10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED APRIL 26, 2003

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM                      TO                     

COMMISSION FILE NUMBER 000-27273

SYCAMORE NETWORKS, INC.

(Exact name of registrant as specified in its charter)

Delaware	04-3410558
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

220 Mill Road Chelmsford, MA 01824

(Address of principal executive offices) (Zip code)

(978) 250-2900

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x No  ¨.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).  Yes  ¨  No  x.

The number of shares outstanding of the Registrant’s Common Stock as of May 23, 2003 was 271,916,034.

Sycamore Networks, Inc.

Index

Part I. Financial Information

	Page No.
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets as of April 26, 2003 and July 31, 2002	3
Consolidated Statements of Operations for the three and nine months ended April 26, 2003 and April 27, 2002	4
Consolidated Statements of Cash Flows for the nine months ended April 26, 2003 and April 27, 2002	5
Notes to Consolidated Financial Statements	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3. Quantitative and Qualitative Disclosure About Market Risk	37
Item 4. Controls and Procedures	37
Part II. Other Information	38
Item 1. Legal Proceedings	38
Item 6. Exhibits and Reports on Form 8-K	39
Signature	40
Certifications	41
Exhibit Index	43

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Part I. Financial Information

Item 1. Financial Statements

Sycamore Networks, Inc.

Consolidated Balance Sheets

(in thousands, except par value)

(unaudited)

	April 26, 2003			July 31, 2002
Assets
Current assets:
Cash and cash equivalents	$	237,444		$	172,658
Short-term investments		320,762			509,350
Accounts receivable, net of allowance for doubtful accounts of $4,684 at April 26, 2003 and July 31, 2002		11,275			18,187
Inventories		6,928			12,940
Prepaids and other current assets		4,567			3,447
Total current assets		580,976			716,582
Property and equipment, net		17,025			32,696
Long-term investments		446,791			361,537
Other assets		3,331			7,760
Total assets	$	1,048,123		$	1,118,575
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	3,172		$	6,104
Accrued compensation		2,512			3,896
Accrued warranty		4,864			5,499
Accrued expenses		4,478			7,649
Accrued restructuring costs		24,905			48,167
Deferred revenue		3,988			4,978
Other current liabilities		3,114			3,759
Total current liabilities		47,033			80,052
Stockholders’ equity:
Preferred stock, $.01 par value, 5,000 shares authorized; none issued or outstanding		—			—
Common stock, $.001 par value; 2,500,000 shares authorized; 271,606 and 273,681     shares issued at April 26, 2003 and July 31, 2002, respectively		272			274
Additional paid-in capital		1,733,768			1,732,846
Accumulated deficit		(726,459	)		(681,086	)
Deferred compensation		(10,608	)		(17,910	)
Treasury stock, at cost, 150 and 1,933 shares held at April 26, 2003 and July 31, 2002,     respectively		(9	)		(158	)
Accumulated other comprehensive income		4,126			4,557
Total stockholders’ equity		1,001,090			1,038,523
Total liabilities and stockholders’ equity	$	1,048,123		$	1,118,575

The accompanying notes are an integral part of the consolidated financial statements.

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Sycamore Networks, Inc .

Consolidated Statements of Operations

(in thousands, except per share amounts)

(unaudited)

	Three Months Ended						Nine Months Ended
	April 26, 2003			April 27, 2002			April 26, 2003			April 27, 2002
Revenue:
Product	$	7,696		$	6,929		$	17,997		$	39,826
Service		2,905			6,653			9,367			16,799
Total revenue		10,601			13,582			27,364			56,625
Cost of revenue:
Product (exclusive of non-cash stock-based compensation expense of $170, $220, $508 and $727)		6,071			(2,587	)		16,786			124,221
Service (exclusive of non-cash stock-based compensation expense of $171, $220, $546 and $666)		2,631			5,639			9,646			20,848
Stock-based compensation		341			440			1,054			1,393
Total cost of revenue		9,043			3,492			27,486			146,462
Gross profit (loss)		1,558			10,090			(122	)		(89,837	)
Operating expenses:
Research and development (exclusive of non-cash stock-based compensation expense of $844, $2,395, $2,562 and $7,460)		12,679			25,541			40,038			88,041
Sales and marketing (exclusive of non-cash stock-based compensation expense of $425, $2,205, $1,553 and $8,771)		4,884			8,870			14,896			33,953
General and administrative (exclusive of non-cash stock-based compensation expense of $387, $501, $1,305 and $1,778)		1,852			2,186			5,261			7,990
Stock-based compensation		1,656			5,101			5,420			18,009
Restructuring charges and related asset impairments		(2,193	)		—			(2,193	)		77,306
Total operating expenses		18,878			41,698			63,422			225,299
Loss from operations		(17,320	)		(31,608	)		(63,544	)		(315,136	)
Losses on investments		—			—			—			(22,737	)
Interest and other income, net		5,426			8,765			18,171			31,746
Loss before income taxes		(11,894	)		(22,843	)		(45,373	)		(306,127	)
Provision for income taxes		—			—			—			—
Net loss	$	(11,894	)	$	(22,843	)	$	(45,373	)	$	(306,127	)
Basic and diluted net loss per share	$	(0.04	)	$	(0.09	)	$	(0.17	)	$	(1.21	)
Weighted-average shares used in computing basic and diluted net loss per share		266,638			256,468			264,640			252,877

The accompanying notes are an integral part of the consolidated financial statements.

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Sycamore Networks, Inc.

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	Nine Months Ended
	April 26, 2003			April 27, 2002
Cash flows from operating activities:
Net loss	$	(45,373	)	$	(306,127	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization		17,255			32,440
Stock-based compensation		6,474			19,402
Restructuring charges and related asset impairments		1,000			134,022
Changes in operating assets and liabilities:
Accounts receivable		6,912			16,828
Inventories		6,012			1,344
Prepaids and other current assets		(1,120	)		5,107
Deferred revenue		(990	)		434
Accounts payable		(2,932	)		(49,664	)
Accrued expenses and other current liabilities		(5,835	)		(8,373	)
Accrued restructuring costs		(23,262	)		(29,354	)
Net cash used in operating activities		(41,859	)		(183,941	)
Cash flows from investing activities:
Purchases of property and equipment		(2,584	)		(13,036	)
Purchases of investments		(300,503	)		(781,671	)
Maturities of investments		403,406			740,404
Decrease in other assets		4,429			5,286
Net cash provided by (used in) investing activities		104,748			(49,017	)
Cash flows from financing activities:
Proceeds from issuance of common stock		2,049			3,056
Purchase of treasury stock		(152	)		(280	)
Net cash provided by financing activities		1,897			2,776
Net increase (decrease) in cash and cash equivalents		64,786			(230,182	)
Cash and cash equivalents, beginning of period		172,658			492,500
Cash and cash equivalents, end of period	$	237,444		$	262,318

The accompanying notes are an integral part of the consolidated financial statements.

5

Sycamore Networks, Inc.

Notes To Consolidated Financial Statements

(unaudited)

1. Description of Business

Sycamore Networks, Inc. (the “Company”) was incorporated in Delaware on February 17, 1998. The Company develops and markets intelligent optical networking products for telecommunications service providers worldwide. The Company has developed software and advanced hardware capabilities that allow a service provider to improve the fundamental economics of their network by reducing both capital and operating costs and enabling them to offer revenue-generating services to their customers.

2. Basis of Presentation

The accompanying financial data as of April 26, 2003 and for the three and nine months ended April 26, 2003 and April 27, 2002 has been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2002.

In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present a fair statement of financial position as of April 26, 2003, and results of operations and cash flows for the periods ended April 26, 2003 and April 27, 2002 have been made. The results of operations and cash flows for the periods ended April 26, 2003 are not necessarily indicative of the operating results and cash flows for the full fiscal year or any future periods.

3. Stock-Based Compensation

Statement of Financial Accounting Standards (“SFAS”) No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure an Amendment of SFAS No. 123”, amends the disclosure requirements of SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”), to require more prominent disclosures in both annual and interim financial statements regarding the method of accounting for stock-based compensation and the effect of the method used on reported results.

The Company accounts for stock-based awards to employees and directors using the intrinsic value method of accounting in accordance with APB No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”). Under the intrinsic value method, when the exercise price of the Company’s employee stock awards equals the market price of the underlying stock on the date of grant, no compensation expense is recognized in the Company’s Consolidated Statements of Operations. The Company currently recognizes compensation expense under APB 25 relating to certain stock options and restricted stock with exercise prices below fair market value.

The Company is required under SFAS 123 to disclose pro forma information regarding the stock awards made to its employees based on specified valuation techniques that produce estimated compensation charges.

The pro forma information is as follows (in thousands, except per share data):

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	Three Months Ended						Nine Months Ended
	April 26, 2003			April 27, 2002			April 26, 2003			April 27, 2002
Net loss:
As reported	$	(11,894	)	$	(22,843	)	$	(45,373	)	$	(306,127	)
Stock-based employee compensation cost included in reported net loss under     APB 25		1,997			5,541			6,474			19,402
Stock-based employee compensation cost that would have been included in reported net loss if the fair value provisions of FAS 123 had been applied to all awards		(10,103	)		(30,464	)		(38,167	)		(102,789	)
Pro forma	$	(20,000	)	$	(47,766	)	$	(77,066	)	$	(389,514	)
Basic and diluted net loss per share:
As reported	$	(0.04	)	$	(0.09	)	$	(0.17	)	$	(1.21	)
Pro forma	$	(0.08	)	$	(0.19	)	$	(0.29	)	$	(1.54	)

The above pro forma disclosures are not necessarily representative of the effects on reported net income or loss for future periods. The fair value of the stock options at the date of grant was estimated using the Black-Scholes model.

4. Net Loss Per Share

Basic net loss per share is computed by dividing the net loss for the period by the weighted-average number of common shares outstanding during the period less unvested restricted stock. Diluted net income (loss) per share is computed by dividing the net income (loss) for the period by the weighted-average number of common and common equivalent shares outstanding during the period, if dilutive. Common equivalent shares are composed of unvested shares of restricted common stock and the incremental common shares issuable upon the exercise of stock options and warrants outstanding.

The following table sets forth the computation of basic and diluted net loss per share (in thousands, except per share data):

	Three Months Ended						Nine Months Ended
	April 26, 2003			April 27, 2002			April 26, 2003			April 27, 2002
Numerator:
Net loss	$	(11,894	)	$	(22,843	)	$	(45,373	)	$	(306,127	)
Denominator:
Weighted-average shares of common stock outstanding		271,518			271,657			271,489			272,252
Weighted-average shares subject to repurchase		(4,880	)		(15,189	)		(6,849	)		(19,375	)
Shares used in per-share calculation – basic and diluted		266,638			256,468			264,640			252,877
Net loss per share:
Basic and diluted	$	(0.04	)	$	(0.09	)	$	(0.17	)	$	(1.21	)

Options to purchase 28.3 million and 29.7 million shares of common stock, at respective average exercise prices of $7.86 and $10.16, have not been included in the computation of diluted net loss per share for the three and nine months ended April 26, 2003 and April 27, 2002, respectively, as their effect would have been anti-dilutive. Warrants to purchase 150,000 shares of common stock at an exercise price of $11.69 have not been included in the computation of diluted net loss per share for the three and nine months ended April 26, 2003 and April 27, 2002, as their effect would have been anti-dilutive. The warrants expired during the three months ended April 26, 2003.

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5. Inventories

Inventories consisted of the following (in thousands):

	April 26, 2003		July 31, 2002
Raw materials	$	1,105	$	3,609
Work in process		696		964
Finished goods		5,127		8,367
Total inventories	$	6,928	$	12,940

6. Comprehensive Loss

The components of comprehensive loss consisted of the following (in thousands):

	Three Months Ended						Nine Months Ended
	April 26, 2003			April 27, 2002			April 26, 2003			April 27, 2002
Net loss	$	(11,894	)	$	(22,843	)	$	(45,373	)	$	(306,127	)
Unrealized loss on investments		(510	)		(2,428	)		(431	)		(2,464	)
Comprehensive loss	$	(12,404	)	$	(25,271	)	$	(45,804	)	$	(308,591	)

7. Restructuring Charges and Related Asset Impairments

In the last two years, there has been a sharp contraction in the availability of capital to the Company’s industry. As a result, capital expenditures by both emerging and incumbent service providers have been substantially reduced. These unfavorable economic conditions have negatively impacted the Company’s operating results in a progressive and increasingly severe manner. As a result, the Company restructured its business three times in order to reduce expenses and align its resources with long-term growth opportunities: the first in the third quarter of fiscal 2001 (the “fiscal 2001 restructuring”), the second in the first quarter of fiscal 2002 (the “first quarter fiscal 2002 restructuring”), and the third in the fourth quarter of fiscal 2002 (the “fourth quarter fiscal 2002 restructuring”). As a result of the combined activity under all of these restructuring programs, during fiscal 2002, the Company recorded a total net charge of $241.5 million, which was classified in the statement of operations as follows: cost of revenue - $91.7 million, operating expenses - $125.0 million, and non-operating expenses - $24.8 million.

During the third quarter of fiscal 2003, the Company recorded a net $2.2 million credit to operating expenses due to various changes in estimates relating to all of the Company’s restructuring activities. The changes in estimates primarily consisted of a $6.4 million reduction in the accrual for estimated legal matters associated with the restructuring activities, a $0.9 million credit relating to proceeds received from the disposal of certain equipment and a $0.8 million reduction in the costs associated with a workforce reduction, partially offset by $4.9 million of additional facility consolidation charges. In addition, the Company recorded a $1.0 million charge for the write-down of certain land. While the Company has reduced the accrual for potential legal matters based on its current estimate as adjusted for events within the current quarter, given the inherent uncertainties involved in such matters, it is reasonably possible that we may incur a loss in addition to the amount accrued. In addition, in the event that other contingencies associated with the restructuring activities occur, or the estimates associated with the restructuring activities are revised, the Company may be required to record additional charges or credits against the reserves previously recorded for the Company’s restructuring activities.

As of April 26, 2003, the Company had $24.9 million in accrued restructuring costs. Details regarding each of the restructuring programs are described below.

