<PAGE> 1
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)
------------------------
<TABLE>
<S> <C> <C>
CALIFORNIA (PRIOR TO 7372 77-0409517
REINCORPORATION) (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
DELAWARE (AFTER REINCORPORATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
</TABLE>
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:
<TABLE>
<S> <C>
LARRY W. SONSINI GREGORY M. GALLO
JOHN T. SHERIDAN DENNIS C. SULLIVAN
ALISANDE M. ROZYNKO JEFFREY D. BALL
WILSON SONSINI GOODRICH & ROSATI GRAY CARY WARE & FREIDENRICH LLP
PROFESSIONAL CORPORATION 400 HAMILTON AVENUE
650 PAGE MILL ROAD PALO ALTO, CALIFORNIA 94301-1825
PALO ALTO, CALIFORNIA 94304-1050 (650) 328-6561
(650) 493-9300
</TABLE>
------------------------
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.
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<PAGE> 2
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.
<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
---------
<S> <C>
SEC registration fee........................................ $ 11,510
NASD filing fee............................................. 4,640
Nasdaq National Market listing fee.......................... 5,000
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......................................
--------
$
========
</TABLE>
- -------------------------
* 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
<PAGE> 3
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
<PAGE> 4
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.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1** Amended and Restated Articles of Incorporation of the
Registrant.
3.2** Form of Amended and Restated Certificate of Incorporation to
be effective on the closing of the offering made pursuant to
this Registration Statement.
3.3** Bylaws of the Registrant.
3.4** Bylaws of the Registrant to be effective upon the closing of
the offering made pursuant to this Registration Statement.
4.1* Form of Registrant's Common Stock certificate.
4.2** Warrant to purchase shares of Series A Preferred Stock of
the Registrant issued to Venture Lending & Leasing, Inc.
4.3** First Amended and Restated Warrant to purchase shares of
Series A Preferred Stock of the Registrant issued to Venture
Lending & Leasing, Inc.
4.4** Warrant to purchase shares of Series B Preferred Stock of
the Registrant issued to Venture Lending & Leasing, Inc.
4.5** Warrant to purchase shares of Series C Preferred Stock of
the Registrant issued to Mason Calle De Luna L.P.
4.6** Warrant to purchase shares of Series C Preferred Stock of
the Registrant issued to Symmetricom, Inc.
4.7 Warrant to purchase shares of Series C Preferred Stock of
the Registrant issued to Imperial Bank.
4.8** Seventh Amended and Restated Investors' Rights Agreement
dated December 3, 1997.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
</TABLE>
II-3
<PAGE> 5
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
10.1** Form of Indemnification Agreement to be entered into by the
Registrant with each of its directors and executive
officers.
10.2** 1995 Equity Incentive Plan and forms of agreements
thereunder.
10.3** 1998 Equity Incentive Plan and forms of agreements
thereunder.
10.4** 1998 Executive Equity Incentive Plan and forms of agreements
thereunder.
10.5** 1999 Employee Stock Purchase Plan.
10.6 1999 Director Option Plan and form of agreement thereunder.
10.7 1999 Stock Plan and forms of agreements thereunder.
10.8** Sublease between Symmetricom, Inc. and the Registrant dated
May 6, 1997.
10.9** Security and Loan Agreement between the Registrant and
Imperial Bank dated June 19, 1997.
10.10** Amendment to Loan Documents between the Registrant and
Imperial Bank dated January 30, 1998.
10.11** Second Amendment to Loan Documents between the Registrant
and Imperial Bank dated August 17, 1998.
10.12** Third Amendment to Loan Documents between the Registrant and
Imperial Bank dated December 15, 1998.
10.13** Master Equipment Lease Agreement between Venture Lending &
Leasing, Inc. and the Registrant dated September 5, 1996.
10.14+ Master Purchase Agreement between Dell Products L.P. and the
Registrant dated November 1, 1998.
10.15+ Purchase Agreement between Sequent Computer Systems, Inc.
and the Registrant.
10.16+ Supplement No. 1 to Purchase Agreement between Sequent
Computer Systems, Inc. and the Registrant dated September
26, 1997.
10.17* OEM Agreement between Storage Technology Corporation and the
Registrant dated March 1, 1998.
10.19 Confidential Agreement and General Release of Claims between
Bruce J. Bergman, The Bergman Family Trust and the
Registrant dated September 23, 1998.
16.1** Letter of PricewaterhouseCoopers LLP, Independent
Accountants.
23.1** Consent of Arthur Andersen LLP, Independent Public
Accountants
23.2* Consent of Counsel (included in Exhibit 5.1.).
24.1** Power of Attorney (see page II-6 of the Registration
Statement).
27.1** Financial Data Schedule.
</TABLE>
- -------------------------
* 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.
<TABLE>
<S> <C>
Schedule II -- Valuation and Qualifying Accounts....... S-2**
</TABLE>
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
<PAGE> 6
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
<PAGE> 7
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:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Chairman of the Board April 15, 1999
------------------------------------------
Seth D. Neiman
/s/ GREGORY L. REYES President and Chief Executive Officer April 15, 1999
------------------------------------------ (Principal Executive Officer)
Gregory L. Reyes
/s/ B. CARL LEE Vice President, Finance and Chief April 15, 1999
------------------------------------------ Financial Officer (Principal
B. Carl Lee Financial and Accounting Officer)
Director
------------------------------------------
Neal Dempsey
* Director April 15, 1999
------------------------------------------
Mark Leslie
* Director April 15, 1999
------------------------------------------
Larry W. Sonsini
*By: /s/ GREGORY L. REYES
-------------------------------------
Gregory L. Reyes, Attorney-in-fact
</TABLE>
II-6
<PAGE> 8
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1** Amended and Restated Articles of Incorporation of the
Registrant.
3.2** Form of Amended and Restated Certificate of Incorporation to
be effective on the closing of the offering made pursuant to
this Registration Statement.
3.3** Bylaws of the Registrant.
3.4** Bylaws of the Registrant to be effective upon the closing of
the offering made pursuant to this Registration Statement.
