McData Corporation Severance Agreement



 Exhibit 10.20.1 
  
  
 

 
 MCDATA CORPORATION 
  
 SEVERANCE AGREEMENT 
  
 This Agreement is made by and between McDATA Corporation (the “Company”), and you, John A. Kelley, Jr. This Agreement is effective
as of December 12, 2003 (the “Effective Date”). For purposes of this Agreement, the “Company” shall include any parent or subsidiary of the Company, unless the context clearly requires otherwise. 
  
 This Agreement is intended to strongly encourage you to remain with the
Company by providing you with certain severance benefits in the event that your employment with the Company terminates under certain circumstances. This Agreement also is intended to provide you with enhanced financial security in recognition of
your past and future service to the Company. 
  
 1. Eligibility
for Severance Benefits. You will be entitled to the payments and benefits described in Section 2 only if both: (a) either (1) the Company terminates your employment for a reason other than Cause, death or Disability, or (2) you voluntarily
terminate your employment with the Company for Good Reason, and (b) you (1) sign and deliver to the Company a Release of Claims satisfactory to the Company, (2) do not subsequently revoke your signature on the Release of Claims, and (3) comply with
all of the terms of this Agreement, including (but not limited to) Section 7 regarding Non-Solicitation of Employees and Section 8 regarding Non-Competition. Notwithstanding the preceding, if your termination of employment would qualify you for
payments and benefits under your Change of Control Severance Agreement with the Company dated August 27, 2001 (the “Change of Control Severance Agreement”), you will receive none of the payments and benefits described in Section 2.
Instead, you will receive the payments and benefits to which you are entitled under your Change of Control Severance Agreement. 
  
 2. Severance Benefits. If you meet the eligibility requirements described in Section 1, you will receive the following. 
  
 (a) Cash Payments. You will receive severance pay
equal to your annual base salary and target bonus in effect immediately prior to the date of your termination of employment (the “Termination Date”) for a period of one year following the Termination Date. The severance pay with
respect to your annual base salary will be paid in accordance with the Company’s standard payroll practices and the severance pay with respect to your target bonus will be paid at the same time as bonuses are scheduled to be paid to the
Company’s other senior executives. No lump sum payment will be made. The payments will commence within three (3) days after the Release of Claims becomes effective and no longer is subject to revocation. 
  
 (b) Option Exercisability. You will have one
year following the Termination Date to exercise your Company Class B stock options and any Company stock options granted to 







 you on or after the Effective Date, but in each case only to the extent that such option is vested and
unexpired on the Termination Date. Moreover, in no event may any such option be exercised after the original maximum term of the option. Any options that are unvested on the Termination Date will be forfeited on that date. With regard to your
Executive Performance Incentive Bonus (“EPIB”) restricted Class B stock shares, you would be entitled to those shares that by their own terms become unrestricted within one year following the Termination Date. 
  
 (c) Other Benefits. The Company will provide you with
health, dental and vision benefits coverage for up to one year following Termination Date or until you become eligible for group insurance benefits from another employer, whichever comes first, but only if you elect continuation coverage
under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), within the time period prescribed pursuant to COBRA. For the duration of the one-year coverage period, the Company will pay the COBRA premiums
otherwise payable by you (for coverage for yourself and your eligible dependents). After the one-year coverage period, you will be responsible for the payment of any COBRA premiums. The Company will not reimburse you for any taxable income imputed
to you because the Company has paid your COBRA premiums (or those of your eligible dependents). 
  
 (e) Accrued Wages and Paid-Time Off; Expenses. The Company will pay you: (1) any unpaid base salary due for periods prior to the
Termination Date, (2) all of your accrued and unused paid-time off (“PTO”) through the Termination Date, (3) following your submission of proper expense reports, the total unreimbursed amount of all expenses incurred by you in your duties
of employment with the Company that are reimbursable in accordance with the Company’s then-existing policies, and (4) any other benefits due to you through the Termination Date under the Company’s formal employee benefit plans (for
example, the Company’s “401(k)” plan). These payments will be made promptly upon your employment termination and within the period of time mandated by law or as provided in the applicable plan document. 
  
