Master Equipment Lease Agreement

TO THE EXTENT THAT THIS LEASE AND ANY LEASE SCHEDULE CONSTITUTES CHATTEL PAPER (AS DEFINED IN THE UNIFORM COMMERCIAL CODE, AS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO SECURITY INTEREST HEREIN OR THEREIN MAY BE CREATED EXCEPT THROUGH THE TRANSFER AND POSSESSION OF THE ORIGINAL EXECUTED COUNTERPART OF SUCH LEASE SCHEDULE, WHICH SHALL BE IDENTIFIED AS THE ORIGINAL EXECUTED COUNTERPART NO. 1 BY THE LESSOR ON THE SIGNATURE PAGE THEREOF. NO SECURITY INTEREST CAN BE CREATED IN THIS LEASE BY TRANSFER OR POSSESSION OF THIS LEASE ALONE WITHOUT ANY ACCOMPANYING ORIGINAL COUNTERPART OF A LEASE SCHEDULE. NO TRANSFER, SALE, MORTGAGE OR OTHER DISPOSITION OF ANY INTEREST IN THIS LEASE CAN BE EFFECTED BY DISPOSITION OF THIS INSTRUMENT ALONE.



MASTER EQUIPMENT LEASE AGREEMENT



MASTER EQUIPMENT LEASE AGREEMENT dated as of September 5, 1996 (this "Lease"), by and between VENTURE LENDING & LEASING, INC., a Maryland corporation ("Lessor"), and BROCADE COMMUNICATIONS SYSTEMS, INC., a California corporation ("Lessee").



Lessee desires to obtain from Lessor purchase money financing for certain items of equipment used in Lessee's business, which equipment is described more particularly under the caption "Description of Equipment" in one or more Lease Schedules (as defined below) to this Lease (such equipment together with all substitutions, renewals or replacements of, and all additions, improvements and accessions to, any and all thereof, being hereinafter collectively and separately referred to as the "Equipment").



Lessor is willing to provide financing for the Equipment to Lessee, all on the terms and conditions hereinafter set forth, and on such additional terms as are set forth in Lessor's commitment letter to Lessee dated August 14, 1996 (the "Commitment").



Accordingly, in consideration of the mutual covenants and agreements hereinafter set forth, the parties hereto agree as follows:



1. Lease. This Lease establishes the general terms and conditions by which Lessor may provide financing to Lessee with respect to the Equipment listed on each lease schedule (sometimes, a "Lease Schedule" or "Schedule") executed periodically pursuant to this Lease. Each Schedule shall be in the form provided by Lessor, shall incorporate by reference the terms of this Lease, and shall be and constitute a separate agreement as to the Equipment listed thereon for all purposes, including default. If any provision of a Lease Schedule conflicts with or supplements the provisions of this Lease, the provisions of such Schedule shall be controlling. Pursuant to the commitment, Lessor has agreed to arrange for the furnishing and lease to Lessee, and Lessee has agreed to accept and lease Equipment having an



aggregate Equipment Cost (as defined in each Schedule) of not in excess of One Million Dollars ($1,000,000.00). Borrower may increase the line up to $500,000 under the same terms and conditions without an increase in the number of warrants. Notwithstanding anything in the Lease to the contrary, it is understood and agreed that Lessee is purchasing the Equipment and Lessor is financing such purchases. Accordingly, title to the Equipment, except for licensed software, shall be vested in Lessee upon its acceptance thereof. To secure its obligations hereunder to Lessor, Lessee hereby grants to Lessor a security interest in all right title and interest of Lessee in: (i) all Equipment, whether now owned or hereafter acquired by Lessee; (ii) all leases and other agreements covering the Equipment and any and all subleases of such Equipment (whether or not permitted under this Lease); (iii) all software, source code escrow arrangements, object code, user manuals and other technical documentation, and licenses purchased as part of or in connection with the Equipment to the extent permissible under the applicable license agreement: and (iv) and all additions and accessions to, substitutions for and proceeds (whether cash or non-cash) and products of any of the foregoing, including, without limitation, all payments under insurance. Upon payment in full of all rentals for such Equipment in accordance with the applicable Schedule and the other terms of this Lease, the provisions of Sections 6 through 22 excluding Section 15 of this Lease shall no longer apply to such items of Equipment and such security interest shall be released.



