OEM Agreement

OEM AGREEMENT


This OEM Agreement (hereinafter, "Agreement") is effective as of May 1, 1998, by and between Brocade Communications Systems, Inc., a corporation organized under the laws of the State of California, with its principal place of business at 1901 Guadalupe Parkway, San Jose, California 95131 (hereinafter, "Brocade") and Storage Technology Corporation (including its subsidiaries and affiliates), a company organized under the laws of the state of Delaware, with its principal place of business at 2270 South 88%gth%g Street, Louisville, Colorado 80022 (hereinafter, "OEM"). This Agreement will be administered on behalf of OEM by the Storage Tek Network Systems Group, with its principal place of business at 7600 Boone Avenue North, Minneapolis, Minnesota 55428. All primary correspondence to OEM with respect to this Agreement shall be sent to the Minnesota address.


RECITALS


WHEREAS, Brocade manufactures certain equipment useful for gigabit data communication interconnect products such as hubs, switches and transceivers which contain hardware components and software programs compatible with such equipment, and which Brocade is willing to provide to OEM on the terms and conditions set forth herein; and


WHEREAS, OEM shall combine such equipment with other equipment, software programs and/or services so as to add Significant Value to Brocade's equipment to create OEM Products and to market the OEM Products on a "turnkey" basis;


NOW, THEREFORE, the parties hereto, for consideration mutually exchanged, agree as follows:


1. DEFINITIONS. For purposes of this Agreement, the definitions below apply to the respective capitalized terms;


(a) "End-User" A prospective customer of OEM or OEM's distribution
channels to whom OEM Products are offered and/or sold for use in
the regular course of such customer's business.


(b) "End-User License Agreement" The form of OEM's license agreement
set forth in Exhibit C and attached hereto, under which OEM
grants an End-User a license to use the Software in conjunction
with the Product as part of an OEM Product.


(c) "OEM Products" Certain storage interconnect solutions and
transceivers manufactured and sold by OEM consisting of
combinations of the Products with other substantial value added
equipment and software independently developed or procured by
OEM, to be offered by OEM, together with related services,
directly or indirectly to End-Users, on a turnkey basis.


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(d) "Products" Brocade's products and services set forth in the then
current version of Exhibit A and attached hereto, including all
model conversions, elements and accessories, whether
incorporated into OEM Products or used as spares in support of
OEM Products. All Products sold to OEM shall be newly
manufactured products, not containing used materials, unless
specifically agreed in advance by OEM and Brocade.


(e) "Significant Value" The value added by the OEM through product
enhancements, either hardware or software, tradename and
significant sales/service leverage or also by other means
approved, in advance and in writing, by Brocade.


(f) "Software" The computer software incorporated within the Product
which provides the basic operating environment for the Product.


2. TERM. This Agreement shall commence on the date set forth above and shall remain in full force and effect for a period of three (3) years, unless earlier terminated as provided herein. Thereafter, this Agreement shall automatically renew for successive one (1) year periods unless either party notifies the other party at least sixty (60) days prior to expiration of the Term. Notwithstanding the foregoing, this Agreement shall remain in full force and effect and shall apply to any accepted purchase order (hereinafter, "Order(s)") issued during the Term of this Agreement and until the obligations of each party, under such Orders, have been fulfilled.


3. OEM'S RESPONSIBILITIES. In consideration for the rights and licenses granted to OEM hereunder, OEM shall:


(a) Combine the Product with other equipment and/or computer
software programs independently developed or procured by OEM so
as to create OEM Products;


(b) Market, sell and deliver OEM Products directly or indirectly to
End-Users;


(c) Provide a copy of the appropriate End-User License Agreement,
when applicable, to all customers and prospective customers as
part of any OEM Products. The End-User License Agreement
provided by OEM shall be at least as protective of Brocade's
interests as Brocade's License Agreement;


(d) Provide technical support for OEM Products directly or
indirectly to End-Users, including all necessary maintenance,
training, and support to enable proper operation of the OEM
Products;


(e) Order, pay for, take delivery of and accept Products; and


(f) Protect Brocade's proprietary rights in the Software;


4. FORECAST. On the first working day of each month, OEM shall provide Brocade with a written minimum [*] rolling non-binding forecast of expected monthly purchases of


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Products. If OEM fails to timely provide Brocade with the forecast, Brocade reserves the right to extend the lead time for shipment of Products.


