PART I - FINANCIAL INFORMATION

EX-10.49 3 f90751exv10w49.txt EXHIBIT 10.49 Exhibit 10.49 MANUFACTURING AND PURCHASE AGREEMENT This MANUFACTURING AND PURCHASE AGREEMENT ("Agreement") is entered into as of the date last executed below ("Effective Date") by and between Brocade Communications Systems, Inc., a Delaware corporation with a place of business at 1745 Technology Drive, San Jose, California 95110 ("Brocade"), and Hon Hai Precision Industry Co., Ltd., a Taiwan corporation with an office at No. 2, Tzu Yu St., Tu-Chen, Taipei Hsien, 20306, Taiwan, R.O.C. ("Hon Hai"). 1. Definitions. 1.1 "Ancillary Technology" means all test programs and fixtures provided to Hon Hai by Brocade. 1.2 "Brocade Technology" means the Technology and all Derivatives thereof (a) provided by Brocade to Hon Hai pursuant to this Agreement, or (b) developed by Brocade pursuant to this Agreement, or (c) developed by Brocade or Hon Hai pursuant to a Statement of Work; provided, however, that such Technology is not Hon Hai Technology. 1.3 "Brocade Vendors" means third party producers and suppliers that have been specified by Brocade in writing (a) on Brocade's approved vendor list ("AVL") as provided by Brocade to Hon Hai and as updated by Brocade from time to time, and (b) as the source of certain parts and/or components to be used by Hon Hai in the manufacture of the Products. 1.4 "Derivative" means: (a) for copyrightable or copyrighted material, any translation, abridgment, revision or other form in which an existing work may be recast, transformed or adapted; (b) for patentable or patented material, any improvement thereon; and (c) for material which is protected by trade secret, any new material derived from such existing trade secret material, including new material which may be protected under copyright, patent and/or trade secret laws. 1.5 "Hon Hai Technology" means the Technology [*] which are (a) developed by Hon Hai prior to entering into this Agreement, and (b) specified on a Statement of Work executed by an authorized representative of Brocade as Hon Hai Technology. 1.6 "Intellectual Property Rights" means copyright rights, trademark rights (including, without limitation, trade names, trademarks, service marks, and trade dress), patent rights, trade secrets, moral rights, right of publicity, goodwill and all other intellectual property rights as may exist now and/or hereafter come into existence and all renewals and extensions thereof, arising under the law of the United States or any state, country or other jurisdiction. 1.7 "Joint Technology" means any (a) Technology that is first conceived or reduced to practice by one or more of Hon Hai's employees with one or more of Brocade's employees; provided in the case of a patentable invention that a party's contribution will meet the requirements for joint invention under United States law, or (b) joint work of authorship fixed in a tangible medium of expression prepared by one or more of Hon Hai's employees with one or more of Brocade's employees with the intention that their contributions be merged into inseparable or interdependent parts of a unitary whole. 1.8 "Products" means the Brocade products identified on Exhibit A, which may be modified from time to time upon written agreement of the parties. - --------------- * Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. Brocade Manufacturing Agreement BROCADE CONFIDENTIAL Page 1 of 20 1.9 "Purchase Order" means a Brocade purchase order for the purchase of the Products issued to Hon Hai pursuant to the provisions of this Agreement. 1.10 "SLA" means the "service level agreement" document, which is a document created by Brocade and Hon Hai containing certain operational and financial terms agreed between the parties. The version of the SLA existing as of the Effective Date is attached as Exhibit C for reference only. The parties may change the SLA from time to time without amending Exhibit C or this Agreement. 1.11 "Specifications" means the functional and performance specifications (including, without limitation, bills of materials, schematic diagrams, parts and assembly drawings, and test specifications and work/assembly instructions) relating to the testing and manufacturing of each Product as provided by Brocade. 1.12 "Statement of Work" means a written statement of work signed by both parties for special development work to be done by Hon Hai for Brocade. Each Statement of Work will be sequentially numbered (e.g., SOW 1, SOW 2, etc.) and attached to this Agreement by an amendment. 1.13 "Technology" means any and all technical information and/or materials, including, without limitation, ideas, techniques, designs, sketches, drawings, models, inventions, know-how, processes, apparatus, methods, equipment, algorithms, software programs, data, software source documents, other works of authorship, formulae and information concerning engineering, research, experimental work, development, design details and specifications. 2. Material Procurement. 2.1 Forecasting and Material Purchasing. Once a [*], Brocade will provide Hon Hai with a rolling [*] forecast of the quantity demand for each Product ("Product Forecast"). For the purpose of spare parts, Brocade will provide Hon Hai, once per [*], with a rolling [*] repair forecast of the quantity demand for all Parts (defined in Section 11.1) listed by part number ("Parts Forecast", collectively with the Product Forecast, the "Forecasts"). Upon the end-of-life of any Product, Brocade will extend its Parts Forecast for all Parts used in such Product [*], which shall in no case extend longer than [*] from the end-of-life date of such Product. The Forecasts are [*]: Hon Hai may purchase the materials required to meet the demand in the Forecasts only as far in advance as the published component lead time (including any manufacturing offset, as agreed to by the parties in the SLA) for each component necessary to manufacture the Product, or as otherwise instructed in writing by Brocade. [*] purchased within the applicable lead time; provided that Hon Hai will take all steps [*] component materials by diligently attempting to return unused materials or to transfer unused materials to use for other customers to the extent that they do not incorporate proprietary Brocade Technology. Brocade will not pay for any unused materials that are purchased [*]. 2.2 Vendor Forecasts. Hon Hai will provide each of the Brocade Vendors with [*] forward-looking, rolling forecasts for the Product materials and will update such forecasts as necessary to keep each Brocade Vendor current with each new Forecast provided by Brocade. 2.3 Material Management. Hon Hai will, at a minimum, comply with the following obligations to ensure good component material management for the Products, including any Parts (defined in Section 11.1) for repair purposes: (a) [*] component level failure analysis or [*] by the Brocade Vendor; (b) [*] component returns, failure analysis and corrective actions regarding defective components with the Brocade Vendors and promptly communicate this information to Brocade; (c) work with Brocade Vendors to [*] component leadtimes and costs; (d) provide regular performance feedback to Brocade Vendors, with a copy to Brocade; (e) ensure that all component materials used by Hon Hai to produce the Products meet the Specifications; and (f) calculate for Brocade and provide documentation of the country of origin - --------------- * Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. Brocade Manufacturing Agreement BROCADE CONFIDENTIAL Page 2 of 20 of each of the Products in accordance with US law. As between Hon Hai and Brocade, [*] will be solely responsible for all costs relating to the collection and replacement of Products and Parts [*] due to Hon Hai's use of component materials that [*] 3. Manufacturing Obligations. 3.1 Work Instructions; SLA. Hon Hai will manufacture and test the Products in strict compliance with the work instructions agreed between Brocade and Hon Hai for each Product. Hon Hai will honor the lead time, reporting, and other requirements in the then-current version of the SLA as agreed between Brocade and Hon Hai. As the work instructions and SLA are operating documents that are subject to frequent change, the most recent versions of the documents will not be formally amended into this Agreement; however, both the work instructions for each Product and the SLA are incorporated herein by reference. 3.2 [*]. Hon Hai acknowledges and agrees that [*] for the provision of manufacturing and repair services and the supply of Products to Brocade hereunder and that the full [*] provision of all manufacturing and repair services and supply of Products to Brocade hereunder is a material condition of this Agreement. 