" & "S"
"T" & "U"
"V" through "Z"
Received in AMF facilities
(Applies to facilities in Austin, including
Manufacturing, Field Service & Board Repair)
Received in EMF facilities
(Applies to facilities in Ireland)
Received in APCC facilities
(Applies to facilities in Malaysia)
Reserved for future use
with no restrictions on the 2nd through 4th positions.
In the event a barcode is not on the part when received, Dell will create a barcode label by entering the DELL Part Number and Manufacturer's
Identification, and the computer will assign the next available sequence number for that part number and print a properly formatted barcode
label, including a date code reflecting the date of label generation. If the manufacturing location code is unknown for Dell generated labels, a 0
(zero) will be used for the location code portion of the supplier's ID. The Dell receiving location will be indicated by the first character of the
sequence number, as noted in the table above, when Dell is printing its own labels.
ANY COMPONENT WITHOUT SUBASSEMBLY LABELS (REQUIRING PARTS TO BE BARCODE LABELED BY DELL) WILL NOT
BE CAPABLE OF REFERENCING MANUFACTURING INFORMATION SUCH AS DATE OF MANUFACTURE, WHERE BUILT,
ETC. THEREFORE, IT IS MOST ADVANTAGEOUS FOR A MANUFACTURER TO PROVIDE THE SUBASSEMBLY (PART) LABEL
AND BE A BENEFACTOR OF THE QUALITY MANAGEMENT INFORMATION DERIVED BY THE DELL SYSTEM.
DELL PART NUMBER (DP/N) IN HUMAN READABLE FORM, LARGER LETTERS.
The eight numeric character part number assigned by DELL that appears as the first eight characters of the subassembly bar code label. The
DP/N will be provided on the purchase order placed for the parts. Note: If the Assigned Dell part number is 5 characters, precede it with 3
zeros.
REVISION (REV) LEVEL BARCODE
A barcode message consisting of three CODE 3 of 9 characters enclosed between start and stop character codes. These three characters
represent the first three characters of the DELL revision level
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of the subassembly. The revision level will be supplied to the manufacturer via the purchase order. The supplier's rev level information for a
particular PO will be supplied to Purchasing at the time of ordering, and confirmation must be received from DELL prior to shipping a new rev
of an existing part where DELL is continuing to use the same DELL part number.
3.1.2 LABEL PLACEMENT The placement of the label on the subassembly (part) must be on a flat surface and in a location that will not
cosmetically mar the look of the finished DELL product and not on a surface normally used for the attachment of the component. If DELL
controls the specification for the subassembly, the placement will be in the location indicated on the DELL assembly drawings. DELL's
purchasing agents should be able to answer questions regarding placement, or refer you to the appropriate contacts, such as peripheral
development. Note:
The location of labels on hard drives intended for notebooks can be critical due to the close tolerances of hard drive bays (See Type D Label).
3.1.3 CODE DENSITY AND DIMENSION FOR PPID LABELS The maximum bar code density in characters per inch is 12.5 (CPI). The
minimum and maximum widths for narrow elements, and allowable ratios are as follows:
Narrow element width
0.005 inches (.127 mm) to 0.010 inch (.254 mm)
Wide element width
0.015 inches (.381 mm) to 0.020 inch (.762 mm)
Wide to narrow element ratios 3:1 for narrow elements less than .065 inch (.165mm)
2.5:1 to 3:1 for narrow elements greater than or equal
to 0.066 inch (.167 mm)
2:1 to 3:1 for narrow elements of 0.010 inch or greater
Element tolerance
0.0017 inches (0.044 mm)
Special note: If Code 128 has been specifically approved for use on a particular part, the minimum narrow element width must be .005 inches.
Only Subset A of Code 128 is allowed for use.
3.1.3.1 CODE HEIGHT - The allowable range for the bar code height is 0.20 inch +/-0.01 inch.
3.1.3. INTERCHARACTER GAP - The distance between characters is the same as the minimum dimension of a narrow element.
3.1.3.3 QUIET ZONES - The minimum left and right margins shall be 15 times the width of one narrow element or 0.12 inch (2.0 mm).
3.1.3.4 SPACING BETWEEN BARCODE AND HRI - A minimum of 0.005 inch (0.127 mm) and a maximum of 0.015 inch(0.38 mm).
3.1.3.5 SPACING BETWEEN EDGE OF LABEL AND HRI - The minimum spacing between the horizontal edge of the label and the HRI
shall be 0.015 inch(0.38 mm).
3.1.3.6 READABILITY AND PRINTING REQUIREMENTS. Using commercially available bar code verifiers, labels must have a minimum
decode percentage of 95% or more. The label stock and ribbon combination, stock, or other printing method must produce labels acceptable for
scanning in the visible light (600 to 660 nm wavelength) as well as
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laser and infrared scanners operating at wavelengths up to 900 nm. Specific details, if required, can be obtained by referring to the EIA-556-A
Shipping and Receiving Bar Code Label Specification or ANSI bar code specifications. ANSI bar code quality standard "C" or better is
indicative of acceptable labels, although care should be used in using this as the only standard of quality, particularly on higher density labels.
These specifications will lay out minimum reflectivity, print contrast ratios, bar growth and size tolerances, defect tolerances, etc. Labels using
the direct thermal process are not acceptable for 5 mil narrow element PPID labels.
Dell is interested in decodability using commercial laser scanners and will be happy to verify any contemplated labels. Dot matrix printed
labels are not acceptable as piece part labels.
3.1.4 SUBASSEMBLY (PARTS) LABEL MATERIAL REQUIREMENTS
3.1.4.1 NON-PCB/PWA (LABEL TYPES A AND B ONLY)
a) Face Stock Requirements The actual material used is at the discretion of the affixing party, provided the labels are legible, permanent and
meet the following minimum standards:
1)
2)
Face Stock Characteristics
Type
Caliper
Basis Weight
Color
Background Reflectance
Print Contrast Signal
Service Temperature Range
Polyester or topcoated paper
0.0020 inch
42 lb. / 3000 square feet
White
633nm / 80% min. (90nm / 70% min.)
95% min. 85% min.
0 to 225 degrees Fahrenheit
Adhesive Characteristics
Type
Minimum Application Temp.
Service Temperature Range
Dwell: Initial Tack
Ultimate Tack
Caliper
Conductivity
Permanent Acrylic
50 degrees Fahrenheit
0 to 225 degrees Fahrenheit
1 hour (at room temperature)
30 hours - Full Strength
0.0009 inch
Non-conductive if applied across
any contacts on a PWA
3.1.4.2 PCB/PWA LABELS (LABEL TYPE C ONLY)
a) Face Stock Requirements - The actual material used is at the discretion of the affixing party, provided the labels are legible, permanent and
meet the following minimum standards:
1)
Face Stock Characteristics
Type
Polymide (kapton) or high
temperature polyester
0.0027 inch
70 lb. / 3300 square feet
Buff / Amber (or white for
polyester)
633nm / 75% (900nm / 80% min.)
63% min. 65% min.
Caliper
Basis Weight
Color
Background Reflectance
Print Contrast Signal
2)
Adhesive characteristics
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Type
Minimum Application Temp
Service Temperature Range
Dwell - Initial Tack
Ultimate Tack
Caliper
High Temp Permanent Acrylic
50 degrees Fahrenheit
0 to 525 degrees Fahrenheit
6 Hours at Room Temperature
36 Hours - Full Strength
0.0020 inches
3.1.4.3 DURABILITY Labels must remain scanable at the above listed minimum acceptable levels for a period of 5 years in a non-condensing
environment with temperatures up to 150 degrees Fahrenheit (65 degrees C). Direct thermal labels are not allowed for PPID labels without
documentation with regards to durability.
3.2 ELECTRONIC INDUSTRIES ASSOCIATION (EIA) SHIPPING/RECEIVING LABEL
Sections of the DELL Standard for this label have been taken from the Electronics Industry Association Standard EIA-556-A for OUTER
PACKAGE LABELS, but have been retyped to focus on the specific needs of DELL. In the event the EIA standard for this label should
change, the DELL Standard will remain in effect until DELL approves in writing any modifications to reflect the EIA Standards change.
3.3.1 EIA LABEL CONTENT
Each shipping container received at DELL shall be labeled with the information indicated below. A shipping container is an individual sealed
box containing one or more parts. It is not a pallet, or overwrap, but is the container from which individual parts would be removed for
assembly into a finished computer. Thus, each individual shipping container on a pallet, or unitized overwrap, will contain multiple individual
cartons with individual EIA labels.
a) FROM AND TO - This shipping information data field is a non-barcoded mandatory data field located as shown in Figure 1. It shall contain,
at a minimum, the supplier's name and address (under the title "FROM") and DELL's name and address (under the title "TO"). Additional
information may be printed in this area such as the DELL logo or telephone numbers, all only in human readable form. The height of the
human readable interpretation (HRI) shall be a minimum 0.2 inch (5.1mm).
b) VENDOR ORDER / SHIPPING NUMBER (15 characters) - A mandatory barcoded field defined by the supplier which contains the
supplier's Invoice or Packing Slip number, in both barcoded and HRI formats. The height of the human readable interpretation (HRI) shall be a
minimum 0.2 inch (5.1mm).
c) PO NUMBER (8 characters) - A mandatory barcoded field containing DELL's Purchase Order Number in both barcoded and HRI formats.
The height of the human readable interpretation (HRI) shall be a minimum 0.2 inch (5.1mm).
d) LINE NUMBER (2 characters) - A mandatory barcoded field containing the Line Number on the DELL Purchase Order that corresponds to
the item contained in the shipping container. The height of the human readable interpretation (HRI) shall be a minimum 0.2 inch (5.1mm).
e) DELL PART NUMBER (5 characters) - A mandatory barcoded field indicating the DELL Part Number of the items in the shipping
container. This number will appear on the DELL
13
P.O. Only one part number may be packed in each shipping container. The human readable interpretation (HRI) shall be located to the right of
the barcode (not closer than 0.25 inch or 6.41mm) and have a minimum height of 0.5 inch (12.7mm). At a future date, if Dell increases the size
of its part number, the number of characters for this field will be increased. Until then, even if leading zeroes are being used to fill out the 8
character part number field on the PPID, this field needs to contain only the 5 character Dell Part number, as issued to suppliers by Dell.
f) BOX QUANTITY (6 numeric digits) - A mandatory barcoded field containing the total quantity of items within the shipping container.
When multiple containers are indicated in the Package Count data field (e.g. 1 of 2), the quantity shown in Box Quantity shall be the quantity
in each package, not the total quantity --- of all packages in the shipment. The human readable interpretation (HRI) shall be located to the right
of the barcode (not closer than 0.25 inch or 6.41mm) and have a minimum height of 0.5 inch (12.7mm).
G) DELL PPID APPLIED? (1 characters) - A mandatory barcoded field indicating whether or not (Y for yes, N for No) the parts within the
box are complaint with Dell's PPID labeling requirements, and that the labels are applied. If the parts within the box do not require PPID labels,
then this field will always be N. The height of the human readable interpretation (HRI) shall be a minimum 0.2 inch (5.1mm).
h) COUNTRY OF ORIGIN (2 characters) - A mandatory barcoded field designating the country from which the item(s) originated. Country
codes have been assigned by DELL and are listed below. The height of the human readable interpretation (HRI) shall be a minimum 0.2 inch
(5.1mm).
i) PART DESCRIPTION - A non-barcoded field which conveys summary information of the pertinent features of the part. The 5 character
DELL Part Number is required to be in the first 5 characters of this field. Optional information such as supplier's description, date of
manufacture, lot number, etc. may also be included in this field. This information must be in human readable form only and the height shall be
a minimum 0.2 inch (5.1mm).
j) PACKAGE COUNT - A non-barcoded mandatory field that describes the numerical sequence of the package when more than one package is
shipped for a specific order or when multiple packages are required for a specific part number. When only one package is required, this should
be indicated as 1 of 1. When multiple packages are required, the form X of Y should be used, where X is the number of the package and Y is
the total number of packages. The height of the human readable interpretation (HRI) shall be a minimum 0.2 inch (5.1mm).
k) TOTAL ORDER QUANTITY - A non-barcoded field indicating the total quantity shipped of the specific part (corresponding to the PO
Number and Line Number). The Total Order Quantity may be contained in more than one shipping container. This should not be confused with
Box Quantity as defined above. The height of the human readable interpretation (HRI) shall be a minimum 0.2 inch (5.1mm).
14
3.3.2 LABEL LOCATION
Whenever possible, the label should be affixed to the smaller end of the package or box, which might be facing the aisle if the package is stored
on the shelving or racks, to permit easy identification during storage. In addition, the EIA Label should not be covered by tape, stickers or other
materials that might inhibit scanning.
[GRAPHIC]
3.3.3
CODE DENSITY AND DIMENSION The optimum barcode density in characters per inch (CPI) is 3.70 to
6.90. The allowable range for the nominal width of the narrow elements (unit size) and nominal ratio of the wide-to-narrow elements is as
follows:
Minimum width of narrow elements 0.010 inch (0.254 mm) Minimum width of wide elements 0.02 inch (0.432 mm) Minimum wide to narrow
ratio 2:1 to 3:1 Element tolerance +/-0.0017 inch (0.41 mm)
3.3.3.1 CODE HEIGHT - The allowable range for the bar code height is 0.50 inch +/- 0.1 inch.
3.3.3.2 INTERCHARACTER GAP - Shall be the range of 1X to 2X.
3.3.3.3 QUIET ZONES - The minimum clear area immediately preceding and following the barcode shall be 0.17 inch (4.32 mm).
3.3.3.4 VERTICAL SPACING BETWEEN BARCODE AND HRI - A minimum of 0.005 inch (0.127 mm) and a maximum of 0.015 inch
(0.38 mm).
3.3.3.5 SPACING BETWEEN EDGE OF LABEL AND HRI - The minimum spacing between the horizontal edge of the label and the HRI
shall be 0.015 inch (0.38 mm).
3.3.3.5 HEIGHT OF HUMAN READABLE INTERPRETATION - The minimum height shall be 0.2 inch (5.1mm).
15
3.3.3.6 READABILITY AND PRINTING REQUIREMENTS Using commercially available bar code verifiers, labels must have a minimum
decode percentage of 95% or more. The label stock and ribbon combination, direct thermal stock, or other printing method must produce labels
acceptable for scanning in the visible light (600 to 660 nm wavelength) as well as laser and infrared scanners operating at wavelengths up to
900 nm. Specific details, if required, can be obtained by referring to the EIA-556-A Shipping and Receiving Bar Code Label Specification or
ANSI bar code specifications. These specifications will lay out minimum reflectivity, print contrast ratios, bar growth and size tolerances,
defect tolerances, etc. DELL is interested in decodability using commercial laser scanners and will be happy to verify any contemplated labels.
3.3.4 EIA LABEL MATERIAL REQUIREMENTS
3.3.4.1 EIA LABELS
a) Face Stock Requirements - The actual material used is at the discretion of the affixing party, provided the labels are legible, permanent and
meet the following minimum standards:
1)
Face Stock Characteristics
Type
Caliper
Optimum Dimensions
Polyester or top coated paper
0.0020 inch
- width 4 inches (102mm)
- height 6.5 inches (165mm)
42 lb. / 3000 square feet
White
670nm (visible light) & 900nm (infra-red
light)
Basis Weight
Color
Background Reflectance
2)
Adhesive Characteristics
Type
Min. Application Temp.
Svc Temperature Range
Dwell: Initial Tack
Ultimate Tack
Caliper
Permanent Acrylic
50 degrees Fahrenheit
0 to 225 degrees Fahrenheit
1 hour (at room temperature)
30 hours - Full Strength
0.0009 inch
3.3.4.2 DURABILITY - Labels must remain scanable at minimum standards for a period of 12 months with storage in an indoor, controlled
environment at temperatures up to 100 degrees Fahrenheit (38 degrees Centigrade).