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Fiscal 2001 Restructuring:

The fiscal 2001 restructuring program included a workforce reduction of 131 employees, consolidation of excess facilities, and the restructuring of certain business functions to eliminate non-strategic products and overlapping feature sets. The Company recorded restructuring charges and related asset impairments of $81.9 million classified as operating expenses and an excess inventory charge of $84.0 million relating to discontinued product lines, which was classified as cost of revenue. The restructuring charges included amounts accrued for potential legal matters, administrative expenses and professional fees associated with the restructuring activities, including employment termination related claims. The fiscal 2001 restructuring program was substantially completed during the first half of fiscal 2002. In the fourth quarter of fiscal 2002, the Company recorded a net $2.1 million credit to operating expenses due to various changes in estimates. The changes in estimates consisted primarily of $4.7 million of additional facility consolidation charges due to less favorable sublease assumptions, offset by a $6.7 million reduction in the potential legal matters associated with the restructuring activities. During the third quarter of fiscal 2003, the Company recorded a net $2.3 million charge to operating expenses due to various changes in estimates. The changes in estimates consisted primarily of $3.6 million of additional facility consolidation charges due to less favorable sublease assumptions, partially offset by a $1.3 million reduction in the accrual for potential legal matters associated with the restructuring activities. As of April 26, 2003, the projected future cash payments of $15.3 million consist of facility consolidation charges that will be paid over the respective lease terms through fiscal 2007, and potential legal matters and administrative expenses associated with the restructuring activities.

The restructuring charges and related asset impairments recorded in the fiscal 2001 restructuring program, and the reserve activity since that time, are summarized as follows (in thousands):

	Original Restructuring Charge		Non-cash Charges		Cash Payments		Adjustments		Accrual Balance at July 31, 2002		Cash Payments		Adjustments			Accrual Balance at April 26, 2003
Workforce reduction	$	4,174	$	829	$	3,203	$	142	$	—	$	—	$	—		$	—
Facility consolidations and certain     other costs		24,437		1,214		5,419		1,994		15,810		2,808		(2,261	)		15,263
Inventory and asset write-downs		137,285		84,972		52,313		—		—		—		—			—
Total	$	165,896	$	87,015	$	60,935	$	2,136	$	15,810	$	2,808	$	(2,261	)	$	15,263

First Quarter Fiscal 2002 Restructuring:

The first quarter fiscal 2002 restructuring program included a workforce reduction of 239 employees, consolidation of excess facilities and charges related to excess inventory and other asset impairments. As a result, the Company recorded restructuring charges and related asset impairments of $77.3 million classified as operating expenses and an excess inventory charge of $102.4 million classified as cost of revenue. In addition, the Company recorded charges totaling $22.7 million, classified as a non-operating expense, relating to impairments of investments in non-publicly traded companies that were determined to be other than temporary. The restructuring charges included $7.1 million of costs relating to the workforce reduction, $11.2 million related to the write-down of certain land, lease terminations and non-cancelable lease costs and $6.0 million for potential legal matters, administrative expenses and professional fees associated with the restructuring activities, including employment termination related claims. The restructuring charges also included $102.4 million for inventory write-downs and non-cancelable purchase commitments for inventories due to a severe decline in the forecasted demand for the Company’s products and $53.1 million for asset impairments related to the Company’s vendor financing agreements and fixed assets that were abandoned by the Company.

The first quarter fiscal 2002 restructuring program was substantially completed during the fourth quarter of fiscal 2002. During the third and fourth quarters of fiscal 2002, the Company recorded credits totaling $10.8 million to cost of revenue due to changes in estimates, the majority of which related to favorable settlements with contract

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manufacturers for non-cancelable inventory purchase commitments. In addition, during the fourth quarter of fiscal 2002, the Company recorded a net $1.7 million credit to operating expenses relating to various changes in estimates. The changes in estimates consisted of a $1.7 million reduction in potential legal matters associated with the restructuring activities and the reversal of an accrued liability of $0.8 million for workforce reductions, partially offset by $0.8 million of additional facility consolidation charges due to less favorable sublease assumptions. During the third quarter of fiscal 2003, the Company recorded a net $0.5 million credit to operating expenses due to various changes in estimates. The changes in estimates primarily consisted of a $1.3 million reduction in the accrual for potential legal matters associated with the restructuring activities, partially offset by $0.8 million of additional facility consolidation charges due to less favorable sublease assumptions. In addition, the Company recorded a $1.0 million non-cash charge for the write-down of certain land. As of April 26, 2003, the projected future cash payments of $4.1 million consist primarily of facility consolidation charges that will be paid over the respective lease terms through fiscal 2005, and potential legal matters and administrative expenses associated with the restructuring activities.

The restructuring charges and related asset impairments recorded in the first quarter fiscal 2002 restructuring program, and the reserve activity since that time, are summarized as follows (in thousands):

	Original Restructuring Charge		Non-cash Charges		Cash Payments		Adjustments		Accrual Balance at July 31, 2002		Cash Payments		Adjustments		Accrual Balance at April 26, 2003
Workforce reduction	$	7,106	$	173	$	6,106	$	827	$	—	$	—	$	—	$	—
Facility consolidations and     certain other costs		17,181		8,572		1,684		835		6,090		1,766		524		3,800
Inventory and asset write-downs		155,451		102,540		41,358		10,804		749		430		—		319
Losses on investments		22,737		22,737		—		—		—		—		—		—
Total	$	202,475	$	134,022	$	49,148	$	12,466	$	6,839	$	2,196	$	524	$	4,119

Fourth Quarter Fiscal 2002 Restructuring:

The fourth quarter fiscal 2002 restructuring program included a workforce reduction of 225 employees, consolidation of excess facilities, and the restructuring of certain business functions to eliminate non-strategic products. This included discontinuing the development of the Company’s standalone transport products, including the SN 8000 Intelligent Optical Transport Node and the SN 10000 Intelligent Optical Transport System. As a result, the Company recorded restructuring charges and related asset impairments of $51.5 million classified as operating expenses. In addition, the Company recorded a charge of $2.1 million, classified as a non-operating expense, relating to impairments of investments in non-publicly traded companies that were determined to be other than temporary. The restructuring charges included $8.7 million of costs relating to the workforce reduction, $5.6 million for lease terminations and non-cancelable lease costs and $14.5 million relating to potential legal matters, contractual commitments, administrative expenses and professional fees related to the restructuring activities, including employment termination related claims. The restructuring charges also included $22.6 million of costs relating to asset impairments, which primarily included fixed assets that were disposed of, or abandoned, due to the rationalization of the Company’s product offerings and the consolidation of excess facilities. The fourth quarter fiscal 2002 restructuring program was substantially completed during the first half of fiscal 2003.

During the third quarter of fiscal 2003, the Company recorded a net $4.0 million credit to operating expenses due to various changes in estimates. The changes in estimates consisted of a $3.7 million reduction in the accrual for potential legal matters associated with the restructuring activities and a $0.8 million reduction in the costs associated with the workforce reduction, partially offset by $0.5 million of additional facility consolidation charges due to less favorable sublease assumptions. In addition, the Company recorded a $0.9 million credit to operating expenses relating to proceeds received from the disposal of certain equipment. As of April 26, 2003, the projected future cash payments of $5.5 million consist primarily of facility consolidation charges that will be paid over the respective lease terms through fiscal 2006 and potential legal matters and administrative expenses associated with the restructuring activities.

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The restructuring charges and related asset impairments recorded in the fourth quarter fiscal 2002 restructuring program, and the reserve activity since that time, are summarized as follows (in thousands):

	Original Restructuring Charge		Non-cash Charges		Cash Payments		Accrual Balance at July 31, 2002		Cash Payments		Adjustments		Accrual Balance at April 26, 2003
Workforce reduction	$	8,713	$	814	$	2,059	$	5,840	$	5,024	$	770	$	46
Facility consolidations and certain other costs		20,132		—		454		19,678		10,965		3,236		5,477
Asset write-downs		22,637		22,637		—		—		—		—		—
Losses on investments		2,108		2,108		—		—		—		—		—
Total	$	53,590	$	25,559	$	2,513	$	25,518	$	15,989	$	4,006	$	5,523

8. Recent Accounting and Regulatory Pronouncements

In December 2002, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure an Amendment of SFAS No. 123”, which requires additional disclosure and provides guidance for Companies that elect to voluntarily adopt the accounting provisions of SFAS No. 123. SFAS No. 148 does not change the provisions of SFAS No. 123 that permit entities to continue to apply the intrinsic value method of Accounting Principles Board (“APB”) Opinion No.25 (“APB No. 25”), “Accounting for Stock Issued to Employees”. SFAS No. 148 is effective for fiscal years ending after December 15, 2002 and the new interim disclosure provisions are effective for the first interim period beginning after December 15, 2002. The Company intends to continue to account for its stock-based compensation in accordance with the provisions of APB No. 25 as interpreted by FASB Interpretation No. 44 (“FIN 44”), “Accounting for Certain Transactions Involving Stock Compensation, an Interpretation of APB Opinion No. 25”, and present the pro forma disclosures required by SFAS No. 123 as amended by SFAS No. 148. The requisite disclosure appears in Note 3 to the Company’s unaudited consolidated financial statements.

In January 2003, the FASB issued FASB Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities”. FIN 46 requires that if an entity has a controlling financial interest in a variable interest entity, the assets, liabilities and results of activities of the variable interest entity should be included in the consolidated financial statements of the entity. FIN 46 requires that its provisions are effective immediately for all arrangements entered into after January 31, 2003. The Company does not have any financial interest in variable interest entities created after January 31, 2003. For those arrangements entered into prior to January 31, 2003, FIN 46 provisions are required to be adopted by the Company in the first quarter of fiscal 2004. The adoption of FIN 46 is not expected to have a material impact on the Company’s financial position or results of operations.

In January 2003, the SEC issued final rules implementing Section 401(b) of the Sarbanes-Oxley Act of 2002 entitled “Conditions for Use of Non-GAAP financial measures”. The rules primarily provide guidance on disclosure of material information that includes non-GAAP financial measures. The rules applied to all disclosures as of March 28, 2003. These rules did not have a material impact on the Company’s financial position or results of operations.

In May 2003, the FASB issued SFAS 150, “Accounting For Certain Financial Instruments with Characteristics of Both Liabilities and Equity” which establishes standards for how an issuer of financial instruments classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances) if, at inception, the monetary value of the obligation is based solely or predominantly on a fixed monetary amount known at inception, variations in something other than the fair value of the issuer’s equity shares or variations inversely related to changes in the fair value of the issuer’s equity shares. This Statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS 150 is not expected to have a material impact on the Company’s financial position or results of operations.

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9. Commitments and Contingencies

Litigation

Beginning on July 2, 2001, several purported class action complaints were filed in the United States District Court for the Southern District of New York against the Company and several of its officers and directors (the “Individual Defendants”) and the underwriters for the Company’s initial public offering on October 21, 1999. Some of the complaints also include the underwriters for the Company’s follow-on offering on March 14, 2000. The complaints were consolidated into a single action and an amended complaint was filed on April 19, 2002. The amended complaint was filed on behalf of persons who purchased the Company’s common stock between October 21, 1999 and December 6, 2000. The amended complaint alleges violations of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, primarily based on the assertion that the Company’s lead underwriters, the Company and the other named defendants made material false and misleading statements in the Company’s Registration Statements and Prospectuses filed with the SEC in October 1999 and March 2000 because of the failure to disclose (a) the alleged solicitation and receipt of excessive and undisclosed commissions by the underwriters in connection with the allocation of shares of common stock to certain investors in the Company’s public offerings and (b) that certain of the underwriters allegedly had entered into agreements with investors whereby underwriters agreed to allocate the public offering shares in exchange for which the investors agreed to make additional purchases of stock in the aftermarket at pre-determined prices. The amended complaint alleges claims against the Company, several of the Company’s officers and directors and the underwriters under Sections 11 and 15 of the Securities Act. It also alleges claims against the Company, the individual defendants and the underwriters under Sections 10(b) and 20(a) of the Securities Exchange Act. The action against the Company is being coordinated with approximately three hundred other nearly identical actions filed against other companies. The actions seek damages in an unspecified amount. On October 9, 2002, the court dismissed the Individual Defendants from the case without prejudice based upon Stipulations of Dismissal filed by the plaintiffs and the Individual Defendants. A motion to dismiss addressing issues common to the companies and individuals who have been sued in these actions was filed on July 15, 2002. An opposition to that motion was filed on behalf of the plaintiffs and a reply brief was filed on behalf of the defendants. On February 19, 2003, the Court denied the motion to dismiss with respect to the Company. The Company believes that the claims against it are without merit and intends to defend against the complaints vigorously. The Company is not currently able to estimate the possibility of loss or range of loss, if any, relating to these claims.

On April 1, 2003, a complaint was filed against the Company in the United States Bankruptcy Court for the Southern District of New York by the creditors’ committee (the “Committee”) of 360 Networks (USA) Inc. and 360 Networks Services Inc. (the “Debtors”). The Debtors are the subject of a Chapter 11 bankruptcy proceeding. The Committee alleges that the Debtors made a preferential payment under Section 547(b) of the Bankruptcy Code to the Company during the 90-day period prior to the Debtors’ bankruptcy filings. The Debtors themselves are not the plaintiffs in this action as this claim has been brought by the creditors’ committee of the Debtors. The Company believes that the claims against it are without merit and intends to defend against the complaint vigorously. The Company is not currently able to estimate the possibility of loss or range of loss, if any, relating to these claims.

The Company is subject to legal proceedings, claims, and litigation arising in the ordinary course of business. While the outcome of these matters is currently not determinable, management does not expect that the ultimate costs to resolve these matters will have a material adverse effect on the Company’s results of operations or financial position.

Guarantees

FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”), requires that upon issuance of a guarantee, the guarantor must disclose and recognize a liability for the fair value of the obligation assumed under that guarantee. The initial recognition and measurement requirement of FIN 45 is effective for guarantees issued or modified after December 31, 2002 for those items that only require disclosure. As of April 26, 2003, the Company’s guarantees requiring disclosure consist of its accrued warranty obligations and indemnifications for intellectual property infringement claims.

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In the normal course of business, the Company also agrees to indemnify other parties, including customers, lessors and parties to other transactions with the Company, with respect to certain matters. The Company has agreed to hold the other parties harmless against losses arising from a breach of representations or covenants, or out of intellectual property infringement or other claims made against certain parties. These agreements may limit the time within which an indemnification claim can be made and the amount of the claim. It is not possible to determine the maximum potential amount under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Historically, payments made by the Company under these agreements have not had a material impact on the Company’s operating results or financial position.

Warranty liability

The Company records a warranty liability for parts and labor on its products at the time revenue is recognized. Warranty periods are generally three years from installation date. The estimate of the warranty liability is based primarily on the Company’s historical experience in product failure rates and the expected material and labor costs to provide warranty services.

The following table summarizes the activity related to product warranty liability during the nine months ended April 26, 2003 (in thousands):

Balance at July 31, 2002	$	5,499
Accruals for warranties during the period		253
Settlements		(888	)
Balance at April 26, 2003	$	4,864

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Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Except for the historical information contained in this report, we caution you that certain matters discussed in this report constitute forward-looking statements that involve risks and uncertainties. Forward-looking statements include statements regarding our expectations, beliefs, intentions or strategies regarding our business prospects and results of operations. You can identify these statements because they do not relate strictly to historical or current facts and contain forward-looking words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “should,” “will,” and “would” or similar words. Our actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including, but not limited to, those risks and uncertainties we discuss under the heading “Factors That May Affect Future Operating Results” in this Form 10-Q. We cannot guarantee that any forward-looking statement will be realized. Should known or unknown risks or uncertainties materialize, or should our underlying assumptions prove inaccurate, our actual results could vary materially from our past results, or from those anticipated. You should bear this in mind as you read our report.