3.3 No Subcontracting. Hon Hai agrees that no portion of the manufacture, assembly, or test of the Products will be subcontracted to third parties and that Hon Hai will not change the location of the facilities for the manufacture, assembly, or test of the Products without Brocade's prior written consent. Hon Hai agrees that no portion of the subassembly of Parts will be subcontracted to affiliated or unaffiliated third parties without Brocade's prior written consent, which shall not be unreasonably withheld or delayed. 3.4 Ancillary Technology. Brocade, at its sole discretion, may furnish Ancillary Technology to Hon Hai solely for use in the manufacture and testing of the Products. Hon Hai will not at any time use the Ancillary Technology for any other purposes or for any third parties or in any manner other than in performing Hon Hai's obligations under this Agreement. Hon Hai will maintain the Ancillary Technology in good condition and repair and provide necessary calibration services for the Ancillary Technology. Brocade and Hon Hai agree that the terms set out in Exhibit B hereto, which may be modified from time to time upon written agreement of the parties, will apply to all Ancillary Technology, and Hon Hai will be responsible for obtaining the requisite insurance coverage and conducting appropriate inspections in accordance with Exhibit B hereto. With respect to any Ancillary Technology licensed to Hon Hai pursuant to this Agreement, Brocade agrees to provide Hon Hai with a reasonable amount of support, at no charge, with respect to the initial installation, set-up and debugging of such Ancillary Technology and Hon Hai will be solely responsible for all ongoing use and support of such Ancillary Technology. 3.5 Non-Exclusivity. Nothing in this Agreement will be construed or deemed to prevent or otherwise inhibit Brocade's ability or right to manufacture, any product (including the Products) at a Brocade facility or at alternate or additional third party facility(ies) of Brocade's choice. Further, nothing in this Agreement will be construed or deemed to (a) require Brocade to order all units of any Product from Hon Hai, or (b) prevent or otherwise inhibit Brocade's ability or right to design, develop, manufacture, have manufactured, market, use, sell, and or distribute any follow-on products or derivatives of the Products. 4. License Rights and Restrictions. 4.1 License to Hon Hai. - --------------- * Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. Brocade Manufacturing Agreement BROCADE CONFIDENTIAL Page 3 of 20 (a) License to Specifications. Subject to the terms of this Agreement, Brocade hereby grants Hon Hai a limited non-exclusive, non-transferable, royalty-free license (without the right to sublicense) under Brocade's trade secret rights, during the term of this Agreement, to use the Specifications solely internally and solely for the purpose of manufacturing the Products for Brocade. (b) License to Ancillary Technology. Subject to the terms of this Agreement, Brocade hereby grants Hon Hai a limited non-exclusive, non-transferable, royalty-free license (without the right to sublicense) under Brocade's copyright and trade secret rights, during the term of this Agreement, to use and copy the test software (provided as part of the Ancillary Technology) solely internally and solely for the purpose of manufacturing and testing the Products for Brocade. (c) License to Brocade Firmware. Subject to the terms of this Agreement, Brocade hereby grants Hon Hai a limited non-exclusive, non-transferable, royalty-free license (without the right to sublicense) under Brocade's copyright rights, during the term of this Agreement, to copy the Brocade Firmware onto Product units in the manufacturing process. (d) License to Brocade Technology. Brocade hereby grants Hon Hai a limited non-exclusive, non-transferable, royalty-free license (without the right to sublicense) under Brocade's Intellectual Property Rights, during the term of this Agreement, to use the Brocade Technology solely internally, and solely as necessary to fulfill its manufacturing obligations under this Agreement. Hon Hai is granted no right, and is expressly prohibited from using the Brocade Technology, to develop, manufacture or distribute any products other than the Products. 4.2 License to Brocade. Neither Hon Hai nor any third party will retain any rights in any materials incorporated into the Products. To the extent that Hon Hai provides any Hon Hai Technology to Brocade [*], Hon Hai hereby grants to Brocade a non-exclusive, royalty-free, perpetual, irrevocable license under Hon Hai's Intellectual Property rights to make, have made, use, sell, import, reproduce, display, distribute, and create derivative works of the Hon Hai Technology solely in connection with the development, manufacture, marketing, and sale of Brocade Products, as listed on Exhibit A, which may be modified from time to time upon written agreement of the parties. 4.3 Restrictions. Except as expressly set forth above, each party retains all of its Intellectual Property Rights. No license is granted by Brocade to make, use or sell any other products under the Brocade Intellectual Property Rights or to make, use or sell any products for any other purpose. Hon Hai will not modify, decompile or reverse engineer the Brocade Firmware or any Brocade Technology. 5. Purchase Orders. 5.1 Purchase Order Acceptance. Hon Hai is permitted to sell the Products only to Brocade, and to third parties who have been authorized in writing by Brocade to purchase the Products from Hon Hai ("Designated Purchasers") in satisfaction of Purchase Orders issued during the term of this Agreement, subject to and in accordance with the terms and conditions of this Agreement. 5.2 Quantity Flexibility. Hon Hai will, at [*], accept all Purchase Order cancellations, reschedulings and changes in the quantity of Products ordered within the cancellation, rescheduling, change, or other flexibility terms outlined in the SLA. The version of the SLA existing as of the Effective Date is attached as Exhibit C for reference only. The parties may change the SLA from time to time without amending Exhibit C or this Agreement. 6. Shipping and Delivery. 6.1 Shipment. All shipments of the Products will be made [*] (per Incoterms 2000). [*] - --------------- * Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. Brocade Manufacturing Agreement BROCADE CONFIDENTIAL Page 4 of 20 6.2 Timing. Shipments to Brocade, or to other locations specified by Brocade, will be shipped in the [*] ordered by Brocade, and [*] the acknowledged delivery date, [*] the acknowledged delivery date. Upon learning of any potential shipment delays, Hon Hai will notify Brocade [*] within such shorter time as may be required in the SLA as to the cause and extent of such delay. Except as Brocade may otherwise advise in advance and in writing, Brocade [*] any goods (i) shipped [*] the quantity ordered, (ii) shipped in a [*] shipments, or (iii) shipped [*]. 6.3 Accelerated Measures. If Hon Hai fails or has reason to believe it will fail to make shipments at the specified time and such failure is not due to an action or omission of Brocade, Hon Hai will, [*] employ accelerated measures [*] required to meet the specified delivery schedule or minimize the lateness of shipments. 7. Acceptance. 7.1 Inspection. Hon Hai will ship Products directly to [*]. All deliveries of Products are subject to inspection and testing by Brocade [*] before final acceptance. Within [*] after receipt of Products ("Rejection Period"), Brocade [*] may inspect and reject any Product that fails to meet the Specifications. 7.2 Rejection. Within the Rejection Period, customers may notify Brocade of any Product rejections and the reasons therefor. In accordance with the RMA procedures of Section 11.1, below, Brocade [*] may return rejected or defective Products to Hon Hai, [*]. In the event that the returned Product is defective, Hon Hai will repair or replace such defective Product, [*]. For all returned Products that are defective, Hon Hai will return to Brocade or its customer, as the case may be, freight prepaid, all repaired or replaced Products within [*] after Hon Hai's receipt of the returned Product or within such other time as specified in the SLA. Any returned Products that have been damaged by misuse, abuse or unauthorized repair, by or on behalf of the End User, may be treated by Hon Hai as "out of warranty" and subject to out of warranty repair charges referenced in Section 8.1 only. Any returned Products which are not in fact defective may be returned by Hon Hai to the End User at [*] expense. 