4.1* Form of Registrant's Common Stock certificate.
4.2** Warrant to purchase shares of Series A Preferred Stock of
the Registrant issued to Venture Lending & Leasing, Inc.
4.3** First Amended and Restated Warrant to purchase shares of
Series A Preferred Stock of the Registrant issued to Venture
Lending & Leasing, Inc.
4.4** Warrant to purchase shares of Series B Preferred Stock of
the Registrant issued to Venture Lending & Leasing, Inc.
4.5** Warrant to purchase shares of Series C Preferred Stock of
the Registrant issued to Mason Calle De Luna L.P.
4.6** Warrant to purchase shares of Series C Preferred Stock of
the Registrant issued to Symmetricom, Inc.
4.7 Warrant to purchase shares of Series C Preferred Stock of
the Registrant issued to Imperial Bank.
4.8** Seventh Amended and Restated Investors' Rights Agreement
dated December 3, 1997.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
10.1** Form of Indemnification Agreement to be entered into by the
Registrant with each of its directors and executive
officers.
10.2** 1995 Equity Incentive Plan and forms of agreements
thereunder.
10.3** 1998 Equity Incentive Plan and forms of agreements
thereunder.
10.4** 1998 Executive Equity Incentive Plan and forms of agreements
thereunder.
10.5** 1999 Employee Stock Purchase Plan.
10.6 1999 Director Option Plan and form of agreement thereunder.
10.7 1999 Stock Plan and forms of agreements thereunder.
10.8** Sublease between Symmetricom, Inc. and the Registrant dated
May 6, 1997.
10.9** Security and Loan Agreement between the Registrant and
Imperial Bank dated June 19, 1997.
10.10** Amendment to Loan Documents between the Registrant and
Imperial Bank dated January 30, 1998.
10.11** Second Amendment to Loan Documents between the Registrant
and Imperial Bank dated August 17, 1998.
10.12** Third Amendment to Loan Documents between the Registrant and
Imperial Bank dated December 15, 1998.
10.13** Master Equipment Lease Agreement between Venture Lending &
Leasing, Inc. and the Registrant dated September 5, 1996.
10.14+ Master Purchase Agreement between Dell Products L.P. and the
Registrant dated November 1, 1998.
10.15+ Purchase Agreement between Sequent Computer Systems, Inc.
and the Registrant.
10.16+ Supplement No. 1 to Purchase Agreement between Sequent
Computer Systems, Inc. and the Registrant dated September
26, 1997.
</TABLE>
<PAGE> 9
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
10.17* OEM Agreement between Storage Technology Corporation and the
Registrant dated March 1, 1998.
10.19 Confidential Agreement and General Release of Claims between
Bruce J. Bergman, The Bergman Family Trust and the
Registrant dated September 23, 1998.
16.1** Letter of PricewaterhouseCoopers LLP, Independent
Accountants.
23.1** Consent of Arthur Andersen LLP, Independent Public
Accountants.
23.2* Consent of Counsel (included in Exhibit 5.1.).
24.1** Power of Attorney (see page II-6 of the Registration
Statement).
27.1** Financial Data Schedule.
</TABLE>
- -------------------------
* 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.
<PAGE> 1
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: Brocade Communications Systems, Inc., a California
corporation
Number of Shares: 25,000
Class of Stock: Series C Preferred
Initial Exercise Price: $3.00 per share
Issue Date: June 13, 1997
Expiration Date: 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
<PAGE> 2
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
<PAGE> 3
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
<PAGE> 4
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
<PAGE> 5
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
<PAGE> 6
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
<PAGE> 7
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
<PAGE> 8
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
<PAGE> 9
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
<PAGE> 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
<PAGE> 1
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
<PAGE> 2
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-
<PAGE> 3
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.
-3-
<PAGE> 4
(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-
<PAGE> 5
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-
<PAGE> 6
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
-6-
<PAGE> 7
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-
<PAGE> 8
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-
<PAGE> 9
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.
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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.
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(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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<PAGE> 4
(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
"performance-based 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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<PAGE> 5
(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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<PAGE> 6
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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<PAGE> 9
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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<PAGE> 10
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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<PAGE> 11
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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<PAGE> 12
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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<PAGE> 13
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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<PAGE> 14
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
<PAGE> 15
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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<PAGE> 16
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
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<PAGE> 17
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.
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<PAGE> 18
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
- --------------------------------
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<PAGE> 19
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
<PAGE> 20
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.
<PAGE> 21
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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<PAGE> 22
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.
<PAGE> 23
(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.
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<PAGE> 24
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.
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<PAGE> 25
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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<PAGE> 26
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.
----------------------------------
----------------------------------
<PAGE> 27
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
<PAGE> 28
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
<PAGE> 29
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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<PAGE> 30
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
-3-
<PAGE> 31
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.
-4-
<PAGE> 32
(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
-5-
<PAGE> 33
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.
<PAGE> 34
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.
<PAGE> 35
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-in-fact 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.
-2-
<PAGE> 36
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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<PAGE> 37
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
-4-
<PAGE> 38
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
<PAGE> 39
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:
ADDRESS:
IDENTIFICATION NO.: TAXPAYER: SPOUSE:
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.
-2-
<PAGE> 40
Dated: _________________, ____ __________________________________
Spouse of Taxpayer
<PAGE> 1
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.
<PAGE> 2
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 one-year
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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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:
<TABLE>
<CAPTION>
Element Currency Content
- ------- ----------------
<S> <C>
Material Japanese yen (15%), Korean Won (12%) and Malaysian Ringgit (32%)
Labor and Overhead New Taiwan Dollar (12%)
Profit Korean Won (55%)
</TABLE>
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
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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:
<TABLE>
<CAPTION>
Days from planned
delivery to [*] Increase Amount
<S> <C>
0 - 30 [*]
31 - 45
46 - 60
61 - 90
91+
</TABLE>
[*] increase of orders by Dell shall be permitted as follows:
<TABLE>
<CAPTION>
Days from planned
delivery to [*] Increase Amount
<S> <C>
0 - 14 [*]
15 - 30
31 - 60
61 - 90
91+
</TABLE>
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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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:
<TABLE>
<CAPTION>
Days from planned
delivery to [*] Reschedule Amount
<S> <C>
0 - 30 [*]
31 - 45
46 - 60
61 - 90
91+
</TABLE>
[*] Dell may extend delivery dates for orders as follows:
<TABLE>
<CAPTION>
Days from planned
delivery to [*] Reschedule Amount
<S> <C>
0 - 14 [*]
15 - 30
31 - 60
61+
</TABLE>
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 [*].