You should read the information in this report in conjunction with our Annual Report on Form 10-K and other reports we file from time to time with the SEC.

Overview

Sycamore Networks, Inc. was incorporated in Delaware on February 17, 1998.

Sycamore develops and markets intelligent optical networking products for telecommunications service providers worldwide. Our current and prospective customers include domestic and international large, established service providers, Internet service providers, non-traditional telecommunications service providers, enterprise organizations with private fiber networks and, to a lesser extent, newer start-up service providers. We believe that our software and advanced hardware capabilities allow a service provider to transform their existing fiber optic infrastructure into an intelligent network that enables them to provision, manage and deliver communication services to their customers. We have pursued a strategy of next generation technology by developing software to provide intelligence in the fiber optic network, along with advanced hardware capabilities. Our products enable service providers to improve the fundamental economics of their networks by reducing both capital and operating costs and enabling them to offer revenue generating services to their customers.

For many of the last several years, the market for our products was influenced by regulatory changes, in particular the Telecommunications Act of 1996, and the entry of a substantial number of new companies into the communications service business. These new companies, commonly referred to as emerging service providers, raised significant amounts of capital, much of which they invested in capital expenditures to build out their networks. In order to compete with the new emerging service providers, the large, established service providers, commonly referred to as incumbent service providers, also increased their capital expenditures above their historical levels. These trends accelerated the growth of the telecommunications equipment industry, including the demand for our products.

Over the last two years, these trends began to reverse. There has been a sharp contraction in the availability of capital to our industry. As a result, many emerging service providers were no longer able to finance the build out of their networks and subsequently have failed or have significantly reduced the scope of their business operations. In addition, many incumbent service providers also had difficulty raising additional capital and have experienced significant financial difficulties. As a result, capital expenditures by both emerging and incumbent service providers have been substantially reduced.

These developments have reduced the capital spending by telecommunications service providers. At the same time, both the United States economy and the economies in substantially all of the countries in which we market our products have slowed significantly. As a result, our existing and prospective customers have become more conservative in their capital expenditures and more uncertain about their future purchases. As a consequence, we are facing a market that is both reduced in size and more difficult to predict and plan for.

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These trends have had a number of significant effects on our business, including a decline in revenue of $309.6 million or 83% in fiscal 2002 compared to fiscal 2001 and a decline in revenue of $29.2 million or 52% for the first nine months of fiscal 2003 compared to the first nine months of fiscal 2002. In response to the deteriorating economic environment in our industry, we enacted three separate restructuring programs through the fourth quarter of fiscal 2002. As a result of our restructuring programs we have incurred charges totaling $405.2 million, comprised as follows: $175.7 million of net charges related to excess inventory, $204.7 million of net charges for restructuring and related asset impairments, and $24.8 million of losses on investments. Primarily as a result of these significant effects on our business, we have incurred a cumulative net loss to date of $726.5 million.

Our restructuring programs have reduced our cost structure compared to historical levels, however, we maintain a significant cost structure, particularly within the research and development and customer support organizations. We believe that our current cost structure is necessary in order to sell our products to incumbent service providers. Currently, we anticipate that our cost of revenue, gross margins and operating results will continue to be affected adversely by our decision to maintain our current cost structure. We anticipate that we will continue to incur low gross margins and operating losses unless our revenue increases significantly compared to current levels. At this time, we cannot predict when, or if, the market conditions and the demand for our products will improve.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements. The preparation of these financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires us to make judgments, assumptions and estimates that affect the reported amounts of assets, liabilities, revenue and expenses and disclosure of contingent liabilities. On an ongoing basis, we evaluate these estimates, including those relating to the allowance for doubtful accounts, inventory allowance, valuation of investments, warranty obligations, restructuring liabilities and asset impairments, litigation and other contingencies. Estimates are based on our historical experience and other assumptions that we consider reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. To the extent there are material differences between our estimates and the actual results, our future results of operations will be affected.

We believe that the following critical accounting policies affect the most significant judgments, assumptions and estimates we use in preparing our consolidated financial statements. Changes in these estimates can affect materially the amount of our reported net income or loss.

When products are shipped to customers, we evaluate whether all of the fundamental criteria for revenue recognition have been met. The most significant judgments for revenue recognition typically involve whether there are any significant uncertainties regarding customer acceptance and whether collectibility can be considered reasonably assured.

Some of our transactions may involve the sales of products and services under multiple element arrangements. While each individual transaction varies according to the terms of the purchase order or sales agreement, a typical multiple element arrangement may include some or all of the following components: product shipments, installation services, maintenance and training. The total sales price is allocated based on the relative fair value of each component, which generally is the price charged for each component when sold separately. For the product portion, we recognize revenue upon shipment if there are no significant uncertainties regarding customer acceptance. If uncertainties regarding customer acceptance exist, we recognize revenue when the uncertainties are resolved. For installation services, typically we recognize revenue for services that have been performed upon acceptance in accordance with the contract. For maintenance and training services, we recognize revenue when the services are performed.

The allowance for doubtful accounts is based on our assessment of the collectibility of specific customer accounts. In the event that we become aware of a deterioration in a particular customer’s financial condition, additional provisions for doubtful accounts may be required.

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We accrue for warranty costs at the time revenue is recognized based on contractual rights and on the historical rate of claims and costs to provide warranty services. If we experience an increase in warranty claims greater than our historical experience or our costs to provide warranty services increase, we may be required to increase our warranty accrual and our gross margins could be adversely affected.

We continuously monitor our inventory balances and we record inventory allowances for any excess of the cost of the inventory over its estimated market value, based on assumptions about future demand and market conditions. While such assumptions may change significantly from period to period, we measure the net realizable value of inventories using the best information available as of the balance sheet date. To the extent that a severe decline in forecasted demand occurs, or a higher incidence of inventory obsolescence because of rapidly changing technology and customer requirements, significant charges for excess inventory are likely to occur, such as the $102.4 million charge we recorded in the first quarter of fiscal 2002.

Once we have written down inventory to its estimated net realizable value, we cannot increase its carrying value due to subsequent changes in demand forecasts. Accordingly, if inventory previously written down to its net realizable value is subsequently sold, we may realize improved gross profit margins on these transactions. During the third and fourth quarters of fiscal 2002, we recorded credits totaling $10.8 million to cost of revenue relating to inventory charges that were originally recorded in the first quarter of fiscal 2002. These credits related to favorable settlements of inventory purchase commitments with contract manufacturers, and to a lesser extent, sales of inventory that we had previously written down.

During the third quarter of fiscal 2001 and the first and fourth quarters of fiscal 2002, we recorded charges for restructuring and related asset impairments totaling $422.0 million, including inventory related charges of $186.4 million. These restructuring activities required us to make numerous assumptions and estimates, including assumptions and estimates regarding future revenue levels and product mix, the timing of and the amounts received for subleases of excess facilities, the fair values of impaired assets, the amounts of other than temporary impairments of strategic investments, and the potential legal matters, administrative expenses and professional fees associated with the restructuring activities.

We continuously monitor the judgments, assumptions and estimates relating to the restructuring activities and, if these judgments, assumptions and estimates change, we may be required to record additional charges or credits against the reserves previously recorded for these restructuring activities. For example, during the third and fourth quarters of fiscal 2002, we recorded a net credit totaling $3.8 million to operating expenses, due to various changes in estimates relating to the restructuring charges that had been recorded in the third quarter of fiscal 2001 and the first quarter of fiscal 2002. These credits included decreases in the accrual for potential legal matters associated with the restructuring activities, partially offset by increases in the accrual for projected liabilities relating to facility consolidations. During the third quarter of fiscal 2003, we recorded a net credit totaling $2.2 million to operating expenses, due to various changes in estimates relating to all of our restructuring activities. These credits included decreases in the accruals for potential legal matters associated with the restructuring activities and workforce reduction costs, partially offset by increases in the accrual for additional facility consolidation charges due to less favorable sublease assumptions. In addition, we recorded a credit totaling $0.9 million to operating expenses relating to proceeds received from the disposal of certain equipment. While we reduced the accrual for potential legal matters based on current estimates as adjusted for events within the current quarter, given the inherent uncertainties involved in such matters, it is reasonably possible that we may incur a loss in addition to the amount accrued. In addition, in the event that other contingencies associated with the restructuring activities occur, or the estimates associated with the restructuring activities are revised, we may be required to record additional charges or credits against the reserves previously recorded for the restructuring activities. As of April 26, 2003, we had $19.5 million accrued as part of our restructuring liability relating to facility consolidations, based on our best estimate of the available sublease rates and terms at the present time. In the event that we are unsuccessful in subleasing any of the restructured facilities, we could incur additional restructuring charges and cash outflows in future periods totaling $1.2 million, which represents the amount of the assumed sublease recoveries that have been incorporated into the current estimate.

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Results of Operations

Revenue

Revenue decreased 22%, or $3.0 million, to $10.6 million for the three months ended April 26, 2003 compared to revenue of $13.6 million for the same period in fiscal 2002. Revenue decreased 52%, or $29.2 million, to $27.4 million for the nine months ended April 26, 2003 compared to revenue of $56.6 million for the same period in fiscal 2002. The decrease in revenue for the three and nine months ended April 26, 2003 was due to the continuing weak overall economic environment and adverse conditions in the telecommunications industry, in particular, the significant capital reductions by our target customers. Product revenue increased slightly to $7.7 million for the three months ended April 26, 2003 compared to product revenue of $6.9 million for the same period in fiscal 2002. For the nine months ended April 26, 2003, product revenue declined 55%, or $21.8 million, to $18.0 million compared to product revenue of $39.8 million for the same period in fiscal 2002. Service revenue declined 56% and 44%, respectively, for the three and nine months ended April 26, 2003, compared to the three and nine months ended April 27, 2002. The decrease in service revenue for the three and nine months ended April 26, 2003, was primarily due to the lower level of installation services associated with our product deployments. For the nine months ended April 26, 2003, three international customers accounted for the majority of our revenue and international revenue represented 88% of our total revenue. For the nine months ended April 27, 2002, two international customers accounted for the majority of our revenue and international revenue represented 89% of our total revenue. We anticipate that, in the near term, our revenue will continue to be highly concentrated in a relatively small number of customers and that international revenue will represent a relatively high percentage of total revenue.

Gross profit (loss)

Gross profit (loss) for product and services, including non-cash stock-based compensation expense, for the three and nine months ended April 26, 2003 and for the three and nine months ended April 27, 2002 was as follows (in thousands, except percentages):

	Three Months Ended						Nine Months Ended
	April 26, 2003			April 27, 2002			April 26, 2003			April 27, 2002
Gross profit (loss):
Product	$	1,455		$	9,296		$	703		$	(85,122	)
Service		103			794			(825	)		(4,715	)
Total	$	1,558		$	10,090		$	(122	)	$	(89,837	)
Gross profit (loss):
Product		18.9	%		134.2	%		3.9	%		(213.7	%)
Service		3.5	%		11.9	%		(8.8	%)		(28.1	%)
Total		14.7	%		74.3	%		(0.4	%)		(158.7	%)

Product gross profit (loss)

Product gross profit was 18.9% of revenue for the three months ended April 26, 2003 compared to 134.2% of revenue for the same period in fiscal 2002. Product gross profit was 3.9% of revenue for the nine months ended April 26, 2003 compared to a gross loss of (213.7%) of revenue for the same period in fiscal 2002. Product gross profit for the three and nine months ended April 26, 2003 has been adversely effected primarily from the decline in product revenue without a proportionate decline in overall manufacturing costs. For the three months ended April 27, 2002, product gross profit included a $9.0 million benefit resulting from changes in estimates relating to the excess inventory charge we recorded in the first quarter of fiscal 2002. The product gross loss for the nine months

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ended April 27, 2002 included an excess inventory net charge of $93.4 million for inventory write-downs and non-cancelable purchase commitments.

Service gross profit (loss)

Service gross profit was 3.5% of revenue for the three months ended April 26, 2003 compared to 11.9% of revenue for the same period in fiscal 2002. Service gross loss was (8.8%) of revenue for the nine months ended April 26, 2003 compared to a gross loss of (28.1%) of revenue for the same period of fiscal 2002. The lower service gross profit for the three months ended April 26, 2003 was primarily due to the decline in service revenue without a proportionate decline in overall customer support expenses. The service gross loss for the nine months ended April 26, 2003, reflects costs associated with a further realignment within the customer support organization, including employee severance costs and capital write offs.

At present, we are currently maintaining a significant cost structure within the manufacturing and customer support organizations that we believe is necessary in order to sell our products to incumbent service provider customers.

Research and Development Expenses

Research and development expenses decreased $12.8 million, or 50%, to $12.7 million for the three months ended April 26, 2003 compared to $25.5 million for the same period in fiscal 2002. Research and development expenses decreased $48.0 million, or 55%, to $40.0 million for the nine months ended April 26, 2003 compared to $88.0 million for the same period in fiscal 2002. The decrease in expenses for the three and nine months ended April 26, 2003 was primarily due to lower project materials costs and personnel-related expenses resulting from our prior restructuring activities. These prior restructuring activities resulted in a consolidation of product offerings and more focused development efforts for our optical switching platforms.

Sales and Marketing Expenses

Sales and marketing expenses decreased $4.0 million, or 45%, to $4.9 million for the three months ended April 26, 2003 compared to $8.9 million for the same period in fiscal 2002. Sales and marketing expenses decreased $19.1 million, or 56%, to $14.9 million for the nine months ended April 26, 2003 compared to $34.0 million for the same period of fiscal 2002. The decrease in expenses for the three and nine months ended April 26, 2003 was primarily due to lower personnel and related expenses resulting from our prior restructuring programs.

General and Administrative Expenses

General and administrative expenses decreased $0.3 million, or 15%, to $1.9 million for the three months ended April 26, 2003 compared to $2.2 million for the same period in fiscal 2002. General and administrative expenses decreased $2.7 million, or 34%, to $5.3 million for the nine months ended April 26, 2003 compared to $8.0 million for the same period in fiscal 2002. The decrease in expenses for the three and nine months ended April 26, 2003 was primarily due to lower personnel and related expenses resulting from our prior restructuring programs.