7.3 Spot Testing. Upon prior notice to Hon Hai, Brocade or its authorized representative(s) may conduct spot functional tests of the Products at Hon Hai's facility at which Products are being manufactured during Hon Hai's normal business hours. The parties will mutually agree upon the timing of such investigations, which will be conducted in such a manner as not to interfere with Hon Hai's operations. If any Products fail any material part of the test procedure set forth on the Statement of Work, Brocade may reject such Products, and Hon Hai will promptly take all steps necessary to correct such failures. 7.4 Site Inspections. Upon [*] notice to Hon Hai, Brocade[*] will have the right to perform on-site inspections at Hon Hai's manufacturing facilities and Hon Hai will fully cooperate with Brocade in that regard at mutually agreed upon times. If an inspection or test is made on Hon Hai's premises, Hon Hai will provide Brocade's inspectors with reasonable assistance at no additional charge. In the event that any on-site inspection of the Products indicates that the Products do not conform to the requirements of this Agreement, Hon Hai will not ship such Products to Brocade until such nonconformity has been cured and only Products meeting the conformance criteria may be shipped. This does not limit Brocade's right to perform additional acceptance testing at Brocade's facilities. 7.5 Failure to Inspect. Notwithstanding anything to the contrary contained in this Agreement, inspection or failure to inspect the Products upon Delivery will not affect Brocade's rights under the warranty provisions of this Agreement. - --------------- * Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. Brocade Manufacturing Agreement BROCADE CONFIDENTIAL Page 5 of 20 8. Pricing and Payment. 8.1 Prices. The unit prices to be paid by Brocade for (a) the Products, and (b) all out-of-warranty repair services, shall be as set forth on Exhibit A or as otherwise agreed by the parties. Except as otherwise expressly provided in this Agreement, such unit prices includes [*] for the Products or repair services (as the case may be), any related deliverable items and services and packaging for delivery to Brocade. All payments hereunder will be paid in U.S. Dollars unless otherwise mutually agreed upon by the parties in writing. 8.2 Taxes. Where the law permits, Hon Hai will treat Brocade as exempt from applicable state and/or local sales tax for Product(s) purchased pursuant to this Agreement. Where required by state or local law, Brocade will provide Hon Hai with a valid reseller's exemption certificate for each taxing jurisdiction to which Hon Hai ships Product(s). The Parties agree that for any purchases made in the People's Republic of China, no sales taxes shall apply. 8.3 Invoices. Hon Hai will submit invoice(s) periodically to Brocade upon [*] of Product(s) to the United States. (All Products shipped outside of the United States shall be governed by the agreement entered into by and between Brocade Switzerland SarL and Hon Hai, dated _____, 2002.) Brocade will pay such invoices net [*] after the date of [*] of the Products or receipt of Hon Hai's invoice, whichever is later ("Payment Period"); provided however, that if the SLA specifies a different Payment Period, Brocade will pay within the time specified in the SLA and not the Payment Period specified in this Agreement. Payment will not constitute acceptance of the Products by Brocade. 9. Quality Assurance. 9.1 Quality Standards. Hon Hai will manufacture and repair the Products in accordance with the quality requirements, standards and expectations as set forth on the Statement of Work or as otherwise mutually agreed upon by the parties in writing. 9.2 Quality Plan. Hon Hai will establish, maintain and manage a quality assurance program for the Products that is consistent with, and at least as restrictive as, the terms and conditions listed in Exhibit D, which may be modified from time to time upon written agreement of the parties. 10. Engineering Changes. 10.1 ECOs. Brocade may, upon advance written notice to Hon Hai, submit engineering change orders ("ECOs") for changes to the Products. ECOs will include documentation of the change to effectively support an investigation of the impact of the engineering change. Hon Hai will review the ECO and report to Brocade within [*] of Hon Hai's receipt of the ECO. If the ECO affects the manufacturing or repair costs of the Products or otherwise affects the price of the affected Products, the parties agree to negotiate in good faith an equitable adjustment to the price of the affected Products prior to implementation of the change. The parties agree that [*] is a reasonable time period to permit Hon Hai to evaluate ECO impact regarding potential excess manufacturing costs and price. 10.2 No Changes. No changes will be made to the Products without Brocade's prior written consent and no approved change will be made effective prior to the date approved by Brocade in writing. Hon Hai will not change or modify the processes for the Products without Brocade's prior written consent. Hon Hai will reimburse Brocade for all expenses incurred by Brocade to qualify changes to such materials or processes that are undertaken by Hon Hai without Brocade's prior written consent. - --------------- * Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. Brocade Manufacturing Agreement BROCADE CONFIDENTIAL Page 6 of 20 11. Product Repairs and Parts Supply. 11.1 Repair Services. [*] Hon Hai will provide repair services to Brocade and Brocade-authorized third parties (i) for all in-warranty Products (including all parts therein and any parts provided separately "Parts")) in accordance with the terms of Sections 14, below, and (ii) for any out-of-warranty Products and Parts for a period of [*] from the end-of-life production of such Products or Parts by Hon Hai or a Brocade Vendor. For any Product or Part that is returned to Hon Hai for repair or replacement services, Brocade will issue a Return Material Authorization ("RMA") number, and will forward such RMA electronically to Hon Hai, through Brocade's Oracle system. All Products and Parts returned to Hon Hai for repair or replacement services will include the RMA affixed to the packaging. 11.2 Parts Supply. Hon Hai will make available to Brocade Product Parts as Brocade may [*] for [*] Products purchased by Brocade from Hon Hai during the Product production. For a period of [*] after the date of delivery to Brocade by Hon Hai of the last unit of the Product manufactured by Hon Hai, Hon Hai will also undertake the following: (a) Hon Hai will maintain [*] necessary for the Products; (b) Hon Hai will maintain [*] so that Hon Hai will be able to [*] any Parts originally [*] by Hon Hai; (c) Hon Hai will [*] its Parts vendors to obtain and will provide notice to Brocade at least [*] prior to discontinuing the availability of any Part; (d) Hon Hai will inform Brocade of all [*] notifications for Parts upon Hon Hai's receipt of such notifications; and (e) Hon Hai will inform Brocade if a [*] is the most economical procurement strategy for such Parts as to which such a notification is received (especially [*] Parts which may require tool maintenance and set-up charges that far outweigh piece part costs). [*] If Brocade determines that [*] is not financially favorable due to the [*]of the remaining support period for the Part(s), Hon Hai will assist Brocade in [*] through manufacturing. [*] 12. Ownership. 12.1 Ownership by Brocade. As between Brocade and Hon Hai, Brocade will own all right, title, and interest in the Specifications, Brocade Firmware, Products, Ancillary Technology and the Brocade Technology (excluding the Hon Hai Technology, which will be owned exclusively by Hon Hai) and all Intellectual Property Rights therein, and Hon Hai hereby irrevocably transfers, conveys and assigns to Brocade all of its right, title, and interest therein. Hon Hai will execute such documents, render such assistance, and take such other action as Brocade may reasonably request, at Brocade's expense, to apply for, register, perfect, confirm and protect Brocade's rights to the Brocade Technology, and all Intellectual Property Rights therein. 12.2 Ownership by Hon Hai. As between Hon Hai and Brocade, Hon Hai will own all right, title and interest in the Hon Hai Technology (excluding the Brocade Technology, which will be owned exclusively by Brocade), and all Intellectual Property Rights therein. 