<TABLE>
<CAPTION>
Days from planned Cancellation
delivery to [*] Amount
<S> <C>
0 - 30 [*]
31 - 45
46 - 60
61 - 90
91+
</TABLE>
[*] cancellation of orders by Dell shall be permitted as follows:
<TABLE>
<CAPTION>
Days from planned Cancellation
delivery to [*] Amount
<S> <C>
0 - 30 [*]
31 - 60
61+
</TABLE>
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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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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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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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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[*]
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
10 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.
<PAGE> 11
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
11 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.
<PAGE> 12
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) FAR 52.222-26 "Equal Opportunity" (except for subparagraph (c))
(2) FAR 52.222-35 "Affirmative Action for Special Disabled and Vietnam
Era Veterans"
(3) FAR 52.222-26 "Affirmative Action for Handicapped Workers"
(4) 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.
12 of 16
<PAGE> 13
[*] 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
<PAGE> 14
[*]
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
<PAGE> 15
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
non-disclosure 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
<PAGE> 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 By: /s/ MICHAEL LAMBERT
-------------------------------- ---------------------------------
Greg Reyes Michael Lambert
Title: President and CEO Title: Senior Vice President,
Systems Group Enterprise
Date: 1-17-99 Date: 12/18/98
----------------------------- -------------------------------
16 of 16
<PAGE> 17
SCHEDULE A TO AGREEMENT NUMBER BRO-001
PRODUCT DESCRIPTION AND PRICING
<PAGE> 18
SCHEDULE A TO AGREEMENT NO. BRO-001
REV. 12.9.1.
Product Description and Pricing
<TABLE>
<CAPTION>
PRODUCT BROCADE PART NUMBER DELL PART NUMBER DESCRIPTION PRICE
- ------- ------------------- ---------------- ----------- -----
<S> <C> <C> <C> <C>
1. SilkWorm Express DL-0880-0002 5829D-X00-01 6FL port, 2G port, 4 SWL GBIC, ICu GBIC with Web
Tools and Zoning enabled [*]
2. SilkWorm Express DL-0880-0003 7829D-X00-01 6FL port, 2G port, 5 Cu GBIC with Web Tools and
Zoning enabled [*]
3. SilkWorm Express-FRU DL-0880-0004 6410P-X00-00 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
[*]
</TABLE>
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.
<PAGE> 19
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.
<PAGE> 20
SCHEDULE A.1
[*]
<TABLE>
<CAPTION>
Per Unit
# OF PALLETS # of Units [*] [*] [*] [*] [*] [*] Total cost
- ------------ ---------- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 16 [*] [*] [*] [*] [*] [*] [*] [*]
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 [*] [*] [*] [*] [*] [*] [*] [*]
</TABLE>
[*]
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
<PAGE> 21
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 By: /s/ MICHAEL LAMBERT
-------------------------------- ---------------------------------
(Authorized Signature) (Authorized Signature)
Title: President and CEO Title: Senior Vice President,
Systems Group Enterprise
Date: 1-17-99 Date: 12/18/98
----------------------------- -------------------------------
<PAGE> 22
SCHEDULE B TO AGREEMENT NUMBER BRO-001
FIBRE CHANNEL SWITCH PRODUCT QUALITY PLAN
<PAGE> 23
DELL
FC SWITCH
PRODUCT
QUALITY PLAN
Revision 0.2
Prepared by
Tim Killworth
11/11/98
TABLE OF CONTENTS
1
<PAGE> 24
<TABLE>
<S> <C> <C>
1.0 FC SWITCH QUALITY PLAN REVISION HISTORY ........................... 4
2.0 REVIEW AND SIGNATURES.............................................. 4
Area .............................................................. 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 Quality Planning ........................................... 5
6.2.1 Design .............................................. 5
6.2.1.1 Development ................................ 5
6.2.1.2 Prototype .................................. 5
6.2.2 Production .......................................... 6
6.2.2.1 Eval Test .................................. 6
6.2.2.2 Pilot ...................................... 6
6.2.2.3 Launch ..................................... 6
6.3 Metric Goals and Analysis .................................. 6
6.4 Training/Certifications .................................... 6
7.0 CONTROL OF PURCHASES .............................................. 6
7.1 Procurement Control ........................................ 6
7.1.1 General Comments .................................... 6
7.1.2 Development ......................................... 6
7.1.3 Prototype ........................................... 7
7.2 Approved Suppliers ......................................... 7
7.3 Incoming Quality Assurance ................................. 7
7.3.1 First Article Inspection ............................ 7
7.3.2 IQA Instructions .................................... 7
8.0 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
</TABLE>
2
<PAGE> 25
<TABLE>
<S> <C> <C>
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
9.0 RISKS ............................................................. 9
9.1 DFMEA Issues ............................................... 9
9.2 PFMEA Issues ............................................... 9
9.3 System Management Issues ................................... 10
</TABLE>
3
<PAGE> 26
FC SWITCH QUALITY PLAN
1.0 FC SWITCH QUALITY PLAN REVISION HISTORY
<TABLE>
<CAPTION>
REVISION BY DATE DESCRIPTION
- -------- -- ---- -----------
<S> <C> <C> <C>
0.0 Tim Killworth 10-21-98 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
</TABLE>
2.0 REVIEW AND SIGNATURES
<TABLE>
<CAPTION>
Area Signature
- ---- ---------
<S> <C>
WW Enterprise System Group (ESG) Randy Printz
Storage Division - Quality Mgr.
WW Enterprise System Group (ESG) Randy Printz
Storage Division - NPO/Quality/Program Mgr.