16
ELECTRONICS INDUSTRIES ASSOCIATION (EIA) LABEL
[GRAPHIC]
17
DELL COMPUTER CORPORATION
ISO COUNTRY CODE TABLE
Feb. 23, 1995
COUNTRY
CODE
------AF
AL
AG
AQ
AN
AO
AV
AY
AC
AR
AM
AS
AU
AJ
BF
BA
BG
BB
BO
BE
BH
DM
BD
BT
BL
BK
BC
BV
BR
IO
VI
BX
BU
BM
BY
CB
CM
CA
PQ
CV
CJ
CT
CD
CI
CH
KT
CK
COUNTRY
CODE
------CO
CN
CF
CW
CS
HR
CU
CY
EZ
DA
DJ
DO
DR
EC
EG
ES
EK
ER
EN
ET
FA
FO
FJ
FI
FR
FG
FP
FS
GB
GA
GZ
GG
GE
GH
GI
GR
GL
GJ
GP
GQ
GT
GV
PU
GY
HA
HM
HO
COUNTRY
------Afghanistan
Albania
Algeria
American Samoa
Andorra
Angola
Anguilla
Antarctica
Antigua
Argentina
Armenia
Australia
Austria
Azerbaijan
Bahamas, The
Bahrain
Bangladesh
Barbados
Belarus
Belgium
Belize
Benin
Bermuda
Bhutan
Bolivia
Bosnia and Herzegovina
Botswana
Bouvet Island
Brazil
British Indian Ocean
British Virgin Islands
Brunei
Bulgaria
Burma
Burundi
Cambodia
Cameroon
Canada
Canal Zone
Cape Verde, Republic
Cayman Islands
Central African Empire
Chad
Chile
China (PRC)
Christmas Island
Cocos (Keeling Island)
18
COUNTRY
------Columbia
Comoros
Congo
Cook Islands
Costa Rica
Croatia
Cuba
Cyprus
Czech Republic
Denmark
Djibouti
Dominica
Dominican Republic
Ecuador
Egypt
El Salvador
Equatorial Guinea
Eritrea
Estonia
Ethiopia
Falkland Islands
Faroe Islands
Fiji
Finland
France
French Guiana
French Polynesia
French Southern
Gabon
Gambia, The
Gaza Strip
Georgia
Germany, Federal Republic
Ghana
Gibraltar
Greece
Greenland
Grenada
Guadaloupe
Guam
Guatemala
Guinea
Guinea-Bissau
Guyana
Haiti
Heard & McDonald Islands
Honduras
DELL COMPUTER CORPORATION
ISO COUNTRY CODE TABLE
Feb. 23, 1995
COUNTRY
CODE
-----HK
HU
IC
IN
ID
IR
IZ
EI
IS
IT
IV
JM
JA
JQ
JO
KZ
KE
KR
KN
KS
KU
KG
LA
LG
LE
LT
LI
LY
LS
LH
LU
MC
MK
MA
MI
MY
MV
ML
MT
MB
MR
MP
MX
MQ
MD
MN
MG
COUNTRY
------Hong Kong
Hungary
Iceland
India
Indonesia
Iran
Iraq
Ireland
Israel
Italy
Ivory Coast
Jamaica
Japan
Johnson Atoll
Jordan
Kazakhstan
Kenya
Kiribati
Korea, PDR
Korea, Republic of
Kuwait
Kyrgyzstan
Laos
Latvia
Lebanon
Lesotho
Liberia
Lybia
Liechtenstein
Lithuania
Luxemborg
Macao
Macedonia
Madagascar
Malawi
Malaysia
Maldives
Mali
Malta
Martinique
Mauritania
Mauritius
Mexico
Midway Islands
Moldova
Monaco
Mongolia
COUNTRY
CODE
-----MW
MH
MO
MZ
WA
NR
BQ
NP
NL
NA
NC
NZ
NU
NG
NI
NE
NF
CQ
NO
MU
PK
PM
PP
PF
PA
PE
RP
PC
PL
PO
RQ
QA
RE
RO
RS
RW
SM
TP
SA
SG
SR
SE
SL
SN
LO
SI
BP
COUNTRY
------Montenegro
Monserrat
Morroco
Mozambique
Namibia
Nauru
Navassa Island
Nepal
Netherlands
Netherlands Antilles
New Caledonia
New Zealand
Nicaragua
Niger
Nigeria
Niue
Norfolk Island
Northern Mariana Island
Norway
Oman
Pakistan
Panama
Papua New Guinea
Paracel Islands
Paraguay
Peru
Philippines
Pitcaim Islands
Poland
Portugal
Puerto Rico
Qatar
Reunion
Romania
Russia
Rwanda
San Marino
Sao Tome & Principe
Saudi Arabia
Senegal
Serbia
Seychelles
Sierra Leone
Singapore
Slovakia
Slovenia
Solomon Islands
DELL COMPUTER CORPORATION
ISO COUNTRY CODE TABLE
Feb. 23, 1995
COUNTRY
CODE
-----SO
SF
SP
PG
CE
SC
SH
SB
ST
VC
SU
NS
JS
WZ
SW
SZ
SY
TW
TI
TZ
TH
TO
TL
TN
TD
NQ
TS
TU
TX
TK
TV
UG
UP
TC
UK
US
ZZ
UV
UY
IQ
UZ
NH
VV
YY
VT
VE
VM
COUNTRY
------Somalia
South Africa
Spain
Spratly Islands
Sri Lanka
St. Christopher-Nevis
St. Helena
St.Pierre and Miquelon
St. Lucia
St. Vincent
Sudan
Surinam
Svalbard and Jan Mayen
Swaziland
Sweden
Switzerland
Syria
Taiwan
Tajikistan
Tanzania, United Republic
Thailand
Togo
Tokelau
Tonga
Trinidad and Tobago
Trust Terr. of the Pacific Is.
Tunisia
Turkey
Turkmenistan
Turks and Caicos Islands
Tuvalu
Uganda
Ukraine
United Arab Emirates
United Kingdom
United States
Unknown
Upper Volta
Uruguay
US. Misc. Pacific Islands
Uzbekistan
Vanuatu
Various
Various Bloc Countries
Vatican City
Venzuela
Vietnam
19
COUNTRY
CODE
-----VQ
WQ
WF
WI
WS
YE
CG
ZA
ZI
COUNTRY
------Virgin Islands (U.S.)
Wake Island
Wallis and Futuna
Western Sahara
Western Samoa
Yemen, Rep. of (SANA)
Zaire
Zambia
Zimbabwe
SCHEDULE F TO AGREEMENT NUMBER BRO-001
DELL UNIQUE SERVICE TAG/BARCODE LABELING REQUIREMENTS
DELL UNIQUE SERVICE TAG/BARCODE LABELING REQUIREMENTS
Due to the fact that the Product will not be introduced into the Dell manufacturing process, specific Product tracking code labels will be
required to be applied by BROCADE or their authorized subcontractor. The following labeling requirements will be required in addition to
those specified in Schedule E - Dell Supplier Labeling Specification, Part Number 13190.
1. Service Tag Track Code
Dell will provide BROCADE a supply of unique 5-digit alpha numeric Service Tag Track Codes (Codes) for use on barcode labels to be
applied to the Product and to the shipping container. The quantity of codes to be supplied will be mutually agreed to by both parties.
BROCADE will notify Dell when the remaining supply of Codes has reached approximately two (2) weeks. Dell will issue a new supply of
Codes upon request.
2. Barcode Label Requirements
BROCADE shall barcode label the Product with the Service Tag Track Code and shall apply the same information on each shipping container
to be received at Dell. The location and size of labels shall be mutually agreed to by the parties. Barcode definitions are contained in Schedule
E of this Agreement.
1
SCHEDULE G TO AGREEMENT NUMBER BRO-001
PRODUCT REGULATORY AND SAFETY REQUIREMENTS
FIBRE CHANNEL SWITCH EMC REGULARLY AND PRODUCT SAFETY REQUIREMENTS
Country / Mark
FCC Class A
CE
VCCI - A
UL
CSA
TUV
NEMKO
translations
EZU
NORTH AMERICA
United States
Canada
SOUTH & CENTRAL AMERICA
Mexico
WESTERN EUROPE
United Kingdom/Ireland
Benelux
France
translations
Germany
Austria
Spain/ Portugal/ Italy
SCANDINAVIAN COUNTRIES
Switzerland/Austria
Sweden
Norway
Finland
Denmark
EASTERN EUROPE
Russia
Czech Republic
Slovenia
Slovakia
Hungary
Poland
ASIA PACIFIC
Japan
translations
Australia
New Zealand
SOUTH EAST ASIA
China
Express
Markings which apply
EMC
EMC
EMC
Safety Agency
Safety Agency
Safety Agency
Safety Agency
Brocade
Dell
Responsibility
Comments
Post RTS - requires
Safety Agency
UL, FCC
CSA, ICES
NOM, Safety Agency
CE
CE
CE
Post RTS - requires
TUV-GS,CE
CE
CE
CE
NEMKO/SEMKO, Safety Agency
CE
NEMKO/FIMKO, Safety Agency
NEMKO, Safety Agency
GOST, Safety Agency requires EMC
EZU, Safety Agency requires EMC
SIQ
EVPU
PCBC, Safety Agency requires EMC
PCBC, Safety Agency requires EMC
VCCI
Post RTS - requires
C-Tick, EMC
C-Tick, EMC
CCIB, Safety Agency
Not required for SilkWorm
Page 1 of 2
FIBRE CHANNEL SWITCH EMC REGULARLY AND PRODUCT SAFETY REQUIREMENTS
Hong Kong
translations
Taiwan
Korea
translations
Singapore
Philippines
Indonesia
INDIAN CONTINENT
India
Malaysia
Thailand
AFRICA
South Africa
MIDDLE EAST
Saudi Arabia
CCIB, Safety Agency
Post RTS - requires
BCIQ, EMC
RRL, EMC
Post RTS - requires
PSB, Safety Agency
No Known Requirements
No Known Requirements
No Known Requirements
No Known Requirements
No Known Requirements
SABS
SASO
Page 2 of 2
SCHEDULE H TO AGREEMENT NUMBER BRO-001
PRODUCT SPECIFICATIONS
1. NO. 0027-SEDS-2 -- SILKWORM EXPRESS SWITCH
[BROCADE LOGO]
SILKWORM EXPRESS(TM) SWITCH
THE ESSENTIAL ELEMENT TO CREATE AN
ENTRY-LEVEL SAN
[GRAPHIC]
SILKWORM EXPRESS is an 8-port, full-duplex, gigabit Fibre Channel switch in the SilkWorm(TM) Switch Family offered by Brocade
Communications Systems, Inc. (BROCADE (R)). This low-cost, high-performance switch ideally suits applications requiring fewer ports while
delivering full SilkWorm Family benefits including:
- Scalability for expanding a network's initial size and capability
- Resiliency to resolve faults immediately, isolating down time to the faulty connection/device
- Connectivity that increases aggregate bandwidth instead of degrading port performance Configuration flexibility for attaching devices,
arbitrated loops, and switches
- Management that is completely automatic and transparent, minimizing administration The SilkWorm Express switch houses four interface
modules (a selection of G-PORT OPTIONS OR FL-PORT OPTIONS). Each of the two ports on a module supports mixed industry media. The
GBICs (Gigabit Interface Converters) plug in from the front of the switch. Each port operates independently at I-gigabit-per-second (Gb/sec),
full-duplex data rate.
A SilkWorm Express switch connects servers and storage devices to create an entry-level Server-Storage Area Network (SAN). The SAN
coexists with and complements an existing LAN/WAN communications infrastructure.
[GRAPHIC]
STATE-OF-THE-ART SWITCHING FOR THE SAN
BROCADE switches fully comply with the Fibre Channel ANSI Standards, as well as provide exclusive leadership hardware design including:
- In-order delivery of data frames--guarantees that frames are delivered to a destination in the same order as received by the switch from the
originator
- Cut-through frame hardware routing--sends a frame without waiting for the end of the frame or for a response back from its destination,
improving bandwidth utilization and minimizing transmission delays
- Cascading--enables a switch to connect to as many other BROCADE switches as there are available ports, enabling a maximum of 32
switches for thousands of connections and long distances by placing switches at intervals
- Flexible switch buffering--stores a data frame for only as long as is absolutely necessary, moving data faster through the switch
- Path selection--automatically identifies a failure and immediately reroutes data onto alternate pathing, creating a highly resilient network
- Registered state change notification--dynamic detection of changes in configuration and port status
CONFIGURATION VERSATILITY
The customer predetermines the configuration of interface options and media to be installed at the factory:
- G-PORT OPTION--automatically detects the connection's operating mode to either a device (F-port mode) or another BROCADE switch (Eport mode)
- FL-PORT OPTION--connects both Fibre Channel Arbitrated Public and Private Loops (i.e., legacy environments), providing their devices
full-citizenship status in the SAN
SCALABILITY AS NEEDED
The SAN grows by adding an additional SilkWorm Family switch and will:
- Seamlessly incorporate more BROCADE switches into the network
- Increase in aggregate bandwidth as connectivity increases
- Network services automatically expand without additional system resources
[GRAPHIC]
FL-PORT OPTION
AN INTERFACE FOR FIBRE CHANNEL CONNECTIONS
TO SILKWORM(TM) FAMILY SWITCHES
[GRAPHIC]
The FL-PORT OPTION, offered by Brocade Communications Systems, Inc. (Brocade(R)), is an interface module used for connecting either
Public or Private Fibre Channel Arbitrated Loops (loops) to a SilkWorm Family switch. The module provides two FL Ports, each port
operating independently at I-gigabit-per-second (Gb/sec) data rate, with full-duplex communication. Two GBICs (Gigabit Interface Converters)
are plugged into the module and are accessible from the front panel of the switch. The form factor of the FL-PORT OPTION is the same as the
Brocade G-Port Option. The latter is used to connect servers and storage devices to the network.
BOTH PUBLIC AND PRIVATE LOOP SUPPORT
A unique feature of Brocade's FL-PORT OPTION is that any device connected to the Server-Storage Area Network (SAN) may communicate
with a Fibre Channel disk or other type of device on either Public or Private Loops:
- In Public Loop operation--all loop devices are available to all other network-connected devices and loop devices in the SAN. The loop
devices behave the same as devices attached directly to the SAN.
- In Private Loop (legacy) operation--Brocade's translative mode allows up to 32 devices connected to the SAN to appear as phantom devices
on a Private Loop.
[GRAPHIC]
FULL NETWORK SUPPORT TO LOOP DEVICES
The interface module acts as a bridge-to-the-world for loop devices, allowing full citizen status in the Brocade Fibre Channel Fabric--the
intelligent interconnection scheme created by the switch. Loop devices realize the same network benefits as a device connected directly to a
switch, because the module manages loop communication with the Brocade Fabric.
IMPROVED LOOP BANDWIDTH UTILIZATION
The module makes best use of a loop tenancy, which begins when a port gains control of the loop and opens another port to send and/or receive
frames, and ends when a port gives up control of the loop. The FL_Port's intelligent-transmit buffer collects data frames for optional
transmission. Collected frames delivered in a single loop tenancy reduce overhead from loop arbitration, thus using loop bandwidth more
efficiently. Collected frames are delivered based on certain criteria, such as when:
- a specific number of frames have been accumulated,
- the end of a sequence has been detected,
- or after a specific time period has elapsed.
SIMPLE NETWORK MANAGEMENT
Brocade, in partnership with such companies as Sun Microsystems, Hewlett Packard, and Seagate Technology, led in the creation of the
industry-standard Fibre Channel Fabric Loop-Attachment technical report (profile). In addition to full Fibre Channel switching capability and
normal Fibre Channel Fabric operation, Brocade extends to loops its commitment of providing value-added software and services available for
the SAN.
[GRAPHIC]
G-PORT OPTION
AN INTERFACE FOR FIBRE CHANNEL CONNECTIONS
TO SILKWORM(TM) FAMILY SWITCHES
The G-PORT OPTION, offered by Brocade Communications Systems, Inc. (Brocade(R)), is an interface module used for connecting nodes to
a SilkWorm Family switch. The module provides two G_Ports, each port operating independently at I-gigabit-per-second (Gb/sec) data rate,
with full-duplex communication. The module provides point-to-point connections between the switch and devices, such as a server or storage,
or to other Brocade switches.
The two GBICs (Gigabit Interface Converters) support a choice of industry-standard media. The GBICs are accessible from the front panel of
the switch. A Public or Private Fibre Channel Arbitrated Loop can also connect to the network (see the Brocade FL-Port Option data sheet).
VERSATILE CONNECTIVITY
The module operates in two Fibre Channel modes:
- E-port mode for connecting the switch with another Brocade switch
- F-port mode for connecting a storage device or server to the network
A port has an auto-sensing capability that determines its mode transparently. The module's ports can be operating in different modes.
[GRAPHIC]
MEDIA FLEXIBILITY
The configuration of G-PORT OPTIONS and FL-PORT OPTIONS is predetermined by the customer and installed in the switch at the factory.
Each port can support a different type of media module. The GBICs plug into an interface module without powering down the unit, making it
easy to swap or replace media modules. The SilkWorm Switch Family supports short- and long-wave-length laser optical fiber and copper
media. Connection distances vary depending on the type of industry GBIC selected.
TRANSPARENT CONFIGURATION AND RECONFIGURATION
Upon initialization of the network, a port automatically identifies information about its connections. The information determines the mode of
operation. The module then reports the port mode to the local Brocade switch. Reconfiguration is automatic--addition of or change in
connections is automatically and transparently recorded in every switch, a key element in making the network resilient.
TRAFFIC MANAGEMENT
In the E-port mode, traffic congestion within the network is managed on the Inter-Switch Link (ISL) via virtual channels. Establishing parallel
links between switches creates alternate pathing to increase network resiliency.
An ISL has up to eight virtual channels with four priority levels. The virtual channels can be configured to logically separate:
- Interswitch and node-related traffic
- Multicast and unicast traffic
- Class-2 and -3 service-related traffic
[GRAPHIC]
BROCADE(R) WEB TOOLS
MANAGEMENT OF A SAN VIA THE
INTERNET OR INTRANET
MAJOR BENEFITS
- Dynamic remote management
- Control at all levels--at the Fabric, switch, and port viewpoints
- Graphical user interface (GUI)--for quick and intuitive management
- One-stop administration--for routine management functions
- Access to all switches--by simple point-and-click
- "Expert Administrator"--displays appear automatically with suggested actions
- Simple setup--accessible via familiar in-band and out-of-band interfaces
[GRAPHIC]
BROCADE WEB TOOLS, optional software offered by Brocade Communications Systems, Inc. (BROCADE(R)), helps to remotely manage a
Server-Storage Area Network (SAN) of SilkWorm(TM) Family switches via the Internet or Intranet. The IT (Information Technology)
administrator logs onto a switch from a host with a Java-based Web browser. From that switch, the administrator dynamically interacts with
any switch in the SAN to monitor its status and performance. Information is available to assist the administrator in making decisions about the
overall topology (for example, increasing bandwidth on a path saturated with data). The Administrative Interface and the Telnet session
provide the means to make administrative changes to the switches/network, with security enforced by user name and encrypted password.
