EXHIBIT 10.15.3

 

MANUFACTURING SERVICES AGREEMENT

 

THIS AGREEMENT (the “Agreement”) is effective as of April 14, 2005 (the
“Effective Date”), by and between McDATA Corporation a Delaware corporation
having a principal place of business at 380 Interlocken Crescent, Broomfield, CO
80021 (“McDATA”) and SANMINA-SCI Corporation, a Delaware corporation having its
principal place of business at 2700 North First Street, San Jose, California
95134 (“SANMINA-SCI or SSCI”).

 

For and in consideration of the mutual promises and covenants contained herein,
the Parties agree as follows:

 

1. SCOPE

 

This Agreement establishes the non-exclusive terms and conditions under which
McDATA agrees to purchase from SSCI and SSCI agrees to manufacture and
supply/sell to McDATA certain Products.

 

2. DEFINITIONS

 

2.1 “Product(s)” refers to the McDATA products described on the attached Exhibit
A, as may be amended from time to time, which meet the specifications agreed
upon by the Parties and which McDATA is hereby authorized to purchase and
distribute.

 

2.2 “Minimum Order Quantity” means the minimum quantity for which an SSCI
supplier will accept an order.

 

2.3 Intentionally Left Blank

 

2.4 “Specifications” means specifications (as stated within Exhibit C),
drawings, Bills of Materials (“BOM”) made available by McDATA to SSCI.

 

2.5 “McDATA Process Documentation” means documents provided by McDATA to SSCI to
define the process SSCI shall use to manufacture the Products.

 

2.6 “SSCI Process Documentation” means the documents used by SSCI to define the
process SSCI shall use to manufacture the Products.

 

2.7 “SSCI Contract Quality Requirements” means the requirements specified on
Exhibit F, as provided by McDATA to SSCI, to define the quality assurance
procedures and requirements necessary in the manufacture of the Products.

 

2.8 “Engineering Change Order” or “ECO” means a change to a Specification,
McDATA Process Documentation, SSCI Process Documentation, or the Products.

 

2.9 “Engineering Change Request” or “ECR” means a notification from one party to
the other, outlining in detail, the specific requirements of an Engineering
Change Order.

 

2.10 “Manufacturability” means the ability to produce the Products to McDATA’s
Specifications, McDATA Process Documentation, SSCI Process Documentation, and
SSCI practices and manufacturing capabilities, in accordance with the terms
stated in Exhibit F, including without limitation the testability of the
Products utilizing the mutually agreed upon Product Acceptance Tests (as defined
herein) resulting in commercially acceptable yields.

 

2.11 “Direct Ship Products” means Product(s) being shipped by SSCI directly to
McDATA’s customer.

 

2.12 “Non-direct Ship Products” means all other Product(s) not being shipped by
SSCI directly to McDATA’s customer.

 

2.13 “Product Acceptance Tests” means the testing array as mutually agreed by
the Parties in writing, to be applied by SSCI to individual Products.

 

2.14 “Finished Goods” means Product that has met the Product Acceptance Test
criteria, and is ready for shipment.

 

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2.15 “Transformation Costs” means all costs associated with the manufacture of
the Products, excluding raw material costs.

 

2.16 Intentionally Left Blank

 

2.17 “End-of-Life” (EOL) means a Product or component which either McDATA or a
component supplier has formally communicated will no longer be manufactured.

 

2.18 Intentionally Left Blank

 

2.19 “Buffer Inventory” means an agreed upon quantity of Product which shall be
built and maintained by SSCI in addition to the current quarters requirements.

 

2.20 “Delivered Cost” shall mean SANMINA-SCI’s quoted cost of Components as
stated on the bill of materials plus material burden as listed within Exhibit E.

 

2.21 “Obsolete Component” shall mean any component which is not currently used
to manufacture McDATA’s Product (whether as a result of an ECO or otherwise)

 

2.22 “Excess Component” shall mean any component which is not required to meet
McDATA’s Orders or the first eight (8) weeks of McDATA’s forecast for which such
component was ordered.

 

3. TERM

 

The initial term of this Agreement shall commence on the Effective Date and
shall continue through the [***][***] of the Effective Date unless sooner
terminated by mutual agreement or in accordance with this Agreement. Upon the
expiry of the initial term, this Agreement shall continue from year to year
until one party terminates the Agreement by giving at least [***][***] prior
written notice to the other party. Notwithstanding the foregoing, the term of
this Agreement shall automatically extend to include the term of any purchase
order (“Order”) issued hereunder.

 

4. PRICING

 

4.1 Pricing. During the term, McDATA shall have the right to purchase from
SANMINA-SCI the products specified in Exhibit A hereto, as such Exhibit may be
amended from time to time at the prices set forth in Exhibit G (Pricing Quote
Model). Prices (a) are in U.S. Dollars, (include McDATA designed packaging where
included in the BOM or included in the SSCI quoted price, (b) exclude the items
set forth in Section 4.3, and (c) are based on (i) the configuration set forth
in the specifications attached hereto as Exhibit C (the “Specifications”) and
(ii) the projected volumes.

 

4.2 Prices. Prices for the Products will be established based on the Pricing
Quote Model (Exhibit G) together with the information from the Price Matrix
(Exhibit E). Prices for the Products shall be mutually agreed upon by both
parties in writing, signed by authorized signatories of each party.

 

4.3 Exclusions from Price. Prices do not include (a) export licensing of the
Product or payment of broker’s fees, duties, tariffs or other similar charges;
(b) taxes or charges imposed by any taxing authority upon the manufacture, sale,
shipment, storage, “value add” or use of the Product which SANMINA-SCI is
obligated to pay or collect; and (c) setup, tooling, or non-recurring
engineering activities (collectively “NRE Charges”). Any charges for these items
shall be separately invoiced.

 

4.4 Other Price Adjustments. MCDATA acknowledges that the Pricing matrix set
forth in Exhibit E is based on the forecasted volumes provided by MCDATA to
SANMINA-SCI. McDATA acknowledges that the prices are based on the Specifications
and the assumptions set forth in Sanmina-SCI’s quote. In the event SANMINA-SCI
experiences an increase in cost as a result of changes in the pricing
assumptions or the Specifications and such increase is verified and agreed to by
the parties (such cost to be verifiable and agreed to by the parties with such
agreement not to be unreasonable withheld).

 

4.5 Vendor Prices. SSCI understands that McDATA has established and negotiates
on a regular basis, special volume price relationships with its component
vendors. If, by virtue of these special relationships, McDATA has obtained a
better price on certain components than has SSCI, SSCI agrees to purchase such
components from said vendors at McDATA’s

 

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negotiated price, provided the overall impact of the underlying terms,
conditions, economic order quantities and lead times associated with obtaining
the better prices can be mutually agreed upon.

 

4.6 Inventory Revaluation. The parties agree that component materials, which
drive approximately [***] of the material cost of Products, will be reviewed and
adjusted on a quarterly basis or as mutually agreed to by the Parties and such
agreement will not be unreasonably withheld. Product quotes will be updated
accordingly on a quarterly basis provided the Parties agree to the “Inventory
Revaluation Method” for implementation of quarterly component cost adjustments.
The “Inventory Revaluation Method” is defined as McDATA’s payment to SSCI for
the difference between the current component standard cost and the new quoted
price for same components, multiplied by the quantity of on-hand and on-order
(which cannot be adjusted) inventory received prior to purchase of components at
the new price. SSCI shall provide a summary of the proposed revaluation
including the component part number, present standard, new quote price and the
quantity of inventory at the current standard cost. McDATA agrees to issue a
purchase order to cover the cost associated with the revaluation of items, which
will be cut in within the next quarter, plus any other items at McDATA’s
discretion. SSCI shall invoice the total quarterly revaluation purchase order
which consists of the net amount of purchase price variance for material
purchased in the previous quarter. The effective date for the agreed to
revaluation Product pricing shall be the first day of the new calendar quarter.
McDATA agrees that the revaluation purchase order shall be issued no later than
thirty (30) days after the end of the calendar quarter. The parties agree to
quote specific items on a semi-annual basis, for particular products or
processes i.e. spares, features, accessories, etc.

 

4.7 Cost And Price Reviews. The parties agree that one hundred (100%) percent of
the component throughput costs and the Transformation Costs will be reviewed and
adjusted on a quarterly basis. The pricing matrix contained in Exhibit E shall
be jointly reviewed by the parties at an agreed upon frequency, not less than
quarterly, and may be modified with the mutual written agreement of the Parties
signed by authorized signatories of each party.

 

4.8 Cost Reductions. SSCI hereby agrees to target overall cost reductions of
[***] [***] to [***] [***][***] quarter over quarter. SSCI agrees to document a
specific cost reduction plan to drive a [***] [***] [***] [***] minimum quarter
over quarter cost reduction. This cost reduction plan shall be jointly reviewed
on a minimum of a monthly basis. SSCI and McDATA will mutually develop a
quarterly plan to identify cost reduction opportunities in internal processes
and component material purchase prices. Reductions, which result directly from
McDATA efforts, will be incorporated into the price at the time the cost benefit
is realized by SSCI. Reductions, which result from SSCI efforts, will be
implemented (as they are approved by McDATA) with [***] of the cost benefits
incorporated into the Product sales price at the time the cost benefit is
realized by SSCI. Full implementation of the cost reduction will occur
[***][***] from the time the cost reduction was realized.

4.9 [***]

 

5. PAYMENT TERMS/SETOFFS

 

5.1 Terms. Terms of payment are [***][***][***][***][***][***][***][***][***]
from date of invoice. Such invoice may not be dated prior to the date the
applicable Products are shipped from SSCI. McDATA is entitled to take such [***]
[***] discount if payment is received by Sanmina-SCI on or before the [***]
[***] after the date of invoice. Net [***][***] payments by McDATA are not
eligible for the discount. Payments are not subject to setoffs or offsets.
McDATA will use commercially reasonable efforts to report disputed invoices to
SSCI within five (5) business days of McDATA receipt. Disputed invoices not
reconciled on or before the [***] invoice discount period shall not be eligible
for the [***][***] invoice discount, unless otherwise mutually agreed. Upon
request, SSCI will provide backup documentation to support SSCI’s claim for the
stated amount of any invoice.

 

6. PURCHASE ORDERS/FORECAST/RESCHEDULE

 

6.1 Purchase Orders.

 

6.1.1 McDATA will issue to SANMINA-SCI specific Orders for Product covered by
this Agreement. Each Order shall be in the form of a written or electronic
communication and shall contain the following information: (i) a description of
the Product by model number; (ii) the quantity of the Product; (iii) the
delivery date or shipping schedule; (iv) the location to which the Product is to
be shipped; and (v) transportation instructions. Each Order shall provide an
order number for billing purposes, and may include other instructions and terms
as may be appropriate under the circumstances.