Stock-Based Compensation Expense

Total stock-based compensation expense decreased $3.5 million, or 64%, to $2.0 million for the three months ended April 26, 2003 compared to $5.5 million for the same period in fiscal 2002. Total stock-based compensation expense decreased $12.9 million, or 67%, to $6.5 million for the nine months ended April 26, 2003 compared to $19.4 million for the same period in fiscal 2002. For the three and nine months ended April 26, 2003, $0.3 million and $1.1 million of stock-based compensation expense was classified as cost of revenue, respectively, and $1.7 million and $5.4 million was classified as operating expenses, respectively. Stock-based compensation expense primarily resulted from the granting of stock options and restricted shares with exercise or sale prices which were deemed to be below fair market value. The decrease in expenses for the three and nine months ended April 26, 2003 was primarily due to stock-based compensation expense for restricted stock and stock options relating to the acquisition of Sirocco Systems, Inc., which were fully amortized in the fourth quarter of fiscal 2002. Stock-based compensation expense also declined as a result of personnel reductions from our prior restructuring activities. We expect to continue incurring stock-based compensation expense through the fourth quarter of fiscal 2005.

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Restructuring Charges and Related Asset Impairments

In the last two years, there has been a sharp contraction in the availability of capital to our industry. As a result, capital expenditures by both emerging and incumbent service providers have been substantially reduced. These unfavorable economic conditions have negatively impacted our operating results in a progressive and increasingly severe manner. As a result, we restructured our business three times in order to reduce expenses and align our resources with long-term growth opportunities: the first in the third quarter of fiscal 2001 (the “fiscal 2001 restructuring”), the second in the first quarter of fiscal 2002 (the “first quarter fiscal 2002 restructuring”), and the third in the fourth quarter of fiscal 2002 (the “fourth quarter fiscal 2002 restructuring”). As a result of our combined activity under all of these restructuring programs, during fiscal 2002, we recorded a total net charge of $241.5 million, which was classified in the statement of operations as follows: cost of revenue – $91.7 million, operating expenses – $125.0 million, and non-operating expenses – $24.8 million.

During the third quarter of fiscal 2003, we recorded a net $2.2 million credit to operating expenses due to various changes in estimates relating to all of our restructuring activities. The changes in estimates primarily consisted of a $6.4 million reduction in the estimated legal matters associated with the restructuring activities, a $0.9 million credit relating to proceeds received from the disposal of certain equipment and a $0.8 million reduction in the costs associated with a workforce reduction, partially offset by $4.9 million of additional facility consolidation charges. In addition, we recorded a $1.0 million charge for the write-down of certain land. While we have reduced the accrual for potential legal matters based on its current estimate as adjusted for events within the current quarter, given the inherent uncertainties involved in such matters, it is reasonably possible that we may incur a loss in addition to the amount accrued. In addition, in the event that other contingencies associated with the restructuring activities occur, or the estimates associated with the restructuring activities are revised, we may be required to record additional charges or credits against the reserves previously recorded for our restructuring activities.

As of April 26, 2003, we had $24.9 million in accrued restructuring costs. Details regarding each of the restructuring programs are described below.

Fiscal 2001 Restructuring:

The fiscal 2001 restructuring program included a workforce reduction of 131 employees, consolidation of excess facilities, and the restructuring of certain business functions to eliminate non-strategic products and overlapping feature sets. We recorded restructuring charges and related asset impairments of $81.9 million classified as operating expenses and an excess inventory charge of $84.0 million relating to discontinued product lines, which was classified as cost of revenue. The restructuring charges included amounts accrued for potential legal matters, administrative expenses and professional fees associated with the restructuring activities, including employment termination related claims. We substantially completed the fiscal 2001 restructuring program during the first half of fiscal 2002. In the fourth quarter of fiscal 2002, we recorded a net $2.1 million credit to operating expenses due to various changes in estimates. The changes in estimates consisted primarily of $4.7 million of additional facility consolidation charges due to less favorable sublease assumptions, offset by a $6.7 million reduction in the potential legal matters associated with the restructuring activities. During the third quarter of fiscal 2003, we recorded a net $2.3 million charge to operating expenses due to various changes in estimates. The changes in estimates consisted primarily of $3.6 million of additional facility consolidation charges due to less favorable sublease assumptions, partially offset by a $1.3 million reduction in potential legal matters associated with the restructuring activities. As of April 26, 2003, the projected future cash payments of $15.3 million consist of facility consolidation charges that will be paid over the respective lease terms through fiscal 2007, and potential legal matters and administrative expenses associated with the restructuring activities.

The restructuring charges and related asset impairments recorded in the fiscal 2001 restructuring program, and the reserve activity since that time, are summarized as follows (in thousands):

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	Original Restructuring Charge		Non-cash Charges		Cash Payments		Adjustments		Accrual Balance at July 31, 2002		Cash Payments		Adjustments			Accrual Balance at April 26, 2003
Workforce reduction	$	4,174	$	829	$	3,203	$	142	$	—	$	—	$	—		$	—
Facility consolidations and certain other costs		24,437		1,214		5,419		1,994		15,810		2,808		(2,261	)		15,263
Inventory and asset write-downs		137,285		84,972		52,313		—		—		—		—			—
Total	$	165,896	$	87,015	$	60,935	$	2,136	$	15,810	$	2,808	$	(2,261	)	$	15,263

First Quarter Fiscal 2002 Restructuring:

The first quarter fiscal 2002 restructuring program included a workforce reduction of 239 employees, consolidation of excess facilities and charges related to excess inventory and other asset impairments. As a result, we recorded restructuring charges and related asset impairments of $77.3 million classified as operating expenses and an excess inventory charge of $102.4 million classified as cost of revenue. In addition, we recorded charges totaling $22.7 million, classified as a non-operating expense, relating to impairments of investments in non-publicly traded companies that were determined to be other than temporary. The restructuring charges included $7.1 million of costs relating to the workforce reduction, $11.2 million related to the write-down of certain land, lease terminations and non-cancelable lease costs and $6.0 million for potential legal matters, administrative expenses and professional fees associated with the restructuring activities, including employment termination related claims. The restructuring charges also included $102.4 million for inventory write-downs and non-cancelable purchase commitments for inventories due to a severe decline in the forecasted demand for our products and $53.1 million for asset impairments related to our vendor financing agreements and fixed assets that we abandoned.

The first quarter fiscal 2002 restructuring program was substantially completed during the fourth quarter of fiscal 2002. During the third and fourth quarters of fiscal 2002, we recorded credits totaling $10.8 million to cost of revenue due to changes in estimates, the majority of which related to favorable settlements with contract manufacturers for non-cancelable inventory purchase commitments. In addition, during the fourth quarter of fiscal 2002, we recorded a net $1.7 million credit to operating expenses relating to various changes in estimates. The changes in estimates consisted of a $1.7 million reduction in potential legal matters associated with the restructuring activities and the reversal of an accrued liability of $0.8 million for workforce reductions, partially offset by $0.8 million of additional facility consolidation charges. During the third quarter of fiscal 2003, we recorded a net $0.5 million credit to operating expenses due to various changes in estimates. The changes in estimates primarily consisted of a $1.3 million reduction in potential legal matters associated with the restructuring activities, partially offset by $0.8 million of additional facility consolidation charges due to less favorable sublease assumptions. In addition, we recorded a $1.0 million non-cash charge for the write-down of certain land. As of April 26, 2003, the projected future cash payments of $4.1 million consist primarily of facility consolidation charges that will be paid over the respective lease terms through fiscal 2005 and potential legal matters and administrative expenses associated with the restructuring activities.

The restructuring charges and related asset impairments recorded in the first quarter fiscal 2002 restructuring program, and the reserve activity since that time, are summarized as follows (in thousands):

	Original Restructuring Charge		Non-cash Charges		Cash Payments		Adjustments		Accrual Balance at July 31, 2002		Cash Payments		Adjustments		Accrual Balance at April 26, 2003
Workforce reduction	$	7,106	$	173	$	6,106	$	827	$	—	$	—	$	—	$	—
Facility consolidations and certain other costs		17,181		8,572		1,684		835		6,090		1,766		524		3,800
Inventory and asset write-downs		155,451		102,540		41,358		10,804		749		430		—		319
Losses on investments		22,737		22,737		—		—		—		—		—		—
Total	$	202,475	$	134,022	$	49,148	$	12,466	$	6,839	$	2,196	$	524	$	4,119

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Fourth Quarter Fiscal 2002 Restructuring:

The fourth quarter fiscal 2002 restructuring program included a workforce reduction of 225 employees, consolidation of excess facilities, and the restructuring of certain business functions to eliminate non-strategic products. This included discontinuing the development of our standalone transport products, including the SN 8000 ntelligent Optical Transport Node and the SN 10000 Intelligent Optical Transport System. As a result, we recorded restructuring charges and related asset impairments of $51.5 million classified as operating expenses. In addition, we recorded a charge of $2.1 million, classified as a non-operating expense, relating to impairments of investments in non-publicly traded companies that were determined to be other than temporary. The restructuring charges included $8.7 million of costs relating to the workforce reduction, $5.6 million for lease terminations and non-cancelable lease costs and $14.5 million relating to potential legal matters, contractual commitments, administrative expenses and professional fees related to the restructuring activities, including employment termination related claims. The restructuring charges also included $22.6 million of costs relating to asset impairments, which primarily included fixed assets that were disposed of, or abandoned, due to the rationalization of our product offerings and the consolidation of excess facilities. The fourth quarter fiscal 2002 restructuring program was substantially completed during the first half of fiscal 2003.

During the third quarter of fiscal 2003, we recorded a net $4.0 million credit to operating expenses due to various changes in estimates. The changes in estimates consisted of a $3.7 million reduction in potential legal matters associated with the restructuring activities and a $0.8 million reduction in the costs associated with the workforce reduction, partially offset by $0.5 million of additional facility consolidation charges. In addition, we recorded a $0.9 million credit to operating expenses relating to proceeds received from the disposal of certain equipment. As of April 26, 2003, the projected future cash payments of $5.5 million consist primarily of facility consolidation charges that will be paid over the respective lease terms through fiscal 2006 and potential legal matters and administrative expenses associated with the restructuring activities.

The restructuring charges and related asset impairments recorded in the fourth quarter fiscal 2002 restructuring program, and the reserve activity since that time, are summarized as follows (in thousands):

	Original Restructuring Charge		Non-cash Charges		Cash Payments		Accrual Balance at July 31, 2002		Cash Payments		Adjustments		Accrual Balance at April 26, 2003
Workforce reduction	$	8,713	$	814	$	2,059	$	5,840	$	5,024	$	770	$	46
Facility consolidations and certain other costs		20,132		—		454		19,678		10,965		3,236		5,477
Asset write-downs		22,637		22,637		—		—		—		—		—
Losses on investments		2,108		2,108		—		—		—		—		—
Total	$	53,590	$	25,559	$	2,513	$	25,518	$	15,989	$	4,006	$	5,523

Interest and Other Income, Net

Interest and other income, net decreased $3.4 million to $5.4 million for the three months ended April 26, 2003 compared to $8.8 million for the same period in fiscal 2002. Interest and other income, net decreased $13.5 million to $18.2 million for the nine months ended April 26, 2003 compared to $31.7 million for the same period in fiscal 2002. The decrease for the three and nine months ended April 26, 2003 was due to a combination of lower interest rates and lower invested cash balances during these periods.

Provision for Income Taxes

We did not provide for income taxes for the three and nine months ended April 26, 2003, or for the same periods in fiscal 2002, due to the net loss in each period. We did not record any tax benefits relating to these losses during these periods due to the uncertainty surrounding the realization of the future tax benefits.

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Liquidity and Capital Resources

Total cash, cash equivalents and investments were $1.0 billion at April 26, 2003. Included in this amount were cash and cash equivalents of $237.4 million, compared to $172.7 million at July 31, 2002. The increase in cash and cash equivalents for the nine months ended April 26, 2003 was due to cash provided by investing activities of $104.7 million and cash provided by financing activities of $1.9 million, offset by cash used in operating activities of $41.9 million.

Cash provided by investing activities of $104.7 million consisted primarily of net maturities of investments of $102.9 million. Cash provided by financing activities of $1.9 million consisted primarily of proceeds from employee stock plan activity. Cash used in operating activities of $41.9 million consisted of the net loss for the period of $45.4 million, adjusted for non-cash charges totaling $24.7 million, and changes to working capital totaling $21.2 million, the most significant component of which was a decrease in accrued restructuring costs of $23.3 million. Non-cash charges include depreciation and amortization, restructuring charges and related asset impairments, and stock-based compensation.

As a result of the financial demands of major network deployments, service providers are continuing to request financing assistance from their suppliers. From time to time we have provided extended payment terms on trade receivables to certain key customers to assist them with their network deployment plans. In addition, although we currently do not have any such arrangements, we may provide or commit to extend additional credit or credit support, such as vendor financing, to our customers, as we consider appropriate in the course of our business. Our ability to provide customer financing is limited and depends on a number of factors, including our capital structure, the level of our available credit and our ability to factor commitments. The extension of financing to our customers will limit the capital that we have available for other uses.

Currently, our primary source of liquidity comes from our cash and cash equivalents and investments, which totaled $1.0 billion at April 26, 2003. Our investments are classified as available-for-sale and consist of securities that are readily convertible to cash, including commercial paper, certificates of deposits, money market funds and government debt securities, with original maturities ranging from 90 days to three years. At April 26, 2003, $320.8 million of investments with maturities of less than one year were classified as short-term investments, and $446.8 million of investments with maturities of greater than one year were classified as long-term investments. At current revenue levels, we anticipate that some portion of our existing cash and cash equivalents and investments will continue to be consumed by operations. Our accounts receivable, while not considered a primary source of liquidity, represents a concentration of credit risk because the accounts receivable balance at any point in time typically consists of a relatively small number of customer account balances due within one year. At April 26, 2003, more than 90% of our accounts receivable balance was attributable to two international customers, including amounts due from one customer under an extended payment term arrangement. As of April 26, 2003, we do not have any outstanding debt or credit facilities, and do not anticipate entering into any debt or credit agreements in the foreseeable future.

Our fixed commitments for cash expenditures consist primarily of payments under operating leases for facilities totaling $24.1 million, payable as follows: remainder of fiscal 2003 – $1.7 million, fiscal 2004 – $6.4 million, fiscal 2005 – $6.3 million, fiscal 2006 – $3.7 million, and fiscal 2007 – $6.0 million. We do not currently have any material commitments for capital expenditures, or any other material commitments aside from operating leases for our facilities and inventory purchase commitments. As of April 26, 2003, we had $3.9 million in inventory purchase commitments. We currently intend to fund our operations, including our fixed commitments under operating leases, and any required capital expenditures over the next few years using our existing cash, cash equivalents and investments.

Based on our current plans and business conditions, we believe that our existing cash, cash equivalents and investments will be sufficient to satisfy our anticipated cash requirements for at least the next twelve months.

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Factors that May Affect Future Operating Results

Risks Related to Our Business

Our business has been, and may continue to be, adversely affected by unfavorable economic and market conditions.