5. PRODUCT PRICES AND PAYMENT TERMS.


(a) Prices for all Products are set forth in the then current version of Exhibit B and attached hereto. All freight, insurance, taxes, duties or other shipping expenses shall be borne by OEM. All prices, charges, and fees quoted by Brocade are in United States Dollars and all amounts to be paid by OEM shall be paid in United States Dollars.


(b) Payment terms are [*] from the Invoice date. Invoices will be forwarded at the time of shipment. Amounts not paid [*] after the invoice date are subject to a late payment charge of the lesser of one and one-half percent (1.5%) or the maximum rate permitted by law, which shall be enforced if delinquency in payment is not promptly brought current upon notice by Brocade, or in the event of a continued pattern of delayed payments. OEM shall pay all of Brocade's collection costs and expenses to enforce and preserve Brocade's rights under this Section.


[*]


6. ORDER, DELIVERY, AND ADMINISTRATION.


(a) OEM shall initiate purchases of Products under this Agreement by issuing Orders to Brocade either in hard copy form, by fax, or by electronic data interchange (hereinafter, "EDI"). OEM's Orders shall be governed only by the terms and conditions of this Agreement. Any additional terms and conditions contained on any Order or other OEM document are of no force or effect, and Brocade hereby gives notice of objection to such additional terms.--


(b) Orders are for the purpose of identifying types and quantities of Products to be shipped and requesting delivery times. Each Order placed by the OEM must include quantity, price, shipping instructions, agreed designated destination and billing addresses, part or model number, and desired delivery date, which date shall be no later than 120 days after the date of the Order. OEM shall forward all Orders to Brocade's principal office or as otherwise instructed by Brocade. Brocade reserves the right, in its sole discretion, to accept or reject, in whole or in part, any or all Orders placed by OEM that are not in compliance with this Agreement. Brocade shall use reasonable commercial efforts to notify OEM of the acceptance or rejection of an Order within [*] after receipt of the Order. Brocade shall use reasonable commercial efforts to meet such dates, but Brocade will not be liable for late delivery. If


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delivery is delayed beyond [*] OEM shall have the right to cancel an unshipped Order, or portion thereof, without penalty. With OEM's prior approval, Brocade may make partial deliveries of Orders. Such deliveries will be invoiced and paid when due, without regard for subsequent deliveries.


(c) All shipments shall be made [*] Shipments shall be sent to designated locations mutually acceptable to Brocade and OEM. Title in and the right of possession to such Products passes to OEM upon [*]. OEM is responsible for obtaining any insurance for the Products and for filing all claims with the carrier, or insurer, for damages or loss in transit.


7. PRODUCT DISCONTINUATION AND CHANGES.


(a) Discontinuation of Products. Brocade may, from time to time, in its discretion, discontinue the offering of any Product by providing an End of Life notice (hereinafter "EOL") to OEM, effective [*] after written notice to OEM of such discontinuation. Such EOL notice will notify OEM of any special conditions, such as time frames for placing final Purchase Orders and accepting delivery thereof, and minimum order quantities, applicable to Brocade's acceptance of final Purchase Orders for certain EOL Products. EOL Product Purchase Orders are non-cancelable and are, if canceled by OEM, subject to a cancellation charge equal to the value of the EOL Products canceled. EOL Purchase Orders for EOL Products shall be considered as being in addition to Purchase Orders placed against forecasted requirements. Products shall be delivered within [*] after receipt of an EOL Purchase Order.


(b) Changes to Products. Brocade reserves the right to introduce modifications to the Products, so long as the product specifications are not adversely affected. Brocade will use reasonable commercial efforts to inform OEM of significant product changes prior to their implementation in units shipped to OEM. It is recognized by the parties that there may be optional changes requested by either OEM or by Brocade which are not required to make the Products conform to their specifications. The cost of implementing such changes, if any, (including kits and labor) on previously delivered units shall be borne by OEM. Brocade shall not change any elements affecting the OEM's unique image associated with the Products, including OEM's logo, labeling or packaging, without OEM's prior approval.


(c) In the event that changes that may affect the form, fit, function, [*] Brocade shall first obtain OEM's approval, which shall not be unreasonably withheld. After mutual agreement that any such changes are to be made, Brocade shall promptly ensure that such changes ("Mandatory Engineering Changes") are included at no additional charge to OEM in all Products which are not yet delivered to OEM. OEM may also request that Brocade incorporate such changes to Products previously delivered under the warranty provisions of Section 11.