 

6.1.2 All Orders shall be confirmed by SANMINA-SCI within [***][***][***] of
receipt or less. If an order is not confirmed within one business day, the
Parties agree to review said order for acceptance or rejection. In the event
SANMINA-SCI is

 

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unable to meet the delivery schedule set forth in a proposed Order, the parties
shall negotiate in good faith to resolve the disputed matter(s).

 

6.2 Forecasts. On a monthly basis, McDATA will provide a new forecast so as to
maintain a minimum of [***][***] month rolling forecast of its projected orders
for Products. Any quantities listed in any forecast beyond the first [***] weeks
of said forecast or other correspondence between the parties are only estimates
and do not constitute a commitment on McDATA’s part to purchase such quantity.
McDATA shall be liable for the first eight weeks of the forecast or other
correspondence between the Parties. The balance of such forecasts are made as an
accommodation for planning purposes and authorization for SSCI’s purchase of
materials as identified in the costed BOMs, which accompany SSCI price
quotation, or as provided in Section 6.2. McDATA’s liability for such long lead
material is as stated in Section 6.7.4.

 

6.3 Burst Capacity. SSCI shall maintain assembly process capacity to accommodate
a [***][***] increase over projected quarterly demand.

 

6.4 Purchase Orders and Releases. SSCI shall build Products to a configurable
level (semi-finished goods) pursuant to the forecast. For Product to be drop
shipped via common carrier, McDATA shall use commercially reasonable efforts, on
a daily basis, to issue purchase orders to SSCI by 12:00 noon on a given day for
individual orders of Products to be shipped on the following day or in such time
as specified on such Purchase Order. Orders will be shipped [***] [***]. For
Product to be shipped [***] [***] (Via SSCI truck), releases received by 12 noon
will be delivered to McDATA manufacturing site or metro Denver locations, not
later than 11:00 a.m. delivery on the second business day after receipt of
release. For McDATA releases received after 12:00 noon on a day, SSCI will use
commercially reasonable efforts to ship Product without additional expense as
requested. In the event alternate shipping methods are required, over-time
expense or other premiums to SSCI quoted costs may be required to achieve
requested delivery, with prior written approval, such cost shall be borne by
McDATA. McDATA may transmit purchase orders and releases in writing, by
facsimile or other means of electronic transfer agreed to by the parties. The
Parties agree that the terms and conditions of this Agreement take precedence
over any pre-printed terms on any purchase order, acknowledgement, notification,
or any other document used in performance of this Agreement.

 

6.5 Non-cancelable Non-returnable (NCNR) Rules for Components. Non-cancelable
non-returnable (NCNR) is hereby defined as any component that is unique to
McDATA’s Products and/or cannot be returned to the supplier after inventory has
been received and cannot be cancelled once components have been placed on order
by SSCI. On a quarterly basis with updates as required, SSCI agrees to provide
McDATA in writing a list of components that are considered to be NCNR and for
which SSCI intends to hold McDATA liable for payment to SSCI. The Parties will
mutually agree to said list. The list will include part number and description,
supplier, Minimum Order Quantity (MOQ), lead-time and price As NCNR items are
identified they will be submitted to McDATA, with sufficient details to approve
and upon approval shall be added to the list. NCNR components contained within
this list shall be considered accepted and authorized by McDATA for purchase as
required to support requirements with consideration to lead-time and MOQ.

 

6.6 Lead Time Expectations. SSCI shall actively work with its suppliers to
continually reduce component and in-house process lead times. Additionally, SSCI
will provide a tracking report on component lead times on a quarterly basis.
Such report will reflect the number of part numbers with lead time in thirty
(30) day increments. As components with lead-times beyond eight-week liability
period detailed with Section 6.2 above are identified they will be submitted to
McDATA, with sufficient details for approval to purchase quantities beyond
forecasted requirements. Upon approval, part numbers, quantities, and
cancellation lead times shall be added to a long lead-time list of components
for which SSCI is authorized to purchase the identified quantity at lead-time,
in addition to rolling forecasted requirements. McDATA’s liability for long lead
time items shall be subject to the terms set forth in Section 6.7.4. Such list
will be published by SSCI on a monthly basis.

 

6.7 MRP Process.

 

6.7.1 SANMINA-SCI shall take the forecast and generate a Master Production
Schedule (“MPS”) for a nine-month period in accordance with the process
described in this Section. The MPS shall define the master plan on which
SANMINA-SCI shall base its procurement, internal capacity projections and
commitments. SANMINA-SCI shall use MCDATA’s forecast to generate the first [***]
[***][***] of the MPS and shall use MCDATA’s remaining forecast to generate the
subsequent [***][***][***] of the MPS.

 

6.7.2 SANMINA-SCI shall process the MPS through industry-standard software (the
“MRP Software”) that will break down McDATA’s Product requirements into
Component requirements.

 

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6.7.3 SANMINA-SCI will release (launch) purchase orders to vendors (including
other SANMINA-SCI facilites) prior to the anticipated date that the Components
are needed at SANMINA-SCI. The date on which these orders are launched will
depend on the lead time determined between the vendor and SANMINA-SCI and
SANMINA-SCI’s manufacturing or materials planning systems.

 

6.7.4 A list of all Components with lead times greater than [***][***] (“Long
Lead-time Components”) is set forth in Exhibit B to this Agreement. SANMINA-SCI
shall use reasonable efforts to update the list of Long Lead-time Components
every quarter and present an updated list of Long Lead-time Components to
McDATA. Each revised Long Lead-time Item list shall be deemed an amendment to
Exhibit B. In the event SANMINA-SCI fails to present an updated list of Long
Lead-time Components, (i) the parties shall continue to rely on the preceding
list (as updated in writing by the parties) and (ii) McDATA will accept
responsibility for Long Leadtime Components ordered outside the leadtimes set
forth in the list provided that SANMINA-SCI can demonstrate to McDATA’S
reasonable satisfaction that such Components were ordered in accordance with the
then-current vendor leadtimes. McDATA acknowledges that leadtimes constantly
change and that SANMINA-SCI might not always be able to present McDATA with a
current Long Leadtime Component List.

 

6.7.5 McDATA acknowledges that SANMINA-SCI will order Components in quantities
sufficient to support McDATA’s forecast. In determining the quantity of
Components to order, SANMINA-SCI divides the Components into three classes,
“Class A,” “Class B” and “Class C.” Class A Components are comprised of the
approximately [***] [***] percent of Components constituting approximately [***]
[***] percent ([***] %) of the Product’s total Component cost. Class C
Components are comprised of the approximately [***] percent ([***] %) of
Components constituting approximately [***] [***] percent ([***] %) of the
Product’s total Component cost. Class B Components are comprised of the
remaining [***] [***] percent ([***] %) of Components constituting approximately
[***] [***] percent ([***] %) of the Product’s total Component cost. SANMINA-SCI
will place orders with its vendors for approximately [***] weeks’ worth of Class
A Components, [***] worth of Class B Components and [***] worth of Class C
Components. A summary of SANMINA-SCI’s purchase commitments is set forth in the
table below.

 

Part Class

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   Expected
Percentage of
Total Parts

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    Expected
Percentage of
Total Value
(of Gross
Requirements)

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    Periods Worth
of Supply to
be Bought
with Each
Order

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A

   [***] %   [***] %   [***]

B

   [***] %   [***] %   [***]

C

   [***] %   [***] %   [***]

 

6.7.6 McDATA acknowledges that SANMINA-SCI will be required to order Components
in accordance with the various minimum buy quantities, tape and reel quantities,
and multiples of packaging quantities required by the vendor. In addition,
McDATA acknowledges that there is a lag time between any McDATA cancellation and
the cancellation of the Components required to support production. SSCI will use
commercially reasonable efforts to notify vendors within three (3) business days
but no later than five (5) business days.

 

6.7.7 SANMINA-SCI shall use reasonable commercial efforts to accommodate any
upside schedule changes beyond the firm order periods.

 

6.8 Excess and Obsolete Inventory.

 

6.8.1 SANMINA-SCI shall advise McDATA in writing of any Excess or Obsolete
Components in its inventory and the Delivered Cost of such Components (the “E&O
List”) weekly. Within ten (10) business days of receiving SANMINA-SCI’s E&O List
with the corresponding waterfall charts for the top 20 components on the list,
McDATA shall advise SANMINA-SCI of any Component on the top 20 E&O List that it
believes is not excess or obsolete with reason for rejection. Within five
business days after receiving SANMINA-SCI’s top 20 E&O List, SANMINA-SCI and
McDATA shall finalize the top 20 E&O List. McDATA shall issue to SANMINA-SCI a
Purchase Order for all mutually agreed Components on the top 20 E&O List. McDATA
shall pay SANMINA-SCI for the mutually agreed Components on the E&O List within
thirty (30) days of the date of invoice. McDATA shall not have the right to
delay payment for Excess Components by increasing or pushing out its forecast
unless mutually agreed to by the Parties and such agreement will not be
unreasonably withheld.

 

6.8.2 In the event SSCI has excess and obsolete (E&O) inventory SSCI shall use
best commercial efforts to minimize McDATA’s liability relative to such E&O
inventory by: (a) using the E&O inventory (when possible) on other programs
within SSCI facilities; (b) issuing cancellation notice on all outstanding
material orders with SSCI suppliers no later than three (3) business days but no
later than five (5) business days; and (c) returning piece parts as allowed by
SSCI suppliers. On no less than a monthly basis, SSCI agrees to provide to
McDATA a report outlining all such E&O inventory.

 

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6.8.3 McDATA Component Liability. McDATA acknowledges that it shall be
financially liable for all Components ordered in accordance with this Section.
Specifically, McDATA’s Component Liability shall be equal to SANMINA-SCI’s
Delivered Cost of all Components ordered in support of any Order or forecast,
including any Excess Components resulting from any minimum buy quantities, tape
and reel quantities, and multiples of packaging quantities required by the
vendor less the actual cost (per the bill of materials) of those Components
which are returnable to vendor (less any cancellation or restocking charges). At
McDATA’S request, SANMINA-SCI shall use commercially reasonable efforts to
minimize McDATA’S Component Liability by attempting to return Components to the
vendor; provided, however, that SANMINA-SCI shall not be obligated to attempt to
return to vendor Components which are, in the aggregate, worth less than $1,000.
Sanmina-SCI agrees to review component usage for other customer requirements to
mitigate this liability.