As a result of the sharp contraction in the availability of capital to our industry and substantially reduced capital expenditures by service providers, our revenue began to decline in the third quarter of fiscal 2001, and we have incurred significant operating losses since that time. Our net loss for fiscal 2002 was $379.7 million and for the nine months ended April 26, 2003 was $45.4 million. Our costs are based largely on the requirements that we believe are necessary to support sales to incumbent service providers. We anticipate that our cost of revenue, gross profit and operating results will continue to be adversely affected by our decision to maintain our current cost structure.

In addition to the economic downturn and the decline in capital spending by telecommunications service providers, the ongoing economic situation following the September 2001 terrorist acts and the related military actions appears to have added additional uncertainty to an already weak overall economic environment. Further acts of war or terrorism, or related effects such as disruptions in air transportation, enhanced security measures and political instability in certain foreign countries, may adversely affect our business, operating results and financial condition. The telecommunications equipment industry remains severely depressed. Our business and results of operations have been and will continue to be seriously harmed if economic conditions do not improve.

We depend entirely on our line of intelligent optical networking products and our future revenue depends on their commercial success.

Our future revenue depends on the commercial success of our line of intelligent optical networking products. Since the third quarter of fiscal 2001, we have narrowed the scope of our product offerings, including discontinuing development of our standalone transport products. As of April 26, 2003, our SN 3000 Optical Edge Switch, SN 16000 and SN 16000 SC Intelligent Optical Switches and Silvx Manager Network Management System are the primary focus of our current development efforts. To be successful, we believe that we must continually enhance the capabilities of our existing products, and successfully develop and introduce new products. We cannot assure you that we will be successful in:

* forecasting evolving customer requirements;

* completing the development, introduction or production manufacturing of new products; or

* enhancing our existing products.

Failure of our current or future products to operate as expected could delay or prevent their adoption. If our target customers do not adopt, purchase and successfully deploy our current and future products, our results of operations could be adversely affected.

We are directing our sales efforts primarily toward incumbent service providers, many of which have made significant investments in traditional optical networking equipment. We believe that our mesh-based architecture offers significant competitive advantages over traditional optical networking equipment. If we are unable to convince incumbent service providers to deploy our intelligent optical networking solutions and transition their networks toward more flexible, data-centric mesh architectures, our business and results of operations will be seriously harmed.

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We expect that substantially all of our revenue will be generated from a limited number of customers, and our revenue depends substantially upon product sales to these customers.

Currently we have a limited number of customers. For the nine months ended April 26, 2003, three international customers accounted for the majority of our revenue. In any given quarter, a relatively small number of customers typically comprise a large percentage of total revenue, though the composition of these customers may vary from quarter to quarter. During fiscal 2002, Vodafone accounted for 45% of our revenue and NTT Communications accounted for 20% of our revenue. In fiscal 2001, Williams Communications accounted for 47% of our revenue and 360networks accounted for 11% of our revenue. In fiscal 2000, Williams accounted for 92% of our revenue.

Through fiscal 2001, a large percentage of our sales were made to emerging service providers such as Williams and 360networks. Many of these emerging service providers have experienced severe financial difficulties, causing them to dramatically reduce their capital expenditures, and in many cases, file for bankruptcy protection. Although some emerging service providers may emerge from bankruptcy protection, they may no longer have the need or the resources to build out their network infrastructures. As a result, we believe that sales to emerging service providers are likely to remain at reduced levels.

Our contracts include terms and arrangements that are customary and standard in our industry, such as payment, delivery and termination. None of our customers are contractually committed to purchase any minimum quantities of products from us and orders are generally cancelable prior to shipment. We expect that in the foreseeable future a majority of our revenue will continue to depend on sales of our products to a limited number of customers. The rate at which our current and prospective customers purchase products from us will depend, in part, on their success in selling communications services based on these products to their own customers. Any failure of current or prospective customers to purchase products from us for any reason, including any determination not to install our products in their networks or a downturn in their business, would seriously harm our financial condition or results of operations.

If we fail to increase our sales to incumbent service providers or to establish successful relationships with distribution partners, our results of operations will be affected adversely.

To be successful, we will need to increase our sales to incumbent service providers, which typically have longer sales evaluation cycles and also have reduced their capital spending plans. Many incumbent service providers have recently announced reductions in their capital expenditure budgets, reduced their revenue forecasts, or announced restructurings. In addition, we are focused on establishing successful relationships with a variety of distribution partners. We have entered into agreements with several distribution partners, some of which also sell products that compete with our products. We cannot be certain that we will be able to retain or attract distribution partners on a timely basis or at all, or that the distribution partners will devote adequate resources to selling our products. We have relatively limited experience in selling our products to incumbent service providers and distribution partners. There can be no assurance that we will be successful in increasing our sales to incumbent service providers and distribution partners.

We expect gross margins to remain at low levels in the near term.

Beginning in the third quarter of fiscal 2001, our gross margins declined significantly compared to historical levels. Our cost of revenue exceeded revenue for the first nine months of fiscal 2003 and certain other previous quarters. We continue to experience lower gross margins compared to historical levels. We anticipate that gross margins are likely to continue to be adversely affected by several factors, including:

* reduced demand for our products;

* the effects of product volumes and manufacturing efficiencies,

* continuing to maintain our manufacturing and customer support organization cost

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  structure;

* component limitations;

* the mix of products and services sold;

* increases in material and labor costs;

* loss of cost savings due to changes in component pricing or charges incurred if we do not correctly anticipate product demand;

* competitive pricing; and

* possible exposure to excess and obsolete inventory charges, such as the charges that occurred in the prior restructuring programs.

Current economic conditions combined with our limited operating history makes forecasting difficult.

Current economic conditions in the telecommunications industry, combined with our limited operating history, make it difficult to forecast revenue accurately. At present, we are currently maintaining a significant cost structure particularly within the research and development, manufacturing and customer support organizations that we believe is necessary in order to sell our products to incumbent service providers. Our ability to sell products and the level of success, if any, we may achieve depend, among other things, upon the level of demand for intelligent optical networking products, which continues to be a rapidly evolving market. In addition, we continue to have limited visibility into the capital spending plans of our current and prospective customers. This increases the difficulty of forecasting our revenue or predicting any recovery in capital spending trends. We have directed our sales efforts primarily toward incumbent service providers, many of which have historically financed their capital expenditures using significant amounts of debt. In recent periods, many of these incumbent service providers have come under increased scrutiny from credit rating agencies and investors due to their relatively high debt levels. We believe this may limit their ability to make future equipment purchases. We expect these conditions are likely to continue to limit our ability to forecast our revenue. If operating results are below the expectations of our investors and market analysts, this could cause declines in the price of our common stock.

Our failure to generate sufficient revenue would prevent us from achieving profitability.

Beginning in the third quarter of fiscal 2001, our revenue has declined considerably and we have incurred significant operating losses since that time. As of April 26, 2003, we had an accumulated deficit of $726.5 million. We cannot assure you that our revenue will increase or that we will generate sufficient revenue to achieve or sustain profitability. We are currently maintaining a significant cost structure particularly within the research and development, manufacturing and customer support organizations. As a result, we will need to generate significantly higher revenue over the current levels in order to achieve and maintain profitability.

The unpredictability of our quarterly results may adversely affect the trading price of our common stock.

Our revenue and operating results have varied significantly from quarter to quarter. From the fourth quarter of fiscal 1999 through the second quarter of fiscal 2001, our revenue increased each quarter sequentially compared to the previous quarter. However, beginning in the third quarter of fiscal 2001, our revenue declined due to a sudden and severe decline in the purchasing patterns of our customers, and as a result, we have incurred significant operating losses since that time. We believe that our revenue and operating results are likely to continue to vary significantly from quarter to quarter due to a number of factors, many of which are outside of our control and any of which may cause our stock price to fluctuate. The primary factors that may affect us include the following:

* fluctuation in demand for intelligent optical networking products;

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* the timing and size of sales of our products;

* capital spending constraints by our target customers;

* the length and variability of the sales cycle for our products, which we believe is increasing in length, due to overall market conditions and our emphasis on selling to incumbent service providers;

* the timing of recognizing revenue and deferred revenue;

* new product introductions and enhancements by our competitors and ourselves;

* changes in our pricing policies or the pricing policies of our competitors;

* our ability to develop, introduce and ship new products and product enhancements that meet customer requirements in a timely manner;

* delays or cancellations by customers;

* our ability to obtain sufficient supplies of sole or limited source components;

* increases in the prices of the components we purchase;

* our ability to attain and maintain production volumes and quality levels for our products;

* manufacturing lead times;

* the timing and level of prototype expenses;

* costs related to acquisitions of technology or businesses;

* changes in accounting rules, such as any future requirement to record expenses for employee stock option grants made at fair value;

* actual events, circumstances, outcomes and amounts differing from judgments, assumptions, and estimates used in determining the values of certain assets, liabilities and other items reflected in our financial statements; and

* general economic conditions as well as those specific to the telecommunications, Internet and related industries.

Due to the foregoing factors, we believe that quarter-to-quarter comparisons of our operating results are not a good indication of our future performance. You should not rely on our results for one quarter as any indication of our future performance. Occurrences of the foregoing factors are extremely difficult to predict. In addition, our ability to forecast our future business has been significantly impaired by the general economic downturn and the current market conditions affecting the telecommunications equipment industry. As a result, our future operating results may be below our expectations or those of public market analysts and investors, and our net sales may continue to decline or recover at a slower rate than anticipated by us or analysts and investors. In either event, the price of our common stock could decrease.

The long and variable sales cycles for our products may cause revenue and operating results to vary significantly from quarter to quarter.

A customer’s decision to purchase our intelligent optical networking products involves a significant commitment of its resources and a lengthy evaluation, testing and product qualification process. As a result, our sales cycle is lengthy and recently has increased in length, as we have directed our sales efforts primarily toward incumbent service providers. Throughout the sales cycle, we spend considerable time and expense educating and providing

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information to prospective customers about the use and features of our products. Even after making a decision to purchase our products, we believe that most customers will deploy the products slowly and deliberately. Timing of deployment can vary widely and depends on the economic environment of our customers, the skills of our customers, the size of the network deployment and the complexity of our customers’ network environment. Historically, customers with complex networks typically have expanded their networks in large increments periodically. Accordingly, in the event that customer order activity increased, we could receive purchase orders for significant dollar amounts on an irregular and unpredictable basis. Because of our limited operating history and the nature of our business, we cannot predict these sales and deployment cycles. The long sales cycles, as well as our expectation that customers may tend to place large orders sporadically with short lead times, may cause our revenue and results of operations to vary significantly and unexpectedly from quarter to quarter.

Our products are complex and are deployed in complex environments and may have errors or defects that we find only after full deployment, which could seriously harm our business.

Our intelligent optical networking products are complex and are designed to be deployed in large and complex networks. Our customers may discover errors or defects in the hardware or the software, or the product may not operate as expected after it has been fully deployed. From time to time, there may be interruptions or delays in the deployment of our products due to product performance problems or post-delivery obligations. If we are unable to identify and fix errors or other problems, or if our customers experience interruptions or delays that cannot be promptly resolved, we could experience:

* loss of or delay in revenue and loss of market share;

* loss of customers;

* failure to attract new customers or achieve market acceptance;

* diversion of development resources;

* increased service and warranty costs;

* delays in collecting accounts receivable;

* legal actions by our customers; and

* increased insurance costs,

any of which could seriously harm our financial condition or results of operations.

We may not be successful if our customer base does not grow.

Our future success will depend on our attracting additional customers. Due to the overall economic downturn in our industry and the financial difficulties experienced by emerging service providers and certain incumbent service providers, the number of potential customers for our products at the current time has been reduced. Our ability to attract new customers could also be affected adversely by:

* customer unwillingness to implement our optical networking architecture;

* difficulty in accurately forecasting evolving customer requirements;

* delays or difficulties that we may incur in completing the development, introduction and production manufacturing of our planned products or product enhancements;

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* new product introductions by our competitors;

* any failure of our products to perform as expected; or

* any difficulty we may incur in meeting customers’ delivery, installation or performance requirements.

Our business is subject to risks from international operations.

International sales represented 87% of total revenue in fiscal 2002, and 88% of total revenue in the first nine months of fiscal 2003, and we expect that international sales will continue to represent a significant portion of our revenue primarily in Europe and Japan. Doing business internationally requires significant management attention and financial resources to successfully develop direct and indirect sales channels and to support customers in international markets. While international sales currently represent a high percentage of total revenue, these sales are concentrated within a relatively small number of customers. We may not be able to maintain or expand international market demand for our products.

We have relatively limited experience in marketing, distributing and supporting our products internationally and to do so, we expect that we will need to develop versions of our products that comply with local standards. In addition, international operations are subject to other inherent risks, including:

* greater difficulty in accounts receivable collection and longer collection periods;

* difficulties and costs of staffing and managing foreign operations in compliance with local laws and customs;

* reliance on working with distribution partners for the resale of our products in certain markets and for certain types of product offerings, such as the integration of our products into third-party product offerings;

* necessity to work with third parties in certain countries to perform installation and obtain customer acceptance, and the resulting impact on revenue recognition;

* the impact of recessions in economies outside the United States;

* unexpected changes in regulatory requirements, including trade protection measures and import and licensing requirements;

* certification requirements;

* currency fluctuations;

* reduced protection for intellectual property rights in some countries;

* potentially adverse tax consequences; and

* political and economic instability, particularly in emerging markets.

We rely on single sources for supply of certain components and our business may be seriously harmed if our supply of any of these components or other components is disrupted.

We currently purchase several key components, including commercial digital signal processors, central processing units, field programmable gate arrays, switch fabric, and SONET transceivers, from single or limited sources. We purchase each of these components on a purchase order basis and have no long-term contracts for these components. Although we believe that there are alternative sources for each of these components, in the event of a

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disruption in supply, we may not be able to develop an alternate source in a timely manner or on favorable terms. Such a failure could hurt our ability to deliver our products to our customers and negatively affect our operating margins. In addition, our reliance on our suppliers exposes us to potential supplier production difficulties or quality variations. Any disruption in supply could seriously impact our revenue and results of operations.

Throughout the downturn in the telecommunications industry, the optical component industry has been downsizing manufacturing capacity while consolidating product lines from earlier acquisitions. In the past year, several suppliers exited the market for optical components, and others have announced reductions of their product offerings. These announcements, or similar decisions by other suppliers, could result in reduced competition and higher prices for the components we purchase. In addition, the loss of a source of supply for key components could require us to incur additional costs to redesign our products that use those components. If any of these events occurred, our results of operations could be materially adversely affected.

We utilize contract manufacturers and any disruption in these relationships may cause us to fail to meet the demands of our customers and damage our customer relationships.