ESSENTIAL CAPABILITIES YET A SIMPLE GUI
BROCADE WEB TOOLS comprise seven screens. Five provide tools for managing:
- Fabric (SAN) View--depicts the number of switches in the network and confirms worldwide names, domain IDs, and switch names, if
applicable
- Fabric Topology View--depicts the physical configuration, including active domains and paths, and routing information (for example, hop
counts--the number of switches that handle a data frame from its origination through its destination)
- General Switch View--displays information about the endosure, gives general switch information, and includes GUI buttons for quick access
to the Administrative Interface, a Telnet session, and the Performance View
- Performance View--graphically portrays real-time data throughput for each port and displays switch bandwidth utilization
- Port Detail View--displays statistics, general information, and status for all ports
Two of the seven screens provide secured interfaces for taking administrative action:
- Administrative Interface--for performing routine functions, such as upgrading firmware versions or reconfiguring a switch
- Telnet Interface--to use BROCADE's superset of Telnet commands (configuration, diagnostics, displaying, and routing) for switch
diagnostics, troubleshooting, and management
BROCADE(R) ZONING
A SERVICE FOR EXTRA CONTROL OF THE SAN
MAJOR BENEFITS
- Increased environmental security applied where and when needed
- Optimization of Information Technology (IT) resources in response to user demand and changing user profiles
- Versatility to customize environments
- Flexibility to manage a Server-Storage Area Network (SAN) to meet the objectives of different closed-user groups
[GRAPHIC]
Brocade Communications Systems, Inc. (BROCADE(R)) provides advanced management for the SAN with its introduction of BROCADE
ZONING. This optional licensed software allows finer segmentation of SANs.
One or more BROCADE switches create the BROCADE Fibre Channel Fabric. This intelligent infrastructure is the backbone for deploying
and managing enterprise resources in a network. Using BROCADE ZONING, Fabric-connected devices are arranged into logical groups over
the physical configuration of the Fabric. ZONING is one of the BROCADE Fabric services that provide management for the SAN both
automatically and transparently.
INCREASED CONTROL OF A SAN
The BROCADE Fabric provides fast, reliable, seamless information access within the SAN for anyone, anywhere, at anytime. ZONING allows
an administrator to create segmentation--or zones--within a Fabric, comprised of selected storage, servers, or even workstations. It also
enforces access of information to only the devices in the defined zone.
Zones may be configured dynamically. The number of zones and zone membership are effectively unlimited. Zones vary in size and shape,
depending on the number of Fabric-connected devices included and device locations. Devices may be members of more than one zone. In
addition, temporary zones can be created, as an example, for enterprise backup.
Zone members "see" only members in their zones and, therefore, access only one another. A device not included in any zone is not available to
the devices in the zones.
THE SIMPLICITY OF BROCADE ZONING
BROCADE ZONING involves:
- Zone Specification--a set of Telnet commands are used to create, delete, and display zones, to add or remove zone members, and to configure
a set of zones.
- Zone Enforcement--the BROCADE Fabric automatically and transparently restricts access to only the devices that are members of the defined
zone(s).
- Zone Management--the administrator creates and controls the zones.
CUSTOMIZATION OF THE SAN
Uses for BROCADE ZONING include:
Integrated support for heterogeneous environments--by isolating systems that have different operating environments or uses Creating functional
areas in the Fabric--for example, by separating test or maintenance areas from production areas Designating closed user groups--by including
certain devices in a zone for exclusive use by zone members Simplifying resource utilization--for instance, by consolidating equipment
logically for IT convenience Facilitating time-sensitive functions--for example, by creating a temporary zone used to back up a set of devices
that are members of other zones Securing Fabric areas--by providing another level of software-managed security to control access
SCHEDULE I TO AGREEMENT NUMBER BRO-001
END USER LICENSE AGREEMENT
EXHIBIT 10.15
PURCHASE AGREEMENT
BETWEEN
BROCADE COMMUNICATIONS SYSTEMS, INC.
AND
SEQUENT COMPUTER SYSTEMS, INC.
CONTENTS
1.
DEFINITIONS
2.
SCOPE OF AGREEMENT
3.
TERM AND TERMINATION
4.
PRODUCT DOCUMENTATION AND TRAINING
5.
PRICE AND PAYMENT
6.
FORECASTING
7.
PURCHASE ORDERS
8.
SHIPPING, DELIVERY AND PACKAGING
9.
INSPECTION AND ACCEPTANCE
10.
WARRANTY
11.
[*]
12.
RETURN MATERIAL AUTHORIZATION
13.
MANDATORY CHANGES
14.
SEQUENT REQUESTED CHANGES
15.
BROCADE REQUESTED CHANGES
16.
PRODUCT WITHDRAWAL
17.
MEETINGS AND SUPPLIER PERFORMANCE
18.
REPORTS
19.
MATERIAL MANAGEMENT
20.
LIMITATION OF LIABILITY
21.
CONFIDENTIAL AND PROPRIETARY INFORMATION
22.
INFRINGEMENT
23.
INDEMNITY AND INSURANCE
24.
NOTICES
25.
MISCELLANEOUS PROVISIONS
26.
ENTIRE AGREEMENT
PAGE
2
2
3
3
4
5
5
9
10
10
12
12
13
14
15
15
16
16
16
16
17
18
19
19
21
ATTACHMENTS
A
B
C
D
E
PRODUCT SPECIFICATION
PRODUCT AND PRODUCT SUPPORT PRICING
SUPPLIER QUALITY
PRODUCT SUPPORT
REPORTS
23
24
26
32
38
*Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
Page 1
PURCHASE AGREEMENT
BETWEEN
BROCADE COMMUNICATIONS SYSTEMS, INC.
AND
SEQUENT COMPUTER SYSTEMS, INC.
This Agreement, effective_______________("Effective Date"), is entered into by and between Sequent Computer Systems, Inc. ("Sequent"),
an Oregon corporation, and Brocade Communications Systems, Inc. ("Brocade"), a California corporation.
Now, therefore, the parties agree as follows:
1. DEFINITIONS
1.1 "Product(s)" means the products described in Attachment A, Product Specification and any other product(s) added to this Agreement by
mutual consent of the parties.
1.2 "Product Documentation" means Brocade's assembly drawings, user manuals, diagnostic software documentation, operations manuals, and
any other such materials required for the maintenance, operation, and use of the Products generally made available to customers. Upon mutual
agreement between the parties, Brocade will provide additional documentation not generally made available to customers.
1.3 "Product Support" means the type and level of support described in Attachment D, Product Support, subject to the provisions contained in
this Agreement.
1.4 "Field Replaceable Unit" ("FRU") means a component of the Product that will be used to replace or repair failed Product in the field.
2. SCOPE OF AGREEMENT
2.1 Brocade agrees to sell Products and Product Support to Sequent in accordance with the terms and conditions of this Agreement. This
Agreement is non-exclusive and the parties may enter into similar agreements with other parties. The parties acknowledge that Sequent may
sell the Products worldwide for use with Sequent's NUMA-Q and Symmetry product lines and other product lines as mutually agreed between
the parties. Sequent shall not be obligated to purchase any Products or Product Support from Brocade hereunder.
2.2 The parties acknowledge that this Agreement may be executed prior to complete qualification of the Product by Sequent. Qualification of
the Product by Sequent and the Product meeting all Product specifications as required in Attachment A are conditions precedent to Sequent's
willingness to purchase Products or Product Support under this Agreement.
Page 2
3. TERM AND TERMINATION
3.1 Subject to the provisions of sub-Sections 3.2, 3.3, and 3.4, below, the term of this Agreement shall be for a period of [*] from the Effective
Date.
3.2 Sequent may terminate this Agreement at any time, without cause, by giving Brocade at least [*] prior written notice. Termination of the
Agreement will not relieve the parties of any obligations incurred prior to the date of termination, including any Sequent liability for
cancellations as described in sub-Section 7.7.
3.3 Either party may immediately terminate this Agreement if the other party:
(i) becomes insolvent or bankrupt, files or has filed against it a petition in bankruptcy and any proceeding under the bankruptcy or insolvency
laws is not dismissed within thirty (30) calendar days, or undergoes a reorganization pursuant to a petition in bankruptcy filed with respect to it;
or
(ii) has all or a substantial portion of its capital stock or assets expropriated by any government; or
(iii) is dissolved or liquidated, or has a petition for dissolution or liquidation filed with respect to it; or
(iv) is subject to property attachment, court injunction, or court order which substantially and negatively affects its operations; or
(v) makes an assignment for the benefit of creditors.
3.4 Either party may terminate this Agreement if the other party fails to perform any of its material obligations under the terms and conditions
of this Agreement so as to be in default hereunder and fails to cure such default within [*] after receiving written notice thereof.
4. PRODUCT DOCUMENTATION AND TRAINING
4.1 Brocade shall provide Sequent with one (1) reproducible copy of the Product Documentation in the form of printed material, magnetic
media, CD ROM, or electronic means as mutually agreed, at no charge to Sequent. Brocade reserves the right to change the content of the
Product Documentation at any time. In the event that such Documentation is changed during the term of this Agreement, Brocade agrees, also
at no charge, to promptly notify Sequent of revised Product Documentation and its availability on Brocade's web site. Additional copies of
Product Documentation and changes thereto may be ordered by Sequent at Brocade's then-current price.
4.2 Brocade hereby grants to Sequent without additional charge the right to reproduce any Product Documentation furnished under this
Section together with an unconditional license to Sequent or each Sequent customer who purchases the Product to use the Product
Documentation to maintain, use, or provide training on the Product purchased by such customer. Any reproduced
*Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
Page 3
copies of such Documentation shall contain legends and copyrights appearing on the copies of the Product Documentation which were
furnished to Sequent.
4.3 Brocade will provide one initial training course to a maximum of
[*] Sequent employees at a time and location to be agreed upon between the parties. The training course and materials will be at no charge to
Sequent. [*] for use in subsequent training. [*]
4.4 Brocade will provide additional training to Sequent when Product changes are made that affect Product Support. [*]
4.5 Sequent may request training courses in addition to those described in sub-Section 4.3 and 4.4, above, at Brocade's then-current charges.
5. PRICE AND PAYMENT
5.1 [*]
5.2 [*]
5.3 [*]
*Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
Page 4
5.4 [*]
5.5 Pricing does not include federal, state, or local excise, sales, or use taxes, except those taxes that are based on Brocade's income. If such
taxes are applicable, they shall be set out as a separate line item on Brocade's invoice.
5.6 Payment terms for all Products and Product Support shall be net
[*] from the date of a correct invoice. Payment of an invoice shall not constitute or imply acceptance of the Product or Product Support or
relieve Brocade of any obligations assumed under this Agreement, nor prevent Sequent from asserting any other rights it may have under this
Agreement or at law or in equity.
5.7 [*]
5.8 [*]
6. FORECASTING
Sequent agrees to provide Brocade with twelve-month rolling forecasts of Sequent's estimated annual Product purchase requirements. These
forecasts are good faith estimates only, and Sequent shall not be liable to Brocade for failure to purchase any of the forecasted Product.
7. PURCHASE ORDERS
7.1 Sequent's purchase orders shall be the sole basis for purchase of Product and Product Support under this Agreement. Designated Sequent
procurement agents shall be the only persons authorized to issue purchase orders or changes to purchase orders. Purchase orders and change
orders may be transmitted by mail, facsimile, or other methods approved by both parties. Purchase order numbers shall be referenced on all
correspondence, invoicing, and packing slips relating to each order.
*Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
Page 5
7.2 Purchase orders will specify: (i) Sequent's part numbers, (ii) Product description, (iii) Product revision level, (iv) quantity ordered, (v)
shipping destination, and (vi) due-on-dock dates. Brocade shall acknowledge in writing its acceptance of such purchase orders within [*] from
receipt of Sequent's purchase order.
7.3 Sequent's part numbers and part number revision levels appearing on the purchase orders shall be considered the most recent. In the event
that Brocade finds any discrepancy between the part or revision level numbers appearing on a purchase order and any other part or revision
level numbers which Brocade believes are correct, Brocade shall obtain clarification from Sequent before shipment of the Product.
7.4 Product lead-time shall be no greater than the lead times in the schedule below, from receipt of Sequent's purchase order until shipment by
Brocade to Sequent's requested point of delivery. Brocade shall use best efforts to meet deliveries requested inside the Product lead-time.
Brocade agrees to meet the Product lead-times according to the following schedule.
Time Period
----------through 9/30/97
Lead Time (Calendar Days)
------------------------[*]
10/1/97-3/31/98
[*]
4/1/98-onward
[*]
7.5 Upside Flexibility Model: Sequent shall have the right for any given purchase order on "unallocated Product" as that term is described
below, to an increase in quantities in issued purchase orders as follows:
Number of Calendar Days
Prior to Scheduled Due on Dock Date
[*]
Allowable Increase
[*]%
[*]%
[*]%
[*]%
[*]%
[*]%
[*]%
[*]%
For the purposes of this sub-Section, "unallocated Product" shall mean a Product not on allocation; with allocation defined as Brocade's
inability to meet the allowable increase in quantities provided above due to Product component or capacity constraint which is beyond the
reasonable control of Brocade.
7.6 Sequent shall have the right to reschedule delivery for [*] up to maximum of [*] out from the original scheduled due-on-dock date for all
quantities not scheduled for delivery in Sequent's then- current fiscal quarter. For all reschedules of quantities scheduled
*Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
Page 6
for delivery in Sequent's then-current fiscal quarter, [*] of the monthly volume can be rescheduled up to [*] out into Sequent's next fiscal
quarter. Sequent shall provide Brocade written notice of requested reschedules at least [*] prior to the scheduled due-on-dock date.
7.7 This sub-Section governs cancellation of Product by Sequent. Sequent shall have the right to cancel delivery for any particular Product
subject to the provisions of this sub-Section.
7.7.1 Sequent cancellations of Product occurring in calendar year 1997 are subject to the following cancellation schedule and fees:
[*]
*
On cancellations occurring within 1 - 30 calendar days
from the due on dock date of the cancelled Product
cancellation fees will be;
[*] of the Product purchase price of the cancelled
Product, [*]
**
On cancellations occurring within 31 - 60 calendar days
from the due on dock date of the cancelled Product;
Cancellation fees shall be based on [*] of the cancelled
Product purchase price.
***
On cancellations occurring greater than [*] calendar days
from the due on dock date of the cancelled Product;
[*]
7.7.2
Cancellations occurring during calendar year 1998 through
the remainder of the term of the Agreement are subject to
the following cancellation schedule and fees:
[*]
*Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
Page 7
[*]
*
On cancellations occurring within 1 - 15 calendar days
from the due on dock date of the cancelled Product
cancellation fees will be;
[*] of the Product purchase price of the cancelled
Product, [*]
**
On cancellations occurring within 16 - 30 calendar days
from the due on dock date of the cancelled Product;
Cancellation fees will be based on Brocade's [*] of the
cancelled Product purchase price.
***
On cancellations occurring within 31 - 60 calendar days
from the due on dock date of the cancelled Product;
Cancellation fees shall be based on [*] of the cancelled
Product purchase price.
****
On cancellations occurring greater than [*] calendar days
from the due on dock date of the cancelled Product;
[*]
7.7.3
[*]
7.7.4
Prior to any subsequent re-sale of a cancelled Product
Brocade may invoice Sequent for such Product, as of the
Product's due-on-dock date. Payment terms will be net
[*] from the date of a correct invoice. [*]
*Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
Page 8
8. SHIPPING, DELIVERY, AND PACKAGING
8.1 Brocade shall follow all instructions contained in Sequent's routing instructions, which Sequent will provide to Brocade. Sequent may
modify its routing instructions from time to time and will provide Brocade with an updated version of any such modified instructions. Brocade
shall be responsible for any freight charges incurred for Product shipped outside the routing instructions to include, but not be limited to, use of
other than Sequent preferred carriers.
8.2 Brocade will ship the Product so that delivery is made at Sequent's dock or a dock location designated by Sequent on the due-on-dock date
specified in the purchase order, subject to Sequent's right to reschedule or cancel delivery as provided in sub-Sections 7.6 and 7.7, above.
Brocade shall maintain a minimum on-time delivery performance of [*] to Sequent's requested due-on-dock dates. Deliveries will be
considered on time if they are made no more than [*] earlier or [*] later than the due-on-dock date specified in the Sequent purchase order.