</TABLE>
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
<PAGE> 27
4.0 QUALITY GOALS FY99
<TABLE>
<CAPTION>
FC Switch: FY 99-Q4 FY00-Q1 FY00-Q2 FY00-Q3 FY00-Q4
- ---------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
IFIR: [*] [*] [*] TBD TBD
</TABLE>
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
<PAGE> 28
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
<PAGE> 29
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
<PAGE> 30
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
<PAGE> 31
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
<PAGE> 32
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
<PAGE> 33
SCHEDULE C TO AGREEMENT NUMBER BRO-001
DELL SERVICE OEM REQUIREMENTS
PROJECT: FIBRE CHANNEL SWITCH
<PAGE> 34
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
[email protected]
<PAGE> 35
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.
<TABLE>
<CAPTION>
FRU MTTR
--- ----
<S> <C>
CU-GBIC or SW-GBIC [*]
Switch (excluding GBICs) [*]
</TABLE>
*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.
<PAGE> 36
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.
<PAGE> 37
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 Level 1 support is the first line, direct
Technical Support End User contact, most likely via a
Engineer 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 Level 2 support is "technical support"
Technical Support provided by DELL personnel. Level 2 is
Engineer 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.
<PAGE> 38
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 Both DELL and BROCADE provide level 3
Technical Support support. BROCADE System Engineers (SE)
Engineer 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 1-
888-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.
<PAGE> 39
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
3 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.
<TABLE>
<CAPTION>
Brief course Switch provided
Audience description by: Duration [*] Price
- -------- ----------- --------------- -------- -------- -----
<S> <C> <C> <C> <C> <C>
DELL Courses 1, 2 BROCADE 3-5 days, [*] [*]
instructors and 3 as [*]
Free* described in
and DELL BROCADE's
Level III published
engineers material
DELL Courses 1, 2 BROCADE shall 3-5 days [*] [*]
international and 3 as provide the
instructors described in required number
BROCADE's of switches (up to
published 6) for training to
material DELL. [*]
DELL Level I Courses 1, 2 DELL 3-5 days [*] [*]
& II and 3 as
engineers described in
BROCADE's
published
material
</TABLE>
*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.
<PAGE> 40
<TABLE>
<S> <C> <C> <C> <C> <C>
DELL Level I Courses 1, 2 BROCADE shall 3-5 days [*] [*]
& II and 3 as provide the
engineers described in required number
(Japan) BROCADE's of switches (up to
published 6) for training to
material DELL. [*]
</TABLE>
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 - [email protected]
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.
<PAGE> 41
[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:
<TABLE>
<S> <C> <C>
Priority 1 System down [*]
Priority 2 Degraded system operation [*]
</TABLE>
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.
<PAGE> 42
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
<PAGE> 43
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.
<TABLE>
<CAPTION>
Severity Definition Service Objective Resolution Time
- -------- ---------- ----------------- ---------------
<S> <C> <C> <C>
1 BROCADE Product is completely non- Respond to initial request within Less than [*]
functional, or deemed a safety hazard, situation [*] during normal (A work around to be
has high impact on development or delivery BROCADE business hours, and implemented within
efforts. Installation problems. [*] for non-business hours. [*]
Resources applied until a
solution or acceptable work-
around is found.
2 BROCADE Product is functionally impaired, Resources applied continuously, Less than [*]
has substantially degraded performance but is during business hours, until a (A work around to be
not completely dysfunctional. There are no solution or work-around is found. implemented within [*]
available work-arounds. Situation has medium
impact on DELL activity
3 BROCADE Product or advertised functionality Resources applied on a priority Next maintenance
may be slightly impaired but is operational, has basis, until a solution or a work- release or [*]
low to no impact on DELL activity, and there around is found. whichever is less.
are work-arounds available.
4 Generic questions, and enhancement requests. Answer generic questions or [*] for generic
provide path to answers within questions.
reasonable time frames. The Enhancement requests
BROCADE web site shall be the are processed on a case
prime repository for this type of by case basis.
information. Enhancement
requests shall be reviewed and
implemented in the next major
release, where feasible, or to
meet specific commitments
made.
</TABLE>
*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.
<PAGE> 44
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.
<PAGE> 45
SCHEDULE D TO AGREEMENT NUMBER BRO-001
DELL INBOUND PACKAGING STANDARDS
PART NUMBER 11500
<PAGE> 46
DELL COMPUTER CORPORATION
INBOUND PACKAGING STANDARDS PN- 11500
REV A06
Page 1
<PAGE> 47
<TABLE>
<CAPTION>
REV ECO DESCRIPTION DATE APPROVED
- --- --- ----------- ---- --------
<S> <C> <C> <C> <C>
A00-00 1285 Release for procurement use. 08/10/87 ---- ----
A01-00 2182 Revise and update. 02/28/89 Pete Genix
A02-00 3650 Correct spelling and revise wording. 07/05/90 Pete Genix
A02-01 11401 Update description to conform to Naming Standard. 10/19/93 Rita Maloy
A03-00 15031 Update rack height requirements. 12/13/94 Greg Peden
A04-00 15031 Incorporate reference of PN 00121 for test method. 12/13/94 Pete Genix
A05-00 Update and revise spec to include line ready packaging
requirements. - JB 12/15/95
A06-00 Tighten palletization methods and add pictorials. - JB
02/27/96
</TABLE>
Page 2
<PAGE> 48
TABLE OF CONTENTS
<TABLE>
<S> <C>
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
</TABLE>
Page 3
<PAGE> 49
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
<PAGE> 50
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
<PAGE> 51
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
<PAGE> 52
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
<PAGE> 53
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
<PAGE> 54
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
<PAGE> 55
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.
Page 10
<PAGE> 56
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
<PAGE> 57
SCHEDULE E TO AGREEMENT NUMBER BRO-001
DELL SUPPLIER LABELING SPECIFICATION
PART NUMBER 13190
<PAGE> 58
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.