12.3 Ownership of Joint Technology. Subject to the ownership rights specified in Sections 1.1 and 1.1, [*] own all right, title and interest in the Joint Technology and all Intellectual Property Rights therein, and [*] use the Joint Technology and all Intellectual Property Rights therein without restriction and for any reason. [*] will execute such documents, render such assistance, and take such other action as [*] may reasonably request, at [*] expense, to apply for, register, perfect, confirm and protect [*] rights in the Joint Technology. 12.4 Attorney in Fact. The Parties agree that that if either Party ("Assignee") is unable because of the other Party's ("Assignor") unavailability, dissolution or incapacity, unreasonable refusal or unreasonable failure to act in a timely manner such that intellectual property rights protection may be impaired, to secure Assignor's signature to apply for or to pursue any application for any United States or foreign patents or mask work or copyright registrations covering the inventions assigned to Assignee under this Agreement, then Assignee hereby irrevocably designates and appoints Assignee and its duly - --------------- * Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. Brocade Manufacturing Agreement BROCADE CONFIDENTIAL Page 7 of 20 authorized officers and agents as Assignor's agent and attorney in fact, to act for and in Assignor's behalf and stead to execute and file any such applications and to do all other lawfully permitted acts to further the prosecution and issuance of patents, copyright and mask work registrations thereon with the same legal force and effect as if executed by Assignor. 13. Confidential Information. 13.1 General. Except as otherwise provided in this Section, the definition, use, and disclosure of confidential information by the parties shall be governed by the Mutual Non-Disclosure Agreement between the parties and dated May 22, 2000. 13.2 Sensitive Brocade Information. "Sensitive Brocade Information" means the Forecasts, Specifications, AVL, Brocade Technology, Ancillary Technology, bill of materials, SLA, work instructions, and all data accessed by Hon Hai pursuant to Sections 1, 1, 1, 1, 1 and 1. 13.3 Confidentiality Obligations. Hon Hai will, at all times, both during the term of this Agreement and at all times thereafter, keep in confidence and trust all Sensitive Brocade Information. Hon Hai may use the Sensitive Brocade Information only as necessary to perform its obligations under this Agreement. Hon Hai will take all required steps to prevent unauthorized disclosure or use of Sensitive Brocade Information and to prevent it from falling into the public domain or into the possession of unauthorized persons. Hon Hai will not disclose Sensitive Brocade Information to any person or entity other than its employees who need access to such Sensitive Brocade Information in order to effect the intent of this Agreement and who have entered into written confidentiality agreements that protect the Sensitive Brocade Information. Hon Hai will immediately give notice to Brocade of any unauthorized use or disclosure of Sensitive Brocade Information. Hon Hai agrees to assist Brocade in remedying such unauthorized use or disclosure of Sensitive Brocade Information. 13.4 Exclusions. These obligations will not apply to the extent that Sensitive Brocade Information: (a) is already known to Hon Hai at the time of disclosure, which knowledge Hon Hai will have the burden of proving; (b) is, or, through no act or failure to act of Hon Hai, becomes publicly known; (c) is received by Hon Hai from a third party without restriction on disclosure; (d) is independently developed by Hon Hai without reference to Sensitive Brocade Information, which independent development Hon Hai will have the burden of proving; or (e) is approved for release by written authorization of Brocade. 13.5 Legal Disclosures. A disclosure of Sensitive Brocade Information (a) in response to a valid order by a court or other governmental body, or (b) otherwise required by law, will not be considered to be a breach of this Agreement or a waiver of confidentiality for other purposes; provided, however, that Hon Hai will provide prompt written notice thereof to Brocade to enable it to seek a protective order or otherwise prevent such disclosure and will cooperate with Brocade in seeking such protective order. 14. Warranty. 14.1 Product Warranty. Hon Hai warrants for a period of [*] from the date of [*] of each unit of each Product, that such unit of each Product [*] (a) will conform to the Specifications; (b) will be of good material (except for material supplied by Brocade) and workmanship and free from defects in the manufacture; (c) will be free and clear of all liens and encumbrances and that Hon Hai will convey good and marketable title to such Product. For purposes of clarification, the Parties agree that Hon Hai will have satisfied its workmanship obligations in (b) above to the extent that such workmanship [*] or (ii) the minimum requirements agreed upon in writing by the parties in a Statement of Work or other signed document. [*] - --------------- * Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. Brocade Manufacturing Agreement BROCADE CONFIDENTIAL Page 8 of 20 14.2 Product Warranty Remedy. In accordance with the RMA procedures outlined in Section 11.1, above, Brocade will promptly notify Hon Hai of any Products [*] that Brocade believes do not comply with the warranties contained in this Agreement. Hon Hai will pay all [*] associated with Products returned for repairs during the warranty period. Hon Hai will, at [*] option, either (i) credit Brocade for the purchase price paid by Brocade for the defective Product units, or (ii) at [*] expense, replace, repair or correct such Product within [*] of notification [*]. Hon Hai will [*] any charges in order to effect the earliest reasonable replacement of such defective Products to Brocade [*]. Hon Hai agrees to maintain a repair capability for products under warranty. Hon Hai will provide to Brocade detailed information, including location, telephone number, contact person and hours of operation for the Hon Hai service representative who will be Brocade's contact for warranty claims and questions. [*] Replaced Products will be warranted for [*] period, plus time equal to [*] because of repair or replacement and shipment time, or [*], whichever is longer. [*] (a) [*] 14.3 Other Obligations and Warranties. (a) Regulatory Compliance. Hon Hai represents and warrants that its manufacturing facilities and processes will comply with all applicable international, federal, state and local statutes, laws and regulations. (b) Import/Export Requirements. Brocade and Hon Hai will comply with all import and export laws and regulations and maintain appropriate import and export documentation. At Brocade's request, Hon Hai will make available for inspection and audit all import and export documentation for the Products and the Hon Hai Technology included in the Products sold under this Agreement. At Brocade's request, Hon Hai will also assist Brocade in determining an appropriate Export Control Classification Number ("ECCN") for all Products sold hereunder. At Brocade's request, Hon Hai will also provide export screening for all shipments of Products or Parts. Hon Hai will not, directly or indirectly, export, re-export or transship any Technology in violation of any applicable U.S. export control laws and regulations or any other applicable export control laws promulgated and administered by the government of any country having jurisdiction over the parties or the transactions contemplated herein. (c) Formation, Good Standing and Authority. Each of Hon Hai and Brocade represents and warrants to the other that it is a company duly formed, validly existing and in good standing under the laws of its jurisdiction and that this Agreement has been duly executed and delivered by it, and (assuming due authorization, execution and delivery by the other) constitutes a legal, valid and binding obligation of it, enforceable against it in accordance with its terms, subject to (i) laws of general application relating to bankruptcy, insolvency and the relief of debtors, and (ii) rules of law governing specific performance, injunctive relief and other equitable remedies. (d) DOAs and Misshipments. Notwithstanding the terms and conditions in Sections 7.2 and 14.2 of the Agreement, in the event that a Product is rejected and returned to Hon Hai by Brocade [*] because (1) such Product was [*] by, or on behalf of, Hon Hai (a "Misshipment"), and such Misshipment is attributable to Hon Hai's acts or omissions, or (2) such Product is found to be dead on arrival (a "DOA"), and such DOA is attributable to the acts or omissions of Hon Hai, then Hon Hai shall: (i) [*] for the return of such Misshipment/DOA; and (ii) [*] testing and reconfiguring such Misshipment/DOA so that it is fully functional and meets the Specifications; and - --------------- * Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. Brocade Manufacturing Agreement BROCADE CONFIDENTIAL Page 9 of 20 (iii) hold such Misshipment/DOA [*] for a period of up to [*] or upon date of Brocade [*], whichever is less. Subject to Hon Hai's compliance with the obligations in (i), (ii) and (iii) above, Brocade agrees to provide Hon Hai with [*] for Misshipments and DOAs. In addition, Hon Hai agrees to [*] all Misshipments and DOAs and to provide Brocade, on a regular basis, a [*] regarding such Misshipments and DOAs. The Parties agree to use their [*] efforts to identify and resolve Misshipment and DOA issues and [*] such issues. 