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EXHIBIT 10.4
SERVICES AGREEMENT
This services agreement (the "Agreement") is made this 1st day of October
1997 by and between XXX Xxxxxxxxxxx ("EMC"), a Massachusetts corporation, McDATA
Holdings Corporation ("Holdings"), a Delaware corporation and McDATA Corporation
("New McDATA"), a Delaware corporation.
Effective the date of this Agreement, several other agreements have been
entered into by the parties hereto whereupon New McDATA was created as a
subsidiary of Holdings.
As a result of this corporate restructuring, Holdings has retained a
majority of the ESCON business, including the currently exclusive manufacturing
and marketing contracts with IBM Corporation for existing ESCON products or
follow on ESCON products (such business, the "ESCON Business", and such
contracts, the "ESCON Contracts").
Substantially all of the principal individuals and entities that caused
Holdings to develop and sustain the ESCON Business and perform all of Holdings'
duties and responsibilities under the ESCON Contracts are now employed by or
associated with New McDATA.
New McDATA has offered to continue the ESCON Business on behalf of Holdings
and perform all of Holdings' duties and responsibilities under the ESCON
Contracts for a service fee as set forth herein (the "Service Fee").
NOW THEREFORE, in consideration of the above and the other respective
promises of the parties set forth herein, the parties hereto agree as follows:
1. New McDATA shall continue the ESCON Business for Holdings without
interruption, including the timely performance of each and every duty and
obligation set forth in the ESCON Contracts. Copies of each of the current ESCON
Contracts and amendments are attached hereto as Exhibit A. It is understood that
any amendment, modification, change or revision to any of the ESCON Contracts
shall be added to Exhibit A when and if such documents are entered into by
Holdings and IBM.
2. Holdings shall transfer all vendor and supplier lists for the ESCON
Business to New McDATA to allow New McDATA to perform its obligations under this
Agreement.
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3. New McDATA shall purchase, as agent for Holdings, all raw materials and
components to be used by New McDATA in the manufacturing of products under the
ESCON Contracts and hold such materials as consigned inventory. Holdings shall
assume the risk of loss or damage with respect to ESCON products until such risk
passes upon shipment of the ESCON products.
4. Pursuant to a separate agreement to be entered into by the parties
hereto on the date hereof, New McDATA shall own all technology used in
connection with the development, manufacture, use or sale of products in the
ESCON Business, other than licenses and rights retained by Holdings as set forth
in such agreement.
5. New McDATA shall not, during the term of this Agreement, perform any
work which would in any material way conflict with, or create any impediment
against, New McDATA's performance under this Agreement and the ESCON Contracts.
6. All revenues under the ESCON Contracts shall be paid directly to
Holdings.
7. In consideration of New McDATA (i) complying with the terms of this
Agreement and (ii) continuing the ESCON Business in substantially the same
manner that it was prior to the date of this Agreement and (iii) for the timely
performance of each and every duty and obligation set forth in the ESCON
Contracts, Holdings shall pay New McDATA the Service Fee set forth in Exhibit B
and reimburse McDATA for the cost for raw materials. The Service Fee, payable
monthly, shall be for the twelve month period following the date of this
Agreement. Either party may renegotiate the Service Fee twice in each twelve
month period during the term of this Agreement. In no event shall the Service
Fee be less than the amount required by New McDATA to perform the obligations of
the ESCON Contracts. The revised Service Fee shall become effective on each
anniversary date of this Agreement and sooner if revised as described in this
paragraph 7.
8. The term of this Agreement shall continue in effect indefinitely until
terminated by mutual agreement of EMC, Holdings and New McDATA.
9. Holdings shall retain liability for (i) costs for the purchase of
materials and supplies for the production of ESCON products and (ii) any royalty
costs related to the ESCON contracts.
10. New McDATA shall be responsible for all obligations incurred in the
ordinary course of its business, including obligations incurred to perform this
Agreement.
11. Holdings and New McDATA shall share liability, in proportion to the
respective amounts of revenue they receive pursuant to this Agreement for any of
the following liabilities and costs that may arise in connection with the ESCON
Business: (i) claims for intellectual property infringement or defense, (ii)
tort claims, (iii) breach of
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any of the ESCON Contracts, (iv) breach of warranty claims or other product
liability claims and (v) other liabilities relating to the ESCON Business not
incurred in the ordinary course of business.
12. This Agreement, the Investors' Rights Agreement, the Common Stock
Purchase Agreement and ancillary agreements as defined in the Common Stock
Purchase Agreement, the Asset Transfer Agreement, the Technology Rights
Agreement and the exhibits to each of these agreements constitutes the entire
agreement among the parties and no party shall be liable or bound to any other
party in any manner by any warranties, representations or covenants except as
specifically set forth herein or therein.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
XXX XXXXXXXXXXX
BY: /s/ Xxxxxx X. Xxxxxxx
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NAME: Xxxxxx X. Xxxxxxx
TITLE: Vice President Corporate and
Business Development
McDATA HOLDINGS CORPORATION
BY: /s/ Xxxxxx X. Xxxxxxx
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NAME: Xxxxxx X. Xxxxxxx
TITLE: Vice President
McDATA CORPORATION
BY: /s/ Xxxx X. Xxxxxxxxx
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NAME: Xxxx X. XxXxxxxxx
TITLE:
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