 

7. MANUFACTURE OF PRODUCTS

 

7.1 Manufacture of Products. Sanmina-SCI shall manufacture for McDATA such
quantities and types of Products as McDATA may order from time to time, and as
Sanmina-SCI may accept pursuant to this Agreement. Sanmina-SCI shall not, unless
otherwise specified in a written agreement entered into by McDATA, manufacture
or sell any Product except as directed by McDATA hereunder. Notwithstanding the
foregoing, nothing in this Agreement shall be deemed to grant Sanmina-SCI any
right to use McDATA’s name for any purpose other than as expressly provided
herein or otherwise mutually agreed.

 

7.2 Manufacturability of McDATA Design. McDATA shall provide its
Specification(s) and may provide McDATA Process Documentation to Sanmina-SCI for
new Products. Sanmina-SCI shall provide to McDATA a New Product Project Plan
(Section 24.3) including without limitation feedback, risk assessment, and
suggested improvements to McDATA in writing as to the Manufacturability of such
design(s). Upon McDATA’s review of such New Product Project Plan submitted by
Sanmina-SCI, and upon mutual agreement and written authorization from McDATA,
Sanmina-SCI shall commence production of the new Product. In the event McDATA
instructs Sanmina-SCI to commence production prior to mutual agreement of such
New Product Project Plan, such commencement does not indicate Sanmina-SCI’s
agreement as to the Manufacturability of such New Product design. If Sanmina-SCI
commences production prior to mutual agreement without McDATA’s specific
instructions to commence production, then such production indicates
Sanmina-SCI’s acceptance of responsibility for production using such design.

 

7.3 Manufacture in Accordance with Specifications. Sanmina-SCI shall manufacture
all Products in strict conformity with all applicable Specifications,
Sanmina-SCI Process Documentation, McDATA Process Documentation, and Sanmina-SCI
Contract Quality Requirements and all applicable laws and regulations.
Sanmina-SCI shall not make any change in or deviate in any way from such
Specifications except pursuant to an Engineering Change Order approved as
provided in this Agreement. Further, Sanmina-SCI shall ensure,that Sanmina-SCI’s
manufacturing processes shall meet the requirements of the regulatory agencies
applicable to the manufacture of the Products, including without limitation
Underwriters’ Laboratory (UL), U.S. Federal Communications Commission (FCC), and
the Canadian Standards Association (CSA). In the event of a breach of this
Section, in addition to other remedies provided in this Agreement and available
to McDATA at law, Sanmina-SCI shall be liable for and shall pay all costs
associated with any retrieval, retest, rework, and/or reinstallation required
due to such breach, including without limitation material, labor, and overhead
costs.

 

7.4 Pricing Quote Model. On or before three (3) business days prior to the end
of each quarter or as mutually agreed to by the Parties, Sanmina-SCI shall
provide pricing quotation schedules to McDATA (in accordance with the “Inventory
Revaluation Method” as defined in Section 4.6) for all Products, with stated
cost reductions in accordance with Section 4.8 below. Additionally, Sanmina-SCI
shall provide to McDATA costed Bills of Materials (BOMs) with each quotation.
McDATA may, from time to time, request interim pricing quotations; such interim
quotation shall be provided to McDATA within three (3) business days of McDATA’s
request for requote of existing Products. First time quotes for new Products
shall be provided within ten (10) business days of McDATA’s request. McDATA’s
issuance of a purchase order indicates McDATA’s acceptance of such quotation.
Sanmina-SCI shall use the Pricing Quote Model, attached hereto as Exhibit G, to
provide such information to McDATA.

 

8. INVENTORY RISK MANAGEMENT

 

8.1 End-Of-Life Inventory Support. SSCI will notify McDATA as parts reach
End-Of-Life, through a supplier of SSCI declaring the End-Of-Life of its parts.
SSCI will use best commercial efforts to locate and qualify a reasonable
alternative to replace the End-Of-Life parts and/or components. If mutually
agreed, SSCI will execute an End-Of-Life buy of such

 

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End-Of-Life parts or components on McDATA’s behalf. SSCI will continue to manage
the End-Of-Life McDATA inventory for a mutually agreed upon term. SSCI shall use
best commercial efforts to mitigate McDATA’s liability for carrying costs by
requesting that its suppliers hold such inventory. SSCI shall provide to McDATA,
on a monthly basis, a summary report of on-hand and projected End-Of-Life
liabilities. SSCI must use best efforts to contractually require critical and
sole source suppliers to provide [***] [***] notice of End-Of-Life and ensure
continuity of supply during this period, including a final End-Of-Life buy at
the end of the notice period.

 

8.2 Unforecasted Requirements. From time to time it may be necessary for SSCI to
procure components to support McDATA’s intended but unforecasted requirements.
Such procurement shall be fulfilled pursuant to a letter of authorization signed
by both parties.

 

8.3 Supplemental First Choice Purchases. In the event McDATA has excess
inventory that may be consumed in the Products, SSCI agrees to purchase such
inventory from McDATA as required to support McDATA Product orders, and SSCI
further agrees to accordingly adjust purchase orders for such parts that are in
place with SSCI’s vendors.

 

8.4 Late Delivery. SSCI shall immediately notify McDATA if delivery of any
Products will be delayed and, concurrently, notify McDATA of the rescheduled
delivery date. In the event of such delay, and with the exception of delays due
to force majeure, McDATA may, at any time prior to the rescheduled delivery
date, cancel without penalty except as set forth herein that portion of its
purchase order covering such delayed Products. The notification may be
communicated by facsimile, telephone, electronic mail, or any other method
agreed to by the parties, provided that SSCI shall use commercially reasonable
efforts to obtain McDATA’s actual acknowledgement of the notice of anticipated
delay. SSCI and McDATA will jointly develop alternatives to resolve any late
delivery of the Product, including use of premium routing. SSCI will develop
recovery plans with new committed shipment dates and communicate such plans to
McDATA within one business day of missed shipments. If SSCI is unable to deliver
the Product on the acknowledged delivery date, through no fault of McDATA,
McDATA may require SSCI to pay the difference between premium routing rates and
standard routing rates.

 

8.5 Delivery Dates. SSCI further agrees that time and rate of delivery are of
the essence of this Agreement. The “Delivery Dates” shall be those specified as
the “promised date”. For Direct Ship Products (as defined in Section 9.1),
deliveries will be considered on time if they are released to the common carrier
on the promise date. For Non-direct Ship Products (as defined in Section 9.2),
deliveries will be considered on time if they are delivered to McDATA on the
promise date.

 

8.6 Rescheduled Product. SSCI agrees to hold rescheduled finished Products(s)
for [***] [***] from the date such Product(s) was received into Finished Goods
at no cost to McDATA. In the event such rescheduled Products have not been
released for shipment within such [***] [***] period, SSCI shall invoice and
ship Products [[***][***] ***] days after completion of Product into SSCI’s
Finished Goods, or upon request by McDATA, SSCI shall hold such Product on
mutually agreed upon terms.

 

8.7 Reschedule Requests. SSCI will provide best commercial efforts to meet
reschedule requests. If Product has been configured or processed specifically
for a Release, which is subsequently cancelled, the cost incurred by SSCI in the
original configuration process and the costs to return Product to semi-finished
goods state shall be borne by McDATA.

 

8.8 Inventory Carrying Cost. McDATA agrees to pay a monthly inventory carrying
cost equal to that defined below.

 

  •   The following carrying charges would be applicable on all inventory
exceeding an agreed upon baseline with the goal for the McDATA/SSCI teams to
obtain inventory turn rates of [***] turns per calendar year and a reasonable
assumption that an ongoing baseline of inventory needs to be retained by SSCI at
the end of each calendar quarter. For instance: (assuming that the current cost
of goods sold is $[***] and [***] [***] turns expectation would require the
maximum of SSCI carrying [***] of active inventory). Turns would be calculated
using GAAP; inventory carrying costs would be calculated as follows: (total
inventory at the end of each month – baseline inventory = inventory subject to
the % below).

 

  •   The baseline inventory for purposes of this Agreement would be calculated
utilizing a [***] [***] month rolling averagecost of goods sold.

 

  •   Inventory carrying charges would be applied at a rate of [***] [***]
percent per month on all inventory over that month’s calculated baseline.

 

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  •   The total inventory must be justified and adjusted according to
documentation generated by SSCI. (i.e., waterfall charts NCNR approvals, long
lead-time agreements, etc.). Any inventory deemed to be the responsibility of
SSCI will be subtracted from the total inventory number calculations as it
pertains to inventory carrying costs

 

Immediately after the Effective Date, the parties will form teams of McDATA and
Sanmina-SCI personnel to develop methods and processes to remedy the causes
generating any inventories beyond those needed to support McDATA forecast
requirements. These teams would report on a monthly basis the progress and
findings of their efforts to a senior management team of McDATA and Sanmina-SCI
to insure all reasonable efforts are made to attain our goal of a minimum of
[***] [***] turns. Additionally SSCI will waive all carrying charges for a [***]
[***] period commencing from the Effective Date of this Agreement, while the
teams are working to initiate processes to insure inventory turns can be
maximized.

 

8.9 Audits. McDATA reserves the right to have access to such SSCI records for
McDATA invoices, supplier purchase orders and any other applicable documentation
of cost and expenses incurred by SSCI in performance of this Agreement, for
purpose of audit and verification. Such audits may be performed by McDATA or by
an independent auditor selected by McDATA during normal business hours and upon
reasonable notice, for so long as such records are required to be retained. SSCI
will retain such records for six (6) years or as required by law. Further,
McDATA reserves the right to audit SSCI and/or SSCI’s facilities at any time
upon reasonable notice, to ensure SSCI’s compliance with this Agreement. McDATA
shall ensure that any auditor performing audit duties, whether McDATA personnel
or an independent auditor selected by McDATA, shall first have entered into
SSCI’s confidentiality agreement.

 

9. SHIPMENT, TITLE AND RISK OF LOSS

 

9.1 For “Direct Ship Products”, such Product shall be shipped [***][***] [***].
Title to and risk of loss for such Products shipped directly to McDATA’s
Customer shall pass to McDATA [***] [***].

 

9.2 For “Non-direct Ship Products”, such Product shall be shipped (SSCI Truck)
FOB Destination unless otherwise provided herein. For Product being shipped
(SSCI Truck) DDP Destination, title to and risk of loss for such other Products
shall pass to McDATA [***][***][***][***]. In the event McDATA chooses to use a
common carrier for expedited shipment (i.e., for schedule pull-ins), such
shipment shall be [***], and title and risk of loss passes [***] [***]. McDATA
shall be responsible for the additional shipping cost on such expedited common
carrier shipments unless otherwise mutually agreed to.