14.4 Warranty Disclaimer. THE WARRANTIES CONTAINED IN THIS SECTION 14 ARE IN LIEU OF, AND EACH PARTY EXPRESSLY DISCLAIMS AND THE OTHER PARTY WAIVES ALL OTHER REPRESENTATIONS AND WARRANTIES, EXPRESS, IMPLIED, STATUTORY OR ARISING BY COURSE OF DEALING OR PERFORMANCE, CUSTOM, USAGE IN THE TRADE OR OTHERWISE, INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR USE AND NONINFRINGEMENT OF THIRD PARTY RIGHTS. 15. Term and Termination. 15.1 Term. This Agreement will commence on the Effective Date and will continue for a period of [*] thereafter, unless earlier terminated pursuant to this Agreement. [*] may renew this Agreement for successive [*] terms by providing written notice to [*] no later than [*] prior to the end of the then-current term. 15.2 Termination for Default. [*] may terminate this Agreement if [*] violates any covenant, agreement, representation or warranty contained herein in any material respect or defaults or fails to perform any of its obligations or agreements hereunder in any material respect, which violation, default or failure is not cured within [*] after written notice (which notice will describe the alleged breach in reasonable detail) from [*] stating its intention to terminate this Agreement by reason thereof. 15.3 Other Causes of Termination. This Agreement will terminate upon written notice by either party, immediately, if (a) a receiver is appointed for the other party or its property; (b) the other party makes a general assignment for the benefit of its creditors; (c) the other party becomes insolvent or unable to pay its debts as they mature in the ordinary course of business or makes an assignment for the benefit of its creditors; (d) the other party is liquidated or dissolved; or (e) any proceedings are commenced against the other party under any bankruptcy, insolvency or debtor's relief law and such proceedings are not vacated or set aside within sixty (60) days from the date of commencement thereof. 15.4 Effect of Termination. In the event of the expiration or termination of this Agreement: (a) Hon Hai will complete the production of any Products of which Hon Hai has [*] as of the effective date of such expiration or termination and Deliver such completed Products to Brocade by the earlier of (i) the acknowledged delivery date, or (ii) [*]; - --------------- * Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. Brocade Manufacturing Agreement BROCADE CONFIDENTIAL Page 10 of 20 (b) Hon Hai will immediately cease the use of all of the Brocade Technology upon completion of the work required in 1.1(a); (c) Hon Hai will return or destroy (as appropriate depending on the nature of the material) all Sensitive Brocade Information within thirty (30) days after the effective date of the termination and certify in writing that such party has complied with its obligations hereunder; and (d) NEITHER BROCADE NOR HON HAI SHALL BE LIABLE TO THE OTHER BECAUSE OF SUCH EXPIRATION OR TERMINATION, FOR COMPENSATION, REIMBURSEMENT OR DAMAGES FOR THE LOSS OF PROSPECTIVE PROFITS, ANTICIPATED SALES OR GOODWILL, ON ACCOUNT OF ANY EXPENDITURES, INVESTMENTS OR COMMITMENTS MADE BY EITHER, OR FOR ANY OTHER REASON WHATSOEVER BASED UPON THE RESULT OF SUCH EXPIRATION OR TERMINATION. 15.5 Survival. The rights and obligations of the parties set forth in Sections 1, 3.3, 3.4, 4.2, 4.3, 5, 6, 7, 8, 9, 11, 12, 14, 15.4, 15.5, 16, 17, 18 and 19 will survive any termination or expiration of this Agreement [*]. 16. Dispute Resolution. In the spirit of continued cooperation, the parties agree to follow the dispute resolution procedure described in this Section in the event any controversy should arise out of or concerning the parties' performance under this Agreement. In the event of a dispute or claim arising between the parties on any matter relating to this Agreement, either party may initiate negotiation proceedings by written notice to the other party setting forth the particulars of the dispute. Upon receipt of such notice, the parties agree to meet in good faith within [*] of the date of such notice, to jointly define the scope of and a method to remedy the dispute. If such meeting does not resolve the dispute, then senior management of Hon Hai and Brocade are authorized to and will meet personally within [*] to confer in a bona fide attempt to resolve the matter. The parties will use diligent efforts to arrange meetings or telephone conferences as needed to facilitate these negotiations. If such dispute remains unresolved following the parties' undertaking of the actions set forth in this Section 16, the parties shall have the right to avail themselves of all other rights and remedies, whether available under this Agreement, at law or in equity. Each party's rights to terminate this Agreement for breach subject to the notice period set forth in Section 15 shall apply regardless of the parties' discussions under this Section 16. 17. Limitation of Liability. 17.1 Consequential Damages Waiver. EXCEPT FOR BREACHES OF [*] NEITHER PARTY SHALL HAVE ANY LIABILITY TO EACH OTHER OR ANY OTHER THIRD PARTY FOR ANY LOST PROFITS, LOST DATA, LOSS OF USE OR COSTS OF PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES, OR FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES ARISING IN ANY WAY OUT OF THIS AGREEMENT OR THE TRANSACTION CONTEMPLATED THEREBY, UNDER ANY CAUSE OF ACTION OR THEORY OF LIABILITY, AND IRRESPECTIVE OF WHETHER SUCH PARTY HAD ADVANCE NOTICE OF THE POSSIBILITY OF SUCH DAMAGES. 17.2 Failure of Essential Purposes. THE LIMITATIONS SET FORTH IN THIS SECTION 17 SHALL APPLY NOTWITHSTANDING THE FAILURE OF THE ESSENTIAL PURPOSE OF ANY LIMITED REMEDY. 18. Indemnification. 18.1 Hon Hai Indemnity. Hon Hai will defend, indemnify and hold Brocade and its officers, directors and employees harmless (inclusive of reasonable attorneys' fees) from and against any claim, suit, action or proceeding brought against Brocade arising from, relating to or in connection with: (a) Hon - --------------- * Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. Brocade Manufacturing Agreement BROCADE CONFIDENTIAL Page 11 of 20 Hai's breach of any licenses granted to Hon Hai under this Agreement; (b) [*] in the Products, to the extent that the claim is based on facts which constitute a non-conformance with the [*] or [*] or [*] provided or developed by Hon Hai; (c) acts, errors or omissions by or negligence of Hon Hai, its employees, officers, agents or representative of any of them; (d) any third party claims founded on theories of [*] related to the Products, to the extent that the claim is not based on elements of the Products manufactured in conformance with the Specifications; or (e) [*] the Products or Hon Hai Technology of any [*] not based on the [*] provided by Brocade. In the event the Hon Hai Technology and/or the Products are held or believed by Hon Hai to infringe, or Brocade's use of the Hon Hai Technology and/or the Products is enjoined, [*] 18.2 Brocade Indemnity. Brocade will defend, indemnify and hold Hon Hai and its officers, directors and employees harmless (inclusive of reasonable attorneys' fees) from and against any claim, suit, action or proceeding brought against Hon Hai arising from, relating to or in connection with: [*] (c) acts, errors or omissions by or negligence of Brocade, its employees, officers, agents or representative of any of them[*]. In the event the Brocade Technology is held or believed by Brocade to infringe, or Hon Hai's use of the Brocade Technology is enjoined, Brocade will have the option[*] to: (i) procure for Hon Hai the right to continue using Brocade Technology; (ii) replace Brocade Technology with non-infringing technology; (iii) modify Brocade Technology so that it becomes non-infringing; or (iv) accept return of Brocade Technology. Brocade's obligations hereunder will be void as to any Brocade Technology modified by Hon Hai (without Brocade's approval), solely to the extent such modification is the alleged basis of the suit. 18.3 [*] 19. Export. Hon Hai agrees that: 19.1 Hon Hai will perform routed transactions for Brocade, and 19.2 Hon Hai will provide Brocade with comprehensive ongoing support regarding the following key issues: [*], accurate record-keeping of all export document packets, [*] on all switches and FRUs, and Manufacturing affidavits for all Brocade Products and Parts. 