We have limited internal manufacturing capabilities. We utilize contract manufacturers to manufacture our products in accordance with our specifications and to fill orders on a timely basis. We may not be able to manage our relationship with our contract manufacturers effectively, and our contract manufacturers may not meet our future requirements for timely delivery. Our contract manufacturers also build products for other companies, and we cannot assure you that they will always have sufficient quantities of inventory available to fill orders placed by our customers or that they will allocate their internal resources to fill these orders on a timely basis. In addition, our utilization of contract manufacturers limits our ability to control the manufacturing processes of our products, which exposes us to risks including the unpredictability of manufacturing yields and a reduced ability to control the quality of finished products.

The contract manufacturing industry is a highly competitive, capital-intensive business with relatively low profit margins. In addition, there have been a number of major acquisitions within the contract manufacturing industry in recent periods. While to date there has been no significant impact on our contract manufacturers, future acquisitions could potentially have an adverse effect on our working relationship with our contract manufacturers. For example, in the event of a major acquisition involving one of our contract manufacturers, difficulties could be encountered in the merger integration process that could negatively impact our working relationship. Qualifying a new contract manufacturer and commencing volume production is expensive and time consuming and could result in a significant interruption in the supply of our products. If we are required or choose to change contract manufacturers for any reason, we may lose revenue and damage our customer relationships.

Our inability to anticipate inventory requirements may result in inventory charges or delays in product shipments.

During the normal course of business, we may provide demand forecasts to our contract manufacturers up to six months prior to scheduled delivery of products to our customers. If we overestimate our requirements, the contract manufacturers may assess cancellation penalties or we may have excess inventory which could negatively impact our gross margins. During the first quarter of fiscal 2002, we recorded an excess inventory charge of $102.4 million due to a severe decline in our forecasted revenue. A portion of this charge was related to inventory purchase commitments. If we underestimate our requirements, the contract manufacturers may have inadequate inventory that could interrupt manufacturing of our products and result in delays in shipment to our customers and revenue recognition. We also could incur additional charges to manufacture our products to meet our customer deployment schedules.

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If we do not respond rapidly to technological changes, our products could become obsolete.

The market for intelligent optical networking products continues to evolve, and has been characterized by rapid technological change, frequent new product introductions and changes in customer requirements. We may be unable to respond quickly or effectively to these developments. We may experience design, manufacturing, marketing and other difficulties that could delay or prevent developing, introducing or marketing new products and enhancements. The introduction of new products by competitors, market acceptance of products based on new or alternative technologies or the emergence of new industry standards could render our existing or future products obsolete.

In developing our products, we have made, and will continue to make, assumptions about the standards that may be adopted by our customers and competitors. If the standards adopted are different from those that we have chosen to support, market acceptance of our products may be significantly reduced or delayed and our business will be seriously harmed. The introduction of products incorporating new technologies and the emergence of new industry standards could render our existing products obsolete.

In addition, in order to introduce products incorporating new technologies and new industry standards, we must be able to gain access to the latest technologies of our customers, our suppliers and other network vendors. Any failure to gain access to the latest technologies could impair the competitiveness of our products.

We will not retain customers or attract new customers if we fail to anticipate and meet specific customer requirements or if our products do not interoperate with our customers’ existing networks.

Our current and prospective customers may require product features and capabilities that our current products do not have. To achieve market acceptance for our products, we must effectively and timely anticipate and adapt to customer requirements and offer products and services that meet customer demands. Our failure to develop products or offer services that satisfy customer requirements would seriously harm our ability to increase demand for our products.

We intend to continue to invest in product and technology development. The development of new or enhanced products is a complex and uncertain process that requires the accurate anticipation of technological and market trends and significant capital resources. We may experience design, manufacturing, marketing and other difficulties that could delay or prevent the development, introduction, volume production or marketing of new products and enhancements. The introduction of new or enhanced products also requires that we manage the transition from older products in order to minimize disruption in customer ordering patterns and ensure that adequate supplies of new products can be delivered to meet anticipated customer demand. Our inability to manage this transition effectively would cause us to lose current and prospective customers.

Many of our customers utilize multiple protocol standards, and each of our customers may have different specification requirements to interface with their existing networks. Our customers’ networks contain multiple generations of products that have been added over time as these networks have grown and evolved. Specifically, incumbent service providers typically have fewer evolutionary networks that contain more generations of products. Our products must interoperate with all of the products within our customers’ networks as well as future products in order to meet our customers’ requirements. The requirement that we modify product design in order to achieve a sale may result in a longer sales cycle, increased research and development expense and reduced margins on our products. If our products do not interoperate with those of our customers’ networks, installations could be delayed or orders for our products could be cancelled. This would also seriously harm our reputation, all of which could seriously harm our business and prospects.

Our market is highly competitive, and our failure to compete successfully could adversely affect our market position.

Competition in the public network infrastructure market is intense. Large companies, such as Nortel Networks, Lucent Technologies, Alcatel and Ciena Corporation, have historically dominated this market. In

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addition, a number of smaller companies have either announced plans for new products or introduced new products to address the same network problems that our products address. Many of our current and potential competitors have significantly greater selling and marketing, technical, manufacturing, financial and other resources, including vendor-sponsored financing programs. Moreover, our competitors may foresee the course of market developments more accurately and could develop new technologies that compete with our products or even render our products obsolete.

In order to compete effectively, we must deliver products that:

* provide extremely high network reliability;

* scale easily and efficiently with minimum disruption to the network;

* interoperate with existing network designs and equipment vendors;

* reduce the complexity of the network by decreasing the need for overlapping equipment;

* provide effective network management; and

* provide a cost-effective solution for service providers.

In addition, we believe that knowledge of the infrastructure requirements applicable to service providers, experience in working with service providers to develop new services for their customers, and the ability to provide vendor-sponsored financing are important competitive factors in our market. We have a limited ability to provide vendor-sponsored financing and this may influence the purchasing decisions of prospective customers, who may decide to purchase products from one of our competitors who are able to provide more extensive financing programs. Furthermore, as we are increasingly directing our sales efforts toward incumbent service providers which typically have longer sales evaluation cycles, we believe that being able to demonstrate strong financial viability is becoming an increasingly important consideration to our customers in making their purchasing decisions.

If we are unable to compete successfully against our current and future competitors, we could experience price reductions, order cancellations and reduced gross margins, any one of which could materially and adversely affect our business, results of operations and financial condition.

Industry consolidation may result in stronger competition.

We believe that the industry in which we compete may enter into a consolidation phase. During 2002, one of our larger competitors, Ciena Corporation, completed the acquisition of another company in our industry, ONI Systems. Over the past two years, the market valuations of the majority of companies in our industry have declined significantly, and most companies have experienced dramatic decreases in revenue due to decreased customer demand in general, a smaller customer base due to the financial difficulties impacting emerging service providers, reductions in capital expenditures by incumbent service providers, and other factors. We expect that the weakened financial position of many companies in our industry may cause acquisition activity to increase. We believe that industry consolidation may result in stronger competitors that are better able to compete as sole-source vendors for customers. This could lead to more variability in operating results as we compete to be a single vendor solution and could have a material adverse effect on our business, operating results, and financial condition.

The intelligent optical networking market is evolving and our business will suffer if it does not develop as we expect.

The market for intelligent optical networking products continues to evolve. In recent periods, there has been a sharp decline in capital spending by our current and prospective customers. The market for our long-haul transport equipment has diminished substantially, and as a result, we made a strategic decision to discontinue the development of our standalone transport products during the fourth quarter of fiscal 2002. We cannot assure you that a viable market for our products will develop or be sustainable. If this market does not develop, develops more slowly than we expect or is not sustained, our business, results of operations and financial condition would be seriously harmed.

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Undetected software or hardware errors and problems arising from use of our products in conjunction with other vendors’ products could result in delays or loss of market acceptance of our products.

Networking products frequently contain undetected software or hardware errors when first introduced or as new versions are released. We expect that errors will be found from time to time in new or enhanced products after we begin commercial shipments. In addition, service providers typically use our products in conjunction with products from other vendors. As a result, when problems occur, it may be difficult to identify the source of the problem. These problems may cause us to incur significant warranty, support and repair costs, divert the attention of our engineering personnel from our product development efforts and cause significant customer relations problems. The occurrence of these problems could result in the delay or loss of market acceptance of our products and would likely have a material adverse effect on our business, results of operations and financial condition. Defects, integration issues or other performance problems in our products could result in financial or other damages to our customers or could damage market acceptance for our products. Our customers could also seek damages for losses from us. A product liability claim brought against us, even if unsuccessful, would likely be time consuming and costly.

Our failure to establish and maintain key customer relationships may result in delays in introducing new products or cause customers to forego purchasing our products.

Our future success will also depend upon our ability to develop and manage key customer relationships in order to introduce a variety of new products and product enhancements that address the increasingly sophisticated needs of our customers. Our failure to establish and maintain these customer relationships may adversely affect our ability to develop new products and product enhancements. In addition, we may experience delays in releasing new products and product enhancements in the future. Material delays in introducing new products and enhancements or our inability to introduce competitive new products may cause customers to forego purchases of our products and purchase those of our competitors, which could seriously harm our business.

The majority of our product sales to date have been to emerging service providers rather than incumbent service providers. We believe that it is important for us to increase our sales to incumbent service providers. Incumbent service providers typically have longer sales evaluation cycles than emerging service providers, and we have limited experience in selling our products to incumbent service providers. In addition, we are currently investing in product certification standards required by some of our customers which will be necessary for us to increase our sales to incumbent service providers. While we have made a commitment to invest resources in obtaining product certification standards, there is no assurance that such efforts will enable us to increase our sales to incumbent service providers. Furthermore, while we have received certain product certifications with our latest software releases, subsequent releases of software on our products may require further investment of resources and requests to obtain product certification. Any failure to establish or maintain strong customer relationships, including product certification standards, could have a material adverse effect on our business and results of operations.

Our failure to continually improve our internal controls and systems, and retain needed personnel could adversely affect our results of operations.

Since inception, the scope of our operations has increased and we have grown our headcount substantially. However, beginning in the third quarter of fiscal 2001, we have reduced our headcount levels significantly, due primarily to our restructuring activities. At April 26, 2003, we had a total of 399 employees, which represents a reduction of approximately 60% from headcount levels immediately prior to our restructuring programs. Our initial growth, followed by more recent headcount reductions, has placed a significant strain on our management systems and resources. Our ability to successfully offer our products and services and implement our business plan in a rapidly evolving market requires an effective planning and management process. We expect that we will need to

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continue to improve our financial, managerial and manufacturing controls and reporting systems, and will need to effectively manage our headcount levels worldwide. We may not be able to implement adequate control systems in an efficient and timely manner. In spite of recent economic conditions, competition for highly skilled personnel is intense, especially in the New England area where we are headquartered. Any failure to attract, assimilate or retain qualified personnel to fulfill our current or future needs could adversely affect our results of operations.

We depend on our key personnel to manage our business effectively in a rapidly changing market, and if we are unable to retain our key employees, our ability to compete could be harmed.

We depend on the continued services of our executive officers and other key engineering, sales, marketing and support personnel, who have critical industry experience and relationships that we rely on to implement our business plan. None of our officers or key employees is bound by an employment agreement for any specific term. We do not have “key person” life insurance policies covering any of our employees. All of our key employees have been granted stock-based awards that are intended to represent an integral component of their compensation package. These stock-based awards may not provide the intended incentive to our employees if our stock price declines or experiences significant volatility. The loss of the services of any of our key employees, the inability to attract and retain qualified personnel in the future, or delays in hiring qualified personnel could delay the development and introduction of, and negatively impact our ability to sell, our products.

If we become subject to unfair hiring, wrongful termination or other employment related claims, we could incur substantial costs in defending ourselves.

Companies in our industry, whose employees accept positions with competitors, frequently claim that their competitors have engaged in unfair hiring practices. We cannot assure you that we will not become parties to claims of this kind or other claims relating to our employees, or that those claims will not result in material litigation. In response to changing business conditions, we have terminated approximately 600 employees since the third quarter of fiscal 2001, and as a result, we may face claims relating to their compensation and/or wrongful termination based on discrimination. We could incur substantial costs in defending ourselves, or our employees, against such claims, regardless of the merits of such actions, and such claims could divert the attention of our management away from operations. We have accrued amounts related to the potential legal matters associated with our restructuring activities, including employment termination related claims. However, there can be no assurance that the ultimate resolution of such claims will not exceed the amounts accrued.

We face certain litigation risks.

We are a party to lawsuits in the normal course of our business. Litigation can be expensive, lengthy, and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict. An unfavorable resolution of a particular lawsuit could have a material adverse effect on our business, operating results, or financial condition. For additional information regarding certain of the lawsuits in which we are involved, see Part II, Item 1 – “Legal Proceedings”.

Our ability to compete could be jeopardized if we are unable to protect our intellectual property rights from third-party challenges.

We rely on a combination of patent, copyright, trademark and trade secret laws and restrictions on disclosure to protect our intellectual property rights. We also enter into confidentiality or license agreements with our employees, consultants and corporate partners and control access to and distribution of our software, documentation and other proprietary information. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain and use our products or technology.

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Monitoring unauthorized use of our products is difficult and we cannot be certain that the steps we have taken will prevent unauthorized use of our technology, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States. If competitors are able to use our technology, our ability to compete effectively could be harmed.

If necessary licenses of third-party technology are not available to us or are very expensive, the competitiveness of our products could be impaired.

From time to time we may be required to license technology from third parties to develop new products or product enhancements. We cannot assure you that third-party licenses will be available to us on commercially reasonable terms, if at all. The inability to obtain any third-party license required to develop new products and product enhancements could require us to obtain substitute technology of lower quality or performance standards or at greater cost, either of which could seriously harm the competitiveness of our products.

We could become subject to claims regarding intellectual property rights, which could seriously harm our business and require us to incur significant costs.

In recent years, there has been significant litigation in the United States involving patents and other intellectual property rights. Our industry in particular is characterized by the existence of a large number of patents and frequent claims and related litigation regarding patents and other intellectual property rights. In the course of our business, we may receive claims of infringement or otherwise become aware of potentially relevant patents or other intellectual property rights held by other parties. We evaluate the validity and applicability of these intellectual property rights, and determine in each case whether we must negotiate licenses or cross-licenses to incorporate or use the proprietary technologies in our products.

Any parties asserting that our products infringe upon their proprietary rights would force us to defend ourselves, and possibly our customers, manufacturers or suppliers against the alleged infringement. Regardless of their merit, these claims could result in costly litigation and subject us to the risk of significant liability for damages. These claims, again regardless of their merit, would likely be time consuming and expensive to resolve, would divert management time and attention and would put us at risk to:

* stop selling, incorporating or using our products that use the challenged intellectual property;

* obtain from the owner of the intellectual property right a license to sell or use the relevant technology, which license may not be available on reasonable terms, or at all;

* redesign those products that use such technology; or

* accept a return of products that use such technologies.