Sequent may refuse to accept deliveries that are not on time. [*] If Sequent agrees to take partial shipments of any order, each such partial
shipment shall be deemed a separate transaction. [*]
8.3 If Brocade anticipates or becomes aware that it will not supply the Product on the due-on-dock delivery date acknowledged by Brocade for
any reason, Brocade shall notify Sequent immediately after Brocade has knowledge of the situation. The notification may be communicated by
facsimile, telephone, electronic mail, or any other method agreed to by the parties, provided that Brocade shall obtain Sequent's actual
acknowledgment of the notice of anticipated delay. Brocade and Sequent will jointly develop alternatives to resolve any late delivery of the
Product, including use of premium routing. Brocade will develop recovery plans with new committed due-on-dock dates and communicate
such plans to Sequent within [*] of missed shipments. If Brocade is unable to deliver the Product on the acknowledged due-on-dock date,
through no fault of Sequent, Sequent may require Brocade to use premium routing and ship the Product freight pre-paid at Brocade's expense.
8.4 In the event of Product allocation due to circumstances beyond Brocade's reasonable control, Brocade shall [*] to supply the number of
Products in Sequent's then current forecast covering the affected period of allocation, in no event less than the proportion of Sequent's
percentage of Product on order to the total Product on order by all of Brocade's customers for the Product or similar Products.
8.5 Except as provided otherwise in sub-sections 8.1 and 8.3, above, sub-section 13.2.1, below, and applicable provisions of Attachment D, [*]
unless otherwise specified by Sequent's designated procurement agents.
8.6 Each shipment of the Product by Brocade shall include a packing slip which contains at a minimum: (i) Brocade's name; (ii) box number
(e.g., 1 of 3, 2 of 3); (iii) receiving address; (iv) Sequent's purchase order number; (v) Sequent's part
*Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
Page 9
number; (vi) revision level of Sequent's part number; (vii) Product serial number; (viii) shipping quantity; (ix) date of shipment; and (x) return
material authorization ("RMA") number, when applicable.
8.7 Unless requested otherwise by Sequent, all shipments to a single Sequent-designated location shipped on the same day shall be
consolidated by Brocade into a single shipment.
8.8 Brocade shall provide the following information about its Product in writing within two weeks of execution of the Agreement: (i) country
of origin; (ii) NAFTA preference criteria; (iii) harmonized scheduled tariff classification number; and (iv) export commerce control number
("ECCN"). Brocade, at its expense, will prepare all international shipping documentation, including commercial invoice, NAFTA certificate,
Shipper's Letter of Instruction, Shipper's Export Declaration, and any other necessary documentation, for international shipments upon request
from Sequent, provided that the Product can be shipped to the requested destination under a General License under the U.S. Export
Administration Regulations. If a validated or other specific prior license is required under the U.S. Export Administration Regulations, Brocade
may request that the Product be exported by Sequent and that Sequent assume all responsibility for export licenses and other export
documentation.
9. INSPECTION AND ACCEPTANCE
Inspection and acceptance of the Product by Sequent will be made within
[*] after delivery. Failure to inspect and accept or reject the Product shall neither relieve Brocade from warranty responsibility or any
applicable quality requirements, infringement, or Product liability as provided in this Agreement nor impose any liability on Sequent. Product
not conforming to Product specifications may, at Sequent's option, be returned to Brocade at Brocade's expense for repair or replacement of the
Product, [*] for any amounts previously paid by Sequent for the Product, or, if the foregoing remedies are insufficient, [*].
10. WARRANTY
Brocade warrants that all new Product delivered under this Agreement will for a period of [*] from the date of shipment of the Product by
Brocade: (i) conform to and perform in accordance with the Product specifications identified in Attachment A, and to any drawings agreed
upon by the parties or samples provided to and approved by Sequent; and
(ii) be free from defects in materials and workmanship. This warranty shall survive inspection, test, acceptance, and payment. The warranties
provided in this Section, referred to hereinafter as the Product Warranty, are in addition to any other remedies available at law or in equity,
including the remedies set forth in Section 11, below.
11. [*]
11.1 In addition to the provisions of this Section, Brocade shall be subject to the requirements and expectations provided for in Attachment C.
11.2 For the purposes of this Section, the following definitions apply.
*Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
Page 10
11.2.1 "Reimbursement" shall mean monetary compensation, no charge replacement Product, unscheduled price reductions, or some mutually
agreed to combination thereof. Other forms of Reimbursement may be identified by mutual agreement on a case by case basis.
11.2.2 The terms "Quality Failure," "Reliability Failure," "Red Light," and "Purge" are defined in Attachment C.
11.3 [*] Quality Failures, Reliability Failures, Red Lights, and Purges when the quality and/or reliability of the Product drops below the
thresholds defined in this sub-Section.
11.3.1 [*] will be [*] when any of the following events occur:
(i) Brocade-confirmed Quality Failures in parts per million ("PPM") exceed [*] the PPM defined in Section 5 of Attachment C; or
(ii) A Red Light or Purge is directly attributable to Brocade's inability to meet the Product specification or PPM thresholds described in this
sub-Section, or results from a safety violation.
11.3.2 [*] when any of the following events occur:
(i) Product mean time between failures ("MTBF") drops below [*] of Brocade's predicted MTBF of [*] for a 16 port switch and [*] for an 8
port switch; or
(ii) A Red Light or Purge is directly attributable to Brocade's inability to meet the Product specification or the MTBF thresholds described in
this sub-Section, or results from a safety violation.
11.3.3 [*] to Sequent will be based on accumulated performance over a [*] rolling period. For instance:
[*]
11.3.4 The parties will summarize and communicate quality and reliability data to provide metrics needed to track performance as provided in
Section 7 of Attachment C.
11.4 [*]
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respect to the omitted portions.
Page 11
(ii) [*]
(iii) An "incident" as described in 11.4 (i) and 11.4 (ii) above begins when a Quality Failure, Reliability Failure, Red Light or Purge is directly
attributable to Brocade's inability to meet the Product specification or the appropriate PPM or MTBF thresholds, as provided in this
Section 11, or results from a safety violation. An "incident" ends when Brocade meets or exceeds the deficient Product specification or PPM or
MTBF threshold or the safety violation has been fully resolved.
11.5 [*] to Sequent under this Section shall be made by the parties at the end of each calendar year quarter and [*] Brocade to Sequent within
[*] from the date of the accounting.
11.6 Remedies in this Section are in addition to those outlined in
Section 10, Warranty. Payment under this Section shall not relieve Brocade of any obligations assumed, nor prevent Sequent from asserting
any other rights it may have, under this Agreement. Amounts paid pursuant to sub-Section 11.4 constitute all damages per incident for Quality
Failures and/or Reliability Failures under this Agreement.
12. RETURN MATERIAL AUTHORIZATION
If Brocade requires an RMA to expedite the return of defective Product, Brocade shall provide a verbal RMA allowing immediate return of the
Product and follow up with a written RMA within [*] from the date of giving the verbal RMA. Except for the need to obtain an RMA, Brocade
shall not require prior approval for the return of Product from Sequent.
13. MANDATORY CHANGES
13.1 In the event that changes are required to make the Product conform to safety and/or regulatory agency requirements ("Mandatory
Engineering Changes"), Brocade shall immediately implement the Mandatory Engineering Changes
*Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
Page 12
without charge to Sequent in further production of the Product. Brocade shall provide Sequent with written notice of any Mandatory
Engineering Changes at the time that Brocade knows of such requirements.
13.2 Brocade and Sequent shall discuss and mutually agree upon one or more of the following remedies, or any other agreed upon remedies,
for implementing Mandatory Engineering Changes on previously delivered Product. Brocade shall use best efforts to immediately implement
the selected remedies, [*].
13.2.1 Sequent may return the affected Product to Brocade or an authorized Brocade facility for implementation of the Mandatory Engineering
Change or Product replacement.
[*]
13.2.2 Sequent may request and Brocade will ship Mandatory Engineering Change kits for Product delivered to Sequent before the Mandatory
Engineering Change was implemented. Brocade shall provide Sequent with installation instructions and/or training necessary to implement the
Mandatory Engineering Change.
13.2.3 Brocade may be requested to provide on-site technical assistance at the appropriate location to implement the Mandatory Engineering
Change.
13.2.4 Sequent may request that a Brocade-approved third party organization implement Mandatory Engineering Change kits for the affected
Product.
13.3 In the event that Brocade cannot implement all Mandatory Engineering Changes to Product delivered to Sequent within a reasonable time,
not to exceed [*] from the date of Brocade's written notice to Sequent of the requirement for such changes, Brocade shall provide no charge
replacement Product to Sequent in exchange for the Product requiring the Mandatory Engineering Change.
13.4 Sequent shall have the option to cancel open purchase orders without penalty if the Mandatory Engineering Changes are incompatible
with or adversely affect performance of Products purchased by Sequent and such changes are not made compatible with the Products or
Sequent is not provided with an acceptable remedy within [*] after Brocade receives notification from Sequent of its intent to cancel its open
purchase orders.
14. SEQUENT REQUESTED CHANGES
14.1 Sequent may request that Brocade provide [*] evaluation of changes to the Product or changes to the method of packing, packaging, or
shipment of the Product. Sequent's request will include a written description of the proposed change sufficient to permit Brocade to evaluate its
feasibility.
14.2 If Sequent's proposed change is accepted by Brocade, Brocade shall notify Sequent in writing within [*] from the date of request, of the
terms and conditions under which it would make the change requested by Sequent. Brocade's written evaluation shall state the cost, if any, to
make the
*Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
Page 13
change and the date that Brocade would be able to implement such change. If the proposed change would be at cost to Sequent, Sequent must
provide prior written approval to Brocade before the change is made. In the evaluation of the effect such changes may have on regulatory
agency certifications, the above referenced
[*] may be extended to take into account the time necessary for Brocade to obtain new regulatory agency certifications.
15. BROCADE REQUESTED CHANGES
15.1 Subject to the provisions of this Section 15, Brocade may propose optional changes, including changes that affect form, fit, function, [*]
as those terms are defined below, which are not Mandatory Engineering Changes ("Optional Engineering Changes"). For the purposes of this
Section, the following definitions apply:
15.1.1 "Form" means the dimensions, weight, appearance, packaging, labeling, finish, texture, color, or material properties of the Product.
15.1.2 "Fit" means the assembly interchangeability or attachment scheme of the Product or FRU within the Product. Fit includes the ability of
an item to become an integral part of another item.
15.1.3 "Function" means performance, operational interface to other components or functions, fitness for use, or testability of the Product or
FRU within the Product.
15.1.4 [*]
15.1.5 [*]
15.2 Brocade shall maintain a formal product change control system to ensure that notification is submitted to Sequent on all proposed changes
to Products covered by Attachment A. Brocade shall provide ongoing Product technology directions and schedules for all Product and Productrelated options. Included in the change notification process shall be the following:
(i) anticipated last shipment date of unchanged Product;
(ii) means of identification between changed and unchanged Product;
(iii) a complete and detailed description of the change proposed and any data that will support the benefits of the change;
(iv) impact to installed base of Product, including FRU inventories.
15.3 [*]
15.4 If the Optional Engineering Changes proposed by Brocade in Sequent's sole opinion necessitate evaluation by Sequent for compatibility
with Sequent's systems and/or specifications, Brocade upon Sequent's request shall provide Sequent with one (1) set of evaluation products,
FRUs, or designs which
*Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
Page 14
incorporate the proposed changes. Sequent will request such evaluation products, FRUs, or designs within [*] of receipt of Brocade's change
proposal. Evaluation products, FRUs, or designs that are provided to Sequent under this provision are for evaluation purposes and will be
returned to Brocade after the evaluation period. Sequent has the right, without liability, to accept or reject Brocade's proposed Optional
Engineering Changes and will inform Brocade of its approval or rejection of those changes in writing within [*] from Sequent's receipt of
notice of Brocade's proposed changes or within [*] of receipt of the evaluation products, FRUs, or designs, whichever is later. If no written
response is received by Brocade from Sequent within the applicable period, Sequent will be deemed not to have accepted the changes.
15.5 If Sequent rejects the Optional Engineering Changes, Brocade shall continue supplying the unaltered Product or provide Sequent with
opportunities for last time buy of the unaltered Product under the terms of Section 16, below.
15.6 Brocade will incorporate changes accepted by Sequent into Product on Sequent's open purchase orders and, at Sequent's request, into
Product going through Brocade's repair process.
15.7 Any changed Product resulting from application of this Section shall be considered added to this Agreement and subject to its terms and
conditions.
16. PRODUCT WITHDRAWAL
Brocade will notify Sequent in writing at least [*] prior to withdrawal of a Product. Brocade will ship Product for open purchase orders that
Brocade has accepted before the withdrawal date for an additional [*] after the withdrawal date. All EOL ("End of Life") purchase orders will
be considered non-cancellable.
17. MEETINGS AND SUPPLIER PERFORMANCE
17.1 Brocade appoints its Account Manager and Sequent appoints its designated Supplier Business Manager as liaisons to monitor Brocade's
performance under this Agreement. These liaisons will also be responsible for coordinating meetings, discussions and reports provided for in
this Agreement. The names and telephone and facsimile numbers of the liaisons will be provided and may be changed by notice from one party
to the other.
17.2 Sequent's designated liaison will conduct quarterly supplier performance review and planning meetings with Brocade's Sequent account
management team. Sequent and Brocade shall mutually develop supplier performance requirements and goals based on Brocade's obligations
and responsibilities under this Agreement, to be evaluated by the parties at these periodic meetings. Brocade's performance requirements and
goals will be based on:
[*] The locations and times for these meetings will be determined by Sequent and Brocade. The purpose of these meetings will include the
following:
*Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
Page 15
(i) Review Brocade's performance over the previous quarter;
(ii) Review action items and resolution;
(iii) Identify opportunities and areas of improvement;
(iv) Agreement on commitments, set target dates, and identify persons responsible;
(v) Review appropriate Brocade reports;
(vi) [*]
(vii) Review Brocade quality and reliability improvement plans;
(viii) Publish minutes.
18. REPORTS
Recurring reports to be provided by Brocade and Sequent under this Agreement are listed in Attachment E, Reports. All reports will be made
available in electronic form or as otherwise mutually agreed. There shall be no charge to either for any recurring reports required under this
Agreement.
19. MATERIAL MANAGEMENT AND PERFORMANCE STANDARDS
19.1 Brocade shall manage the scheduling of material to meet Sequent's Product availability and delivery requirements as set forth in this
Agreement and on accepted purchase orders. Brocade will provide status reports to Sequent that include open order status and ship date
information, on the following schedule:
1997:
[*]
1998:
[*]
19.2 Brocade shall manage sub-tier supplier performance in areas to include quality, availability, including allocated Product, and delivery to
meet the requirements of this Agreement. Brocade shall set performance goals and objectives with sub-tier suppliers and monitor progress
against goals. Sequent may request status reports periodically to audit these suppliers' performance.
20. LIMITATION OF LIABILITY
EXCEPT AS PROVIDED FOR IN [*] NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY INDIRECT, SPECIAL,
INCIDENTAL, OR CONSEQUENTIAL DAMAGES, INCLUDING LOST PROFITS, ARISING OUT OF THIS AGREEMENT OR ANY
PERFORMANCE HEREUNDER, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
21. CONFIDENTIAL AND PROPRIETARY INFORMATION
21.1 Both parties may, in connection with this Agreement, disclose to the other party information considered confidential and proprietary
information of the disclosing party ("Confidential Information"). Information shall be considered Confidential Information if identified as
confidential in nature by the disclosing party at the time of disclosure, or which by its nature is normally and reasonably considered
confidential, such as information related to past, present or future research, development, or business affairs, any proprietary products,
materials or
*Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
Page 16
methodologies, or any other information which provides the disclosing party with a competitive advantage. Confidential Information, if
disclosed or provided in tangible form, shall be clearly and conspicuously identified as company confidential or proprietary. Confidential
Information, if orally or visually disclosed, shall be identified as company confidential or proprietary in nature at the time of disclosure. The
receiving party shall protect the disclosing party's Confidential Information with the same degree of care that it regularly uses to protect its own
Confidential Information from unauthorized use or disclosure, but in no event less than a reasonable degree of care. Confidential Information
shall not be provided or disclosed to anyone except those employees of the receiving party with a need to know under this Agreement. No
rights or licenses under patents, trademarks or copyrights are granted or implied by any disclosure of Confidential Information. Confidential
Information and any and all authorized copies thereof shall remain the property of the disclosing party and shall be destroyed or returned if
requested by the disclosing party. The receiving party shall not export or re-export Confidential Information without the appropriate United
States or foreign government export licenses. This Section 21 shall survive the expiration or termination of this Agreement for a period of [*]
21.2 The obligations of confidentiality imposed by this Agreement shall not apply to any Confidential or Proprietary Information that: (a) is
rightfully received from a third party without accompanying markings or disclosure restrictions; (b) is independently developed by employees
of the receiving party who have not had access to such Confidential Information; (c) is or becomes publicly available through no wrongful act
of the receiving party; (d) is already known by the receiving party as evidenced by documentation bearing a date prior to the date of disclosure;
or, (e) is approved for release in writing by an authorized representative of the disclosing party.
21.3 The terms and conditions of this Agreement, but not its existence, are considered Confidential Information.
22. INFRINGEMENT
22.1 Brocade will defend or settle at its own expense any action or claim brought against Sequent to the extent that such action is based upon a
claim that any Product purchased hereunder infringes a patent, copyright, trade secret, or any intellectual property right of any third party.