20. Environmental Requirements. Hon Hai warrants and agrees that: 20.1 Product Content. All Products and their packaging will comply with Brocade's general specifications for environment (if any), and, for purposes of this Agreement, such specifications are part of the Specifications for the Product. 20.2 Shipment. All Products will be shipped in conformance with all applicable national and international [*] including, where applicable, regulations regarding [*], including regulations regarding [*]. All packaging materials, including pallets, will be [*] and comply with national and international regulations regarding [*] where applicable. 20.3 [*]. Each [*] contained in the Product is on the inventory of [*] compiled and published by [*] pursuant to the [*]. 20.4 Hon Hai will provide complete and accurate [*] for Product prior to shipment. 20.5 [*] Information. Hon Hai will furnish Brocade any information reasonably requested by Brocade to confirm compliance with applicable laws or to determine the [*] effects of materials included in the Products or in its packaging. - --------------- * Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. Brocade Manufacturing Agreement BROCADE CONFIDENTIAL Page 12 of 20 20.6 Hon Hai will comply with all applicable laws governing import or export of Products and will be solely responsible for obtaining all requisite licenses and other authorizations. 20.7 Disposition of Excess Materials. Hon Hai will [*] of any excess or waste materials generated from manufacture of Product (including damaged or nonconforming product or materials) in compliance with the provisions of this Agreement, applicable laws and any specific instructions received from Brocade. 20.8 Hon Hai will continuously implement and maintain processes and policies designed to [*] at any facility at which Product manufacturing operations are performed under this Agreement. 20.9 Ozone Depleting Substances. Hon Hai hereby certifies that neither Product, nor any part, piece or component of any Product: (a) contains any [*] as those terms are defined in [*] and implementing regulations of the [*], as now in existence or hereafter amended; or (b) has been manufactured with a process that uses any [*] 21. General. 21.1 Insurance. Each party will maintain workers' compensation and comprehensive general liability insurance (including product liability coverage) adequate to cover its obligations under this Agreement. 21.2 Assignment. [*] will assign this Agreement, in whole or in part, or any obligations or rights hereunder (except the right to receive payments), except with the prior written consent of [*], which consent will not be unreasonably withheld or delayed. Notwithstanding the foregoing, Brocade will have the right to assign or otherwise transfer this Agreement without such consent (i) to a subsidiary, parent, or entity under common control with Brocade, or (ii) to a successor party in the event of a merger, acquisition, sale, transfer or other disposition of all or substantially all of the assets of Brocade. Subject to the foregoing, this Agreement will inure to the benefit of each of the party's successors and assigns. 21.3 Relationship of the Parties. The parties to this Agreement are independent contractors. There is no relationship of agency, partnership, joint venture, employment or franchise between the parties. Neither party has the authority to bind the other or to incur any obligation on its behalf. 21.4 Publicity. Hon Hai will not publicize or disclose the terms of this Agreement to any third party without the prior written consent of Brocade. 21.5 Waiver. No term or provision hereof will be considered waived by either party, and no breach excused by either party, unless such waiver or consent is in writing signed on behalf of the party against whom the waiver is asserted. No consent by either party to, or waiver of, a breach by either party, whether express or implied, will constitute a consent to, waiver of, or excuse of any other, different or subsequent breach by either party. 21.6 Severability. If any part of this Agreement is found invalid or unenforceable, that part will be amended to achieve as nearly as possible the same economic effect as the original provision and the remainder of this Agreement will remain in full force. 21.7 Choice of Law. This Agreement will be governed by and construed in accordance with the laws of the United States and the State of California as applied to agreements entered into and to be - --------------- * Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. Brocade Manufacturing Agreement BROCADE CONFIDENTIAL Page 13 of 20 performed entirely within California between California residents. The parties agree that the United Nations Convention on Contracts for the International Sale of Goods (1980) is specifically excluded from application to this Agreement. 21.8 Choice of Forum. This Agreement will be deemed made and entered into in Santa Clara County, California. Except for either party's right to apply to any court of competent jurisdiction for a temporary restraining order and/or a preliminary injunction to enjoin the other party from misappropriating or infringing any Intellectual Property Rights of the moving party, the parties hereby submit to the exclusive jurisdiction of, and waive any venue objections against, the United States District Court for the Northern District of California, San Jose Branch and the Superior and Municipal Courts of the State of California, Santa Clara County, in any litigation arising out of this Agreement. The parties hereby irrevocably waive any and all claims and defenses either might otherwise have in any action or proceeding in any of such courts based upon any alleged lack of personal jurisdiction, improper venue, forum non conveniens or any similar claim or defense. 21.9 Notices. Any notice provided for or permitted under this Agreement will be treated as having been given when (a) delivered personally, (b) sent by confirmed telex or telecopy, (c) sent by commercial overnight courier with written verification of receipt, or (d) mailed postage prepaid by certified or registered mail, return receipt requested, to the party to be notified, at the address set forth below, or at such other place of which the other party has been notified in accordance with the provisions of this Section. If to Brocade: Brocade Communications Systems, Inc. 1745 Technology Drive San Jose, CA 95110 Attn.: General Counsel If to Hon Hai: Hon Hai Precision 1705 Junction Court Suite 200 San Jose, CA 95112-1023 Attn.: ________________________ Such notice will be treated as having been received upon the earlier of actual receipt or five (5) days after posting. 21.10 Amendment. This Agreement may be amended or supplemented only by a writing that refers explicitly to this Agreement and that is signed on behalf of both parties. 21.11 Interpretation. No party will be deemed the drafter of this Agreement, which Agreement will be deemed to have been jointly prepared by the parties. If this Agreement is ever construed, whether by a court or by an arbitrator, such court or arbitrator will not construe this Agreement or any provision hereof against any party as drafter. The Section and other headings contained in this Agreement are for reference purposes only and will not in any way affect the meaning and/or interpretation of this Agreement. It is the intent of the parties that this Agreement and its addenda will prevail over the terms and conditions of any purchase order, acknowledgment form or other instrument. In the event of a conflict between the terms of this Agreement and the terms contained in any addenda to this Agreement, the terms of the addenda will be controlling. Addenda will not be binding until executed by authorized representatives of each party. 21.12 Entire Agreement; Counterparts; Fax Signatures. This Agreement, including all exhibits to this Agreement, constitutes the entire agreement between the parties relating to this subject matter and supersedes all prior and/or simultaneous representations, discussions, negotiations and agreements, whether written or oral. This Agreement may be executed in counterparts, each of which will be deemed Brocade Manufacturing Agreement BROCADE CONFIDENTIAL Page 14 of 20 an original, but both of which together will constitute one and the same instrument. The parties agree that facsimile signatures of the parties will be binding. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective duly authorized officers as of the date first written above. HON HAI PRECISION BROCADE COMMUNICATIONS SYSTEMS, INC. By: _________________________________ By: __________________________________ Name: _______________________________ Name: ________________________________ Title: ______________________________ Title: _______________________________ Date: _______________________________ Date: ________________________________ Brocade Manufacturing Agreement BROCADE CONFIDENTIAL Page 15 of 20 EXHIBIT A PRODUCTS