 3. Other Terminations of Employment. If your employment with the
Company is terminated by the Company for Cause, death or Disability, or if you voluntarily terminate your employment other than for Good Reason, you will not be entitled to receive any of the payments or benefits described in Section 2 of this
Agreement. However, you may be eligible for other benefits under other Company plans or policies that may exist on the Termination Date. In addition, the Company will pay you: (1) any unpaid base salary due for periods prior to the Termination Date,
(2) all of your accrued and unused PTO through the Termination Date, (3) following your submission of proper expense reports, the total unreimbursed amount of all expenses incurred by you in your duties of employment with the Company that are
reimbursable in accordance with the Company’s then-existing policies, and (4) any other benefits due to you through the Termination Date under the Company’s formal employee benefit plans (for example, the Company’s “401(k)”
plan). These payments will be made promptly upon your employment termination and within the period of time mandated by law or as provided in the applicable plan document. 
  

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 4. Definition of Terms. The following terms used to in this Agreement shall have the following
meanings: 
  
 (a) Cause. “Cause” means
(1) an act of personal dishonesty taken by you in connection with your responsibilities as an employee and intended to result in your substantial personal enrichment, (2) your being convicted of a crime recognized as a felony in the United States,
(3) a willful act by you which constitutes gross misconduct and which is injurious to the Company, (4) following delivery to you of a written demand for performance from the Company which describes the basis for the Company’s reasonable belief
that the you have not substantially performed your duties, continued violations by you of your obligations to the Company which are demonstrably willful and deliberate on your part. 
  
 (b) Disability. “Disability” means your being unable to perform the principal functions of
your duties due to a physical or mental impairment, but only if such inability has lasted or is reasonably expected to last for at least six months. The Company will determine whether a Disability exists based on evidence provided by one or more
physicians selected by the Company and reasonably acceptable to you. 
  
 (c) Good Reason. “Good Reason” means, without your written consent (1) a material reduction of your duties, authority or responsibilities, relative to your duties, authority or responsibilities as in
effect immediately prior to such reduction, or the assignment to you of such reduced duties, authority or responsibilities; (2) a material reduction by the Company of your base compensation as in effect immediately prior to such reduction (unless
similar reductions apply to substantially all of the Company’s other senior executives or to the employees); and (3) a material reduction by the Company in the kind or level of benefits to which you were entitled immediately prior to such
reduction with the result that your overall benefits are significantly reduced (unless similar reductions apply to substantially all of the Company’s other senior executives or to the employees). 
  
 (d) Release of Claims. “Release of Claims”
means a written waiver by you (in a form specified by the Company) of all employment-related obligations of the Company and all claims and causes of action against the Company. 
  
 5. Term of Agreement. If you have a termination of employment that entitles you to receive the payments and benefits
descried in Section 2, this Agreement will terminate when all of your and the Company’s obligations under the Agreement have been satisfied. If you have a termination of employment that does not entitle you to receive the payments and benefits
descried in Section 2, this Agreement will terminate on the Termination Date. 
  
 6. At-Will Employment. The Company and you acknowledge that your employment is and will continue to be at-will, as defined under applicable law. 
  
 7. Non-Solicitation of Employees. You agree that for a period of two years following the Termination Date, you
will not either directly or indirectly solicit, induce, recruit or encourage any of the Company’s employees to leave their employment, or take away such employees, or attempt to solicit, induce, recruit, encourage or take away employees of the
Company, either for yourself or any other person or entity. 
  

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 8. Non-Competition. With respect to the businesses of the Company or any of its subsidiaries on
either the Effective Date or the date of your termination of employment from the Company and all of it subsidiaries (collectively, the “Businesses”), you agree that during period beginning on the Effective Date and ending two years
after the Termination date, you, directly or indirectly, whether as employee, owner, sole proprietor, partner, director, member, consultant, agent, founder, co-venturer or otherwise, will: (i) not engage, participate or invest in any business
activity anywhere in the world that is directly competitive with the principal products or services of the Businesses (except that it will not be a violation of this Section 11 for you to own as a passive investment not more than one percent of any
class of publicly traded securities of any entity); nor (ii) directly or indirectly solicit business from any of the Businesses’ customers and users on behalf of any business that directly competes with the Businesses. 
  