If we are forced to take any of the foregoing actions, our business may be seriously harmed.

Any acquisitions or strategic investments we make could disrupt our business and seriously harm our financial condition.

As part of our ongoing business development strategy, we consider acquisitions and strategic investments in complementary companies, products or technologies. We completed the acquisition of Sirocco Systems, Inc. in September 2000, and may consider making other acquisitions from time to time. In the event of an acquisition, we could:

* issue stock that would dilute our current stockholders’ percentage ownership;

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* consume cash, which would reduce the amount of cash available for other purposes;

* incur debt;

* assume liabilities;

* increase our ongoing operating expenses and level of fixed costs;

* record goodwill and non-amortizable intangible assets that will be subject to impairment testing and potential periodic impairment charges;

* incur amortization expenses related to certain intangible assets;

* incur large and immediate write-offs; or

* become subject to litigation.

Our ability to achieve the benefits of any acquisition, will also involve numerous risks, including:

* problems combining the purchased operations, technologies or products;

* unanticipated costs;

* diversion of management’s attention from other business issues and opportunities;

* adverse effects on existing business relationships with suppliers and customers;

* risks associated with entering markets in which we have no or limited prior experience; and

* problems with integrating employees and potential loss of key employees.

We cannot assure you that we will be able to successfully integrate any businesses, products, technologies or personnel that we might acquire in the future and any failure to do so could disrupt our business and seriously harm our financial condition.

As of April 26, 2003, we have made strategic investments in privately held companies totaling approximately $26.0 million, and we may decide to make additional investments in the future. In fiscal 2002, we recorded impairment losses of $24.8 million relating to these investments. These types of investments are inherently risky as the market for the technologies or products they have under development are typically in the early stages and may never materialize. We could lose our entire investment in certain or all of these companies.

Any extension of credit to our customers may subject us to credit risks and limit the capital that we have available for other uses.

We continue to receive requests for financing assistance from customers and potential customers and we expect these requests to continue. We believe the ability to offer financing assistance can be a competitive factor in obtaining business. From time to time we have provided extended payment terms on trade receivables to certain key customers to assist them with their network deployment plans. In addition, we may provide or commit to extend additional credit or credit support, such as vendor financing, to our customers as we consider appropriate in the course of our business. Such financing activities subject us to the credit risk of customers whom we finance. In addition, our ability to recognize revenue from financed sales will depend upon the relative financial condition of the specific customer, among other factors. Although we have programs in place to monitor the risk associated with vendor financing, we cannot assure you that such programs will be effective in reducing our risk of an impaired ability to pay on the part of a customer whom we have financed. We could experience losses due to customers

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failing to meet their financial obligations that could harm our business and materially adversely affect our operating results and financial condition, such as the losses that we incurred during the first quarter of fiscal 2002.

During the first quarter of fiscal 2002, we experienced losses relating to our two existing vendor financing customers, as each of them experienced a significant deterioration in their financial condition. As a result, we determined that we were unlikely to realize any significant proceeds from these vendor financing agreements. Accordingly, we recorded an impairment charge for the assets related to these financing agreements, which consisted of the cost of the systems shipped to the vendor financing customers, and had been classified in other long-term assets.

Risks Related to the Securities Market

Our stock price may continue to be volatile.

Historically, the market for technology stocks has been extremely volatile. Our common stock has experienced, and may continue to experience, substantial price volatility. The following factors could cause the market price of our common stock to fluctuate significantly:

* our loss of a major customer;

* significant changes or slowdowns in the funding and spending patterns of our current and prospective customers;

* the addition or departure of key personnel;

* variations in our quarterly operating results;

* announcements by us or our competitors of significant contracts, new products or product enhancements;

* failure by us to meet product milestones;

* acquisitions, distribution partnerships, joint ventures or capital commitments;

* regulatory changes in telecommunications;

* variations between our actual results and the published expectations of securities analysts;

* changes in financial estimates by securities analysts;

* sales of our common stock or other securities in the future;

* changes in market valuations of networking and telecommunications companies; and

* fluctuations in stock market prices and volumes.

In addition, the stock market in general, and the Nasdaq National Market and technology companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of such companies. These broad market and industry factors may materially adversely affect the market price of our common stock, regardless of our actual operating performance. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted against such companies.

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There may be sales of a substantial amount of our common stock that could cause our stock price to fall, or increase the volatility of our stock price.

As of April 26, 2003, options to purchase a total of 28.3 million shares of our common stock were outstanding. While these options are subject to vesting schedules, a number of the shares underlying these options are freely tradable. Sales of a substantial number of shares of our common stock could cause our stock price to fall or increase the volatility of our stock price. In addition, sales of shares by our stockholders could impair our ability to raise capital through the sale of additional stock.

Insiders own a substantial number of Sycamore shares and could limit your ability to influence the outcome of key transactions, including changes of control.

As of April 26, 2003, our officers, directors and entities affiliated with them, in the aggregate, beneficially owned approximately 40.3% of our outstanding common stock. These stockholders, if acting together, would be able to significantly influence matters requiring approval by our stockholders, including the election of directors and the approval of mergers or other business combination transactions.

Provisions of our charter documents and Delaware law may have anti-takeover effects that could prevent a change of control.

Provisions of our amended and restated certificate of incorporation, by-laws, and Delaware law could make it more difficult for a third party to acquire us, even if doing so would be beneficial to our stockholders.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk related to changes in interest rates and foreign currency exchange rates. We do not use derivative financial instruments and other market risk sensitive instruments for speculative or trading purposes.

Interest Rate Sensitivity

We maintain a portfolio of cash equivalents and short-term and long-term investments in a variety of securities including commercial paper, certificates of deposit, money market funds and government debt securities. These available-for-sale investments are subject to interest rate risk and may fall in value if market interest rates increase. If market interest rates increase immediately and uniformly by 10 percent from levels at April 26, 2003, the fair value of the portfolio would decline by approximately $0.9 million. We have the ability to hold our fixed income investments until maturity, and therefore do not expect our operating results or cash flows to be affected to any significant degree by the effect of a sudden change in market interest rates on our investment portfolio.

Foreign Currency Exchange Rate Sensitivity

We operate primarily in the United States, and the majority of our sales since inception have been made in US dollars. However, our business has become increasingly global, with international revenue representing 87% of total revenue in fiscal 2002, and 88% of total revenue in the first nine months of fiscal 2003, and we expect that international sales will continue to represent a significant portion of our revenue primarily in Europe and Japan. Fluctuations in foreign currencies may have an impact on our financial results, although to date the impact has not been material. We are prepared to hedge against fluctuations in foreign currencies if the exposure is material, although we have not engaged in hedging activities to date.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures. Within 90 days prior to the filing date of this quarterly report, we carried out an evaluation under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and

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procedures. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

(b) Changes in Internal Controls. There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their last evaluation.

Part II. Other Information

Item 1. Legal Proceedings

Beginning on July 2, 2001, several purported class action complaints were filed in the United States District Court for the Southern District of New York against the Company and several of its officers and directors (the “Individual Defendants”) and the underwriters for the Company’s initial public offering on October 21, 1999. Some of the complaints also include the underwriters for the Company’s follow-on offering on March 14, 2000. The complaints were consolidated into a single action and an amended complaint was filed on April 19, 2002. The amended complaint was filed on behalf of persons who purchased the Company’s common stock between October 21, 1999 and December 6, 2000. The amended complaint alleges violations of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, primarily based on the assertion that the Company’s lead underwriters, the Company and the other named defendants made material false and misleading statements in the Company’s Registration Statements and Prospectuses filed with the SEC in October 1999 and March 2000 because of the failure to disclose (a) the alleged solicitation and receipt of excessive and undisclosed commissions by the underwriters in connection with the allocation of shares of common stock to certain investors in the Company’s public offerings and (b) that certain of the underwriters allegedly had entered into agreements with investors whereby underwriters agreed to allocate the public offering shares in exchange for which the investors agreed to make additional purchases of stock in the aftermarket at pre-determined prices. The amended complaint alleges claims against the Company, several of the Company’s officers and directors and the underwriters under Sections 11 and 15 of the Securities Act. It also alleges claims against the Company, the individual defendants and the underwriters under Sections 10(b) and 20(a) of the Securities Exchange Act. The action against the Company is being coordinated with approximately three hundred other nearly identical actions filed against other companies. The actions seek damages in an unspecified amount. On October 9, 2002, the court dismissed the Individual Defendants from the case without prejudice based upon Stipulations of Dismissal filed by the plaintiffs and the Individual Defendants. A motion to dismiss addressing issues common to the companies and individuals who have been sued in these actions was filed on July 15, 2002. An opposition to that motion was filed on behalf of the plaintiffs and a reply brief was filed on behalf of the defendants. On February 19, 2003, the Court denied the motion to dismiss with respect to the Company. The Company believes that the claims against it are without merit and intends to defend against the complaints vigorously. The Company is not currently able to estimate the possibility of loss or range of loss, if any, relating to these claims.

On April 1, 2003, a complaint was filed against the Company in the United States Bankruptcy Court for the Southern District of New York by the creditors’ committee (the “Committee”) of 360 Networks (USA) Inc. and 360 Networks Services Inc. (the “Debtors”). The Debtors are the subject of a Chapter 11 bankruptcy proceeding. The Committee alleges that the Debtors made a preferential payment under Section 547(b) of the Bankruptcy Code to the Company during the 90-day period prior to the Debtors’ bankruptcy filings. The Debtors themselves are not the plaintiffs in this action as this claim has been brought by the creditors’ committee of the Debtors. The Company believes that the claims against it are without merit and intends to defend against the complaint vigorously. The Company is not currently able to estimate the possibility of loss or range of loss, if any, relating to these claims.

The Company is subject to legal proceedings, claims, and litigation arising in the ordinary course of business. While the outcome of these matters is currently not determinable, management does not expect that the ultimate costs to resolve these matters will have a material adverse effect on the Company’s results of operations or financial position.

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Item 6. Exhibits and Reports on Form 8-K

Exhibits:

(a) List of Exhibits

Number	Exhibit Description
3.1	Amended and Restated Certificate of Incorporation of the Company (2)
3.2	Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company (2)
3.3	Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company (3)
3.4	Amended and Restated By-Laws of the Company (2)
4.1	Specimen common stock certificate (1)
4.2	See Exhibits 3.1, 3.2, 3.3 and 3.4, for provisions of the Certificate of Incorporation and By-Laws of the Registrant defining the rights of holders of common stock of the Company (2)(3)
*10.20	Manufacturing Services Agreement between Sycamore Networks, Inc. and Plexus Services Corp.
99.1 (a)	Certification of Chief Executive Officer
99.1 (b)	Certification of Chief Financial Officer

(1) Incorporated by reference to Sycamore Networks, Inc.’s Registration Statement on Form S-1 (Registration Statement No. 333-84635).

(2) Incorporated by reference to Sycamore Networks, Inc.’s Registration Statement on Form S-1 (Registration Statement No. 333-30630).

(3) Incorporated by reference to Sycamore Networks, Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended January 27, 2001 filed with the Securities and Exchange Commission on March 13, 2001.

* Confidential treatment has been requested for certain portions of this Exhibit pursuant to Rule 24b-2 promulgated under the Securities Exchange Act of 1934, as amended, which portions are omitted and filed separately with the Securities and Exchange Commission.

(b) Reports on Form 8-K: On February 12, 2003, the Company furnished a Current Report on Form 8-K under Item 9 containing the press release relating to our second quarter fiscal 2003 results.

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Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

SYCAMORE NETWORKS, INC.

/s/     FRANCES M. JEWELS

Frances M. Jewels

Chief Financial Officer

(Duly Authorized Officer and Principal

Financial and Accounting Officer)

Dated: June 5, 2003

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CERTIFICATIONS

I, Daniel E. Smith, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Sycamore Networks, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: June 5, 2003

/s/      DANIEL E. SMITH      

Daniel E. Smith

Chief Executive Officer

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CERTIFICATIONS

I, Frances M. Jewels, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Sycamore Networks, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: June 5, 2003

/s/    FRANCES M. JEWELS

Frances M. Jewels

Chief Financial Officer

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EXHIBIT INDEX

Number	Exhibit Description
3.1	Amended and Restated Certificate of Incorporation of the Company (2)
3.2	Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company (2)
3.3	Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company (3)
3.4	Amended and Restated By-Laws of the Company (2)
4.1	Specimen common stock certificate (1)
4.2	See Exhibits 3.1, 3.2, 3.3 and 3.4, for provisions of the Certificate of Incorporation and By-Laws of the Registrant defining the rights of holders of common stock of the Company (2)(3)
*10.20	Manufacturing Services Agreement between Sycamore Networks, Inc. and Plexus Services Corp.
99.1 (a)	Certification of Chief Executive Officer
99.1 (b)	Certification of Chief Financial Officer

(1) Incorporated by reference to Sycamore Networks, Inc.’s Registration Statement on Form S-1 (Registration Statement No. 333-84635).

(2) Incorporated by reference to Sycamore Networks, Inc.’s Registration Statement on Form S-1 (Registration Statement No. 333-30630).

(3) Incorporated by reference to Sycamore Networks, Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended January 27, 2001 filed with the Securities and Exchange Commission on March 13, 2001.

* Confidential treatment has been requested for certain portions of this Exhibit pursuant to Rule 24b-2 promulgated under the Securities Exchange Act of 1934, as amended, which portions are omitted and filed separately with the Securities and Exchange Commission.

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EX-10.20

Exhibit 10.20

Sycamore Networks, Inc.

MANUFACTURING SERVICES AGREEMENT

This Manufacturing Services Agreement is entered into as of the 20th day of March, 2003 (“Effective Date”) by and between Sycamore Networks Inc. (“Sycamore”), with offices at 220 Mill Road, Chelmsford, Massachusetts 01824 and Plexus Services Corp. (“Supplier”), with offices at 55 Jewelers Park Drive, Neenah, Wisconsin 54957.

WHEREAS, Sycamore desires to enter into a business relationship involving the regular performance of two general classes of Manufacturing Services referred to as “non-recurring” and “recurring” services; and

WHEREAS, Supplier desires to enter into such a business relationship to perform such services for Sycamore,

NOW, THEREFORE, in consideration of the mutual promises, covenants, and Agreements contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Sycamore and Supplier hereby agree to the following terms and conditions for the performance of Manufacturing Services by Supplier for Sycamore.

1.0 DEFINITIONS

As used in this Agreement, the following terms shall have the following respective meanings:

“Component Inventory” means inventory purchased by Supplier as a result of a Sycamore Purchase Order owned by Supplier that remains at its location for Supplier’s use in performing Services hereunder exclusively for Sycamore.

“Consigned Inventory” or “Consignment Inventory” means inventory owned by Sycamore but located at Supplier’s site.

“Consigned Repairs Components” means components owned by Sycamore and located at Supplier’s site for the purpose of Supplier performing “Out of Warranty” repairs.