Brocade shall indemnify and hold Sequent harmless against all costs and expenses and damages, including reasonable attorneys' fees, and shall
pay those costs, expenses, and damages incurred by Sequent, so long as Sequent provides the following: (i) prompt notification of any claim,
provided that Sequent has actual knowledge of such claim; (ii) reasonable cooperation and assistance with a claim at Brocade's expense; (iii)
sole control of defense and settlement to Brocade.
22.2 In the defense or settlement of a claim for infringement of a patent, copyright, trade secret, or any intellectual property right of any third
party, Brocade may procure for Sequent the right to continue using the Product, or if such remedy is not reasonably available, replace or
modify the Product so that its use or resale becomes non-infringing, provided that any replacement or modified product meets substantially the
same specifications as the original and is acceptable to
*Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
Page 17
Sequent. If any of the above remedies are not available, Sequent may return the Product to Brocade and receive [*] for the Product.
22.3 Brocade shall have no liability to Sequent to the extent that a claim of infringement is based upon (i) compliance with Sequent's designs,
plans, or specifications if without such designs, plans, or specifications the Product would not have been infringing;
(ii) the combination of the Product with other products or devices not supported hereunder where the Product itself would not be infringing; or
(iii) modifications of the Product made by Sequent or on Sequent's behalf by a party other than Brocade, where the unmodified Product would
not be infringing.
23. INDEMNITY AND INSURANCE
23.1 Brocade shall defend, indemnify, and hold Sequent harmless at Brocade's sole cost and expense, from tangible property damage, personal
injury including death, and expense, including attorney's fees, incurred by an employee, agent, invitee, or customer of Sequent, regardless of
how caused if arising out of a Product defect or defect that results from the providing of services, except to the extent such loss, property
damage, personal injury, or expense, including attorneys' fees, was caused by the negligence of Sequent or its employees, customers, or
authorized agents while acting within the scope of their authority.
23.2 Brocade shall provide Sequent with a certificate of insurance with not less than the following coverages upon execution of this
Agreement. Sequent shall be named as an additional insured on Brocade's insurance coverage. The fulfillment of the insurance obligations shall
not otherwise relieve Brocade of any liability assumed under the Agreement or in any way modify or limit any obligations of indemnification
hereunder.
Coverage
-------Worker's Compensation:
Required Limits
--------------Statutory
Employer's Liability:
[*] each accident, bodily injury by accident
[*] each employee, bodily injury by disease
[*] policy limit, bodily injury by disease
Comprehensive General
Liability:
Automobile Liability:
[*]
[*]
[*]
[*]
general aggregate
products/completed operations aggregate
personal and advertising injury limit
each occurrence limit
[*] combined single limit, bodily injury and
property damage coverage
23.3 Certificates of insurance shall state that a policy or policies have been issued and are in force at such time, that the policy or policies shall
not expire or lapse, and that the policy or policies will not be cancelled or changed so as to affect the insurance described in the certificate until
after thirty (30) days prior written
*Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
Page 18
notice to Sequent of such change. Such certificates or true copies thereof and any notices regarding insurance shall be sent to:
Sequent Computer Systems, Inc. 15450 S.W. Koll Parkway Beaverton, OR 97006-6064 Attn: Manager, Contracts, MS EDO2-805
23.4 Upon Sequent's request, Brocade shall furnish Sequent, for its inspection and approval, policies of insurance with all endorsements, or
conformed specimens thereof, certified by the insurance company to be true and correct copies. The fulfillment of this insurance obligation
shall not otherwise relieve Brocade of any liability assumed under this Agreement or in any way modify or limit Brocade's obligations to
indemnify Sequent hereunder.
24. NOTICES
Any legal notice required or permitted to be made or given to either party pursuant to this Agreement shall be sufficiently made or given on the
date of delivery if delivered personally or on the date of mailing if sent by certified or registered mail (postage prepaid and return receipt
requested) to the other party at the address set forth below. Either party may change the information below by giving the other party prior
written notice of such change.
25.
Brocade:
Brocade Communications Systems, Inc.
1901 Guadalupe Parkway
San Jose, CA 95131
Attn: Chief Financial Officer
Sequent:
Sequent Computer Systems, Inc.
15450 S.W. Koll Parkway
Beaverton, OR 97006
Attn: Manager, Contracts, MS EDO2-805
MISCELLANEOUS PROVISIONS
25.1 Compliance with Laws
Brocade shall comply with all applicable federal, state, country, and local laws, ordinances, regulations, and codes in the performance of this
Agreement.
25.2 Governing Law
This Agreement shall be governed by and construed in accordance with the laws of the State of Oregon.
25.3 Waiver
The failure of either party to insist upon or enforce strict conformance by the other party of any provision of this Agreement or to exercise any
right under this Agreement shall not be construed as a waiver or relinquishment of such party's
Page 19
right unless made in writing and shall not constitute any subsequent waiver or relinquishment.
25.4 Amendments, Changes, and Modifications
Amendments, changes, or modifications to the Agreement, to be valid, must be in writing and signed by authorized representatives of both
parties. Any verbal agreements, discussions, and understandings, express or implied, shall not constitute an amendment to this Agreement.
25.5 Invalid Provisions
If any provision of this Agreement is finally held by a court of competent jurisdiction to be illegal or unenforceable, the legality, validity, and
enforceability of the remaining provisions of this Agreement shall not be affected or impaired.
25.6 Survival
The provisions of Section 10 (Warranty), Section 11 [*], Section
16 (Product Withdrawal), Section 20 (Limitation of Liability),
Section 21 (Confidential and Proprietary Information), Section 22 (Infringement), Section 23 (Indemnity and Insurance), sub-Section
25.1 (Compliance with Laws), sub-Section 25.2 (Governing Law), and applicable provisions of Attachment D (Product Support) of this
Agreement shall survive the termination or expiration of this Agreement. Outstanding purchase orders shall survive the termination of this
Agreement.
25.7 Force Majeure
Neither party shall be responsible for delays or failures in performance resulting from acts beyond the reasonable control of such party,
including, but not limited to, acts of God, strikes or other labor disputes, riots, acts of war, communication line failures, power failures, fire, or
disasters. The time for performance of any delayed obligation shall be extended for the time period lost by reason of the delay, except that if the
delay exceeds thirty (30) calendar days from the beginning of the delay, Sequent may terminate this Agreement for cause without further notice
or liability to Brocade.
25.8 Successors and Assigns
Except as specifically provided for in sub-Section 3.3.2 of Attachment D, below, [*]. Any assignment of rights shall not work as a novation of
obligations hereunder without written agreement.
[*], either party may assign this Agreement to a surviving entity in connection with any merger, acquisition, or consolidation of not less than a
majority ownership in the merged, acquired, or consolidated company by the surviving entity.
*Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
Page 20
25.9
Attorney's Fees
If either party commences litigation to enforce any provision of
this Agreement, the prevailing party shall be entitled to recover
reasonable attorneys' fees and expenses of litigation, including
fees and expenses of any appeal.
25.10
Headings
The section and paragraph headings of this Agreement are intended
as a convenience only, and shall not affect the interpretation of
its provisions.
25.11
Conflicting Terms
The terms and conditions of this Agreement shall take precedence
over any conflicting terms and conditions contained on Sequent's
purchase orders and Brocade's quotation or acknowledgment.
25.12
Cumulative Remedies
The rights and remedies afforded to either party pursuant to any
provision of this Agreement are in addition to and do not in any
way limit any other rights or remedies afforded to either party
by any other provision of this Agreement or by law. All such
rights and remedies are cumulative and may be exercised
singularly or concurrently.
26. ENTIRE AGREEMENT
This Agreement, including all Attachments, constitutes the entire Agreement between the parties and supersedes all prior or contemporaneous
agreements, discussions, and understandings between the parties, either express or implied. The following Attachments are part of this
Agreement and are incorporated herein by this reference.
Attachments:
A Product Specification
B Product and Product Support Pricing
C Supplier Quality
D Product Support
E Reports
Page 21
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives.
Sequent Computer Systems, Inc.
Brocade Communications Systems, Inc.
By: /s/ Wayne A. Pittarger
------------------------------(Signature)
By: /s/ Bruce J. Bergman
---------------------------(Signature)
Name:
Wayne A. Pittarger
-------------------------(Printed or Typed)
Name:
Title: VP Operations
------------------------Date: 6/17/97
--------------------------
Title: CEO
------------------------Date: 6/17/97
-------------------------
Bruce J. Bergman
-------------------------(Printed or Typed)
Page 22
ATTACHMENT A
PRODUCT SPECIFICATION
This Attachment describes the Product and Product specifications required under the Agreement.
1. PRODUCT DESCRIPTION AND PRODUCT SPECIFICATIONS
The Products and Product specifications are described below. The Product specifications are further described in Sequent documents identified
by the Sequent part numbers listed below. Such documents identified below are incorporated by reference as though fully set forth herein.
Product descriptions and specifications are subject to change by mutual agreement of the parties.
PRODUCT DESCRIPTION
------------------16 Port Fibre Channel Switch
8 Port Fibre Channel Switch
0 Port Fibre Channel Switch for Service Spares
G-Port Card for Service Spares
GBIC, multi-mode, non-OFC for FC Switch (2M to 500M)
Page 23
Production Specifications
(By Sequent Part Numbers)
------------------------1003-69661
1003-69660
1003-73151
1003-73153
1003-73152
ATTACHMENT B
PRODUCT AND PRODUCT SUPPORT PRICING
This Attachment sets forth Product and Product Support pricing to Sequent from Brocade under the Agreement.
1. PRODUCT PRICING
1997
1.1
1.2
1.3
1.4
1.5
1998*
(not to exceed)
8 Port Sequent part number 1003-69660;
Brocade part number B1600-110
[*]
[*]
16 Port: Sequent part number 1003-69661;
Brocade part number B1600-100
[*]
[*]
0 Port: Sequent part number 1003-73151;
Brocade part number X1017
[*]
[*]
GBIC: Sequent part number 1003-73152
Brocade part number X1006
[*]
[*]
G-Port Card: Sequent part number 1003-73153;
Brocade part number X1003
[*]
[*]
* Note: Pricing for 1999 through the remainder of the term of the Agreement will be as agreed upon between the parties [*].
** Note: For initial stocking orders and subsequent orders in excess of a net aggregate of [*], Brocade will apply a [*] for Brocade part number
X1003 and a [*] for Brocade part number X1006.
2. PRODUCT SUPPORT PRICING
2.1 Exchange Product Charges
The charge for Exchange Product, as that term is defined in sub-Section 3.1 of Attachment D, shall be [*] of the then-current Product price or
the repair price for the Product, whichever is less.
2.2 Out of Warranty Repair Charges
(i)
(ii)
Switch:
G Port without GBIC:
[*]
[*]
2.3 NTF Charges
Charges for NTF testing of Product will be per the following schedule:
(i)
Switch:
[*]
*Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
Page 24
(ii)
G-Port Card:
[*]
2.4 Recertification Charges
Charges for re-certification, as provided in sub-Section 6 of Attachment D, shall be [*].
2.5 Charges for out of warranty upgrade will be as agreed upon between the parties on a case-by-case basis.
3. TRAINING
Charges for additional training (training conducted other than the original/initial one day training course provided to Sequent and Sequent
service partners) shall be as follows:
(i) One (1) day at Brocade: [*] per person Includes: Copy of all course materials
(ii) One (1) day at Sequent-specified site:
[*][*] persons/5 person minimum, plus travel expenses
[*] per person for more than five persons
Includes:
Copy of all course materials for each
person
*Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
Page 25
ATTACHMENT C
SUPPLIER QUALITY
1. INTRODUCTION, SCOPE AND [*]
1.1 This Attachment is subject to applicable terms and conditions of the Agreement and defines the quality requirements and expectations for
Brocade under the Agreement. Changes to this Attachment must be approved by the parties' designated quality representatives. Except as
specifically provided otherwise, there will be no charge to Sequent for activities and discharge of obligations required of Brocade described in
this Attachment.
1.2 Brocade shall implement the procedures, plans, goals and processes to include but not be limited to: (i) document control;
(ii) continuous improvement; (iii) customer feedback; (iv) performance tracking against objectives; and (v) corrective action processes required
of Brocade to remain in compliance with its obligations under the Agreement.
1.3 Brocade shall create, implement and maintain a continuous process improvement program with the goals of reducing costs and lead-time
and improving quality and service to Sequent. Such program shall be documented and provided to Sequent.
1.4 [*]
2. INSPECTION, AUDIT RIGHTS AND STOP SHIPS
2.1 Sequent shall have the right to inspect and audit any manufacturing or administrative site, including Brocade sites that supply goods or
services, including the Product, subject to agreements with Brocade suppliers. In addition, on an annual basis at a time which is mutually
agreed upon between the parties, Sequent shall be entitled to audit Brocade records and processes which directly insure that Brocade [*].
Sequent shall also be entitled to review relevant documents pertaining to quality information including but not limited to procedures and
certificates of conformance affecting materials, including the Products, if requested. Brocade shall assist Sequent in arranging such inspections,
audits and reviews.
2.2 Sequent shall have the right, without liability, to stop Brocade's shipments to Sequent and/or Sequent's customers of Product that does not
conform to the specifications and criteria contained herein. Sequent will advise Brocade of such non-conformance. Such Products shall not be
shipped by Brocade unless (i) Brocade has corrected the areas of non-conformance in the Product and Sequent approves Product shipment or
(ii) Sequent permits shipment of such Products pending Brocade's correction of the non-conformance.
*Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
Page 26
3. DEFINITIONS
3.1 Quality Failure: Any failure that occurs in Sequent's factory during integration/systems test or during the first [*] after installation at a
Sequent customer site, both circumstances sometimes referred to as "dead on arrival" ("DOA"). These failures are considered in the calculation
of the parts-per-million ("PPM") failure rate. This includes any and all functional and non-functional failures, to include but not be limited to
incorrect labels and missing jumpers.
3.2 Reliability Failure: Any failure that occurs after the first
[*] of operation after installation at Sequent's customer's site. Reliability is measured as mean-time-between-failure(s) ("MTBF").
3.3 Red Light: A Red Light is anything that causes data corruption, loss of use, safety, and/or other problems that negatively impact the
customer's ability to effectively use the Product per its functional specification or intended use. This includes not only the Product or a service
but also related processes such as shipping and documentation. When a Red Light occurs, Product is not shipped and resources are redirected to
solve the situation.
3.4 Purge: Removal and segregation of Product in Sequent's factory and service centers due to a discrepancy with a particular lot or date code
of the Product.
3.5 Quality Issues: Quality Issues are those issues that arise when the Products do not meet the Product specifications and include but are not
limited to incorrect packaging, labeling, incorrect revision levels and Purges.
3.6 Routine Questions and Issues: Routine Questions and Issues are those that do not address Quality Failures, Red Lights, Purges or Quality
Issues.
4. PERFORMANCE ACTIVITIES
4.1 Brocade shall establish, implement and maintain a comprehensive quality assurance program to ensure the consistent supply of Products
that meet the requirements specified in the Agreement and this Attachment. Details of the program shall be made available to Sequent upon
request and Sequent has the right to survey and audit the program. Sequent will provide a minimum of two (2) weeks notice prior to any
planned survey or audit.
4.2 Brocade shall have a documented system to ensure a consistent supply of materials used for the assembly of Products. This system shall
maintain procedures for incoming inspection per category of material and procedures outlining the qualification of new materials suppliers.
4.3 Brocade shall have a formally documented manufacturing process and quality control system. Brocade shall also maintain established
intervals for preventive maintenance of manufacturing equipment.
4.4 Brocade shall have a documented system to ensure continued accuracy of measurement equipment in manufacturing. Measuring equipment
shall be
Page 27
calibrated at established intervals against certified standards that have valid relationships to national standards.
4.5 Brocade shall have an established program for statistical process control ("SPC") in manufacturing. This program shall use SPC tools to
control and improve the manufacturing process and its capabilities. Documentation for process control shall consist of control procedures, SPC
limits and SPC violation rules.
4.6 Brocade shall maintain and use a system for identifying and segregating non-conforming material. Adequate documentation concerning the
nature of the non-conformance shall be generated and maintained.
4.7 All material received at Sequent shall conform with the requirements specified in the purchase order and the Product specifications. To
support Sequent's quality assurance program and to enable compliance with regulatory requirements, the current revision of each of the
following items must be furnished to Sequent upon request:
(i) [*]
(ii) [*]
(iii) [*]
5. SEQUENT QUALITY FAILURE AND RELIABILITY FAILURE REQUIREMENTS
5.1 The Quality Failure requirement for the Product is that the failure rate shall be no higher than [*]. This failure rate will be measured by
calculating the number of defects found in Sequent factory in addition to any failures that occur within the first [*] after installation at a
customer site, divided by the total number of Products shipped. [*]
[*]
5.2 The Reliability Failure Goal for the 16 Port Switch is [*] MTBF (Annual Failure Rate (AFR) x [*]). The Reliability Failure Goal for the 8
Port Switch is [*] MTBF (Annual Failure Rate (AFR) equal to or approximately %)
5.3 A Red Light will occur if the reliability of the Product drops below the required [*] for the 16 port switch or [*] for the 8 port switch.