 9. Assignment. This Agreement will be binding upon and become of
advantage to (a) your heirs, executors and legal representatives upon your death and (b) any successor of the Company. Any such successor of the Company will be deemed substituted for the Company under the terms of this Agreement for all purposes.
For this purpose, “successor” means any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires all or substantially all of the assets or business of
the Company. None of your rights to receive any form of compensation payable pursuant to this Agreement may be assigned or transferred except by will or the laws of descent and distribution. Any other attempted assignment, transfer, conveyance or
other disposition of your right to compensation or other benefits will be null and void. 
  
 10. Notices. 
  
 (a)
General. All notices, requests, demands and other communications called for by this Agreement will be in writing and will be deemed given (1) on the date of delivery if delivered personally, (2) one day after being sent by a well established
commercial overnight service, or (3) four days after being mailed by registered or certified mail, return receipt requested, prepaid and addressed to the parties or their successors at the following addresses, or at such other addresses as the
parties may later designate in writing: 
  
 If to
the Company: 
  
 McDATA Corporation 

380 Interlocken Crescent 
 Broomfield, Colorado 80012 
  
 Attn: General Counsel 
  
 If to you: 
  
 at
your last residential address known by the Company. 
  

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 (b) Notice of Termination. Any termination by the Company for Cause or by you for Good Reason must
be communicated by a notice of termination to the other party. The notice will indicate the specific termination provision in this Agreement relied upon, will set forth in reasonable detail the facts and circumstances claimed to provide a basis for
termination under the provision so indicated, and will specify the date of your employment termination (which will not be more than 30 days after the giving of such notice). Any failure on your part to include in the notice any fact or circumstance
that contributes to a showing of Good Reason will not waive any of your rights under this Agreement or prevent you from asserting that fact or circumstance in enforcing this Agreement. 
  
 11. Severability. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction
to be illegal, unenforceable or void, this Agreement will continue in full force and effect without said provision. 
  
 12. Entire Agreement. This Agreement, your Change of Control Severance Agreement and the agreements evidencing any Company stock options and other
equity compensation awards (if any) granted to you represent the entire agreement and understanding between the Company and you concerning your severance arrangements with the Company or any of its subsidiaries, and supersedes and replaces any and
all prior agreements and understandings concerning your severance arrangements with the Company. 
  
 13. Arbitration. 
  
 (a) General. In consideration of your service to the Company, its promise to arbitrate all employment related disputes and your receipt of the
compensation, pay raises and other benefits paid to you by the Company, at present and in the future, you agree that any and all controversies, claims, or disputes with anyone (including the Company and any employee, officer, director, shareholder
or benefit plan of the Company in their capacity as such or otherwise) arising out of, relating to, or resulting from your service to the Company under this Agreement or otherwise or the termination of your service with the Company, including any
breach of this Agreement, shall be subject to binding arbitration under the Arbitration Rules set forth under the rules and regulations of the American Arbitration Association (the “Rules”) and pursuant to Colorado law. Disputes which you
agree to arbitrate, and thereby agree to waive any right to a trial by jury, include any statutory claims under state or federal law, including, but not limited to, claims under Title VII of the Civil Rights Act of 1964, the Americans with
Disabilities Act of 1990, the Age Discrimination in Employment Act of 1967, the Older Workers Benefit Protection Act, the Colorado Fair Employment and Housing Act, the Colorado Labor Code, claims of harassment, discrimination or wrongful termination
and any statutory claims. You further understand that this Agreement to arbitrate also applies to any disputes that the Company may have with you. 
  