 

9.3 Delivery. SANMINA-SCI shall mark, pack, package, crate, transport, ship and
store Product to ensure (a) delivery of the Product to its ultimate destination
in safe condition, (b) compliance with all requirements of the carrier and
destination authorities, and (c) compliance with any special instructions of
McDATA. SANMINA-SCI shall use reasonable efforts to deliver the Products on the
agreed-upon delivery dates and shall use reasonable efforts to notify McDATA of
any anticipated delays;

 

10. DELIVERY AND ACCEPTANCE

 

10.1 Acceptance. Acceptance of the Product shall occur no later than
[***][***][***] after shipment of Product and shall be based solely on whether
the Product passes a mutually agreeable acceptance test procedure or inspection
designed to demonstrate compliance with the Specifications. Product cannot be
rejected based on criteria that were unknown to SANMINA-SCI or based on test
procedures that SANMINA-SCI does not conduct. Product shall be deemed accepted
if not rejected within this [***] day period. Once a Product is accepted, all
Product returns shall be handled in accordance with Article 7 (Warranty). Prior
to returning any rejected Product, McDATA shall obtain an Authorized Return
Material (“ARM”) number from SANMINA-SCI, and shall return such Product in
accordance with SANMINA-SCI’s instructions. McDATA shall specify the reason for
such rejection in all ARM’s. In the event a Product is rejected, SANMINA-SCI
shall have a reasonable opportunity to cure any defect which led to such
rejection. Payment does not constitute acceptance.

 

10.2 Location and Qualification of Manufacturing Operations. SSCI shall
manufacture all Products in facilities approved by McDATA. Other SSCI facilities
may manufacture McDATA Products upon meeting the certification and quality
standards required by McDATA. Should the quality standards of any SSCI facility
fall below McDATA’s stated requirements for the manufacture of its Product, and
it is necessary for McDATA to re-qualify one of SSCI’s manufacturing facilities,
SSCI and McDATA will mutually agree on SSCI’s reimbursement of the reasonable
expenses incurred by McDATA for such re-qualification. Notwithstanding the
foregoing, SSCI shall not be liable to pay expenses for regularly-scheduled
visits on McDATA’s behalf. Subject to McDATA’s approval, which shall not be
unreasonably withheld, SSCI shall have the right to utilize internal
capabilities as it relates to manufacture of components and sub-assemblies
including

 

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but not limited to pcb’s, backplanes, sheetmetal, cables, engineering services,
provided there is no negative impact to Product sales price or adherence to
Specifications. The intent over time is for SSCI to become the approved vendor
for such components, at competitive prices, that go into the systems McDATA
sells.

 

11. CHANGES

 

11.1 General. McDATA may upon sufficient notice make changes within the general
scope of this Agreement. Such changes may include, but are not limited to
changes in (1) drawings, plans, designs, procedures, Specifications, test
specifications or BOM, (2) methods of packaging and shipment, (3) quantities of
Products to be furnished, (4) delivery schedule, or (5) McDATA-Furnished Items.
All changes other than changes in quantity of Products to be furnished shall be
requested pursuant to an Engineering Change Notice (“ECN”) and, if accepted by
McDATA, finalized in an Engineering Change Order (“ECO”). If any such change
causes either an increase or decrease in SANMINA-SCI’s cost or the time required
for performance of any part of the work under this Agreement (whether changed or
not changed by any ECO) the Prices and/or delivery schedules shall be adjusted
in a manner which would adequately compensate the parties for such change.

 

11.2 ECN’s. SANMINA-SCI will respond to [***] [***] ECN requests per [***]
without a non-recurring administrative fee; responses to additional ECN’s will
incur an administrative fee of [***] each. Within [***] business days after an
ECN is received, SANMINA-SCI shall advise McDATA in writing (a) of any change in
Prices or delivery schedules resulting from the ECN and (b) the Delivered Cost
of any Finished Product, Work-in-Process or Component rendered excess or
obsolete as a result of the ECN (collectively the “ECN Charge”). Unless
otherwise stated, ECN Charges are valid from[***] [***] days from the date of
the ECN Charge.

 

11.3 ECO’s. In the event McDATA desires to proceed with the change after
receiving the ECN Charge pursuant to Section 11.2, McDATA shall advise
SANMINA-SCI in writing and shall pay the portion of the ECN Charge set forth in
Section 11.2. In the event McDATA does not desire to proceed with the ECN Change
after receiving the ECN Charge, it shall so notify SANMINA-SCI. In the event
SANMINA-SCI does not receive written confirmation of McDATA’s desire to proceed
with the change within [***] [***] days after SANMINA-SCI provides McDATA with
the ECN Charge, the ECN shall be deemed cancelled. Both Parties agree to notify
the other party immediately if anything in an ECN or ECO could affect the safety
and well being of employees and/or customers. The parties shall mutually agree
in writing to each ECO, and to the implementation and all costs thereof. SSCI
shall not commence implementation of an ECO until both parties agree to such ECO
in writing. McDATA agrees to provide purchase order at the time of effectivity.

 

11.4 Unauthorized Change. In the event SSCI implements an unauthorized change,
upon notification by McDATA, SSCI shall be liable for, and shall pay all
authorized costs associated with any retrieval, retest, rework and/or
reinstallation required due to such breach, including without limitation
material, labor, and overhead costs.

 

12. WARRANTY

 

12.1 SANMINA-SCI Warranty. SANMINA-SCI’s warranty period is for[***] [***] from
date of manufacture and is limited to correction of defects in materials and
SANMINA-SCI workmanship. For the purpose of this Section, “workmanship” shall
mean manufacture in accordance with the most current version of IPC-A-600 or
IPC-A-610, SANMINA-SCI’s manufacturing workmanship standards or the McDATA’s
written workmanship standards set forth in the Specifications (the “Standards”).
Unless otherwise agreed in writing, Products shall be considered free from
defects in workmanship if they are manufactured in accordance with the Standards
and successfully complete any mutually agreed product acceptance test.
SANMINA-SCI shall, at its option and at its expense, repair, replace or issue a
credit for Product found defective during the warranty period. ALL CLAIMS FOR
BREACH OF WARRANTY MUST BE RECEIVED BY SANMINA-SCI NO LATER THAN THIRTY (30)
DAYS AFTER THE EXPIRATION OF THE WARRANTY PERIOD.

 

12.2 Performance Warranties. The Parties represent and warrant that (a) they
have the power to enter into and perform their obligations under this Agreement;
(b) have and will have full and sufficient right to assign or grant any rights
and/or licenses granted pursuant to this Agreement; and (c) their performance of
this Agreement shall not infringe upon or violate the intellectual property
rights of any third party or violate any federal, state or municipal laws.

 

12.2.1 Sanmina-SCI will, and without charge to McDATA, promptly (within
[***][***] of Sanmina-SCI’s receipt) repair, or replace as mutually agreed, any
Product which is determined to be defective in workmanship and which is returned
to Sanmina-SCI for warranty repair, provided the Product has not been damaged,
subjected to misuse, altered, improperly repaired or maintained by McDATA or
third parties in a manner which Sanmina-SCI reasonably determines to have
adversely affected performance or reliability. The materials portion of the
Product warranty shall not apply to McDATA consigned or supplied materials
unless such consigned or supplied materials have been abused or misused by
Sanmina-SCI

 

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or damaged by external causes directly contributed to by Sanmina-SCI. Further,
the component materials portion of the Product warranty provided by Sanmina-SCI
or the cost associated with rework and/or impacts to production shall not exceed
the component warranty provided by the component manufacturer for those items
where McDATA has negotiated a contract with such other component manufacturer.
Sanmina-SCI’s liability hereunder is limited to the repair, or replacement of
the defective Product, and if neither repair nor replacement is possible, a
refund of the monies paid for such non-conforming Product, and does not include
any labor related to the removal and/or subsequent reinstallation thereof.
Sanmina-SCI agrees that if a field replaceable unit (“FRU”) under warranty is
returned by McDATA to Sanmina-SCI [***] [***] times for the same failure, or
[***] [***] times for any non-cosmetic failure, Sanmina-SCI shall replace such
FRU and Sanmina-SCI shall subsequently destroy such FRU. Sanmina-SCI shall
provide McDATA a quarterly report by serial number of the FRUs that have been
returned to Sanmina-SCI [***] [***] times for the same failure and [***] [***]
times for any non-cosmetic failure. Product may consist in part of used FRUs
which are warranted as equivalent to new when used in the Product.

 

12.3 ARM Procedure. SANMINA-SCI shall concur in advance on all Product to be
returned for repair or rework. McDATA shall obtain an Authorized Returned
Material (ARM) number from SANMINA-SCI prior to return shipment. All returns
shall state the specific reason for such return, and will be processed in
accordance with SANMINA-SCI’s Authorized Returned Material Procedure, a copy of
which is available from SANMINA-SCI upon request SANMINA-SCI shall pay all
transportation costs for valid returns of the Products to SANMINA-SCI and for
the shipment of the repaired or replacement Products to McDATA, and shall bear
all risk of loss or damage to such Products while in transit; McDATA shall pay
these charges, plus a handling charge, for invalid or “no defect found” returns.
Any repaired or replaced Product shall be warranted as set forth in this Article
for a period equal to the greater of (i) the balance of the applicable warranty
period relating to such Product or (ii) [***] [***] days after it is received by
McDATA.

 

12.3.1 Within one business day of receipt of an RMA request, SSCI will issue an
RMA number or request additional information required to process the RMA request
for return of Product. A return Purchase Order or adjustments to the quantity of
an existing order will be communicated along with the RMA request. McDATA shall
be liable for all down revision on non-warranty items or excess Products
returned through the RMA process. Warranty returns to SSCI will be transacted
for repair, replacement or credit of the purchase price at SSCI’s option. In the
event McDATA requests that SSCI accept non-warranty returns for
SSCI-manufactured products, SSCI agrees accept such returns, and at McDATA’s
discretion, SSCI will repair, replace or dispose of such return, and McDATA will
pay SSCI the rework, replacement or disposition charges applicable. The Parties
will mutually agree on non-warranty returns for non-SSCI-manufactured products.
All shipping costs for warranty returns are borne by SSCI. All shipping costs
for non- warranty returns are borne by McDATA.

 

12.3.2 The standard process for transaction of RMAs shall be for McDATA to issue
a debit memo and SSCI to issue an offsetting credit. RMA Product, which is
debited upon return shall reflect the current months sales price.

 

12.4 Failure analysis on return material authorization (RMA) shall be completed
in accordance with Section 8 of Exhibit F (SSCI Contract Quality Requirements).

 

12.4.1 SSCI’s warranty obligations will cease upon the earlier of the agreed
upon warranty period or upon SSCI’s fulfillment of McDATA’s request to return
any Tooling necessary for Product testing.