2. Term. The term of this Lease as to each item of Equipment leased hereunder, shall commence on the date of acceptance of such item and shall end at the expiration of the term therefor specified under "Term" in the applicable Schedule.



3. Rent. Lessee shall pay to Lessor as rent for each item of Equipment during the applicable Term, on each Rent Payment Date (as defined in the Schedule), the amount specified under "Lease Rental Payments" in the Schedule (hereinafter referred to as "Rent"). If any amount due hereunder is not paid when due, Lessee shall pay to Lessor, on demand, a reasonable late charge in the amount of 5% of such overdue amount and interest on such overdue amount at the rate of 2% per month (the "Late Payment Rate"); such late charge and interest shall apply only if permitted by applicable law, and if not so permitted, such late charge and interest shall be calculated at the maximum rates permitted by applicable law. All payments of Rent and other amounts payable by Lessee to Lessor hereunder shall be made at the office of Lessor specified under "Lessor's Address" in the Schedule, or to such other person, firm or corporation or Assignee (as defined in Section 21, "Assignment by Lessor") and at such other place as Lessor or Assignee, as the case may be, may from time to time designate in writing to Lessee. Notwithstanding any provisions hereof to the contrary, any payment, including Rent, required under this Lease which is due on a day which is not a business day shall be made on the business day next preceding the day on which such payment is due. This Lease is non-cancelable and irrevocable for the entire term set forth in the Schedule. Lessee's obligation to pay all rentals and other amounts payable hereunder are absolute and unconditional and shall not be subject to any abatement, reduction, setoff, defense, counterclaim or recoupment for any reason whatsoever, including but not limited to Lessee's right to possession of











the Equipment being terminated or Lessor retaking possession of the Equipment because of a default by Lessee hereunder.



4. Lessee's Selection, Inspection and Acceptance. Lessee has selected or will select all items of Equipment to be leased hereunder from the manufacturer or vendor thereof on the basis of its own judgment, and is not relying on any statements, representations or warranties made by Lessor or its representatives. Lessee shall assure that each item of Equipment is properly invoiced and sold to Lessor. Upon delivery, Lessee, at its own expense, shall make all necessary inspections and tests of the Equipment in order to determine whether the Equipment conforms to specifications and is in good condition and repair. If the Equipment is in good condition and repair, Lessee shall execute and deliver to Lessor a Certificate of Acceptance, in substantially the form thereof attached hereto. Lessee warrants that each item of the Equipment is leased solely for commercial or business use.