[*]
*Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
Page 28
6. TECHNICAL SUPPORT AND RESPONSIVENESS
6.1 Brocade shall promptly notify Sequent, in writing, of any discrepancies found which could have a detrimental effect on previously shipped
Product. In such cases, Brocade shall provide a timely response with effective corrective action for any nonconformity discovered.
6.2 Routine Questions and Issues. Brocade will provide [*] acknowledgment, by electronic mail ("Email"), facsimile ("Fax") or other method
of communication agreed to by the parties, of all Sequent requests for assistance with Routine Questions and Issues, including but not limited
to questions regarding Product service and support. Sequent shall have access to Brocade personnel, to include but not be limited to developers,
order fulfillment, quality and technical personnel, to assist Sequent. Brocade personnel shall use best efforts to provide a response to Sequent's
requests for assistance within
[*] of receipt of the request.
6.3 Failure Analysis. Brocade shall perform failure analysis on all failed Products returned to Brocade. Failure analysis will be a cooperative
effort between Brocade and Sequent to determine the root cause of the failure. Initial failure analysis on failed Products shall be completed
within [*] from Brocade's receipt of the Products; except in isolated incidents based on extreme critical Sequent customer need, from the time
of receipt by Brocade of defective Product from Sequent, Brocade agrees to provide expedited failure analysis on a commercially reasonable
basis, including isolation of the defect to the basic component level. Complete failure analysis to root cause shall be completed within [*] from
receipt of failed Product. Once failure analysis has been completed, Brocade will Email or Fax a failure analysis report to the Sequent Supplier
Engineer designated by Sequent to work with Brocade. The failure analysis report shall include at a minimum, the Product part number,
Product serial number, failure cause and corrective action that Brocade will take to prevent further occurrences of the failure. There will be no
charges for failure analysis.
6.4 Quality Issues. Quality Issues must be responded to by Brocade within two (2) business days after being notified that such an issue exists.
Brocade shall completely close the Quality Issue with effective corrective action that will prevent a repeat failure within [*] depending on the
nature of the issue.
6.5 Red Lights. Red Lights shall be highest priority and shall cause immediate allocation of all necessary Brocade resources to expeditiously
develop and implement effective containment and resolution plans in conjunction with Sequent, until problem resolution. Brocade's
commitment of resources shall be at its expense and shall include but not be limited to committing Brocade personnel to work evenings and
weekends or, if necessary, to send such personnel to Sequent's site or Sequent's customer's site.
6.6 Brocade shall comply with the Sequent Corporate Standard Operating Policy for Electrostatic Discharge Control, Sequent part number
1003-55472-E01, a copy of which has been provided to Brocade.
*Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
Page 29
6.7 Depending on the amount and/or complexity of quality issues outstanding at any given time, either party may initiate ongoing weekly
conference calls between the parties for the purpose of quality issue resolution.
7. QUALITY DATA AND REPORTING
7.1 The parties will be responsible for providing each other with quality data. The specific data, the party responsible for the data, and the time
for reporting is as follows:
Data (Field Metrics) & Responsible Party
Time of Reporting
Summary of field Quality Failures
install) (Sequent)
On or before the
15th of the month
[*] after
Reliability Data in the form of average time between
the replacement ("ATBR"). ATBR includes all
replacements, some of which may not have been actual failures
(Sequent)
On or before
15th of the month
Data (Factory Metrics) & Responsible Party
Time of Reporting
Summary of all inspection/test station yields for the
month for all Products shipped to Sequent (Brocade)
On or before the
15th of the month
Pareto of failures for the above stations for the month
for all Products shipped to Sequent (Brocade)
On or before the
15th of the month
Failure analysis summary of Sequent returned
Products (Brocade)
On or before the
15th of the month
[*]
7.2 This above data will be sent by Email, Fax or other method agreed to by the parties, between Brocade and Sequent quality personnel no
later than the required time of reporting.
7.3 All Brocade test records must be archived for a minimum of
[*]. Brocade shall maintain and analyze in-process failure data and use best efforts to improve test suites to drive the number of in-process
failures to zero.
7.4 Test flow diagram and content for all Products including systems, features and spares shall be available to Sequent upon request.
8. CORRECTIVE ACTION PROCESS
All Quality Failures and Reliability Failures shall be resolved to root cause. Brocade shall perform failure analysis on defective Products in
accordances with sub-Section 6.3 of the Agreement. Upon determining the root cause of the failure, Brocade shall establish a corrective action
plan, with Sequent's assistance if requested, to insure that the Product defect is removed and that root cause corrective action is implemented.
Sequent will assist Brocade with tracking all open failures and will work with Brocade to insure that the proper repair priority is set. In the
event Brocade encounters a no trouble found ("NTF") in a Product sent from Sequent, Brocade shall re-submit through the complete
manufacturing test process for a final assembly.
*Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
Page 30
9. MULTIPLE FAILURE PRODUCT DISPOSITION
9.1 Product of a specific part and serial number with a history of
[*] or more failures ("Multi-failure Product") shall be clearly labeled as non-conforming due to multiple failures and segregated from good
Product, as the term "good" is described in sub-section 9.2, below.
9.2 Multi-failure Product may be re-labeled as "good" and used as a replacement Product when the following criteria have been met:
(i) Brocade provides to the designated Sequent Supplier Engineer ("SE"), written documentation of a positive correlation between all failures
and Brocade's fixes; and
(ii) Product meets all Product specifications and test criteria; and
(iii) Sequent's SE has provided Brocade with written authorization to label the documented Multi-failure Product as good.
9.3 In the event that no positive correlation between failure and fix can be established for a Multi-failure Product, then Brocade shall not repair
or use such Product as a replacement Product. Brocade shall submit a scrap request to Sequent's designated Supplier Engineer for review and
authorization. Brocade's requests for scrap authorization shall include the following information:
(i) Product part, revision, and serial numbers;
(ii) Documented history of remedial processes performed on the Product; and
(iii) Product's failure mode or quality conformance issue.
9.4 Brocade may be required to return scrapped Product to Sequent for verification and analysis. Sequent will notify Brocade of this
requirement at the time of Product scrap authorization.
*Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
Page 31
ATTACHMENT D
PRODUCT SUPPORT
This Attachment sets forth the terms and conditions that govern the support for the Product(s). Notwithstanding anything that may be construed
to the contrary, Sequent shall not have an obligation to purchase any Product Support from Brocade under the Agreement.
1. PRODUCT SUPPORT AND PRODUCT SUPPORT DURATION
1.1 At Sequent's request, Brocade shall provide the Product Support described in this Attachment. Charges for Product Support are provided in
Attachment B to the Agreement.
1.2 Product Support may include but not be limited to Product: (1) testing; (ii) repair; (iii) upgrades; (iv) failure analysis; and
(v) advance exchange.
1.3 Brocade shall provide Product repair and testing at reasonable prices and throughput time as provided in this Attachment D for a period of
not less than [*] years after Product withdrawal.
1.4 In the event that Brocade is unable or unwilling to comply with Sequent's Product Support requirements, Brocade will, at Sequent's request,
assist Sequent in identifying another repair source to provide all or part of the Product Support. Brocade's assistance may include, but is not
limited to: (i) training required by Sequent and/or the third party to provide Product Support and (ii) providing Sequent and/or the third party
with all necessary documentation and component sourcing information required to perform Product Support. Such assistance will be provided
to Sequent [*].
1.5 The parties acknowledge that Product returns to Brocade may come from three (3) different sources: (i) Sequent's service organization; (ii)
Sequent's evaluation and demonstration product organization; and (iii) [*]. Processing returns may differ depending on the source of the return.
[*]
2. PRODUCT REPAIR
2.1 Upon Sequent's request for Product repair, Brocade shall ship repaired or replacement Product within [*] of receipt of Sequent's defective
Product.
2.2 All field returned Product shall be upgraded and/or repaired as agreed between the parties, and then reassembled, tested and packaged per
Sequent's requirements for new Product. All final test and inspection as required by Brocade for new Product shall be performed on field
returned Product prior to its return to Sequent.
*Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
Page 32
2.3 There shall be no charge for Product repair during Product warranty. Prices for out-of-warranty Product repair are as provided in subSection 2.2. of Attachment B.
3. EXCHANGE PRODUCT
3.1 For purposes of this Section 3, the following definitions apply:
3.1.1
"Exchange Product" means a new Product or a Product that
has been previously repaired or refurbished and which
Brocade uses to replace defective Product.
3.1.2
"Product Warranty" means the warranty period as provided
for in Section 10 of the Agreement.
3.1.3
"Product Support Warranty" means the warranty, as
described in sub-Section 3.5.3, below, applicable to
Exchange Product delivered pursuant to this Section 3
after expiration of the Product Warranty.
3.2 Brocade will provide replacement Product to Sequent under the provisions of this Section 3. The charge for Exchange Product shall be as
provided in sub-Section 2.1 of Attachment B.
3.3 Repair of Exchange Product
3.3.1
All field returned Product shall be upgraded and/or
repaired as agreed between the parties, and then
reassembled, tested and packaged per Sequent's
requirements for new Product. All final test and
inspection required by Brocade for new Product shall be
performed on field returned Product prior to its return to
Sequent.
3.3.2
Brocade shall be responsible for repair and/or
refurbishment of Products that may be provided to Sequent
as Exchange Product. Brocade may assign repair or
refurbishment activities to a third party provided that
Brocade's assignee repairs and/or refurbishes Product in
accordance with Attachment C, Supplier Quality, and the
provisions of this Agreement. Brocade shall remain liable
to Sequent for its obligations under the Agreement, to
include but not be limited to providing Exchange Product.
3.4 In-Warranty Product Exchange
3.4.1
During Product Warranty, Brocade shall replace defective
Product under Product Warranty in accordance with and
subject to the following provisions. Except as provided in
sub-Section 3.4.1.2, below, there shall be no charge to
Sequent for Exchange Product provided under this
sub-Section 3.4.
3.4.1.1
Upon Sequent's request for an Exchange Product,
Sequent shall provide the serial number of the
failed Product and Brocade
Page 33
shall ship Exchange Product to Sequent or to a
location designated by Sequent:
(i)
within [*] of Sequent's request; or
(ii)
in case of a Quality Failure, as defined
in Attachment C, Brocade will ship an
Exchange Product (equivalent to new,
defined as any repaired line integration
failure, and line integration and DOA
NTFs) within [*] of Sequent's request.
If a new (not previously repaired or
refurbished) Exchange Product is
required, Brocade will ship such
Exchange Product within [*] starting the
next business day. Brocade may request
that line integration failures be
retained at Sequent as Brocade will have
the option to send a trained technician
to diagnose a failure to a FRU level and
effect repair on site, provided that
Sequent can accommodate Brocade's
request without impact to the Sequent
customer requested ship date.
3.4.1.2 Sequent will use best efforts to return the
defective Product to Brocade within [*] from
domestic locations and [*] from international
locations from the date of delivery of the
Exchange Product unless otherwise directed to
hold or dispose of the defective Product by
Brocade. Brocade shall provide to Sequent a
listing by location of Brocade's exchange
facilities. In the event that the failed Product
is not returned to Brocade within the applicable
time period, Brocade may invoice Sequent for the
difference between the then-standard commercial
list price of a new Product and the price of an
Exchange Product, for the replacement Product;
provided, however, that upon receipt of the
defective Product from Sequent, Brocade shall
credit Sequent for the amount invoiced less any
reasonable and necessary administrative costs
incurred by Brocade for the invoice and credit
transactions.
3.4.1.3 Upon shipment of an Exchange Product, Brocade
shall notify Sequent of the Exchange Product
serial number that is being shipped as the
replacement.
3.4.1.4 Sequent shall be responsible for all freight
charges for return of failed Product and Brocade
shall be responsible for freight charges for
shipment of Exchange Product.
3.4.1.5 Brocade shall honor the original Product
Warranty of a Product and provide Exchange
Product under this Agreement, regardless of
whether Sequent was the original purchaser of
the Product.
3.4.2
From the date of delivery, the Exchange Product shall be
warranted in accordance with and for the remainder of the
Product Warranty of the defective Product which was
replaced or in accordance with and for the period of the
Product Support Warranty provided at sub-Section 3.5.3 of
*Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
Page 34
this Attachment, whichever is longer, provided that Sequent has provided Brocade with the serial number of the failed Product, as defined in
sub-Section 3.4.1.1. In the case where no serial number is provided by Sequent, the Exchange Product warranty shall default to [*]. Warranty
tracking and documentation for Products and FRUs as configured upon initial shipment from Brocade, including Exchange Products, shall be
the responsibility of Brocade.
3.5 Post-Warranty Product Exchange and Repair
3.5.1
The provisions of this sub-Section 3.5 shall apply solely
to replacement of Product after expiration of the Product
Warranty.
3.5.2
Brocade shall repair or replace or exchange defective
Product under Product Support Warranty in accordance with
and subject to the following provisions.
3.5.2.1 Upon Sequent's request for Exchange Product,
Brocade shall ship Exchange Product to Sequent
within three (3) business days of Sequent's
request at no charge.
3.5.2.2 Sequent will use best efforts to return the
defective Product to Brocade within [*] from
domestic locations and [*] from international
locations, from the date of delivery of the
Exchange Product unless otherwise directed to hold
or dispose of the defective Product by Brocade.
Brocade shall provide to Sequent a listing by
location of Brocade's exchange facilities. In the
event that the failed Product is not returned to
Brocade during the applicable time period, Brocade
may invoice Sequent for the Exchange Product
Charge per Attachment B less the Out of Warranty
Repair charge per Attachment B. Invoices generated
under these circumstances shall be payable net [*]
from the date of receipt of a correct invoice.
3.5.2.3 Upon shipment of an Exchange Product, Brocade
shall notify Sequent of the Exchange Product
serial number that is being shipped as the
replacement.
3.5.2.4 Sequent shall be responsible for freight charges
for shipment of defective Product to Brocade.
Brocade shall be responsible for freight charges
for shipment of Exchange Product.
3.5.3
Products, including Exchange Product used to replace
defective Products under this Section 3.5 of Attachment D,
are warranted for a period of [*] from the date of
delivery of the Exchange Product, to conform to and
perform in accordance with the Sequent's specifications in
effect at the time of the replacement of the defective
Product, and to be free from defects in materials and
workmanship ("Product Support Warranty"). The
above-referenced Product Support Warranty is subject to
the applicable provisions of Section 10, Warranty, of the
Agreement. Warranty tracking and documentation for
Products,
*Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
Page 35
including Exchange Products, shall be the responsibility of Brocade. Sequent shall have the right to audit Brocade's records that directly verify
and monitor Product warranty, at times and places mutually agreed upon.
4. FAILURE ANALYSIS
Brocade shall provide failure analysis in accordance with the provisions of sub-Section 6.3 of Attachment C.
5. NO TROUBLE FOUND ("NTF") TESTING
5.1 Brocade shall provide NTF testing under the provisions of this
Section 5. For purposes of this Section 5, NTF shall mean that a Product has undergone testing and has been determined by Brocade to
conform to and perform in accordance with all applicable specifications, without repair, upgrade, or other modification being required. Charges
for NTF testing of Products are provided for in Attachment B.
5.2 Upon Sequent's request, Brocade shall provide NTF testing on Products, Such testing shall commence no later than [*] from Brocade's
receipt of the Product to be tested. Brocade shall provide Sequent with the reports documenting and describing its NTF results no later than [*]
after Brocade receives the Product. There shall be no charge to Sequent for NTF reports.
6. RECERTIFICATION
6.1 For purposes of this sub-Section, the following definition applies:
"Recertification" shall include the following: (i) diagnostic testing; (ii) upgrade with Mandatory Engineering Changes, if required; (iii) system
test; (iv) HASS test; (v) burn-in; and
(vi) final test.
6.2 Brocade shall provide Recertification under the provisions of this Section 6. Charges for Recertification testing of Products are provided for
in Attachment B.
6.3 Upon Sequent's request, Brocade shall provide Recertification on Products. Such testing shall commence no later than [*] from Brocade's
receipt of the Product to be tested. Brocade shall provide Sequent with the reports documenting and describing the Recertification results no
later than [*] after Brocade receives the Product. There shall be no charge to Sequent for Recertification reports.
6.4 Recertification will be performed on any Product that has been at Sequent or one of Sequent's customers for period not exceeding
[*]. This Product would have originally been shipped to Sequent or one of Sequent's customers for the purpose of qualification, demonstration
or on a similar trial basis. The expectation is that after undergoing Brocade's Recertification process, this Product could be returned to Sequent
as "equivalent-to-new" product.
6.5 In the event that Product is returned from one of Sequent's customers after a period exceeding [*] and Brocade's estimated cost of
*Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
Page 36
recertification exceeds the standard cost provided in sub-Section 2.4 of Attachment B, Brocade shall provide a quotation with a complete
breakdown of time and materials for the Recertification and upon Sequent's acceptance of the pricing Brocade shall perform the
Recertification.
Page 37
ATTACHMENT E
REPORTS
This Attachment summarizes the reports required of Brocade and Sequent under the Agreement. There shall be no charge to either party for
any reports required under the Agreement.