 

12.4.2 Each party warrants to the other party that Process Documentation which
it provides to the other paryt to manufacture the Products is accurate and
complete unless otherwise notified.

 

12.5 UNLESS EXPRESSLY AGREED TO BY SSCI IN WRITING, SSCI MAKES NO WARRANTY THAT
THE PRODUCTS WILL (i) MEET ANY SPECIFICATION NOT MADE KNOWN TO AND AGREED TO BY
SSCI, OR (ii) RECEIVE THE APPROVAL OF OR BE CERTIFIED BY UNDERWRITERS
LABORATORY, ANY FEDERAL, STATE, LOCAL OR FOREIGN GOVERNMENT AGENCY (INCLUDING
WITHOUT LIMITATION THE FEDERAL COMMUNICATIONS COMMISSION) OR ANY OTHER PERSON OR
ENTITY. SSCI ASSUMES NO RESPONSIBILITY FOR OBTAINING SUCH APPROVALS OR
CERTIFICATIONS FOR THE PRODUCTS, OR MEETING SUCH UNKNOWN SPECIFICATIONS FOR THE
PRODUCTS.

 

12.6 THE PRODUCT WARRANTY AND SUCH OTHER WARRANTIES AS AGREED TO IN THIS
AGREEMENT ARE THE ONLY WARRANTIES GIVEN BY SSCI. SSCI MAKES, AND McDATA
RECEIVES, NO OTHER WARRANTY EITHER EXPRESSED OR IMPLIED. ALL WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, COMPLIANCE WITH RoHS
AND WEEE (OR SIMILAR LEGISLATION) AND ALL IMPLIED WARRANTIES OF TITLE ARE
EXPRESSLY DISCLAIMED AND EXCLUDED HEREFROM.

 

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12.7 Exclusions From Warranty. This warranty does not include Products that have
defects or failures resulting from (a) McDATA’s design of Products including,
but not limited to, design functionality failures, specification inadequacies,
failures relating to the functioning of Products in the manner for the intended
purpose or in the specific McDATA’s environment; (b) accident, disaster,
neglect, abuse, misuse, improper handling, testing, storage or installation
including improper handling in accordance with static sensitive electronic
device handling requirements; (c) alterations, modifications or repairs by
McDATA or third parties or (d) defective McDATA-provided test equipment or test
software. McDATA bears all design responsibility for the Product.

 

12.8 Remedy. THE SOLE REMEDY UNDER THIS WARRANTY SHALL BE THE REPAIR,
REPLACEMENT OR CREDIT FOR DEFECTIVE PARTS AS STATED ABOVE. THIS WARRANTY IS IN
LIEU OF ANY OTHER WARRANTIES EITHER EXPRESS OR IMPLIED, INCLUDING
MERCHANTABILITY, NONINFRINGEMENT AND FITNESS FOR A PARTICULAR PURPOSE.

 

12.9 Epidemic Failure Warranty.

 

12.9.1 In addition to the warranties specified above, SSCI warrants all Products
against Epidemic Failure (as defined below) found to exist in the Products
during the warranty period (Epidemic Failure Period).

 

12.9.2 An Epidemic Failure shall mean a Product failure resulting from a defect
in SSCI’s workmanship or a defect in SSCI original manufactured (vertical
integration) material that has: (i) a defect rate of [***] [***] percent or more
as determined by the parties occurring with the same Product (s) for the same
root cause over any consecutive [***] [***] day period.

 

12.9.3 In the event of a suspected Epidemic Failure situation, SSCI and McDATA
shall work together to (i) conduct a thorough investigation into the failure’s
root cause, (ii) determine whether the failure constitutes an Epidemic Failure
as defined in this section, and (iii) develop an agreed cost effective
corrective action plan. If the Epidemic Failure is the result of material
provided by a supplier other than SSCI, SSCI and McDATA shall jointly pursue a
remedy from such supplier that will resolve the Epidemic Failure to the
satisfaction of McDATA or McDATA may pursue against the supplier any legal
remedies it deems appropriate. If the Epidemic Failure is the result of material
manufactured by SSCI, SSCI and McDATA shall jointly pursue a remedy from such
supplier that will resolve the Epidemic Failure to the satisfaction of McDATA.

 

12.9.4 In the event of an Epidemic Failure, McDATA has the option of having
SSCI, at SSCI’s expense: (i) sort, screen, repair and/or replace McDATA’s
Product, including installed Products, Products pending installation, and Spares
which are subject to such Epidemic Failure; and (ii) implement corrective
action. The parties will mutually agree on the time required to complete
servicing/correcting such Products. SSCI shall reimburse McDATA for all
commercially reasonable direct (out of pocket) costs, including without
limitation all overhead and logistical costs related to the implementation of
the corrective action.

 

13. MCDATA FURNISHED EQUIPMENT AND COMPONENTS

 

13.1 McDATA-Furnished Items. McDATA shall provide SANMINA-SCI with the
equipment, tooling, Components or documentation set forth in EXHIBIT D
(collectively the “McDATA-Furnished Items”). The McDATA-Furnished Items shall be
fit for their intended purposes and shall be delivered to SANMINA-SCI in a
timely manner. Documentation (including BOM’s, drawings and artwork) shall be
current and complete. McDATA shall be responsible for schedule delay, reasonable
inventory carrying charges and allocated equipment down time charges associated
with the incompleteness, late delivery or non-delivery of the McDATA-Furnished
Items.

 

13.2 Care of McDATA-Furnished Items. All McDATA-Furnished Items shall remain the
property of MCDATA. SANMINA-SCI shall clearly identify all McDATA-Furnished
Items by an appropriate tag and shall utilize such McDATA-Furnished Items solely
in connection with the manufacture of McDATA’s Product. SANMINA-SCI shall not
make or allow modifications to be made to the McDATA-Furnished Items without
McDATA’s prior written consent. SANMINA-SCI shall be responsible for reasonable
diligence and care in the use and protection of any McDATA-Furnished Items and
routine maintenance and repairs of any McDATA-Furnished Equipment, but shall not
be responsible for major repairs or replacements (including service warranties
and calibration to the equipment) or repair or replacement of failed
McDATA-Furnished Item unless such failure was caused by SANMINA-SCI’s negligence
or willful misconduct. Provided that McDATA is current in its payments to
SANMINA-SCI, all McDATA-Furnished Items shall be returned to McDATA at MCDATA’s
expense upon request. SANMINA-SCI’s production and warranty obligations which
require the utilization of the returned McDATA-Furnished Items will cease upon
SANMINA-SCI’s fulfillment of the McDATA’s request.

 

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13.3 McDATA-Furnished Components. McDATA-furnished Components shall be handled
in accordance with SANMINA-SCI’s procedures regarding McDATA-Furnished Material,
incorporated by reference herein, copies of which are available upon request.

 

14. INDEMNIFICATION

 

14.1 SANMINA-SCI’s Indemnification. SANMINA-SCI shall indemnify, defend, and
hold McDATA and McDATA’s affiliates, shareholders, directors, officers,
employees, contractors, agents and other representatives (the
“McDATA-Indemnified Parties”) harmless from all demands, claims, actions, causes
of action, proceedings, suits, assessments, losses, damages, liabilities,
settlements, judgments, fines, penalties, interest, costs and expenses
(including fees and disbursements of counsel) of every kind (each a “Claim,”
and, collectively “Claims”) (i) based upon personal injury or death or injury to
property to the extent any of the foregoing is proximately caused either by the
negligent or willful acts or omissions of SANMINA-SCI or its officers,
employees, subcontractors or agents and/or (ii) arising from or relating to any
actual or alleged infringement or misappropriation of any patent, trademark,
mask work, copyright, trade secret or any actual or alleged violation of any
other intellectual property rights arising from or in connection with
SANMINA-SCI’s manufacturing processes.

 

14.2 McDATA’s Indemnification. McDATA shall indemnify, defend, and hold
SANMINA-SCI and SANMINA-SCI’s affiliates, shareholders, directors, officers,
employees, contractors, agents and other representatives (the
“SANMINA-SCI-Indemnified Parties”) harmless from all Claims (i) based upon
personal injury or death or injury to property to the extent any of the
foregoing is proximately caused either by a defective Product, by the negligent
or willful acts or omissions of McDATA or its officers, employees,
subcontractors or agents and/or (ii) arising from or relating to any actual or
alleged infringement or misappropriation of any patent, trademark, mask work,
copyright, trade secret or any actual or alleged violation of any other
intellectual property rights arising from or in connection with the Products,
except to the extent that such infringement exists as a result of use by McDATA
of SANMINA-SCI’s manufacturing processes.

 

14.3 Procedure. A party entitled to indemnification pursuant to this Article
(the “Indemnitee”) shall promptly notify the other party (the “Indemnitor”) in
writing of any Claims covered by this indemnity. Promptly after receipt of such
notice, the Indemnitor shall assume the defense of such Claim with counsel
reasonably satisfactory to the Indemnitee. Notwithstanding the foregoing, if the
Indemnitee in its sole judgment so elects, the Indemnitee may also participate
in the defense of such action by employing counsel at its expense, without
waiving the Indemnitor’s obligation to indemnify and defend. The Indemnitor
shall not compromise any Claim or consent to the entry of any judgment without
an unconditional release of all liability of the Indemnitee to each claimant or
plaintiff.

 

15. LIMITATION OF LIABILITY

 

IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY INDIRECT,
CONSEQUENTIAL, INCIDENTIAL, OR SPECIAL DAMAGES, OR ANY DAMAGES WHATSOEVER
RESULTING FROM LOSS OF USE, DATA OR PROFITS, EVEN IF SUCH OTHER PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THE LIMITATION SET FORTH IN THIS
SECTION SHALL APPLY WHERE THE DAMAGES ARISE OUT OF OR RELATE TO THIS AGREEMENT.
FOR THE PURPOSE OF THIS SECTION, BOTH LOST PROFITS AND DAMAGES RESULTING FROM
VALUE ADDED TO THE PRODUCT BY McDATA SHALL BE CONSIDERED CONSEQUENTIAL DAMAGES.
EXCEPT AS STATED BELOW, IN NO EVENT SHALL EITHER PARTY’S LIABILITY FOR A PRODUCT
(WHETHER ASSERTED AS A TORT CLAIM OR CONTRACT CLAIM) EXCEED THE AMOUNTS PAID TO
SANMINA-SCI FOR SUCH PRODUCT HEREUNDER. IN NO EVENT WILL SANMINA-SCI BE LIABLE
FOR COSTS OF PROCUREMENT OF SUBSTITUTE GOODS BY McDATA. CLAIMS (i) FOR DAMAGES
FOR BODILY INJURY OR DEATH OR DAMAGE TO PERSONAL PROPERTY DIRECTLY CAUSED BY
EITHER PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT; (ii) BREACH OF A PARTY’S
OBLIGATIONS RELATING TO INDEMNIFICATIONS; OR (iii) BREACH OF CONFIDENTIALITY,
ARE SPECIFICALLY EXCLUDED FROM THE FOREGOING LIMITATION. Nothing in this Section
shall not (i) affect McDATA’s obligation for termination payments in accordance
with Section 16.4 or (ii) prevent the Indemnitor from indemnifying the
Indemnitee from and against any license fees and/or royalties the Indemnitee is
required to pay to any third party.