5. DISCLAIMER OF WARRANTIES BY LESSOR. LESSOR DOES NOT MAKE, HAS NOT MADE, AND SHALL NOT BE DEEMED TO MAKE OR HAVE MADE, ANY REPRESENTATION OR WARRANTY, EITHER EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING, WITHOUT LIMITATION, THE DESIGN OR CONDITION OF THE EQUIPMENT, ITS MERCHANTABILITY, DURABILITY, SUITABILITY OR ITS FITNESS FOR ANY PARTICULAR PURPOSE, THE QUALITY OF THE MATERIAL OR WORKMANSHIP OF THE EQUIPMENT, OR THE CONFORMITY OF THE EQUIPMENT TO THE PROVISIONS AND SPECIFICATIONS OF ANY PURCHASE ORDER OR ORDERS RELATING THERETO OR TITLE TO THE EQUIPMENT OR ANY COMPONENT THEREOF, AND LESSOR HEREBY DISCLAIMS ANY SUCH REPRESENTATION OR WARRANTY (WHICH DISCLAIMER LESSEE HEREBY ACKNOWLEDGES, EXCEPT THAT LESSOR WARRANTS THAT NEITHER LESSOR NOR ANY ONE ACTING OR CLAIMING THROUGH LESSOR, BY ASSIGNMENT OR OTHERWISE, WILL INTERFERE WITH LESSEE'S QUIET ENJOYMENT OF THE USE OF THE EQUIPMENT SO LONG AS NO EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING). WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, LESSOR SHALL NOT BE LIABLE OR RESPONSIBLE FOR ANY DEFECTS, EITHER PATENT OR LATENT (WHETHER OR NOT DISCOVERABLE BY LESSEE OR LESSOR), IN ANY UNIT OF THE EQUIPMENT, OR FOR ANY DIRECT OR INDIRECT DAMAGE TO PERSONS OR PROPERTY RESULTING THEREFROM, OR FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING STRICT OR ABSOLUTE LIABILITY IN TORT), it being agreed that all such risks, as between Lessor and Lessee, are to be borne solely by Lessee. Lessee acknowledges that Lessor is not a dealer in or manufacturer of equipment of any kind, and that each item of Equipment subject to this Lease is of a type, size, design and capacity selected solely by Lessee. If the Equipment is not properly installed, does not operate as represented or warranted by the manufacturer or seller thereof, or is unsatisfactory for any reason, Lessee shall make any claim on account thereof solely against the manufacturer or seller, and no such occurrence shall relieve Lessee of any of its obligations hereunder. Lessor hereby assigns to Lessee any interest Lessor may have in any manufacturer's or seller's warranty, whether express or implied, on such item. All claims or actions on any warranty shall be made or prosecuted by Lessee, who may do so in Lessor's name, at its sole expense, and Lessor shall have no obligation whatsoever









to make any claim on such warranty. At Lessor's option, all cash proceeds or equivalent thereof from such warranty recovery shall be used to repair or replace the Equipment.



6. Equipment to be and Remain Personal Property. Lessee shall take all such actions as may be required to assure that the Equipment shall be, and at all times shall remain, personal property, notwithstanding the manner in which the Equipment may be attached or affixed to real property. Lessee shall give Lessor prompt notice of any circumstances which may permit any person to acquire, and shall obtain and record such instruments and take such steps as may be reasonably requested by Lessor to prevent any such person from acquiring, any rights in the Equipment by reason of the Equipment being claimed or deemed to be real property. If requested by Lessor, Lessee shall obtain and deliver to Lessor valid and effective waivers, in recordable form, by the owners, landlords and mortgagees of any real property upon which the Equipment is located, or certificates of Lessee that it is the owner of such real property and that such real property is not leased and/or mortgaged. Lessee will at all times protect and defend, at its own cost, Lessor's security interests in the Equipment from and against all claims, liens and legal process of creditors of Lessee.



7. Location and Right of Inspection. The Equipment at all times shall be located at the address of Lessee specified under "Location of Equipment" in the Schedule or such other place as shall be agreed upon in writing between Lessor and Lessee, Upon prior notice, Lessor shall at all reasonable times during customary business hours have the right to enter into and upon the premises where the Equipment may be located for the purpose of inspecting the Equipment. Lessee shall not move the Equipment from its agreed location except with the prior written consent of Lessor which will not be unreasonably withheld or delayed. Lessee shall promptly advise Lessor of any circumstances with respect to location which adversely affects the Equipment or Lessor's security interests therein.



8. Markings and Filings. Lessee shall affix to the Equipment such labels, plates or decals as may by provided by Lessor, or conspicuously mark the Equipment with such language as Lessor may reasonably request, to reflect the interest of Lessor therein and, if there is an Assignee of Lessor, that such Assignee has such interest in the Equipment specified by Lessor. Lessor is hereby authorized to cause this Lease or any financing or other statement in respect thereto, showing the interest of Lessor and any Assignee in and to this Lease and the Equipment, to be filed or recorded with any governmental office deemed appropriate by Lessor. Lessee shall execute any such financing statements presented to it by Lessor or any Assignee, and shall be responsible for the payment of any fees for filing or recording such statements.