1. RECURRING REPORTS
1.1 Brocade Provided Reports
1.1.1
Brocade Factory Metrics
Brocade will provide these reports to the designated
Sequent Supplier Engineer as provided in sub-Section 7.1
of Attachment C. The content of these reports shall
include:
1.1.2
(i)
Summary of all inspection/test station yields
for the month for all Products shipped to
Sequent;
(ii)
Pareto of failures for all inspection/test
stations for the month for all Products shipped
to Sequent; and
(iii)
Failure analysis summary of Sequent returned
Products.
Repair Throughput and Aging Profile
Brocade will provide these reports [*] as agreed upon
between the parties.
1.2 Sequent Provided Reports
1.2.1
Sequent Field Metrics
Sequent will provide the following reports as provided for
in sub-Section 7.1 of Attachment C. The content of these
reports shall include:
(i)
(ii)
Summary of field Quality Failures
Reliability Data in the form of average time
between failures ("ATBR"). ATBR includes all
replacements, some of which may not have been
actual failures.
2. REQUESTED REPORTS
2.1 Brocade Provided Reports
2.1.1
Sub-Tier Supplier Performance
The content shall include status reports indicating
sub-tier supplier performance as provided in Section 19 of
the Agreement.
*Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
Pg. 38
2.1.2
NTF Test Reports
The NTF reports required in Section 5 of Attachment D are
to be supplied no later than ten 10) business days after
completion of the NTF testing. Content of the reports will
be as provided in sub-Section 5.2 of Attachment D.
2.1.3
Failure Analysis Reports
Failure Analysis reports, including report content and
time requirements, are to be supplied under sub-Section
6.3 of Attachment C.
2.1.4
Recertification Reports
The Recertification reports required in Section 6 of
Attachment D are to be supplied no later than ten (10)
business days after completion of the Recertification.
Content of the reports will be as provided in sub-Section
6.3 of Attachment D.
Page 39
EXHIBIT 10.16
SUPPLEMENT NO. 1
TO
PURCHASE AGREEMENT
BETWEEN
SEQUENT COMPUTER SYSTEMS, INC.
AND
BROCADE COMMUNICATIONS SYSTEMS, INC.
The above referenced agreement ("Agreement") entered into between Sequent Computer Systems, Inc. ("Sequent") and Brocade
Communications Systems, Inc. ("Brocade") is amended as provided below. This supplement number 1 ("Supplement") is effective September
26, 1997 ("Supplement Effective Date.").
1. DEFINITIONS
1.1 "Caterpillar Product" shall mean the product described in Attachment A of this Supplement.
1.2 "Caterpillar Development Project" shall mean the development of the Caterpillar Product, including prototype and Production Caterpillar
Products.
1.3 "Production Caterpillar Product" shall mean Caterpillar Products that will be available for purchase and resale by Sequent.
2. SCOPE OF SUPPLEMENT
2.1 This Supplement, together with the Agreement, contains the terms and conditions which govern Brocade's development of the Caterpillar
Product for Sequent.
2.2 The Caterpillar Product shall be developed in accordance with the Caterpillar Product description and specification as provided in
Attachment A.
2.3 The parties acknowledge that this Supplement may be executed prior to complete qualification of the Caterpillar Product by Sequent.
Qualification of the Caterpillar Product by Sequent and the Caterpillar Product meeting all specifications as required in Attachment A are
conditions precedent to Sequent's obligations under this Supplement or under the Agreement.
2.4 Upon completion of the Caterpillar Development Project and Brocade making the Production Caterpillar Product available to Sequent, the
parties shall add the Caterpillar Product to the Agreement. Any purchases of the Production Caterpillar Product by Sequent will be governed by
the Agreement as amended by this Supplement.
1
3. CATERPILLAR DEVELOPMENT PROJECT
3.1 Unless otherwise mutually agreed to in writing by the parties, Brocade shall begin the Caterpillar Development Project and provide Sequent
with the deliverables described below on or before the dates indicated:
Deliverable
----------Delivery of the first prototype
Caterpillar Product to Sequent
Completion Date
--------------November 7, 1997
Delivery of the first Production
Caterpillar Product to Sequent
December 27, 1997
3.2 Brocade shall provide Sequent with a Production Caterpillar Product that conforms to and performs in accordance with the descriptions and
specifications provided in Attachment A and, unless otherwise agreed to in writing by the parties, Brocade shall use [*] to make a Production
Caterpillar Product available for purchase by Sequent no later than December 27, 1997. Brocade recognizes the importance of delivering the
Production Caterpillar Product at the earliest possible time.
3.3 After the Production Caterpillar Product has been made available to Sequent and within a time period to be agreed upon between the
parties, Brocade shall upgrade all prototype Caterpillar Products previously delivered to Sequent to Production Caterpillar Products. Such
upgrades shall be done [*].
4. CATERPILLAR DEVELOPMENT PROJECT ACCEPTANCE, PRICING, AND PAYMENT
4.1 Brocade may invoice Sequent for the amounts set forth below upon satisfaction of the acceptance criteria set forth in sub-Section 4.2, below
for the listed deliverable. Such payments, when made, shall constitute full and complete payment to Brocade for all of its efforts and
deliverables under the Caterpillar Development Project, including, but not limited to, all costs and expenses for work, communications, and
technical data and equipment that Brocade is required to provide to Sequent under this Supplement. In the event Sequent terminates the
Agreement without cause prior to completion of all deliverables under this Supplement, Brocade will be entitled solely to actual, substantiated,
documented, necessary and reasonable costs and expenses incurred by Brocade under the Supplement up to the date of notice of termination. If
the Agreement is so terminated prior to full completion of Brocade's obligations, in no event shall Sequent's obligation to Brocade exceed the
payment amount that would have been due Brocade following acceptance of the next listed, but uncompleted, deliverable.
*Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
2
Deliverable
----------Delivery of the first prototype
Caterpillar Product to Sequent
Payment Amount
-------------$[*]
Delivery of the first Production
Caterpillar Product to Sequent
$[*]
4.2 Sequent's obligation to pay the amounts listed above is conditioned on satisfaction of the following acceptance criteria:
4.2.1 Delivery of the first prototype Caterpillar Product to Sequent. This deliverable will be accepted at such time as Sequent determines that
Brocade has provided Sequent with the first prototype Caterpillar Product that satisfies the requirements of Attachment A.
4.2.2 Delivery of the first Production Caterpillar Product to Sequent. This deliverable will be accepted at such time as Sequent determines that
Brocade has provided Sequent with the first Production Caterpillar Product that satisfies the requirements of Attachment A.
5. CATERPILLAR PRODUCT PRICING
5.1 Unless otherwise agreed to by the parties, prototype and Production Caterpillar Product pricing shall be in accordance with the following
pricing matrix. Pricing is based on cumulative Caterpillar Product purchases.
Cumulative Purchase Volume
-------------------------[*]
[*]
Price per Caterpillar Product
----------------------------$[*]
not to exceed $[*]
5.2 The prices listed above shall remain in effect until Brocade ships [*] Caterpillar Products to the total marketplace. At such time that
Brocade ships in excess of [*] Caterpillar Products, Brocade shall reduce the above referenced prices to Sequent by
[*] per Caterpillar Product, or any subsequent low cost Product offering that Sequent purchases, until such time as Sequent has realized a total
price reduction of $[*].
6. PRECEDENCE
6.1 For purposes of this Supplement, the term "Product," as such term is used in the Agreement, will mean the prototype and Production
Caterpillar Product as the terms and conditions of the Agreement apply to this Supplement.
6.2 The terms and conditions of this Supplement shall take precedence over any conflicting terms and conditions of the Agreement. Except as
otherwise provided in this Supplement, the remaining terms and conditions of the Agreement shall remain in full force and effect.
*Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
3
IN WITNESS WHEREOF, the parties have caused this Supplement to be executed by their duly authorized representatives.
SEQUENT COMPUTER SYSTEMS, INC.
BROCADE COMMUNICATIONS SYSTEMS, INC.
By: /s/ Robert D. Bakker
---------------------------------(Signature)
By: /s/ CHARLES W. SMITH
---------------------------------(Signature)
Name: Robert D. Bakker
----------------------------(Printed or Typed)
Name: Charles W. Smith
----------------------------(Printed or Typed)
Title: Sr. Director Mfg. Ops
---------------------
Title: Vice President, Worldwide Sales
-------------------------------
Date: 4/20/98
-----------------------------
Date: April 16, 1998
-----------------------------
4
ATTACHMENT A
PRODUCT SPECIFICATION
Attachment A is amended to include the following:
1. PRODUCT DESCRIPTION AND PRODUCT SPECIFICATIONS
Product Specifications
(By Sequent Part Numbers)
------------------------1003-74200
FCS-9ASY-16
FCS-9ASY-06
Product Description
------------------6 Port Fibre Channel Switch
16 Port FRU
6 Port FRU
5
ATTACHMENT B
PRODUCT AND PRODUCT SUPPORT PRICING
Attachment B is amended to include the following:
1. Product Pricing
1997
1.4
GBIC: Sequent part number 1003-73152
Brocade part number X1006
1998*
(not to exceed)
[*]
[*]
1.6
16 Port FRU: Sequent part number FCS-9ASY-16
[*]
[*]
1.7
6 Port FRU: Sequent part number FCS-9ASY-06
[*]
[*]
1.8
6 Port: Sequent part number 1003-74200
[*]
[*]
*Note: Pricing for 1999 through the remainder of the term of the Agreement will be as agreed upon between the parties [*].
**Note: For initial stocking orders and subsequent orders in excess of a net aggregate of [*], Brocade will apply a [*] for Brocade part number
X1003 and a [*] for Brocade part number X1006.
***Note: Refer to sub-Section 5.1 of the Agreement regarding volume based pricing requirements.
*Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
6
ATTACHMENT C
SUPPLIER QUALITY
Attachment C is amended as follows:
1. Delete sub-Section 11.3.2(i) and insert: "Product mean time between failures ("MTBF") drops below [*] of Brocade's predicted MTBF of [*]
for a 16 port switch and [*] for a 6 port switch; or"
2. Delete sub-Section 5.2 and insert: "The Reliability Failure Goal for the 16 Port Switch is [*] MTBF (Annual Failure Rate ("AFR") [*]). The
Reliability Failure Goal for the 6 Port Switch is [*] MTBF (AFR [*]).
*Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
7
EXHIBIT 10.19
CONFIDENTIAL AGREEMENT
AND GENERAL RELEASE OF CLAIMS
THIS CONFIDENTIAL AGREEMENT AND GENERAL RELEASE OF CLAIMS (the "AGREEMENT") effective as of September 23, 1998
is between Bruce J. Bergman ("EMPLOYEE"), The Bergman Family Trust (the "TRUST") and Brocade Communications Systems, Inc.
("BROCADE"), a California corporation. As used in this Agreement, Brocade refers to Brocade Communications Systems, Inc. and all parents,
subsidiaries, divisions, predecessors, and successors of Brocade Communications Systems, Inc.
RECITALS
WHEREAS, Employee and Brocade entered into that certain confidential Agreement and General Release dated as of April 25 1998 (the
"PREVIOUS AGREEMENT") setting forth certain rights and obligations of each of the parties arising both prior to and following the date
EMPLOYEE's successor commenced employment as President and Chief Executive Officer with brocade (the "TERMINATION DATE"),
which date was July 13, 1998;
WHEREAS, Employee originally acquired 773,528 shares of Brocade's Common Stock (after giving effect to all stock splits through the date
hereof) (the "SHARES") pursuant to a Restricted Stock Purchase Agreement dated June 5, 1996 ("PURCHASE AGREEMENT"), and
EMPLOYEE transferred such shares to the Trust on March 11, 1997; and
WHEREAS, the parties wish to amend and restate the Previous Agreement so as to clarify the post-Termination Date rights and obligations of
each party, including but not limited to (i) the rights of EMPLOYEE, with respect to certain payments, and the Trust with respect to the Shares,
(ii) the completion date of EMPLOYEE's employment, directorship and consultancy activities with Brocade and
(iii) the scope of EMPLOYEE's agreement not to compete with Brocade;
NOW, THEREFORE, the parties agree as follows:
AGREEMENT
1. EMPLOYMENT TERMINATION. The parties agree and confirm that EMPLOYEE's employment as President and Chief Executive Officer
of Brocade terminated effective on the Termination Date. EMPLOYEE agrees that his service as a member of Brocade's Board of Directors,
and as a consultant to Brocade, shall cease effective as of the date of this Agreement.
2. PRETERMINATION OBLIGATIONS. The parties agree and confirm that EMPLOYEE has received his then effective base salary and all
other compensation and benefits accrued through the Termination Date (less applicable withholding).
3. OBLIGATIONS OF BROCADE.
a. In exchange for entering into this Agreement, subject to EMPLOYEE's compliance with Sections 5(c) and 5(d) hereof during the Transition
Period, Brocade agrees to provide EMPLOYEE with the following benefits during the one (1) year period following the Termination Date (the
"TRANSITION PERIOD"):
(1) Brocade will pay EMPLOYEE his base salary in effect on the Termination Date (less applicable withholding) in accordance with Brocade's
normal payroll practices. EMPLOYEE shall not participate in Brocade's bonus plans or continue to accrue vacation or sick time during the
Transition Period.
(2) Brocade will provide EMPLOYEE with all existing employee health benefit insurance coverage during the Transition Period. Thereafter,
EMPLOYEE will be eligible to purchase independently the identical healthcare insurance coverage programs as required by C.O.B.R.A.
(Consolidated Omnibus Budget Reconciliation Act of 1985, as amended).
b. EMPLOYEE and Trust each understand and acknowledge that neither the EMPLOYEE nor the Trust will be entitled to any benefits from
Brocade other than those expressly set forth in this Section 3.
c. Subject to EMPLOYEE's compliance with Sections 5(c) and
Section 5(d) hereof during the Transition Period, the benefits provided under this Section 3 shall be payable for the Transition Period even if
EMPLOYEE dies prior to the end of the Transition Period.
4. STATUS OF PRE-EXISTING AGREEMENTS. In exchange for entering into the Agreement, Brocade, Employee and Trust agree as
follows with respect to the Shares:
a. The Shares continue to be subject to (1) that certain Fourth Amended and Restated Right of First Refusal and CoSale Agreement dated as of
December 3, 1997 between Brocade and the parties thereto (the "COSALE AGREEMENT"), (2) the Fourth Amended and Restated Voting
Agreement dated as of December 3, 1997, among Brocade and the investors named therein (the "VOTING AGREEMENT"), and (3) the
Purchase Agreement.
b. Section 5 of the Purchase Agreement is hereby amended to read as set forth on ADDENDUM A hereto.
5. OBLIGATIONS OF EMPLOYEE. In exchange for the benefits described in
Section 3, EMPLOYEE and Trust agree to the following:
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a. EMPLOYEE agrees to promptly provide Brocade with any available information relating to work previously performed by EMPLOYEE for
Brocade upon reasonable notice and request from Brocade during the Transition Period.
b. EMPLOYEE will continue to be bound by and comply with the terms of that certain Employee Invention Assignment and Confidentiality
Agreement ("CONFIDENTIALITY AGREEMENT") effective June 24, 1996, a copy of which is attached to this Agreement. EMPLOYEE
will return all Brocade property (unless otherwise agreed in writing) and all confidential and proprietary information in EMPLOYEE's
possession to Brocade within five (5) business days of execution of this Agreement, provided, however, EMPLOYEE may retain the computer
and cell phone provided by Brocade to EMPLOYEE.
c. EMPLOYEE will not solicit, or initiate any solicitation of any Brocade employee to leave his/her employment with Brocade to commence a
relationship with EMPLOYEE or any other employer for a period commencing on the Termination Date and ending one year from the end of
the Transition Period.
d. EMPLOYEE during the Transition Period will not (i) accept employment (full or part time) with, or consult with any business that competes
with Brocade or (ii) engage in activities or behavior which is inconsistent or conflicts with or is contrary to the responsibilities or duties of a
Director of Brocade (as though EMPLOYEE was in fact a Director of Brocade), ("RESTRICTED ACTIVITIES"), including such activities as
being a Director of a competitor, or significant customer or partner of Brocade, being an employee or consultant of a significant customer or
partner of Brocade or owning or having the right to own in excess of 2-1/2% of the outstanding securities of a competitor or significant
customer or partner of Brocade, and consistent with the duties of a director EMPLOYEE shall raise for discussion with the Chairman of
Brocade's Board of Directors any potential Restricted Activities prior to engaging in such activities.
6. RELEASE.
a. GENERAL
(1) Subject to Section 6(a)(2) below EMPLOYEE, Trust and Brocade, on behalf of themselves and their respective heirs, family members,
executors, beneficiaries, investors, employees, officers, directors, agents, attorneys, legal successors, and assigns, hereby fully and forever
release each other and their respective heirs, family members, executors, beneficiaries, shareholders, from and agree not to sue concerning, any
and all claims, actions, obligations, duties, causes of action, whether now known or unknown, suspected or unsuspected, that either of them
may possess based upon or arising out of any matter, cause, fact, thing, act, or omission whatsoever occurring or existing at any time to and
including the Effective Date (as defined hereinafter) (collectively, the "RELEASED MATTERS"), including without limitation,
A. any and all claims relating to or arising from EMPLOYEE's employment relationship with Brocade and the termination of that relationship.