 

16. TERMINATION

 

16.1 Termination for Cause. Either party may terminate this Agreement or an
Order hereunder for default if the other party materially breaches this
Agreement; provided, however, no right of default shall accrue until [***] days
after the defaulting party is notified in writing of the material breach and has
failed to cure or provide plan mutually acceptable within the [***] [***] day
period after notice of material breach. Notwithstanding the foregoing, there
shall be five (5) business day period following notification for payment-related
defaults.

 

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16.2 Termination For Convenience. McDATA may terminate this Agreement hereunder
for any reason upon [***] [***] days’ prior written notice. In addition, McDATA
may terminate an Order hereunder for any reason upon ninety days’ (before
scheduled shipment) prior written notice. SANMINA-SCI may terminate this
Agreement for any reason upon [***] [***] days’ notice.

 

16.3 Termination by Operation of Law. This Agreement shall immediately terminate
should either party (a) become insolvent; (b) enter into or file a petition,
arraignment or proceeding seeking on order for relief under the bankruptcy laws
of its respective jurisdiction; (c) enter into a receivership of any of its
assets or (d) enter into a dissolution or liquidation of its assets or an
assignment for the benefit of its creditors.

 

16.4 Consequences of Termination.

 

16.4.1 Termination for Reasons other than SANMINA-SCI’s Breach. In the event
this Agreement or an Order hereunder is terminated for any reason other than a
breach by SANMINA-SCI (including but not limited to a force majeure or
termination for convenience), McDATA shall pay SANMINA-SCI, termination charges
equal to (1) the contract model price for all finished Product, existing at the
time of termination; (2) SANMINA-SCI’s cost (including labor, Components and
material mark-up as agreed to in the contract price model for all work in
process; and (3) McDATA’S Component Liability pursuant to Section 6.8.3
including material mark-up.

 

16.4.2 Termination Resulting From SANMINA-SCI’S Breach. In the event McDATA
terminates this Agreement or any Order hereunder as a result of a breach by
SANMINA-SCI, McDATA may, at McDATA”s sole option and discretion, pay
SANMINA-SCI, termination charges equal to (1) the contract price for all
finished Product, existing at the time of termination; (2) SANMINA-SCI’s cost
(including labor, Components) for all work in process; and (3) McDATA’S
Component Liability pursuant to Section 6.8.3; provided, however, that for the
purposes of this subsection only, McDATA’S Component Liability shall be
calculated using “standard cost” rather than “Delivered Cost.”

 

16.5 Return of Materials. Upon the termination of this Agreement, each party
shall promptly deliver to the other party any of the other party’s proprietary
information in its possession, including, but not limited to, Confidential
Information and/or developments, and all notes, records, engineering notebooks,
Tooling, and other documents relating thereto. Each party shall continue
thereafter to promptly return to the other party any of the above mentioned
materials and all copies thereof that come into its possession.

 

16.6 Effect of Termination. Termination of this Agreement and pursuant liability
of either party shall be limited in accordance with Section 15. Notwithstanding,
either party may seek injunctive relief. The parties’ rights and obligations
under Sections [***] hereof shall survive termination of this Agreement. In the
event of termination or expiration of this Agreement, SSCI agrees to provide
McDATA with all of the data and records required in Exhibit F (SSCI Contract
Quality Requirements). The parties agree that for a period of six (6) months
following termination or expiration of this Agreement, the terms of this
Agreement shall apply to any purchase orders issued by McDATA and subsequently
accepted by SSCI, provided SSCI may retain the Tooling required for the testing
and manufacturing of the Products

 

17. DISPUTE RESOLUTION

 

In the case of disputes between the Parties that cannot be resolved upon one
Party issuing and the other Party receiving written notice of a dispute, the
following escalation sequence is mutually agreed between the Parties. Should the
dispute not be resolved within fifteen (15) calendar days after dispute
notification, both Parties agree to escalate the dispute to the appropriate
Corporate Executive VP’s. Should the dispute remain unresolved in the pursuing
fifteen (15) day period from escalation, the Parties will discuss the legal
options which best suit the dispute. In the event the Parties cannot agree on
the legal option (judicial, mediation, or arbitration) on the thirty-fifth
(35th) day after the dispute notification, the Parties agree to seek Arbitration
as the means of settling the dispute. The Parties agree to use the Commercial
Arbitration Rules-Expedited Procedures of the American Arbitration Association.
If the Parties mutually agree upon one arbitrator to hear the case, one
arbitrator will be used. If the Parties cannot agree upon one arbitrator, then
each Party will chose one arbitrator and the third arbitrator shall be selected
by the other two arbitrators. The period allowed for the arbitrator(s)’
discovery shall not exceed thirty (30) calendar days after the selection of the
arbitrator(s). Arbitration shall be limited to fifteen (15) following discovery
completion, and the judgment of the arbitrator(s) shall be final and binding
upon the Parties. The arbitrator(s) award may include direct damages against
either party but under no circumstances will the arbitrator(s) be authorized to
nor shall they award punitive or consequential damages against either party. Any
arbitration pursuant to this Agreement shall be held in Denver, Colorado. Each
party shall bear its own expenses and shall share equally the administrative
expenses of the hearing, including, without limitation, arbitration fees and the
expenses of a court reporter.

 

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18. QUALITY

 

18.1 Specifications. Product shall be manufactured by SANMINA-SCI in accordance
with the Specifications set forth in Exhibit C, as modified via written ECO’s in
accordance with this Agreement. Neither party shall make any change to the
Specifications, to any Components described therein, or to the Products
(including, without limitation, changes in form, fit, function, design,
appearance or place of manufacture of the Products or changes which would affect
the reliability of any of the Products) unless such change is made in accordance
with Section 11 and SANMINA-SCI’s ECO procedure. Notwithstanding the foregoing,
SANMINA-SCI shall be permitted to make changes in its manufacturing process at
any time, upon notification to McDATA and approval of change by McDATA, so long
as such changes do not affect the form, fit or function of the Products and such
approval will not be unreasonably withheld.

 

18.2 Content of Specifications. The Specifications shall include, but shall not
be limited to (i) detailed electrical, mechanical, performance and appearance
specifications for each model of Product, (ii) the BOM; (iii) tooling
specifications, along with a detailed description of the operation thereof, (iv)
art work drawings, (v) Component specifications, (vi) supplier cross references.

 

18.3 Quality of Components. SANMINA-SCI shall use in its production of Products
such Components of a type, quality, and grade specified by McDATA to the extent
McDATA chooses to so specify, and shall purchase Components only from vendors
appearing on McDATA’s approved vendor list (“AVL”); provided, however, that in
the event SANMINA-SCI cannot purchase a Component from a vendor on McDATA’S AVL
for any reason, SANMINA-SCI shall be able to purchase such Component from an
alternate vendor, subject to McDATA’s prior written approval, which approval
shall not be unreasonably withheld or delayed.

 

18.4 Quality Specifications. SANMINA-SCI shall comply with the quality
specifications set forth in its Quality Manual, incorporated by reference
herein, a copy of which is available from SANMINA-SCI upon request.

 

18.5 Inspection of Facility. Upon reasonable advance written notice, McDATA may
inspect the Products and Components held by SANMINA-SCI for McDATA at
SANMINA-SCI’s facilities during SANMINA-SCI’s regular business hours, provided
that such inspection does not unduly affect SANMINA-SCI’S operations. McDATA and
its representatives shall observe all security and handling measures of
SANMINA-SCI while on SANMINA-SCI’s premises. McDATA’s representatives who are
not employees of McDATA shall first have entered into Sanmina-SCI’s
confidentiality agreement.

 

19. FORCE MAJEURE

 

19.1 Force Majeure. Neither party shall be liable for any failure or delay in
its performance under this Agreement due to causes which are beyond its
reasonable control, including, but not limited to, acts of God, acts of civil or
military authority, fires, epidemics, floods, earthquakes, riots, wars,
sabotage, and governmental actions; provided that (a) the delayed party: (i)
gives the other party written notice of such cause promptly, and in any event
within [***] days of discovery thereof, and (ii) uses commercially reasonable
efforts to correct such failure or delay in its performance, and (b) the delayed
party’s time for performance or cure under this Agreement shall be extended for
a period equal to the duration of the cause or [***] days, whichever is less.
The party against whom this Section is invoked shall have the right to terminate
the affected installments under any purchase order. This force majeure provision
may not be invoked for failure or inability to make a payment under this
Agreement.

 

19.2 Notice of Force Majeure Event. Neither party shall be responsible for any
failure to perform due to a Force Majeure Event provided that such party gives
notice to the other party of the Force Majeure Event as soon as reasonably
practicable, but not later than two business (2) days after the date on which
such Party knew or should reasonably have known of the commencement of the Force
Majeure Event, specifying the nature and particulars thereof and the expected
duration thereof; provided, however, that the failure of a party to give notice
of a Force Majeure Event shall not prevent such party from relying on this
Section except to the extent that the other party has been prejudiced thereby.

 

19.3 Termination of Force Majeure Event. The party claiming a Force Majeure
Event shall use reasonable efforts to mitigate the effect of any such Force
Majeure Event and to cooperate to develop and implement a plan of remedial and
reasonable alternative measure to remove the Force Majeure Event. Upon the
cessation of the Force Majeure Event, the party affected thereby shall
immediately notify the other party of such fact, and use its best efforts to
resume normal performance of its obligations under the Agreement as soon as
possible.

 

19.4 Limitations. Notwithstanding that a Force Majeure Event otherwise exists,
the provisions of this Article shall not excuse (i) any obligation of either
party, including the obligation to pay money in a timely manner for Product
actually delivered or

 

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other liabilities actually incurred, that arose before the occurrence of the
Force Majeure Event causing the suspension of performance; or (ii) any late
delivery of Product, equipment, materials, supplies, tools, or other items
caused solely by negligent acts or omissions on the part of such party.

 

19.5 Termination. In the event a party fails to perform any of its obligations
for a Force Majeure Event for a cumulative period of [***] days or more from the
date of such party’s notification to the other party then the other party at its
option may extend the corresponding delivery period for the length of the delay,
or terminate this Agreement for convenience in accordance with Section 16.2.