9. Alterations. Lessee shall not make any material alterations, additions or improvements to the Equipment without the prior written consent of Lessor. Except as may be otherwise agreed between Lessor and Lessee, all such alterations, additions and improvements shall be considered accessions to the Equipment.



10. Use, Maintenance and Repair. Lessee shall use the Equipment solely in the conduct of its business and shall comply with all laws, ordinances or regulations, and all conditions contained in any insurance policies or manufacturers' warranties, relating to the Equipment or its use, operation or









maintenance. Lessee shall put the Equipment only to the use contemplated by the manufacturers thereof. Lessee shall at Lessee's own expense maintain the Equipment in good operating condition, repair and appearance furnish all parts and labor required to keep the Equipment in such condition, protect same from deterioration other than normal wear and tear. Lessee shall cause the Equipment to be maintained in accordance with the supplier's standard preventive maintenance contract, if available.



11. Insurance. Lessee will maintain at all times at its own expense, with insurers of recognized standing, (i) insurance against "all physical loss" perils subject to standard exclusions in an amount not less than the greater of the full replacement value or the Stipulated Loss Value of such item of Equipment as set forth on any Schedule B attached to the Lease Schedule and (ii) public liability and property damage insurance policies insuring against third party personal and property damage in respect of the use and operation of the Equipment in an amount not less than $1,000,000 for each occurrence. Each policy shall (i) name Lessor and Assignee, if any, as an additional insured and loss payee, as their interests may appear; (ii) contain an agreement by the insurer that any loss thereunder shall be payable to Lessor and Assignee notwithstanding any breach of representation or warranty by Lessee; (iii) provide that there shall he no recourse against Lessor or Assignee for payment of premiums or other amounts with respect thereto; and (iv) provide that at least thirty (30) day's prior written notice of cancellation change or lapse shall be given to Lessor and Assignee by the insurer. All insurance for loss or damage shall provide that losses, if any, shall be adjusted only with and payable to Lessor or its Assignee, if any. Lessee shall pay all premiums for such insurance and shall deliver to Lessor evidence of such payment and of the maintenance of the insurance coverages required hereunder. Lessee hereby appoints Lessor as Lessee's attorney-in-fact to make claim for, receive payment of, and execute and endorse all documents, checks or drafts received in payment for any loss or damage under any such insurance policy.



12. All Risk of Loss. All risk of loss, damage, theft or destruction (a "Loss") to the Equipment shall be borne entirely by Lessee, whether or not the Loss is insured. Except as expressly provided in this Section, no Loss of any kind shall relieve or release Lessee of its Rent and other obligations under this Lease, all of which shall continue in full force and effect. In the event of a Loss to any Equipment, Lessee shall promptly notify Lessor in writing of such fact and of all details with respect thereto, and shall promptly, at Lessee's option (or if an Event of Default has occurred and is continuing, at the option of Lessor):



(a) repair and restore the item of Equipment to good mechanical condition and working order; or



(b) replace the Equipment with other equipment of the same type, capacity and condition, and free and clear of claims or encumbrances in favor of any third party other than Lessor, whereupon such replacement equipment shall be subject to this Lease and be deemed Equipment for purposes hereof; or



(c) pay to Lessor, on the Rent Payment Date next succeeding the date on which the Loss occurred, an amount equal to the sum of (A) all accrued and unpaid Rent payable for such









Equipment through and including such Rent Payment Date, and (B) the Stipulated Loss Value of the Equipment as of such Rent Payment Date as set forth on any Schedule B attached to the Lease Schedule pertaining to such Equipment.



13. Licensing, Registration and Taxes. Lessee shall, at its sole cost and expense, (i) obtain any licensing and registration of the Equipment as may be required by law, (ii) pay and discharge when due all license and registration fees, assessments, taxes (excluding any tax measured by Lessor's net income), including, without limitation, sales, use, excise, personal property, ad valorem, stamp, documentary and other taxes, and all other governmental charges, fees, fines or penalties whatsoe ...