<PAGE> 59
LABELING SPECIFICATION
CONTENTS
<TABLE>
<S> <C>
SCOPE 4
Purpose 4
Application 4
Subassembly (Parts) Classes 4
BARCODE DEFINITIONS 5
GENERAL LABEL REQUIREMENTS 6
Subassembly (Parts) Labels 6
Subassembly (Parts) Label Content 6
Type A Label 6
Type B Label 6
Type C Label 7
Type D Label 7
Twenty Digit Barcode 8
DELL Part Number 9
Manufacturer's Identification 9
Seven Character Date Code/Sequence Number Combination 9
Date Code 9
Sequence Number 10
DELL Part Number 10
Revision (Rev) Level Barcode 10
Label Placement 11
Code Density and Dimension 11
Code Height 11
Intercharacter Gap 11
Quiet Zones 11
Spacing Between Barcode and HRI 11
Spacing Between Edge Of Label and HRI 11
Readability and Printing Requirements 11
Subassembly (Parts) Label Material Requirements 12
Non-PCB/PWA (Label Types A and B Only) 12
Face Stock Characteristics 12
Adhesive Characteristics 12
PCB/PWA Labels (Label Type C Only) 12
Face Stock Characteristics 12
Adhesive Characteristics 12
Durability 13
Electronic Industries Association (EIA) Shipping/Receiving Label 13
EIA Label 13
EIA Label Content 13
EIA Label Location 15
Code Density and Dimension 15
Code Height 15
Intercharacter Gap 15
Quiet Zones 15
Spacing Between Barcode and HRI 15
Spacing Between Edge of Label and HRI 15
Height of Human Readable Interpretation 15
Readability and Printing Requirements 16
EIA Label Material Requirements 16
</TABLE>
2
<PAGE> 60
<TABLE>
<S> <C>
Face Stock Characteristics 16
Adhesive Characteristics 16
Durability 16
Sample Electronics Industry Association (EIA) Labels 17
ISO Country Codes 19
</TABLE>
3
<PAGE> 61
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
<PAGE> 62
- 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
<PAGE> 63
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
<PAGE> 64
[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
<PAGE> 65
[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
<PAGE> 66
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
<TABLE>
<S> <C> <C> <C>
January 1 July 7
February 2 August 8
March 3 September 9
April 4 October A
May 5 November B
June 6 December C
</TABLE>
Day Codes
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
1st 1 11th B 21st L 31st V
2nd 2 12th C 22nd M
3rd 3 13th D 23rd N
4th 4 14th E 24th O
5th 5 15th F 25th P
6th 6 16th G 26th Q
</TABLE>
9
<PAGE> 67
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
7th 7 17th H 27th R
8th 8 18th I 28th S
9th 9 19th J 29th T
10th A 20th K 30th U
</TABLE>
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" Received in AMF facilities
(Applies to facilities in Austin, including
Manufacturing, Field Service & Board Repair)
"R" & "S" Received in EMF facilities
(Applies to facilities in Ireland)
"T" & "U" Received in APCC facilities
(Applies to facilities in Malaysia)
"V" through "Z" 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
10
<PAGE> 68
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:
<TABLE>
<S> <C>
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)
</TABLE>
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
11
<PAGE> 69
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:
<TABLE>
<S> <C>
1) Face Stock Characteristics
Type Polyester or topcoated paper
Caliper 0.0020 inch
Basis Weight 42 lb. / 3000 square feet
Color White
Background Reflectance 633nm / 80% min. (90nm / 70% min.)
Print Contrast Signal 95% min. 85% min.
Service Temperature Range 0 to 225 degrees Fahrenheit
2) Adhesive Characteristics
Type Permanent Acrylic
Minimum Application Temp. 50 degrees Fahrenheit
Service Temperature Range 0 to 225 degrees Fahrenheit
Dwell: Initial Tack 1 hour (at room temperature)
Ultimate Tack 30 hours - Full Strength
Caliper 0.0009 inch
Conductivity Non-conductive if applied across
any contacts on a PWA
</TABLE>
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:
<TABLE>
<S> <C>
1) Face Stock Characteristics
Type Polymide (kapton) or high
temperature polyester
Caliper 0.0027 inch
Basis Weight 70 lb. / 3300 square feet
Color Buff / Amber (or white for
polyester)
Background Reflectance 633nm / 75% (900nm / 80% min.)
Print Contrast Signal 63% min. 65% min.