 

20. CONFIDENTIALITY AND NON-SOLICITATION OF EMPLOYEES

 

20.1 Definitions. For the purpose of this Agreement,

 

20.1.1 “Confidential Information” means information (in any form or media)
regarding a party’s customers, prospective customers (including lists of
customers and prospective customers), methods of operation, engineering methods
and processes (include any information which may be obtained by a party by
reverse engineering, decompiling or examining any software or hardware provided
by the other party under this Agreement), programs and databases, patents and
designs, billing rates, billing procedures, vendors and suppliers, business
methods, finances, management, or any other business information relating to
such party (whether constituting a trade secret or proprietary or otherwise)
which has value to such party and is treated by such party as being
confidential; provided, however, that Confidential Information does not include
information that (i) is known to the other party prior to receipt from the
disclosing party hereunder, which knowledge shall be evidenced by written
records, (ii) is independently developed as evidenced by written records, (iii)
is or becomes in the public domain through no breach of this Agreement, or (iv)
is received from a third party without breach of any obligation of
confidentiality. Information that is to be treated as confidential shall (i) be
disclosed in tangible form (including electronic form) and marked by the
Disclosing Party as “Confidential” or other appropriate legend indicating the
confidential nature of the information or (ii) be disclosed orally or visually
and be identified by the Disclosing Party as confidential and then summarized in
tangible form and delivered to the Receiving Party within thirty (30) days after
the date of first disclosure.

 

20.1.2 “Person” shall mean and include any individual, partnership, association,
corporation, trust, unincorporated organization, limited liability company or
any other business entity or enterprise.

 

20.1.3 “Representative” shall mean a party’s employees, agents, or
representatives, including, without limitation, financial advisors, lawyers,
accountants, experts, and consultants.

 

20.2 Nondisclosure Covenants. In connection with this Agreement, each party (the
“Disclosing Party”) may furnish to the other party (the “Receiving Party”) or
its Representatives certain Confidential Information. For a period of [***]
[***] from the date of this Agreement, the Receiving Party (a) shall maintain as
confidential all Confidential Information heretofore or hereafter disclosed to
it by the Disclosing Party, (b) shall not, directly or indirectly, disclose any
such Confidential Information to any Person other than those Representatives of
the Receiving Party whose duties justify the need to know such Confidential
Information and then only after each Representative has agreed to be bound by
this Confidentiality Agreement and clearly understands his or her obligation to
protect the confidentiality of such Confidential Information and to restrict the
use of such Confidential Information and (c) shall treat such Confidential
Information with the same degree of care as it treats its own Confidential
Information (but in no case with less than a reasonable degree of care).

 

20.3 No Other Purpose. The disclosure of any Confidential Information is solely
for the purpose of enabling each party to perform under this Agreement, and the
Receiving Party shall not use any Confidential Information disclosed by the
Disclosing Party for any other purpose.

 

20.4 Property. Except as otherwise set forth in this Agreement, all Confidential
Information supplied by the Disclosing Party shall remain the property of the
Disclosing Party, and will be promptly returned by the Receiving Party upon
receipt of written request therefor.

 

20.5 Legally required Disclosure. If the Receiving Party or its Representative
is requested or become legally compelled to disclose any of the Confidential
Information, it will provide the Disclosing Party with prompt written notice. If
a protective order or other remedy is not obtained, then only that part of the
Confidential Information that is legally required to be furnished will be
furnished, and reasonable efforts will be made to obtain reliable assurances of
confidentiality.

 

20.6 Non-Solicitation of Employees. During the term of this Agreement and for a
period of [***][***] [***] thereafter, neither party shall directly or
indirectly solicit, recruit (or attempt to solicit, recruit) any of the other
party’s employees; provided, however, that this shall not prohibit a party from
(a) advertising for open positions provided that such advertisements are

 

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not targeted solely at the employees of the other party; (b) or employing any
individual who initiates contact with such party on his or her own initiative,
whether in response to an advertisement or otherwise.

 

20.7 Injunctive Relief Authorized. Any material breach of this Section by a
party or its Representatives may cause irreparable injury and the non-breaching
party may be entitled to equitable relief, including injunctive relief and
specific performance, in the event of a breach. The above will not be construed
to limit the remedies available to a party. In addition, the prevailing party
will be entitled to be reimbursed for all of its reasonable attorneys’ fees and
expenses at all levels of proceedings and for investigations, from the
non-prevailing party.

 

21. NO PUBLICITY

 

Each party agrees not to publicize or disclose the existence or terms of this
Agreement to any third party without the prior written consent of the other
party except as required by law (in which case, the party seeking to disclose
the information shall give reasonable notice to the other party of its intent to
make such a disclosure). Neither party shall make any press release or simliar
public statement without the prior written consent of the other party. SSCI
acknowledges and agrees that McDATA will file this Agreement with the Securities
and Exchange Commission (SEC), and that McDATA will seek confidential treatment
of pricing terms and as otherwise allowed by the SEC.

 

22. RISK MANAGEMENT

 

22.1 Disaster Recovery. Within thirty (30) days after the Effective Date of this
Agreement, SSCI agrees to provide McDATA a formal disaster recovery plan in
writing. Such plan shall delineate SSCI’s ability to continue process
development, Product manufacture and shipment, and to preserve contracted
commitments in the event of a disaster (e.g., fire, flood, loss of database or
engineering documentation, etc.). The plan shall be designed to encompass all
aspects of SSCI’s commitments.

 

22.2 Minimum Recovery Requirements. The disaster recovery plan shall address, at
a minimum:

 

  •   alternate facilities to accommodate parts procurement, assembly, test,
storage and warehousing activities

 

  •   alternate transportation methods to McDATA’s specified customers

 

  •   SSCI’s database protection plan to include off-site storage

 

  •   replacement of tooling needed for the Products

 

  •   actions which would be taken in the event of a strike by SSCI employees,
outside suppliers, and outside groups vital to the operation of SSCI’s business

 

  •   estimated recovery time in the event that a disaster occurred affecting
the area listed above and any other potential disaster

 

  •   SSCI’s work-in-process (WIP) and raw stock position

 

  •   plan for single and sole source components

 

  •   archiving all design and manufacturing documentation in a secured facility
not located at or near SSCI’s facility.

 

22.3 Key Personnel. SSCI shall notify McDATA in a timely manner of any change in
SSCI key personnel assigned to McDATA’s account, including without limitation,
day-to-day operational contacts, SSCI management team, and any other individuals
SSCI believes to be key to SSCI’s performance under this Agreement.

 

22.4 SSCI Supplier Disaster Recovery Plan. SSCI shall use commercially
reasonable efforts to ensure that each of its strategic sole source suppliers
supplying components for the Products has a disaster recovery strategy in place
similar to the requirements stated in this section.

 

23. MANUFACTURE RIGHTS

 

In the event (1) of proceedings in bankruptcy or insolvency invoked by or
against SSCI, or in the event of the appointment of an assignee for the benefit
of creditors or a receiver, or (2) SSCI is no longer in business, and provided
McDATA has complied with all its payment obligations under this Agreement, SSCI
agrees that McDATA or McDATA’s selected contract manufacturer(s) may produce the
Products. Such authorization shall be in the form of a Manufacturing Rights
Agreement between the parties for McDATA to make, have made, sell, offer for
sale or export the Products. SSCI’s Manufacturing Rights Agreement will allow
McDATA to receive and utilize SSCI’s manufacturing strategies and production
documentation, SSCI Process Documentation, test procedures, all data and records
required in Exhibit F (SSCI Contract Quality Requirements). In the event the
Products contain any SSCI Intellectual Property, SSCI agrees to grant to McDATA
a worldwide, nonexclusive, irrevocable license to continued use of such SSCI
Intellectual Property in the

 

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Products. SSCI will grant McDATA Manufacturing Rights including SSCI
Intellectual Property License only if one (1) of the two (2) events stated above
occurs.

 

24. PROGRAM MANAGEMENT

 

24.1 Quarterly Reviews. SSCI and McDATA shall participate in reviews, at a
minimum on a quarterly basis, to discuss pricing and delivery; quality and
reliability performance against mutually agreed upon performance goals; Product
changes; deliveries; NCNR quantities; economic order quantities; current and
future business strategies; and other business opportunities as necessary. Cost
reduction target attainment and suggestions for future cost reduction will be
highlighted, along with action plans to remedy anticipated problems and to
resolve existing problems.

 

24.2 On-site Support Expectations. No later than thirty (30) days following the
Effective Date, SSCI agrees to place a technical resource on-site at McDATA to,
at a minimum, coordinate the activities regarding (i) ECOs as set forth in
Section 4.6, (ii) component change(s), (iii) cost reductions, (iv) supplier
evaluations, (v) new Product introduction (as set forth in Section 24.3). The
on-site technical resource shall further act as liaison between SSCI and McDATA.
McDATA agrees to provide appropriate facilities at McDATA to enable such on-site
technical resource to perform the duties in accordance with this Agreement.

 

24.3 New Product Introduction Program Coordination. SSCI agrees to assume the
program management for new product introduction (NPI) for McDATA Products at
SSCI. SSCI’s NPI Program Manager shall manage all aspects of NPI, including
without limitation (i) quality planning expectations as further defined in the
SSCI Contract Quality Requirements, Exhibit F attached hereto, including without
limitation, subcontract supplier selection and qualification; receiving
inspection; in-process inspection points and criteria; closed loop corrective
action (“CLCA”); (ii) prototype, alpha and pre-production build support
expectations; qualification builds, reports and results; and (iii) DFx analysis
support (Manufacturability). SSCI shall develop a project plan for each NPI
encompassing all such aspects of NPI as set forth above (“New Product Project
Plan”), including without limitation, defining the point at which SSCI shall
warrant to McDATA the Manufacturability of any such new Product.

 

25. INSURANCE

 

25.1 Minimum Insurance Amounts. SANMINA-SCI agrees to maintain during the term
of this Agreement (a) workers’ compensation insurance as prescribed by the law
of the state in which SANMINA-SCI’s services are performed; (b) employer’s
liability insurance with limits of at least [***] per occurrence; (c)
comprehensive automobile liability insurance if the use of motor vehicles is
required, with limits of at least [***] for bodily injury and property damage
for each occurrence; (d) comprehensive general liability insurance, including
blanket contractual liability and broad form property damage, with limits of at
least [***] combined single limit for personal injury and property damage for
each occurrence; and (e) comprehensive general liability insurance endorsed to
include products liability and completed operations coverage in the amount of
[***] for each occurrence. SANMINA-SCI shall furnish to McDATA certificates or
evidence of the foregoing insurance indicating the amount and nature of such
coverage and the expiration date of each policy. Each party agrees that it, its
insurer(s) and anyone claiming by, through, under or in its behalf shall have no
claim, right of action or right of subrogation against the other party and the
other party’s affiliates, directors, officers, employees and customers based on
any loss or liability insured against under the insurance required by this
Agreement.