Brocade Manufacturing Agreement BROCADE CONFIDENTIAL Page 16 of 20 EXHIBIT B ANCILLARY TECHNOLOGY TERMS AND CONDITIONS 1. All tools, tooling equipment, test equipment and other materials furnished to Hon Hai by Brocade or paid for by Brocade ("Brocade Property" or "Ancillary Technology") in connection with this Agreement will be clearly identified by Hon Hai and will remain the property of Brocades and will be (a) clearly marked and remain the personal property of Brocade, and (b) kept free of liens and encumbrances. Hon Hai will allow Brocade personnel onto Hon Hai's premises upon 24 hours notice to allow Brocade to inspect the condition of the Brocade Property or reclaim possession of the Brocade Property. 2. Brocade [*] the Brocade Property, and Hon Hai [*] agrees that it will not issue any negotiable bills or receipts on the Brocade Property and will neither file nor permit any lien or other claim to be filed against any of the Brocade Property. In the event that such a lien or claim is filed, Hon Hai will promptly notify Brocade and will take all action necessary to cause such lien or claim against the Brocade Property to be released or otherwise removed within [*]. If such lien or claim is not released within such [*], then Brocade may deem that Hon Hai has purchased the Brocade Property at the [*] cost for such Brocade Property and such amount will be immediately payable to Brocade. Hon Hai will hold Brocade Property at its own risk and will not modify the property without the written permission of Brocade. Hon Hai agrees that Brocade property will be used by Hon Hai only to perform Hon Hai's obligations under this Agreement. Upon Brocade's request, Hon Hai will redeliver the property to Brocade in the same condition as originally received by Hon Hai with the exception of reasonable wear and tear. Hon Hai agrees that in the event the property is lost, damaged or destroyed, Hon Hai's liability for the property is limited to the book value of the property. 3. Unless otherwise agreed to in writing by Brocade, all Ancillary Technology will be insured by [*]. Hon Hai will execute and deliver to Brocade such other or further agreements relative to property furnished by Brocade to Hon Hai as may be requested by Brocade. - ---------------- * Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. Brocade Manufacturing Agreement BROCADE CONFIDENTIAL Page 17 of 20 EXHIBIT C SLA (FOR REFERENCE ONLY) Brocade Manufacturing Agreement BROCADE CONFIDENTIAL Page 18 of 20 EXHIBIT D QUALITY PLAN Solectron shall comply with the terms and conditions of Brocade's quality procedure document identified in Brocade's Agile system as: [*] MANUFACTURING SUPPLIER QUALITY PROCEDURE - ---------------- * Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. Brocade Manufacturing Agreement BROCADE CONFIDENTIAL Page 19 of 20 EXHIBIT D BROCADE MANUFACTURING SUPPLIER QUALITY PROCEDURE OPERATIONS

Brocade Communication Systems Inc. Document: 99-0000112-01 Page 1 of 8 Revision: A Revision Date: 2/11/03 TABLE OF CONTENTS

Brocade Communication Systems Inc. Document: 99-0000112-01 Page 2 of 8 Revision: A Revision Date: 2/11/03 1.0 DESCRIPTION 1.1 This procedure outlines the generic product and process quality requirements for key commodity parts supplied to and/or manufactured for Brocade, Inc. 2.0 SCOPE 2.1 This procedure applies to [*] to Brocade, Inc. It may also be applied, at Brocade's discretion, to products specifically developed for Brocade by [*] and other [*]. 2.2 If a conflict arises between any requirement outlined in this procedure and a specific supplier contract signed by Brocade Inc., the [*] take precedence. 3.0 REFERENCES 3.1 Acceptability of Printed Boards (Class 2) ANSI/IPC-A-600E (latest revision) 3.2 Acceptability of Printed Circuit Assemblies (Class 2) ANSI/IPC-A-610B (latest revision) 3.3 ANSI/IPC 7711 and 7721 Suggested Guidelines for Modification, Rework and Repair of Printed Boards and Assemblies (Level C) 3.5 ANSI/IPC-T-50D (Terms and Definitions for Interconnecting and Packaging Electronic Circuits) 3.6 ANSI Z1.4 Sampling tables 3.7 Brocade Product Quality Plan (Product Specific) 3.8 Manufacturing/contract agreement 4.0 PROCEDURE 4.1 VALUE PROPOSITION 4.1.1 The Brocade supply chain value proposition is to establish supplier partnerships characterized by the following: - Open and honest communication - Strong "values based" management - On-time delivery of quality products - End user customer focus - Timely data driven decision making - Mutual respect and responsiveness - Ongoing mutual total life cycle cost reduction 4.1.2 We believe that relationships with these characteristics will enable us to establish a world class supply chain management system and provide products and services that consistently meet or exceed our customer's requirements. [FLOW CHART] 4.1.3 We believe that everyone in a supply chain is a customer for the work done by an "upstream" internal employee or external supplier. As such, you have a right to expect good work from them and an obligation to deliver work of high caliber to your internal and/or external customer. - ------------------ [*] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. Brocade Communication Systems Inc. Document: 99-0000112-01 Page 3 of 8 Revision: A Revision Date: 2/11/03 4.1.4 Sustained quality excellence requires continuous process improvement. This means, regardless of how good present performance is, it can become even better. "You can manage what you can measure." Align what you measure to the individual behaviors you want to support. 4.2 SUPPLIER PARTICIPATION 4.2.1 Contract manufacturing and other key suppliers are expected to [*] in the Brocade product development process. We depend on your [*] to optimize the design, quality, cost and delivery of Brocade products. Brocade will formally engage suppliers, through meetings and dialogue, throughout the product life cycle. Appendix A outlines a generic product qualification process flow. 4.3 MANAGEMENT COMMUNICATION 4.3.1 Our goal is to create a communication process to establish and sustain mutually profitable and rewarding business relationships. We want to become your [*], and we want you to become our [*]. 4.3.2 To this end, Brocade will participate in periodic management communication meetings with key suppliers. These meetings will include a review of quality, cost and delivery performance metrics and ongoing improvement plans. 4.3.3 Specific Quality metrics and requirements are identified with in the Brocade Product Quality Plan's. Additionally, process parameters and controls may be included within each plan. 4.4 WORKMANSHIP STANDARDS 4.4.1 Printed Wiring Boards shall meet the requirements of [*], latest revision, Class [*]. 4.4.2 Printed Circuit Assemblies shall meet the requirements of [*], latest revision, Class [*]. 4.4.3 [*] Requirements for Soldered Electrical and Electronic Assemblies and HDBK-001 (Handbook and guide to supplement [*] with amendment [*]). 4.4.4 [*]. Supplier specific workmanship standards should be identified and communicated to Brocade, Inc. prior to production. 4.4.5 Brocade Cosmetic Specification 95-0000001-01. 4.5 REPAIR AND REWORK 4.5.1 [*] (Terms and Definitions for Interconnecting and Packaging Electronic Circuits) contains the following definitions: Repair(ing): The act of restoring the functional capability of a defective article in a manner that precludes compliance with applicable drawings or specifications. Rework(ing): The act of reprocessing non-complying articles, through the use of original or alternate equivalent processing, in order to bring the article into compliance with applicable drawings and specifications. 4.5.2 [*] (Suggested Guidelines for Modification, Rework and Repair of Printed Boards and Assemblies) categorizes modifications, rework and repairs into [*] levels ([*]). 