 (b) Procedure. You agree that any arbitration will be administered by the American Arbitration Association (“AAA”) and that a neutral
arbitrator will be selected in a manner consistent with its National Rules for the Resolution of Employment Disputes. The arbitration proceedings will allow for discovery according to the rules set forth in the National Rules for the Resolution
of Employment Disputes or Colorado Code of Civil Procedure. You agree that the 
  

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 arbitrator shall have the power to decide any motions brought by any party to the arbitration, including motions for
summary judgment and/or adjudication and motions to dismiss and demurrers, prior to any arbitration hearing. You agree that the arbitrator shall issue a written decision on the merits. You also agree that the arbitrator shall have the power to award
any remedies, including attorneys’ fees and costs, available under applicable law. You understand the Company will pay for any administrative or hearing fees charged by the arbitrator or AAA except that you shall pay the first $200.00 of any
filing fees associated with any arbitration you initiate. You agree that the arbitrator shall administer and conduct any arbitration in a manner consistent with the Rules and that to the extent that the AAA’s National Rules for the Resolution
of Employment Disputes conflict with the Rules, the Rules shall take precedence. 
  
 (c) Remedy. Except as provided by the Rules, arbitration shall be the sole, exclusive and final remedy for any dispute between you and the Company. Accordingly, except as provided for by the Rules, neither you
nor the Company will be permitted to pursue court action regarding claims that are subject to arbitration. Notwithstanding, the arbitrator will not have the authority to disregard or refuse to enforce any lawful Company policy, and the arbitrator
shall not order or require the Company to adopt a policy not otherwise required by law which the Company has not adopted. 
  
 (d) Availability of Injunctive Relief. In addition to the right under the Rules to petition the court for provisional relief, you agree that any
party may also petition the court for injunctive relief where either party alleges or claims a violation of this Agreement or any other agreement regarding trade secrets, confidential information, or nonsolicitation. In the event either party seeks
injunctive relief, the prevailing party shall be entitled to recover reasonable costs and attorneys’ fees. 
  
 (e) Administrative Relief. You understand that this Agreement does not prohibit you from pursuing an administrative claim with a local, state or
federal administrative body such as the Department of Fair Employment and Housing, the Equal Employment Opportunity Commission or the workers’ compensation board. This Agreement does, however, preclude you from pursuing court action regarding
any such claim. 
  
 (f) Voluntary Nature of Agreement. You
acknowledge and agree that you are executing this Agreement voluntarily and without any duress or undue influence by the Company or anyone else. You further acknowledge and agree that you have carefully read this Agreement and that you have asked
any questions needed for you to understand the terms, consequences and binding effect of this Agreement and fully understand it, including that you are waiving your right to a jury trial. Finally, you agree that you have been provided an opportunity
to seek the advice of an attorney of your choice before signing this Agreement. 
  
 14. No Oral Modification, Cancellation or Discharge. This Agreement may be changed or terminated only in writing (signed by you and an authorized officer of the Company). 
  
 15. Withholding. The Company is authorized to withhold, or cause to be
withheld, from any payment or benefit under this Agreement the full amount of any applicable withholding taxes. 
  

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 16. Governing Law. This Agreement will be governed by the laws of the State of Colorado (with the
exception of its conflict of laws provisions). 
  
 17.
Acknowledgment. You acknowledge that you have had the opportunity to discuss this matter with and obtain advice from your private attorney, have had sufficient time to, and have carefully read and fully understand all the provisions of this
Agreement, and are knowingly and voluntarily entering into this Agreement. 
  

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 IN WITNESS WHEREOF, the undersigned have executed this Agreement on the respective dates set forth below:

  
 JOHN A. KELLEY, JR. 
  

	 	 	 	 	 
				
	
	 	 	 	Date:	 	                                      
                                        
   , 2003
	 	 	 	 	 	 	 	 	 
	 MCDATA CORPORATION
  
	 	 	 	 
				
	
	 	 	 	Date:	 	                                      
                                        
   , 2003
	 Name:
	 	  

	 	 	 	 	 	 
	 Title:
	 	  

	 	 	 	 	 	 

  

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