 

25.2 Upon McDATA’s written request pursuant to the execution of this Agreement,
SSCI will provide McDATA with proof of such coverage in the form of a
Certificate of Insurance. SSCI further agrees to notify McDATA of any changes in
such insurance coverage. McDATA’s written request for SSCI to issue a
Certificate of Insurance should be sent to the following: Sanmina-SCI Corp. /
Attn: Insurance / 2700 North First Street / San Jose, CA 95134.

 

26. IDENTIFICATION OF PRODUCTS AND TRADEMARK RIGHTS

 

26.1 Identification of Products. SSCI and McDATA hereby agree that Products sold
hereunder will be labeled and marketed by McDATA under McDATA’s (or its
McDATAs’) trademarks. SSCI shall have the right to affix and McDATA shall not
remove or cover over any nameplate indicating model number, serial number,
patent number and/or patent pending legends, and any other markings which may be
required by law or by regulatory agencies, where covering over such nameplate
would violate any laws, patents, or trademarks.

 

26.2 Trademark Rights

 

26.2.1 McDATA shall provide to SSCI for each Product a list and description of
the trademarks, trade names, insignia, symbols, decorative designs or packaging
designs (collectively the “Trademarks”) to be affixed by SSCI to the finished

 

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Products or to the packaging of such finished Products. SSCI agrees to affix the
Trademarks in strict conformity with the then-current McDATA written
instructions and standards received by SSCI. However, nothing in this Agreement
shall operate to confer on SSCI any right to use any Trademark for any purpose
other than in connection with the manufacture or repair of Products in
accordance with this agreement

 

26.2.2 It is the intention of the parties to protect as fully as possible all of
their rights to their respective trademarks. Therefore, no right is granted
hereunder for either party to use the trademarks of the other party, except as
specifically permitted in writing by such other party. Willful use of either
party’s trademark by the other party contrary to the provisions of this Section
shall constitute a material breach of this Agreement.

 

27. ENVIRONMENTAL MATTERS

 

27.1 Compliance With Laws. SSCI warrants that it is currently in compliance with
and that it shall continue to comply with all federal, state and local laws,
rules, orders, and regulations relating to the protection of the environment and
related matters that are applicable to Sanmina-SCI’s manufacturing processes.
SSCI acknowledges that any chemical, material or waste that may be used or
generated in its processes, is solely its responsibility to properly handle,
use, store, treat, and dispose of in accordance with the above mentioned
applicable environmental laws and regulations. SSCI shall notify McDATA
immediately of any change or possible change in SSCI’s compliance with this
section.

 

27.2 Environmental Laws. SSCI agrees to provide McDATA, promptly upon request,
with any and all relevant information concerning its compliance with applicable
environmental laws and regulations, including copies of required documentation.
SSCI also agrees, upon reasonable notice and during normal office hours, to
permit McDATA to inspect its premises and audit its relevant records for the
sole purpose of determining SSCI’s compliance with all applicable environmental
laws and regulations.

 

27.3 RoHS And WEEE. Any changes to the above due to RoHS and/or WEEE compliance
will be addressed at such time RoHS and/or WEEE become applicable.

 

28. EXPORT ADMINISTRATION

 

28.1 Export Compliance. Each party agrees to comply with the U.S. Foreign
Corrupt Practices Act and all relevant export laws and regulations of the United
States and the country or territory in which the Products are provided (“Export
Laws”) to assure that neither any deliverable, if any, nor any direct product
thereof is (i) exported, directly or indirectly, in violation of Export Laws or
(ii) intended to be used for any purposes prohibited by the Export Laws,
including without limitation nuclear, chemical, or biological weapons
proliferation.

 

28.2 Country of Origin Certificate. Upon McDATA’s reasonable request, SSCI will
provide a Country of Origin Certificate for SSCI-manufactured Products.

 

28.3 International Direct Ship Products. Unless otherwise agreed, for Direct
Ship Products being shipped internationally, McDATA shall be (i) the exporter of
record for any Products and/or Product documentation exported from the country
of manufacture, and shall comply with all applicable country of manufacture
export control statutes and regulations, and (ii) the importer of record for all
Products exported from the country of manufacture and later imported and
returned to McDATA or to SSCI. SSCI will cooperate with McDATA in obtaining any
export or import licenses for the Products.

 

28.4 NAFTA. Upon McDATA request, SSCI will evaluate the Product to determine
whether or not Product qualifies as originating goods within the North American
Free Trade Agreement (NAFTA). SSCI will provide a NAFTA Certificate of Origin
for those goods that are found to be NAFTA eligible. McDATA will assist SSCI by
providing any information requested by SSCI that is needed to evaluate the
Product. Such information may include, but is not limited to: engineering
support, technical information, Product literature, functionality of Product,
end use of Product, manufacturer and country of manufacture for any components
supplied or consigned by McDATA. In the event McDATA’s Product evaluation by
SSCI cannot be performed without incurring additional expenses, McDATA will be
responsible for payment of such additional expenses.

 

28.5 Technical Data. McDATA hereby certifies that it will not knowingly export,
directly or indirectly, any U.S. origin technical data or software acquired from
SSCI or any direct product of that technical data or software, to any country
for which the United States Government requires an export license or other
approval, without obtaining such approval from the United States Government.

 

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29. MISCELLANEOUS

 

29.1 Integration Clause. This Agreement (including the Exhibits to this
Agreement) constitutes the entire agreement of the parties, superseding all
previous Agreements including the Manufacturing and Purchase Agreement dated
3/1/03 covering the subject matter. This Agreement shall not be changed or
modified except by written Agreement, specifically amending, modifying and
changing this Agreement, signed by SANMINA-SCI and an authorized representative
of the McDATA.

 

29.2 Order of Precedence. All quotations, Orders, acknowledgments and invoices
issued pursuant to this Agreement are issued for convenience of the Parties only
and shall be subject to the provisions of this Agreement and the Exhibits
hereto. When interpreting this Agreement, precedence shall be given to the
respective parts in the following descending order: (a) this Agreement; (b)
Schedules and Exhibits to this Agreement; and (c) if Orders are used to release
Product, those portions of the Order that are not pre-printed and which are
accepted by SANMINA-SCI. The Parties acknowledge that the preprinted provisions
on the reverse side of any such quotation, Order, acknowledgment or invoice have
no force or effect.

 

29.3 Assignment. Neither this Agreement nor any rights or obligations hereunder
shall be transferred or assigned by either party without the written consent of
the other party, which consent shall not be unreasonably withheld or delayed.
This Agreement may be assigned by either party to any corporation controlling,
controlled by or under common control with its parent corporation or to any
successor to substantially all the business of the party.

 

29.4 Labor Disputes. SSCI shall immediately notify McDATA whenever any actual or
potential labor dispute delays or threatens to delay the timely performance of
this Agreement.

 

29.5 Notices. Wherever one party is required or permitted or required to give
written notice to the other under this Agreement, such notice will be given by
hand, by certified U.S. mail, return receipt requested, by overnight courier, or
by fax and addressed as follows:

 

If to Buyer:

 

with a copy to:

To McDATA:   With an additional copy to:

McDATA Corporation

 

McDATA Corporation

380 Interlocken Crescent

 

380 Interlocken Crescent

Broomfield, CO 80021-3464

 

Broomfield, CO 80021-3464

Attn: VP Manufacturing

 

Attn: General Counsel

CC: Director of Materials

 

CC: Director, Contracts Department

If to Seller:   with a copy to:

SANMINA-SCI Corporation

 

SANMINA-SCI Corporation

2700 N. First Street

 

2700 N. First Street

San Jose, California 95134

 

San Jose, California 95134

Att’n: President

 

Att’n: Vice President & Corporate Counsel

Phone: (408) 964-3600

 

Phone: (408) 964-3600

Fax: (408) 964-3636

 

Fax: (408) 964-3636

 

All such notices shall be effective upon receipt. Either party may designate a
different notice address from time to time upon giving ten (10) days’ prior
written notice thereof to the other party.

 

29.6 Relationship of Parties. McDATA and SSCI are independent contractors.
Nothing in this Agreement shall be construed to create a partnership, joint
venture, or agency relationship between the parties. Neither party is granted
the right or authority to assume or create any obligation or responsibility,
express or implied, on behalf of, or in the name of the other party, or to bind
such other party in any manner to anything whatsoever. It is expressly agreed
that under no circumstances shall any of the employees of one party be deemed
the employees of the other for any purpose. Each party shall be solely
responsible for payment of all compensation and benefits payable to its
employees, as well as all employment related taxes.

 

29.7 Severability. If any provision of this Agreement is held to be invalid or
unenforceable by a proper authority having jurisdiction over this Agreement,
such provision shall be deemed null and void and the remaining provisions of
this Agreement shall remain in full force and effect. The parties shall
substitute for the affected provision an enforceable provision that approximates
the intent and economic effect of the affected provision.

 

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29.8 Waiver. No waiver of any right or remedy on one occasion by either party
shall be deemed a waiver of such right or remedy on any other occasion.

 

29.9 Disputes/Choice of Law. The parties shall attempt to resolve any disputes
between them arising out of this Agreement through good faith negotiations. In
the event the parties cannot resolve a dispute, the parties acknowledge and
agree that the state courts Denver, Colorado and the federal courts located in
the State of Colorado shall have exclusive jurisdiction and venue to adjudicate
any and all disputes arising out of or in connection with this Agreement. The
parties consent to the exercise by such courts of personal jurisdiction over
them and each party waives any objection it might otherwise have to venue,
personal jurisdiction, inconvenience of forum, and any similar or related
doctrine. This Agreement shall be construed in accordance with the substantive
laws of the State of Colorado(excluding its conflicts of laws principles). The
United Nations Convention on Contracts for the International Sale of Goods
(CISG) is specifically excluded and shall not be applicable to any transaction
contemplated herein.

 

29.10 McDATA Satisfaction Index. McDATA may complete a customer satisfaction
index report on a monthly basis and deliver (electronically) to SSCI program
management. Report is to be reviewed jointly with McDATA and shall be submitted
to the SSCI Executive Management through the SSCI CSI system. (Example of
document included as Exhibit H).

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
effective as of the date on page one, by their officers, duly authorized.

 

SANMINA-SCI CORPORATION

     

McDATA CORP.

/s/ Authorized Officer

     

/s/ Authorized Officer