2) Adhesive characteristics
</TABLE>
12
<PAGE> 70
<TABLE>
<S> <C>
Type High Temp Permanent Acrylic
Minimum Application Temp 50 degrees Fahrenheit
Service Temperature Range 0 to 525 degrees Fahrenheit
Dwell - Initial Tack 6 Hours at Room Temperature
Ultimate Tack 36 Hours - Full Strength
Caliper 0.0020 inches
</TABLE>
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
<PAGE> 71
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
<PAGE> 72
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
<PAGE> 73
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:
<TABLE>
<S> <C>
1) Face Stock Characteristics
Type Polyester or top coated paper
Caliper 0.0020 inch
Optimum Dimensions - width 4 inches (102mm)
- height 6.5 inches (165mm)
Basis Weight 42 lb. / 3000 square feet
Color White
Background Reflectance 670nm (visible light) & 900nm (infra-red
light)
2) Adhesive Characteristics
Type Permanent Acrylic
Min. Application Temp. 50 degrees Fahrenheit
Svc Temperature Range 0 to 225 degrees Fahrenheit
Dwell: Initial Tack 1 hour (at room temperature)
Ultimate Tack 30 hours - Full Strength
Caliper 0.0009 inch
</TABLE>
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
<PAGE> 74
ELECTRONICS INDUSTRIES ASSOCIATION (EIA) LABEL
[GRAPHIC]
17
<PAGE> 75
DELL COMPUTER CORPORATION
ISO COUNTRY CODE TABLE
Feb. 23, 1995
<TABLE>
<CAPTION>
COUNTRY COUNTRY
CODE COUNTRY CODE COUNTRY
- ------- ------- ------- -------
<S> <C> <C> <C>
AF Afghanistan CO Columbia
AL Albania CN Comoros
AG Algeria CF Congo
AQ American Samoa CW Cook Islands
AN Andorra CS Costa Rica
AO Angola HR Croatia
AV Anguilla CU Cuba
AY Antarctica CY Cyprus
AC Antigua EZ Czech Republic
AR Argentina DA Denmark
AM Armenia DJ Djibouti
AS Australia DO Dominica
AU Austria DR Dominican Republic
AJ Azerbaijan EC Ecuador
BF Bahamas, The EG Egypt
BA Bahrain ES El Salvador
BG Bangladesh EK Equatorial Guinea
BB Barbados ER Eritrea
BO Belarus EN Estonia
BE Belgium ET Ethiopia
BH Belize FA Falkland Islands
DM Benin FO Faroe Islands
BD Bermuda FJ Fiji
BT Bhutan FI Finland
BL Bolivia FR France
BK Bosnia and Herzegovina FG French Guiana
BC Botswana FP French Polynesia
BV Bouvet Island FS French Southern
BR Brazil GB Gabon
IO British Indian Ocean GA Gambia, The
VI British Virgin Islands GZ Gaza Strip
BX Brunei GG Georgia
BU Bulgaria GE Germany, Federal Republic
BM Burma GH Ghana
BY Burundi GI Gibraltar
CB Cambodia GR Greece
CM Cameroon GL Greenland
CA Canada GJ Grenada
PQ Canal Zone GP Guadaloupe
CV Cape Verde, Republic GQ Guam
CJ Cayman Islands GT Guatemala
CT Central African Empire GV Guinea
CD Chad PU Guinea-Bissau
CI Chile GY Guyana
CH China (PRC) HA Haiti
KT Christmas Island HM Heard & McDonald Islands
CK Cocos (Keeling Island) HO Honduras
</TABLE>
18
<PAGE> 76
DELL COMPUTER CORPORATION
ISO COUNTRY CODE TABLE
Feb. 23, 1995
<TABLE>
<CAPTION>
COUNTRY COUNTRY
CODE COUNTRY CODE COUNTRY
- ------ ------- ------ -------
<S> <C> <C> <C>
HK Hong Kong MW Montenegro
HU Hungary MH Monserrat
IC Iceland MO Morroco
IN India MZ Mozambique
ID Indonesia WA Namibia
IR Iran NR Nauru
IZ Iraq BQ Navassa Island
EI Ireland NP Nepal
IS Israel NL Netherlands
IT Italy NA Netherlands Antilles
IV Ivory Coast NC New Caledonia
JM Jamaica NZ New Zealand
JA Japan NU Nicaragua
JQ Johnson Atoll NG Niger
JO Jordan NI Nigeria
KZ Kazakhstan NE Niue
KE Kenya NF Norfolk Island
KR Kiribati CQ Northern Mariana Island
KN Korea, PDR NO Norway
KS Korea, Republic of MU Oman
KU Kuwait PK Pakistan
KG Kyrgyzstan PM Panama
LA Laos PP Papua New Guinea
LG Latvia PF Paracel Islands
LE Lebanon PA Paraguay
LT Lesotho PE Peru
LI Liberia RP Philippines
LY Lybia PC Pitcaim Islands
LS Liechtenstein PL Poland
LH Lithuania PO Portugal
LU Luxemborg RQ Puerto Rico
MC Macao QA Qatar
MK Macedonia RE Reunion
MA Madagascar RO Romania
MI Malawi RS Russia
MY Malaysia RW Rwanda
MV Maldives SM San Marino
ML Mali TP Sao Tome & Principe
MT Malta SA Saudi Arabia
MB Martinique SG Senegal
MR Mauritania SR Serbia
MP Mauritius SE Seychelles
MX Mexico SL Sierra Leone
MQ Midway Islands SN Singapore
MD Moldova LO Slovakia
MN Monaco SI Slovenia
MG Mongolia BP Solomon Islands
</TABLE>
<PAGE> 77
DELL COMPUTER CORPORATION
ISO COUNTRY CODE TABLE
Feb. 23, 1995
<TABLE>
<CAPTION>
COUNTRY COUNTRY
CODE COUNTRY CODE COUNTRY
- ------ ------- ------ -------
<S> <C> <C> <C>
SO Somalia VQ Virgin Islands (U.S.)
SF South Africa WQ Wake Island
SP Spain WF Wallis and Futuna
PG Spratly Islands WI Western Sahara
CE Sri Lanka WS Western Samoa
SC St. Christopher-Nevis YE Yemen, Rep. of (SANA)
SH St. Helena CG Zaire
SB St.Pierre and Miquelon ZA Zambia
ST St. Lucia ZI Zimbabwe
VC St. Vincent
SU Sudan
NS Surinam
JS Svalbard and Jan Mayen
WZ Swaziland
SW Sweden
SZ Switzerland
SY Syria
TW Taiwan
TI Tajikistan
TZ Tanzania, United Republic
TH Thailand
TO Togo
TL Tokelau
TN Tonga
TD Trinidad and Tobago
NQ Trust Terr. of the Pacific Is.