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B. any and all claims relating to, or arising from, EMPLOYEE's or Trust's right to purchase, or actual purchase of, shares of stock of Brocade,
including, without limitation, any claims by EMPLOYEE or Trust of fraud, misrepresentation, breach of fiduciary duty, breach of duty under
applicable state corporate law, and securities fraud under any state or federal law;
C. any and all claims for wrongful discharge of employment; termination in violation of public policy; discrimination; breach of contract, both
express and implied; breach of a covenant of good faith and fair dealing, both express and implied; promissory estoppel; negligent or
intentional infliction of emotional distress; negligent or intentional misrepresentation; negligent or intentional interference with contract or
prospective economic advantage; unfair business practices; defamation; libel; slander; negligence; personal injury; assault; battery; invasion of
privacy; false imprisonment; and conversion.
D. any and all claims for violation of any federal, state or municipal statute, including, but not limited to, Title VII of the Civil Rights Act of
1964, the Civil rights Act of 1991, the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act of 1990, the Fair
Labor Standards Act, the Employee Retirement Income Security Act of 1974, the Worker Adjustment and Retraining Notification Act, Older
Workers Benefit Protection Act, and the California Fair Employment and Housing Act, and Labor Code section 201, et. seq.;
E. any and all claims for violation of the federal, or any state, constitution;
F. any and all claims arising out of any other laws and regulations relating to employment or employment discrimination;
G. any and all claims for attorneys' fees and costs; and
H. any and all claims either Brocade, on the one hand, or EMPLOYEE and/or Trust, on the other hand, may have against the other for any acts
by either occurring at any time prior to the execution of this Release.
Each of the parties agrees that the foregoing enumeration of claims released is illustrative, and the claims hereby released are in no way limited
by the above recitation of specific claims, it being the intent of the parties to fully and completely release all claims whatsoever in any way
relating to the EMPLOYEE's employment with Brocade and to the termination of such employment. Each of the parties agrees that the release
set forth in this section will be and remain in effect in all respects as a complete general release as to the matters released.
(2) THE PARTIES AGREE THAT NOTWITHSTANDING ANY OF THE FOREGOING THIS RELEASE DOES NOT EXTEND TO ANY
OBLIGATIONS INCURRED UNDER THE AGREEMENT OR ANY OBLIGATIONS OF EMPLOYEE OR TRUST UNDER THE
CONFIDENTIALITY AGREEMENT PREVIOUSLY EXECUTED BY
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THE EMPLOYEE, THE COSALE AGREEMENT, VOTING AGREEMENT OR PURCHASE AGREEMENT.
(3) EMPLOYEE and Trust each represent that neither EMPLOYEE nor Trust has any lawsuits, claims nor actions pending in EMPLOYEE's or
Trust's name, or on behalf of any other person or entity, against Brocade or any other person or entity referred to herein. EMPLOYEE and
Trust each also represent that neither EMPLOYEE nor Trust intends to bring any claims on EMPLOYEE's or Trust's own behalf against
Brocade or any other person or entity referred to herein.
(4) EMPLOYEE and Trust each represent that neither EMPLOYEE nor Trust is aware of any claim by EMPLOYEE or Trust other than the
claims that are released by this Release. EMPLOYEE and Trust each acknowledge that he/it has been advised by legal counsel and is familiar
with Section 1542 of the Civil Code of the State of California, which states:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN
HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED
HIS SETTLEMENT WITH THE DEBTOR.
EMPLOYEE and Trust expressly waive any right or benefit which EMPLOYEE or Trust has or may have under Section 1542 of the California
Civil Code or any similar provision of the statutory or non-statutory law of any other jurisdiction to the full extent that EMPLOYEE or Trust
may lawfully waive those rights and benefits pertaining to the subject matter of this Release. The parties acknowledge that in the future they
may discover claims or facts in addition to or different from those that they now know or believe to exist with respect to the subject matter of
this Release, and that each of EMPLOYEE, Trust and Brocade intend to fully, finally, and forever settle all of the Released matters in exchange
for the benefits set forth in this Release and in the Agreement. This release will remain in effect as a full and complete release notwithstanding
the discovery or existence of any additional claims or facts.
b. INDEMNIFICATION. This Release shall not apply with respect to any claims arising under EMPLOYEE's existing rights to
indemnification and defense pursuant to the Articles of Incorporation and Bylaws of Brocade for acts as a director and/or officer or to
EMPLOYEE's rights of insurance under any director and officer liability policy in effect covering Brocade's directors and officers. Brocade
agrees to maintain any such director and officer liability policy in effect with respect to EMPLOYEE's for services performed by him as an
officer to the same extent as other Brocade officers.
c. ACKNOWLEDGMENT OF WAIVER OF CLAIMS UNDER ADEA. EMPLOYEE acknowledges that EMPLOYEE is waiving and
releasing any rights EMPLOYEE may have under the Age Discrimination in Employment Act of 1967 ("ADEA") and that this waiver and
release is knowing and voluntary. EMPLOYEE and Brocade agree that this waiver and release
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does not apply to any rights or claims that may arise under ADEA after the Effective Date of this Release, EMPLOYEE acknowledges that the
consideration given for this waiver and release agreement in addition to anything of value to which EMPLOYEE was already entitled.
EMPLOYEE further acknowledges that EMPLOYEE has been advised by this writing that:
(1) EMPLOYEE should consult with an attorney prior to executing this Release;
(2) EMPLOYEE has at least twenty-one (21) days within which to consider this Release, although EMPLOYEE may accept the terms of this
Release at any time within those 21 days;
(3) EMPLOYEE has at least seven (7) days following the execution of this Release by the parties to revoke this Release; and
(4) This Release will not be effective until the revocation period has expired.
d. VOLUNTARY EXECUTION OF AGREEMENT. This Release is entered into and executed voluntarily and without any duress or undue
influence on the part or behalf of the parties hereto, with the full intent of releasing all claims. The parties acknowledge that:
(1) they have read this Release;
(2) they have been represented in the preparation, negotiation, and execution of this Release by legal counsel of their own choice or that they
have voluntarily declined to seek such counsel;
(3) they understand the terms and consequences of this Release and of the releases it contains;
(4) they are fully aware of the legal and binding effect of this Release.
EMPLOYEE AND TRUST UNDERSTAND THAT HE/IT IS ADVISED TO CONSULT WITH AN ATTORNEY BEFORE SIGNING THIS
RELEASE AND UNDERSTANDS THAT HE/IT IS GIVING UP ANY LEGAL CLAIMS HE/IT HAS AGAINST BROCADE BY SIGNING
THIS RELEASE. EMPLOYEE AND TRUST FURTHER ACKNOWLEDGE THAT EMPLOYEE AND TRUST DO SO KNOWINGLY,
WILLINGLY, AND VOLUNTARILY IN EXCHANGE FOR THE BENEFITS DESCRIBED IN THE AGREEMENT.
7. ARBITRATION. Any claim, dispute, or controversy arising out of or in any way relating to this Agreement or the alleged breach of this
Agreement will be submitted by the parties to binding arbitration in Santa Clara County, California by the American Arbitration
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Association under its California Employment Dispute Resolution Rules or by a judge to be mutually agreed upon. This Section 7 will not
prevent either party from seeking injunctive relief (or any other provisional remedy) from any court having jurisdiction over the parties and the
subject matter of their dispute relating to EMPLOYEE's obligations under EMPLOYEE's Confidentiality Agreement, and EMPLOYEE's
obligations under Sections 5(c) and 5(d) and EMPLOYEE's or Trust's obligation under Section 9 hereof.
8. ATTORNEYS' FEES. The prevailing party will be entitled to recover from the losing party its attorneys' fees and costs (including expert
witness fees) incurred in any arbitration, lawsuit or other proceeding brought to enforce any right arising out of this Agreement.
9. CONFIDENTIALITY. EMPLOYEE and Trust each acknowledge that EMPLOYEE and Trust have not disclosed any of the terms of this
Agreement to anyone other than EMPLOYEE's and Trust's counsel and/or spouse/domestic partner. EMPLOYEE and Trust agree, on behalf of
each of EMPLOYEE, Trust and their respective agents, not to disclose, or to take every reasonable precaution to prevent disclosure of, any of
the terms of this Agreement (or the Previous Agreement) or consideration for this Agreement (the "SETTLEMENT INFORMATION") to third
parties, and agrees that there will be no publicity, directly or indirectly, concerning any Settlement Information. EMPLOYEE and Trust agree
to take every reasonable precaution to disclose Settlement Information only to EMPLOYEE's and/or Trust's attorney, accountant, tax
authorities, and EMPLOYEE's spouse/domestic partner, if and only if these individuals have a reasonable and justifiable need to know of such
Settlement Information, provided, however, that any person or entity to whom such disclosure is made will, prior to disclosure and to the extent
permitted by law, acknowledge the confidentiality of such information and agree to keep such information confidential. EMPLOYEE and Trust
acknowledge that the confidentiality of the terms of this Agreement is a material inducement to Brocade in entering into it. Any dispute
concerning this confidentiality provision will be resolved through arbitration before the American Arbitration Association in Santa Clara
County, California (the "ARBITRATOR") pursuant to Section 7. The prevailing party in the arbitration will be entitled to reasonable attorneys'
fees and costs incurred in arbitrating the breach of the confidentiality provision, regardless of what other sanctions or remedies the Arbitrator
may award.
10. NON-DISPARAGEMENT. EMPLOYEE and Trust agree to refrain from disparagement, criticism, defamation or slander of Brocade or
any of its employees, officers, directors, agents, products or services to anyone, including but not limited to other employees and any past,
present or prospective customers. Brocade agrees to maintain its neutral reference policy in regard to EMPLOYEE and use its reasonable
efforts to refrain from disparagement, criticism, defamation and slander of EMPLOYEE.
11. NO ADMISSION OF LIABILITY. Brocade, EMPLOYEE and Trust understand and acknowledge that this Agreement constitutes a
compromise and settlement. No action taken by the parties hereto, or either of them, either previously or in connection with this Agreement
will be deemed or construed to be (a) an admission of the truth or falsity of any claims or (b) an acknowledgment or admission by a party of
any fault or liability whatsoever to the other party or to any third party.
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12. NO KNOWLEDGE OF WRONGDOING. EMPLOYEE has no knowledge of any wrongdoing involving improper or false claims against a
federal or state governmental agency, or other wrongdoing, that involves EMPLOYEE or other present or former Brocade employees.
13. SUCCESSORS. The provisions of this Agreement will extend and inure to the benefit of, and be binding upon the respective legal
successors and assigns of Brocade, EMPLOYEE and Trust in addition to Brocade, EMPLOYEE and Trust.
14. INTEGRATION. This Agreement constitutes the entire Agreement between the parties with respect to the subject matter of this Agreement
and supersedes all prior negotiations and Agreements, including the Previous Agreement, whether written or oral with the exception of
EMPLOYEE's obligations under the Confidentiality Agreement, CoSale Agreement, Voting Agreement and Purchase Agreement (to the extent
not amended hereby).
15. NO ORAL MODIFICATION. This Agreement may not be altered or amended except by a written document executed by the affected
parties.
16. GOVERNING LAW. This Agreement will in all respects be governed by the laws of the State of California as applied to agreements
entered into and to be performed entirely within California between California residents.
17. EFFECTIVE DATE. This Agreement is effective as of September 23, 1998, provided that the Release, and Brocade's obligations pursuant
to Section 3 above, shall become effective on the eighth day after this Agreement has been signed by both parties (the "EFFECTIVE DATE"),
unless sooner revoked by EMPLOYEE. EMPLOYEE ACKNOWLEDGES THAT HE WAS OFFERED A PERIOD OF AT LEAST
TWENTY-ONE (21) DAYS TO CONSIDER THE TERMS OF THIS AGREEMENT. EMPLOYEE MAY REVOKE THE RELEASE
UNDER THIS AGREEMENT FOR A PERIOD OF SEVEN (7) DAYS FOLLOWING EXECUTION OF THIS AGREEMENT. IF
EMPLOYEE DESIRES TO REVOKE THE RELEASE, EMPLOYEE MUST DELIVER OR CAUSE TO BE DELIVERED A WRITTEN
STATEMENT OF REVOCATION FROM EMPLOYEE PRIOR TO THE EFFECTIVE DATE TO THE CHIEF FINANCIAL OFFICER,
BROCADE COMMUNICATIONS SYSTEMS, INC., 1901 GUADALUPE PARKWAY, SAN JOSE, CA 95131. IF EMPLOYEE REVOKES
THE RELEASE PRIOR TO THE EFFECTIVE DATE BROCADE SHALL HAVE NO OBLIGATIONS UNDER SECTION 3 HEREOF
AND SHALL HAVE THE RIGHT TO REPURCHASE ALL SHARES OF COMMON STOCK HELD BY THE TRUST WHICH ARE
UNVESTED SHARES UNDER THE PURCHASE AGREEMENT AS OF THE DATE OF SUCH REVOCATION AS PROVIDED IN
ADDENDUM A HERETO.
18. NO REPRESENTATIONS. Each party represents that it has had the opportunity to consult with an attorney, and has carefully read and
understands the scope and effect of the provisions of this Agreement. Neither party has relied upon any representations or statements made by
the other party hereto which are not specifically set forth in this Agreement.
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19. COUNTERPARTS. This Agreement may be executed in counterparts, and each counterpart will have the same force and effect as an
original and will constitute an effective, binding agreement on the part of each of the undersigned.
20. SEVERABILITY. In the event that any one or more of the provisions contained herein will for any reason be held to be unenforceable in
any respect under any statute, rule or law of any state or of the United States of America, such unenforceability will not affect any other
provision of this Agreement, but, with respect only to the jurisdiction holding the provision to be unenforceable, this Agreement will then be
construed as if such unenforceable provision or provisions had never been contained herein.
EMPLOYEE:
BROCADE COMMUNICATIONS
SYSTEMS, INC.
Bruce J. Bergman
/s/ SETH NEIMAN
----------------------------------------By: Seth Neiman
Title: Chairman of the Board
/s/ Bruce J. Bergman
------------------------------Signature
Date: 09-23-98
Date: September 23, 1998
TRUST:
The Bergman Family Trust
/s/ Bruce J. Bergman
-------------------------------By: /s/ Janet L. Bergman
---------------------------Date: 09-23-98
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ADDENDUM A
5. COMPANY'S REPURCHASE OPTION. The Company has the option to repurchase all or a portion of the Unvested Shares (as defined
below) on the terms and conditions set forth in this Section (the "REPURCHASE OPTION") if Purchaser (i) breaches Sections 5(c) or 5(d) of
that certain Confidential Agreement and General Release of Claims effective as of August 19, 1998 by and among parties including the
Company and Purchaser (the "RELEASE AGREEMENT") or
(ii) revokes the Release under Section 17 of the Release Agreement (the "REVOCATION").
(a) UNVESTED AND VESTED SHARES. Shares that are not Vested Shares (as defined in this Section) are "UNVESTED SHARES". As of
July 24, 1998 of the 773,528 Shares (after giving effect to all stock splits through such date) purchased hereunder 596,263 Shares (after giving
effect to all stock splits through such date) are Vested Shares. For each full calendar month after July 24, 1998 that Purchaser is not in breach
of any of his obligations under Sections 5(c) and/or 5(d) of the Release Agreement Purchaser an additional 16,115 Shares (as constituted as of
July 24, 1998 and subject to proportional adjustment for any stock split, stock dividends, reverse stock splits or the like with respect to the
Company's Common Stock thereafter) shall become Vested Shares. Notwithstanding the foregoing no Unvested Shares will become Vested
Shares at any time after the Revocation or following a breach of either Section
5 (c) and/or Section 5(d) of the Release Agreement.
(b) ADJUSTMENTS. The number of Shares that are Vested Shares or Unvested Shares will be proportionally adjusted to reflect any stock
dividend, stock split, reverse stock split or recapitalization of the Common Stock of the Company occurring after July 24, 1998.
(c) EXERCISE OF REPURCHASE OPTION AT ORIGINAL PRICE. In the event of a (i) Revocation or (ii) a breach of any of Purchaser's
obligations under
Section 5(c) and/or Section 5(d) of the Release Agreement prior to expiration of the Transition Period, then at any time within ninety (90) days
after the date of such Revocation or the Company's Board of Directors becomes notified of such breach, the Company may elect to repurchase
any or all of the Unvested Shares (as of the date of such Revocation or breach, as the case may be) by giving Purchaser written notice of
exercise of the Repurchase Option. The Company and/or its assignee(s) will then have the option to repurchase from Purchaser (or from
Purchaser's personal representative as the case may be) any or all of the Unvested Shares at the Purchaser's original Purchase Price Per Share
(as adjusted to reflect any stock dividend, stock split, reverse stock split or recapitalization of the common stock of the Company occurring
after June 5, 1996).
(d) PAYMENT OF REPURCHASE PRICE. The repurchase price payable to purchase Unvested Shares upon exercise of the Repurchase
Option will be payable, at the option of the Company or its assignee(s), by check or by cancellation of all or a portion of any outstanding
indebtedness of Purchaser to the Company (or to such assignee) or by any combination thereof. The repurchase price will be paid without
interest within ninety (90) days after the date of such breach."
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End of Filing
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