4.5.3 Brocade will accept PWB fab and assemblies that have been [*]), using Level [*] techniques outlined in the above. Level [*] rework techniques may be authorized by Brocade, only through prior Brocade Engineering or Quality approval. 4.5.4 All [*] must meet the workmanship requirements of [*] and/or [*]. Any [*] method not contained in [*] must be authorized by Brocade Quality before being used on any Brocade product. 4.6 DESIGN FOR MANUFACTURABILITY (DFM) AND VALUE ENGINEERING 4.6.1 [*] shall conduct Design for Manufacturability analysis for every new Brocade board design and/or significant ECO. [*] should participate in these reviews, as appropriate and/or conduct similar reviews for [*] products. - ------------------ [*] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. Brocade Communication Systems Inc. Document: 99-0000112-01 Page 4 of 8 Revision: A Revision Date: 2/11/03 4.6.2 Suppliers are expected to initiate and/or participate in periodic value engineering efforts to reduce the current and future Brocade cost of goods sold (COGS). The timing and content of this activity shall be determined on a [*] basis. 4.7 AUTHORIZED VENDOR LIST (AVL) 4.7.1 Contract manufacturers and other partners who supply critical components to Brocade must use Brocade's AVL, as required. Notification of this requirement will be made in advance. 4.7.2 Brocade will consider AVL change recommendations from any supplier. Change requests must be approved in writing by Brocade prior to implementation. This is typically done through Brocade's Agile Document System. 4.7.3 Brocade reserves the right to [*] or [*] at no additional cost of any materials supplied with [*] content. This will be considered a serious offense and may have a negative impact on the offending supplier relationship with Brocade. 4.8 PROCESS QUALIFICATION & CONTROLS 4.8.1 Brocade may require certain documentation from selected suppliers prior to commencing production. 4.8.2 The following supporting documentation may be requested: - Supplier qualification & performance monitoring process - Production process flow diagram - Product qualification testing plan and results (PVT) - Supplier version of BOM's and AVL's used to produce Brocade products - Process characterization documentation [e.g. SMT stencil, solder paste, SMT and through-hole reflow, board cleaning, rework, etc.] - Production test specifications and instructions, and in-process quality/control plan - Assembly process flow diagram - Gage Repeatability and Reproducibility Studies (Gage R&R: where/when applicable) - First Article Inspection - Other documentation as appropriate 4.9 TEST/QUALITY DATA COLLECTION & REPORTING 4.9.1 Suppliers will be required to provide periodic test and inspection yield information to Brocade, upon request. Typical (but not limited to the following) test and inspection results requested would be: - ------------------------------------------------------------------------------- Incoming Inspection Test Failure Pareto Charts [debug/rework] - ------------------------------------------------------------------------------- In-circuit Test Quality Inspection Pareto Charts - ------------------------------------------------------------------------------- Functional Test Final Inspection Results - ------------------------------------------------------------------------------- Environmental Stress Screening Corrective Action Status - ------------------------------------------------------------------------------- In-Process Audit Results Third Party Audit Results - -------------------------------------------------------------------------------

4.9.2 Performance reporting charts and graphs should generically include the following information: - Goals: benchmarks of best in class performance - Targets: interim goal for a given period - Actions: actions that are necessary to realize these improvements with owners assigned and planned completion dates - Progress: measured by relative improvements (delta) each period - -------------- [*] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. Brocade Communication Systems Inc. Document: 99-0000112-01 Page 5 of 8 Revision: A Revision Date: 2/11/03 4.10 PRODUCT INSPECTION / PROCESS AUDITING 4.10.1 Brocade reserves the right to conduct [*] product inspection and/or process audits of supplier facilities engaged in producing supplied parts or Brocade final products. These activities would be conducted with [*] of the respective supplier. Discrepancies found during these audits will result in a Corrective Action Request (CAR) (see Paragraph 4.12 below.) 4.10.2 Brocade also reserves the right to conduct source inspection at the supplier site. This inspection process, if implemented, would typically include the following activities: - Inspection of in process and/or finished product against all appropriate workmanship standards. - Acceptance sampling in accordance with ANSI Z1.4 (supercedes Mil Std 105), Single Sampling Plan for 1% AQL, Level II, normal inspection level. - As an example, a random sample of 13 units would be inspected for critical workmanship attributes from a lot of 100 units. The lot would be accepted with zero defects found and rejected with one or more defects found. The supplier would be responsible to conduct a 100% screen of the entire lot for the defective attribute and re-submit the lot for another sample inspection. - Reduced inspection would occur when production is at steady state, ten consecutive lots pass at normal inspection levels, and the total number of defects in the sample from those ten lots are equal to or less than the applicable number given in ANSI Z1.4. Acceptance of five additional lots at reduced level would qualify the part number for dock-to-stock. Conversely, if two of five consecutive lots were rejected, a tightened inspection would be conducted until five consecutive lots were accepted. At that point, the part would start the qualification process over at the normal inspection level. 4.10.3 Details of the source inspection process and qualification standards will be further defined and agreed upon prior to implementation with selected suppliers. 4.11 RETURN MATERIAL AUTHORIZATION (RMA) PROCESSING 4.11.1 Brocade will contact suppliers with RMA requests via telephone, e-mail and/or fax, depending upon the specific arrangements made. 4.11.2 Unless otherwise specified, suppliers shall provide RMA numbers to Brocade within [*] from receipt of the request. 4.11.3 Suppliers shall repair or replace the defective part within [*] of receipt of the defective product. 4.11.4 Suppliers shall maintain records of all RMA requests and provide in-process and completion status of Brocade RMA's. 4.12 CORRECTIVE ACTION REQUESTS (CARS) 4.12.1 Brocade will issue a Corrective Action Request (Appendix B) whenever a discrepant product or unsatisfactory supplier process condition is discovered. The CAR Form may be transmitted to the supplier via e-mail or fax. 4.12.2 Unless otherwise specified, suppliers shall acknowledge receipt and provide a preliminary assessment and immediate corrective action of the discrepancy within [*]) of receipt. Unless otherwise specified, the preventative measures shall be completed and the documentation submitted no later than [*] of a CAR receipt. - ---------------- [*] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. Brocade Communication Systems Inc. Document: 99-0000112-01 Page 6 of 8 Revision: A Revision Date: 2/11/03 Appendix A: Standard Product Qualification Process Flow [FLOW CHART] Brocade Communication Systems Inc. Document: 99-0000112-01 Page 7 of 8 Revision: A Revision Date: 2/11/03 Appendix B: Corrective Action Template (8D) CLOSED LOOP CORRECTIVE ACTION FORM
CUSTOMER AFFECTED BROCADE PART NUMBER CUSTOMER MODEL NUMBER QTY:

STEP 1 INTERNAL TEAM MEMBERS EXTERNAL TEAM MEMBERS
STEP 2 DESCRIBE THE PROBLEM DATE: STEP 3 ROOT CAUSE ANALYSIS DATE: STEP 4 CONTAINMENT PLAN DATE: STEP 5 CORRECTIVE ACTION PLAN DATE: STEP 6 VERIFICATION OF CORRECTIVE ACTION DATE: STEP 7 PREVENT RECURRENCE DATE: STEP 8 CONGRATULATE TEAM DATE:

- ------------------------------------------------------------------------------------------------------- CLCA# Status: Target Closure Date: Customer Ref. No. - ------------------------------------------------------------------------------------------------------- ~~BRC-MMDDYY OPEN If applicable - -------------------------------------------------------------------------------------------------------~~
Brocade Communication Systems Inc. Document: 99-0000112-01 Page 8 of 8 Revision: A Revision Date: 2/11/03 EXHIBIT E EXCLUDED PARTS PART FXCN NO. ---- -------- 1. [*] [*] - ---------------- * Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. Brocade Manufacturing Agreement BROCADE CONFIDENTIAL Page 20 of 20