TS Tunisia
TU Turkey
TX Turkmenistan
TK Turks and Caicos Islands
TV Tuvalu
UG Uganda
UP Ukraine
TC United Arab Emirates
UK United Kingdom
US United States
ZZ Unknown
UV Upper Volta
UY Uruguay
IQ US. Misc. Pacific Islands
UZ Uzbekistan
NH Vanuatu
VV Various
YY Various Bloc Countries
VT Vatican City
VE Venzuela
VM Vietnam
</TABLE>
19
<PAGE> 78
SCHEDULE F TO AGREEMENT NUMBER BRO-001
DELL UNIQUE SERVICE TAG/BARCODE LABELING REQUIREMENTS
<PAGE> 79
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
<PAGE> 80
SCHEDULE G TO AGREEMENT NUMBER BRO-001
PRODUCT REGULATORY AND SAFETY REQUIREMENTS
<PAGE> 81
FIBRE CHANNEL SWITCH EMC REGULARLY AND PRODUCT SAFETY REQUIREMENTS
<TABLE>
<CAPTION>
Responsibility
<S> <C> <C> <C> <C>
Country / Mark Markings which apply Brocade Dell Comments
FCC Class A EMC
CE EMC
VCCI - A EMC
UL Safety Agency
CSA Safety Agency
TUV Safety Agency
NEMKO Safety Agency Post RTS - requires
translations
EZU Safety Agency
NORTH AMERICA
United States UL, FCC
Canada CSA, ICES
SOUTH & CENTRAL AMERICA
Mexico NOM, Safety Agency
WESTERN EUROPE
United Kingdom/Ireland CE
Benelux CE
France CE Post RTS - requires
translations
Germany TUV-GS,CE
Austria CE
Spain/ Portugal/ Italy CE
SCANDINAVIAN COUNTRIES
Switzerland/Austria CE
Sweden NEMKO/SEMKO, Safety Agency
Norway CE
Finland NEMKO/FIMKO, Safety Agency
Denmark NEMKO, Safety Agency
EASTERN EUROPE
Russia GOST, Safety Agency requires EMC
Czech Republic EZU, Safety Agency requires EMC
Slovenia SIQ
Slovakia EVPU
Hungary PCBC, Safety Agency requires EMC
Poland PCBC, Safety Agency requires EMC
ASIA PACIFIC
Japan VCCI Post RTS - requires
translations
Australia C-Tick, EMC
New Zealand C-Tick, EMC
SOUTH EAST ASIA
China CCIB, Safety Agency Not required for SilkWorm
Express
</TABLE>
Page 1 of 2
<PAGE> 82
FIBRE CHANNEL SWITCH EMC REGULARLY AND PRODUCT SAFETY REQUIREMENTS
<TABLE>
<S> <C> <C> <C> <C>
Hong Kong CCIB, Safety Agency Post RTS - requires
translations
Taiwan BCIQ, EMC
Korea RRL, EMC Post RTS - requires
translations
Singapore PSB, Safety Agency
Philippines No Known Requirements
Indonesia No Known Requirements
INDIAN CONTINENT
India No Known Requirements
Malaysia No Known Requirements
Thailand No Known Requirements
AFRICA
South Africa SABS
MIDDLE EAST
Saudi Arabia SASO
</TABLE>
Page 2 of 2
<PAGE> 83
SCHEDULE H TO AGREEMENT NUMBER BRO-001
PRODUCT SPECIFICATIONS
1. NO. 0027-SEDS-2 -- SILKWORM EXPRESS SWITCH
<PAGE> 84
[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 (E-port 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]
<PAGE> 85
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]
<PAGE> 86
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]
<PAGE> 87
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
<PAGE> 88
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
<PAGE> 89
SCHEDULE I TO AGREEMENT NUMBER BRO-001
END USER LICENSE AGREEMENT
<PAGE> 1
EXHIBIT 10.15
PURCHASE AGREEMENT
BETWEEN
BROCADE COMMUNICATIONS SYSTEMS, INC.
AND
SEQUENT COMPUTER SYSTEMS, INC.
<TABLE>
<CAPTION>
CONTENTS PAGE
<S> <C>
1. DEFINITIONS 2
2. SCOPE OF AGREEMENT 2
3. TERM AND TERMINATION 3
4. PRODUCT DOCUMENTATION AND TRAINING 3
5. PRICE AND PAYMENT 4
6. FORECASTING 5
7. PURCHASE ORDERS 5
8. SHIPPING, DELIVERY AND PACKAGING 9
9. INSPECTION AND ACCEPTANCE 10
10. WARRANTY 10
11. [*]
12. RETURN MATERIAL AUTHORIZATION 12
13. MANDATORY CHANGES 12
14. SEQUENT REQUESTED CHANGES 13
15. BROCADE REQUESTED CHANGES 14
16. PRODUCT WITHDRAWAL 15
17. MEETINGS AND SUPPLIER PERFORMANCE 15
18. REPORTS 16
19. MATERIAL MANAGEMENT 16
20. LIMITATION OF LIABILITY 16
21. CONFIDENTIAL AND PROPRIETARY INFORMATION 16
22. INFRINGEMENT 17
23. INDEMNITY AND INSURANCE 18
24. NOTICES 19
25. MISCELLANEOUS PROVISIONS 19
26. ENTIRE AGREEMENT 21
ATTACHMENTS
A PRODUCT SPECIFICATION 23
B PRODUCT AND PRODUCT SUPPORT PRICING 24
C SUPPLIER QUALITY 26
D PRODUCT SUPPORT 32
E REPORTS 38
</TABLE>
*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
<PAGE> 2
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
<PAGE> 3
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
<PAGE> 4
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
<PAGE> 5
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
<PAGE> 6
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.
<TABLE>
<CAPTION>
Time Period Lead Time (Calendar Days)
----------- -------------------------
<S> <C>
through 9/30/97 [*]
10/1/97-3/31/98 [*]
4/1/98-onward [*]
</TABLE>
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:
<TABLE>
<CAPTION>
Number of Calendar Days
Prior to Scheduled Due on Dock Date Allowable Increase
<S> <C>
[*] [*]%
[*]%
[*]%
[*]%
[*]%
[*]%
[*]%
[*]%
</TABLE>
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
<PAGE> 7
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:
<TABLE>
<CAPTION>
<S> <C>
[*]
</TABLE>
* 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:
<TABLE>
<CAPTION>
<S> <C>
[*]
</TABLE>
*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
<PAGE> 8
[*]
* 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
<PAGE> 9
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.
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<PAGE> 10
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.
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<PAGE> 11
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 [*]
*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.
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<PAGE> 12
(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.
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<PAGE> 13
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.
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<PAGE> 14
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 Product-related 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.
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<PAGE> 15
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.
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<PAGE> 16
(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:
<TABLE>
<S> <C>
1997: [*]
1998: [*]
</TABLE>
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.
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<PAGE> 17
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.
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<PAGE> 18
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.