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8. CANCELLATION AND RESCHEDULING


(a) OEM may cancel or reschedule the quantity on any Order previously accepted by Brocade by sending written notice to Brocade, subject to the following limitations. Each Order may be rescheduled only once. Any rescheduling may not delay delivery for more than [*] but in no event beyond the Term of this Agreement, Cancellation requests for quantities on Orders that have already been rescheduled will be subject to charges and limitations based upon the original scheduled delivery date, which may preclude a cancellation due to the [*] limitation. The following charge will apply:


Number of Days prior to Cancellation charges Rescheduling charges
scheduled delivery per unit per unit
91 days or more [*] [*]
61-90 days
31-60 days
0-30 days


(b) Cancellation and/or rescheduling charges, [*] are subject to [*] terms from the date of OEM's request subject to such charges.


9. INSPECTION, ACCEPTANCE, RETURN, AND SPARING.


(a) OEM shall promptly inspect all Products shipped to OEM upon receipt thereof and may reject any item that falls substantially to conform to the then current specifications. To reject a Product, OEM shall, within [*] after receipt of the Products notify Brocade of any defect or deficiency and request a Return Material Authorization number (hereinafter "RMA"). If no notice is given within that time, then the Products shall be deemed accepted and thereafter are returnable only for warranty repair. Products which fail upon initial installation at End-User locations may be deemed by OEM as "DOA", so long as such initial failures are reported by OEM not later than [*] from the date of shipment by Brocade. Brocade shall use commercially reasonable efforts to provide replacements for DOA units on an expedited basis to be received at the Continental US location specified by the OEM within [*] of receipt of the returned DOA units. Brocade shall have the right to utilize the [*] spare inventory (as defined in section 9(d)) for fulfillment of this DOA replacement, which does not waive Brocade's obligation for maintaining the [*] spares inventory.


(b) Within [*] of receiving an RMA number, which shall be issued by Brocade within two (2) business days of OEM's request, OEM shall return rejected or DOA Product(s), freight prepaid and properly insured, in the original shipping carton, or in other suitable protective packaging if the original carton is no longer available, FOB destination with the RMA number displayed on the outside of the carton, to the address and by the shipping means, as


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specified by Brocade in the RMA. Product returns will not be accepted by Brocade without an RMA number.


(c) If Brocade confirms the defect, Brocade shall, at Brocade's option and expense, either repair or replace the Product or issue credit to OEM. Brocade shall reimburse OEM for the shipping charges to return properly rejected Product and for the shipment of the replacement Product; otherwise OEM shall be responsible for all shipping charges.


(d) Brocade [*] of spare parts which are specified and paid for by the OEM. The procedures for maintaining, configuring, testing, and shipping of spares will be defined in the technical support procedures. Maintenance of the level of [*] spare inventory is the responsibility of the OEM.


10. TECHNICAL SUPPORT.


The parties agree to negotiate in good faith to develop and honor the terms of mutually acceptable technical support procedures which shall define the responsibilities of each party with respect to end user support, including provisions to address continuously available emergency support, appropriate levels of support and means of communicating issues between the parties, and problem tracking and escalation procedures.


11. WARRANTY LIMITATION.


(a) BROCADE WARRANTS AND REPRESENTS TO THE OEM THAT THE PRODUCTS DELIVERED TO OEM BY BROCADE WILL PERFORM SUBSTANTIALLY IN ACCORDANCE WITH BROCADE'S PUBLISHED PRODUCT SPECIFICATIONS FOR A PERIOD OF [*] FROM THE DATE OF SHIPMENT ("WARRANTY PERIOD"). TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, BROCADE DISCLAIMS ALL OTHER WARRANTIES, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. THIS LIMITED WARRANTY PROVIDES THE OEM WITH SPECIFIC LEGAL RIGHTS IN ADDITION TO OTHER LEGAL RIGHTS WHICH VARY FROM STATE TO STATE.


(b) During the Warranty Period Brocade shall, at its sole option and expense, repair or replace any hardware Product, or part or component thereof, which Brocade determines was defective in material or workmanship. Products shipped as exchanged units under this Section 11, (i) may be newly manufactured, (ii) may be assembled from new or serviceable used parts that are equivalent to new parts in performance, or (iii) may have been previously installed, but in other respects meets the Product specifications.


(c) OEM shall request and receive an RMA number, which shall be issued by Brocade within two (2) business days of OEM's request, for repair of Product prior to return for repair. OEM shall use reasonable commercial efforts to return Product with defects covered by the foregoing warranty to Brocade, [*] pursuant to the shipping and other requirements specified by Brocade in its RMA, within [*] of issuance of the RMA number. Brocade shall use reasonable commercial efforts to ship repaired/replacement Product


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within [*] but in no event l ...