....There is still some bad blood between BRCD and EMC and I don't think EMC would be sympathetic to a BRCD buy-out. Besides, the cultural differences, I have been told, are almost too vast to overcome. A hostile is therefore out of the question, BRCD can't risk talent walking out the door.....
From the 10K released 3/2/2001, it looks like the tax sharing agreement and the accompanying restrictions expire on May 2003 -- or 27 months after February 2001. The 2-year non-compete agreement ends on August 2002, but McData will always be able to recruit scarce technical talent more aggressively with options than a behemoth like EMC and McData has a very significant installed base in first generation SANs (ESCON/FICON) and second generation SANs (Fibre Channel) so I think the relationship has a good chance of continuing through succeeding generations of SAN technology.
RISK RELATED TO OUR RELATIONSHIP WITH EMC
Under the terms of the Tax Sharing Agreement between EMC and us, until 27 months after the date of EMC's distribution of our Class A common stock indirectly held by it to its stockholders, we may not, without the consent of EMC or the receipt by EMC of a private letter ruling from the Internal Revenue Service that the tax treatment of the distribution will not be adversely affected:
- enter into any transaction that would result in any person acquiring a 50% or greater interest in us;
- take or fail to take any other action which would cause the distribution to be taxable to EMC stockholders;
- issue stock or other equity interests in us, or redeem or repurchase any of our capital stock which would involve the acquisition by one or more persons of more than 35% of our stock; or
- undertake any transaction which would be treated as a liquidation or reorganization for tax purposes.
These restrictions may prevent us from being acquired, either in a negotiated transaction or otherwise, from using shares of our common stock as payment in the acquisition by us of other companies or from financing our operations through sales of securities........
It also appears that they completed the financing for their global headquarters. The financing contains restrictions on about $60M of McData's $368M in cash and marketable securities.
From the 10K
.........On February 9, 2001, we entered into a lease and associated agreements with Deutsche Bank AG, New York Branch ("Deutsche Bank") for the lease of a 167,000 (approx.) square foot multi-story office and engineering building to be constructed on a 109 acre parcel of land located in Broomfield, Colorado. For further information on the lease, please see "Item 2. Properties" in the Annual Report. Construction must be completed no later than February 2003. As part of the transaction, we have guaranteed a residual value of the facility to Deutsche Bank of approximately 85% of the total original cost. We have agreed to restrict up to $60 million (plus 5 percent) of our investment securities as collateral for specified obligations of ours under the lease. These investment securities are restricted as to withdrawal and are managed by a third party subject to certain limitations. In addition, the lease agreement requires that the Company maintain compliance with certain affirmative and negative covenants, representations and warranties, including certain defined financial covenants.
Groundbreaking ceremony.....
The first building of the new campus will be 168,000 square feet. It will house McDATA's engineering, research, integration and development lab, information technologies and data center department focused on the development of high-availability enterprise-class open storage networking hardware and related software used to connect servers and storage systems in corporate storage area networks (SANs). The completion of the first building is scheduled for May 2002.
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