<TABLE>
<CAPTION>
Coverage Required Limits
-------- ---------------
<S> <C>
Worker's Compensation: 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: [*] general aggregate
[*] products/completed operations aggregate
[*] personal and advertising injury limit
[*] each occurrence limit
Automobile Liability: [*] combined single limit, bodily injury and
property damage coverage
</TABLE>
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.
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<PAGE> 19
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.
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
25. 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
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<PAGE> 20
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.
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<PAGE> 21
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
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<PAGE> 22
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 By: /s/ Bruce J. Bergman
------------------------------- ----------------------------
(Signature) (Signature)
Name: Wayne A. Pittarger Name: Bruce J. Bergman
-------------------------- --------------------------
(Printed or Typed) (Printed or Typed)
Title: VP Operations Title: CEO
------------------------- -------------------------
Date: 6/17/97 Date: 6/17/97
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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.
<TABLE>
<CAPTION>
PRODUCT DESCRIPTION Production Specifications
------------------- (By Sequent Part Numbers)
-------------------------
<S> <C>
16 Port Fibre Channel Switch 1003-69661
8 Port Fibre Channel Switch 1003-69660
0 Port Fibre Channel Switch for Service Spares 1003-73151
G-Port Card for Service Spares 1003-73153
GBIC, multi-mode, non-OFC for FC Switch (2M to 500M) 1003-73152
</TABLE>
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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
<TABLE>
<CAPTION>
1997 1998*
(not to exceed)
<S> <C> <C>
1.1 8 Port Sequent part number 1003-69660;
Brocade part number B1600-110 [*] [*]
1.2 16 Port: Sequent part number 1003-69661;
Brocade part number B1600-100 [*] [*]
1.3 0 Port: Sequent part number 1003-73151;
Brocade part number X1017 [*] [*]
1.4 GBIC: Sequent part number 1003-73152
Brocade part number X1006 [*] [*]
1.5 G-Port Card: Sequent part number 1003-73153;
Brocade part number X1003 [*] [*]
</TABLE>
* 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
<TABLE>
<S> <C>
(i) Switch: [*]
(ii) G Port without GBIC: [*]
</TABLE>
2.3 NTF Charges
Charges for NTF testing of Product will be per the following
schedule:
<TABLE>
<S> <C>
(i) Switch: [*]
</TABLE>
*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.
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<TABLE>
<S> <C>
(ii) G-Port Card: [*]
</TABLE>
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.
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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.
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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
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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.
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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.
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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:
<TABLE>
<CAPTION>
<S> <C>
Data (Field Metrics) & Responsible Party Time of Reporting
Summary of field Quality Failures [*] after On or before the
install) (Sequent) 15th of the month
Reliability Data in the form of average time between On or before
the replacement ("ATBR"). ATBR includes all 15th of the month
replacements, some of which may not have been actual failures
(Sequent)
Data (Factory Metrics) & Responsible Party Time of Reporting
Summary of all inspection/test station yields for the On or before the
month for all Products shipped to Sequent (Brocade) 15th of the month
Pareto of failures for the above stations for the month On or before the
for all Products shipped to Sequent (Brocade) 15th of the month
Failure analysis summary of Sequent returned On or before the
Products (Brocade) 15th of the month
[*]
</TABLE>
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.
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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.
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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.
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2.3 There shall be no charge for Product repair during Product
warranty. Prices for out-of-warranty Product repair are as
provided in sub-Section 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
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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.
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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.
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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
<PAGE> 37
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
<PAGE> 38
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:
(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.
1.1.2 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) Summary of field Quality Failures
(ii) 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
<PAGE> 39
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
<PAGE> 1
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
<PAGE> 2
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:
<TABLE>
<CAPTION>
Deliverable Completion Date
----------- ---------------
<S> <C>
Delivery of the first prototype November 7, 1997
Caterpillar Product to Sequent
Delivery of the first Production December 27, 1997
Caterpillar Product to Sequent
</TABLE>
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
<PAGE> 3
<TABLE>
<CAPTION>
Deliverable Payment Amount
----------- --------------
<S> <C>
Delivery of the first prototype $[*]
Caterpillar Product to Sequent
Delivery of the first Production $[*]
Caterpillar Product to Sequent
</TABLE>
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.
<TABLE>
<CAPTION>
Cumulative Purchase Volume Price per Caterpillar Product
-------------------------- -----------------------------
<S> <C>
[*] $[*]
[*] not to exceed $[*]
</TABLE>
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
<PAGE> 4
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 By: /s/ CHARLES W. SMITH
- ---------------------------------- ----------------------------------
(Signature) (Signature)
Name: Robert D. Bakker Name: Charles W. Smith
----------------------------- -----------------------------
(Printed or Typed) (Printed or Typed)
Title: Sr. Director Mfg. Ops Title: Vice President, Worldwide Sales
--------------------- -------------------------------
Date: 4/20/98 Date: April 16, 1998
----------------------------- -----------------------------
4
<PAGE> 5
ATTACHMENT A
PRODUCT SPECIFICATION
Attachment A is amended to include the following:
1. PRODUCT DESCRIPTION AND PRODUCT SPECIFICATIONS
<TABLE>
<CAPTION>
Product Specifications
Product Description (By Sequent Part Numbers)
------------------- -------------------------
<S> <C>
6 Port Fibre Channel Switch 1003-74200
16 Port FRU FCS-9ASY-16
6 Port FRU FCS-9ASY-06
</TABLE>
5
<PAGE> 6
ATTACHMENT B
PRODUCT AND PRODUCT SUPPORT PRICING
Attachment B is amended to include the following:
1. Product Pricing
<TABLE>
<CAPTION>
1997 1998*
(not to exceed)
<S> <C> <C>
1.4 GBIC: Sequent part number 1003-73152
Brocade part number X1006 [*] [*]
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 [*] [*]
</TABLE>
*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
<PAGE> 7
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
<PAGE> 1
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).
<PAGE> 2
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:
-2-
<PAGE> 3
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.
- 3 -
<PAGE> 4
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
- 4 -
<PAGE> 5
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
-5-
<PAGE> 6
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
- 6 -
<PAGE> 7
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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<PAGE> 8
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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<PAGE> 9
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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<PAGE> 10
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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