“Days” means calendar days unless otherwise noted.

“Direct Fulfillment Inventory” means finished goods inventory built by Supplier at the direction of Sycamore, that remains at Supplier’s location for direct shipment to Sycamore customers.

“Engineer Change Order” or “ECO” means a specification change issued by Sycamore which, if made to Products, would affect the form, fit, or function of such Product.

“Excess Inventory” means those components in Supplier’s inventory or on order that will not be consumed by a then outstanding Sycamore Purchase Order.

“Long Lead-Time Components” means any Component with a lead-time greater than [ * ] Days.

“NCNR” means a non-cancelable, non-returnable purchase order issued by Supplier for Component Inventory on behalf of Sycamore.

“Non-Recurring Manufacturing Services,” “Non Recurring Expense” or “NRE” means services generally associated with the initial introduction of new Products, including, but not limited to: development and design of production tooling; advanced circuit packaging development; printed wiring board design and layout; development and design of production tooling, test fixtures and test software for printed wiring assemblies; and Product changes and rework of printed wiring assemblies based on Sycamore ECOs.

* 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. Asterisks within brackets denote omission.

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“Obsolete Inventory” means those components in Supplier inventory or on order , which no longer appear on a Sycamore active bill of materials of a Product.

“Pass Through Items” means any autonomous assembly(ies) that are purchased fully tested and ready for direct ship to Sycamore customers for which Supplier has not performed, and Sycamore will not require it to perform, Recurring Manufacturing Services; a list of such items is attached hereto as Exhibit E, as may be amended from time to time by agreement of the parties.

“Product(s)” means the product(s) manufactured and assembled by Supplier in the course of performing Services hereunder.

“Purchase Order(s)” shall have the meaning set forth in Section 4 hereof.

“Recurring Manufacturing Services” means the volume production of Products for Sycamore including, but not limited to, assembly of Printed Wiring Assemblies, testing and direct order fulfillment to identified Sycamore customers, and any other service not defined as Non-Recurring Manufacturing Services.

“Services” means Recurring Manufacturing Services and Non-Recurring Manufacturing Services.

“Ship Date” means the date specified on a Purchase Order as the date on which Products are to ship from Supplier’s manufacturing facility to a destination specified by Sycamore in such order.

“Sycamore Price File” or “SPF” means the prices of the components for which Sycamore has independently established the pricing with the Vendor for use by the Supplier.

“Specifications” means the bill of materials, manufacturing specifications, schematics, assembly drawings and test specifications provided by Sycamore to Supplier and reasonably agreed upon by Supplier for purposes of performing Recurring Manufacturing Services under this Agreement.

“Supplier Supplied Pricing” or “SSP” means the prices of the components for which the Supplier has independently established the pricing with the Vendor.

“Vendor” means any third party supplying products or services to Supplier or Sycamore.

2.0 PURPOSE OF AGREEMENT

2.1 On and subject to the terms and conditions of this Agreement, from time to time, Sycamore may purchase Services from Supplier. Pricing shall be determined in accordance with Section 6 below.

2.2 To purchase Services, Sycamore, as applicable, shall issue a purchase order (“Purchase Order”) at least [ * ] Days prior to the requested Ship Date. Each such Purchase Order shall be deemed to incorporate by reference the terms and conditions of this Agreement.

3.0 TERM OF AGREEMENT

This Agreement shall become effective on the latter of the signature dates of the parties, and it shall continue in effect until terminated in accordance with Section 24.

4.0 SYCAMORE ORDERS TO SUPPLIER

4.1 Sycamore shall purchase Products and/or Services from Supplier by issuing Sycamore Purchase Orders [ * ] Days prior to the requested Ship Date. Sycamore may issue Purchase Orders in writing, by mail or facsimile, or by electronic means as the parties may from time to time agree.

* 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. Asterisks within brackets denote omission.

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4.2 Each Sycamore Purchase Order shall include: a description of the Products and/or Services to be purchased, the quantity, routing instructions, requested Ship Date, destination and price per this Agreement. Sycamore Purchase Orders issued under this Agreement shall constitute the only authorization for the Supplier to expend any money or incur any liabilities for which Supplier will be reimbursed by Sycamore.

4.3 Supplier shall acknowledge such Purchase Orders promptly and shall notify Sycamore of acceptance (or rejection, with the reasons therefor) of such Purchase Orders within [ * ] business days of receipt. Supplier shall be deemed to have accepted any Purchase Order which is not rejected within [ * ] business days of receipt. Supplier shall not reject any Purchase Order which conforms to the terms of this Agreement but may modify the Ship Date by mutual agreement of the parties to reflect the then-current lead time of components and manufacturing lead time.

4.4 Supplier shall [ * ] require Sycamore to place a [ * ] of Products in its Purchase Orders.

5.0 SUPPLIER PURCHASES ON BEHALF OF SYCAMORE

5.1 Supplier shall purchase components on Sycamore’s behalf only in accordance with Sycamore issued Purchase Orders. Supplier shall not hold Sycamore liable for any amounts not supported by a Sycamore Purchase Order, provided that Sycamore shall be liable for components purchased as part of a [ * ] if such purchase was approved by Sycamore pursuant to Section 5.4 hereof.

5.2 Supplier shall use reasonable and prudent purchasing practices to minimize Sycamore’s liability to pay for components or services. Such reasonable and prudent purchasing practices include, without limitation, Supplier’s use of its reasonable best efforts (a) to obtain and secure rights to return, reschedule and/or cancel its purchase or order of such components or services, (b) to ascertain the restocking charge, if available, for such components, subject to the prior approval of Sycamore, and (c) to return, cancel, reschedule, resell or use such components or services elsewhere in its business.

5.3 Prior to Supplier issuing any Supplier purchase orders on Sycamore’s behalf, Supplier shall use applicable Consigned Inventory and Component Inventory to support Sycamore Purchase Orders or Supplier shall be liable for additional purchases.

5.4 In the event that Supplier’s materials requirement planning indicates demand for Component Inventory that: (a) is less than the Vendor’s [ * ] or [ * ] value, or (b) is identified as an NCNR component, Supplier shall identify such components to Sycamore in writing in advance of order. To the extent that the total dollar cost of all material components, including NCNR and [ * ], ordered by Supplier for any Purchase Order equals or is less than the total dollar cost of all material components identified in that Purchase Order, Supplier shall be entitled to purchase such NCNR and [ * ] components required to produce the Product subject to that Purchase Order without obtaining the advance approval of Sycamore through the Variance Authorization Form so long as those components have been identified and documented as [ * ] (including the quantities thereof) and/or NCNR during the [ * ] review to establish the reconciled costed bill of materials under Section 6.2 hereof; all other orders for NCNR and [ * ] components must be approved by Sycamore in advance using the Variance Authorization Form attached hereto as Exhibit A. Notwithstanding the foregoing, with respect to a Vendor’s [ * ] or [ * ] value, Supplier shall be entitled to order such components without obtaining the prior written approval of Sycamore through the Variance Form to the extent of [ * ] in the aggregate for all such components per [ * ]. Supplier shall obtain prior written consent from Sycamore as set forth herein to order such [ * ] or NCNR components, and agrees that Sycamore shall not be liable for such components purchases without Sycamore’s written preapproval except and only to the extent of the specific exceptions set forth in the preceding sentences of this Section 5.4. Excess components shall be held by Supplier as Component Inventory and Sycamore shall direct its disposition under the inventory liability provisions hereinafter set forth in Section 11.2 hereof.

For example, in the event that Sycamore places a Purchase Orders in the amount of $1 million per quarter and $500,000 of that cost is for the material components, Supplier can order NCNR and [ * ] components without use of the Variance Form so long as the total cost to Sycamore for all components required to produce the Product subject to that Purchase Order does not exceed [ * ].

* 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. Asterisks within brackets denote omission.

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5.5 Sycamore may independently establish a Sycamore Price File with a particular Vendor to supply a specific component for Products and/or Services by Supplier. In that event, Sycamore shall notify Supplier of the SPF. To extent that Sycamore does not establish an SPF with respect to any and all other components, Supplier shall establish an SSP file for such components. Supplier shall issue its purchase orders in accordance with the pricing of the SPF for all SPF components and the SSP for other components. In the event that any SPF terms and conditions with a particular vendor conflicts with any provision in this Agreement, Supplier shall not be obligated to perform such conflicting terms and conditions within this Agreement and Sycamore shall waive any such claims of non-performance under this Agreement with respect to the specific purchase order in question.

5.6 Purchase Price Variance

5.6.1 “PPV” occurs when the Supplier is not able to purchase an SPF component at the SPF price. For SPF components only, in the event that the Supplier is not able to purchase a component at the then current SPF price, then Supplier must provide prompt written notice to Sycamore in advance of placing any purchase orders. Such notice shall be in the form of the Variance Authorization Form attached hereto as Exhibit A, and Supplier shall attach the following documentation to such form or provide such information electronically:

• Sycamore Purchase Order Number which created the demand, and

• Vendor quotation including price, quantity, and delivery date.

Sycamore must give prior written approval of each and every Supplier purchase order to a Vendor which varies from the price in the then current SPF. If Supplier does not give written notice of Purchase Price Variance prior to placing its purchase order with the Vendor, then the PPV claim against Sycamore is waived. In addition to the foregoing, in the event that the Supplier determines that there are expedite or premium charges for any SSP component during [ * ] after the parties have agreed upon the costed bill of materials for that [ * ] pursuant to Section 6.2 below, Supplier shall provide written notice to Sycamore in advance of placing any such purchase orders and must obtain Sycamore’s prior written approval. Such notice shall be in the form of the Variance Authorization Form attached hereto as Exhibit A, and Supplier shall attach the following documentation to such form or provide such information electronically:

• Sycamore Purchase Order Number which created the demand, and

• Vendor quotation including price, quantity, and delivery date.

Notwithstanding the foregoing, in no event shall Supplier request or be entitled to recover expedite or premium charges for any SSP component to the extent it has failed to order such components in a timely and prudent manner using reasonable business practices in order to meet the scheduled Ship Date.

5.7 At Sycamore’s discretion, Sycamore approved purchase price variance changes will be processed on a case by case basis under either Section 10.3 Component Inventory Buy Down or under Section 5.6, but not under both provisions. To the extent that Sycamore elects to process a purchase price variance under Section 5.6, Supplier shall promptly issue either a credit memo or an invoice (in accordance with Section 16.3) following issuance by Sycamore of a Purchase Order to Sycamore reflecting the purchase pricing variances identified through this Purchase Price Variance Process. Disagreement on any aspect of this process shall be resolved through the Dispute Resolution Process set out in Section 31.0.

5.8 In the event that Sycamore establishes an SPF and issues a Sycamore Purchase Order to a Vendor, Sycamore may, at its discretion, transfer such Sycamore Purchase Order to the Supplier and such Purchase Order, subject to Supplier’s agreement in writing to transfer the same, shall be treated by the parties as having been initially issued directly by the Supplier to the Vendor. Upon Supplier’s consent to transfer such purchase order, Supplier shall issue its own purchase order to the Vendor to substitute for the original Sycamore purchase order.

5.9 At Sycamore’s cost for its out-of-pocket expenses, Sycamore has the right to audit the purchasing practices and records utilized by Supplier. Such audit rights shall include but not be limited to the right to audit purchase price variances approved under Section 5.6.1, in which case Supplier shall provide Sycamore with the following information: the Sycamore Purchase Order which created the demand, the Supplier purchase order number with Vendor for the PPV material, the date Supplier

* 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. Asterisks within brackets denote omission.

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placed the purchase order and Vendor confirmed delivery date, and quantity ordered and purchase order unit cost. Sycamore shall provide 5 Days notice to Supplier and such practices and records shall be reviewed at Supplier’s location. Supplier shall have 10 business days to comply with Sycamore’s request. Sycamore’s audit rights are subject to Supplier’s confidentiality obligations to third parties.

6.0 PRICING TERMS

6.1 NRE Pricing. The initial prices for Non-Recurring Manufacturing Services shall be as set forth in Exhibit B. In order to determine new pricing for NRE, Sycamore shall provide Supplier with a Specification for requested NRE. Supplier shall use commercially reasonable efforts to issue a written quotation within [ * ] business days. Sycamore shall authorize the performance of the NRE by issuance of a Purchase Order. Supplier charges for such NRE shall be in accordance with the quotation.

6.2 Recurring Manufacturing Services Pricing. [ * ] Days before the start of [ * ], Sycamore shall provide Supplier with a copy of its most recent SPF pricing file and Supplier shall provide Sycamore with a copy of its most recent Supplier Supplied Pricing files for reconciliation. Sycamore and Supplier shall confer and agree within [ * ] Days on the cost of the components in the SPF and Supplier Supplied Pricing files which shall form the basis of the costed bill of materials for Sycamore Products for such [ * ]. Supplier shall then provide an updated, reconciled costed bill of materials to Sycamore that represents a quote to Sycamore for production for such [ * ]. This quote shall be firm [ * ] following its receipt by Sycamore subject to PPV as provided above in Sections 5.6 and 5.7. Supplier will promptly inform Sycamore of any Vendor price variations.

Any Purchase Order(s) placed by Sycamore and accepted by Supplier for delivery of Products before the parties have reached agreement on the reconciled costed bill of materials for Sycamore’s [ * ] will be adjusted to reflect new pricing as determined and requested by Sycamore; existing on hand and on order inventory will be managed in Sycamore’s discretion either by resort to the Component Inventory Buy-Down provisions (Section 10.3) or through the PPV adjustment provisions (Sections 5.6 and 5.7), unless otherwise agreed to by the parties. For the convenience of the parties, Exhibit D hereto sets forth [ * ].

6.3 [ * ]. For each Product upon which Supplier performs Recurring Manufacturing Services, Supplier shall charge Sycamore a [ * ] at the time of delivery of a Product in accordance with Schedule 1. At least [ * ] Days before the start of [ * ], the parties shall meet and confer to designate the [ * ] based on Sycamore’s estimated business range for [ * ] based on the Purchase Orders placed by Sycamore with Supplier for that [ * ] prior to the start thereof. If the parties are unable to agree upon the [ * ], the parties shall attempt to resolve the disagreement utilizing the Dispute Resolution Process set out in Section 31. The parties agree that the [ * ] designated by Sycamore in good faith based on the Purchase Orders placed by Sycamore with Supplier prior to the start of [ * ] shall apply to all orders for Product pending resolution of the disagreement.

[ * ] Review. The [ * ] set out in Schedule 1 is fixed for the term of the Agreement for Sycamore’s [ * ] and [ * ] family of Product lines (including, but not limited to, any modifications to an existing Product or the introduction of new feature(s) in an existing Product). In the event that Sycamore introduces a new Product which does not fall within the[ * ] or [ * ] Product family, then Sycamore and Supplier will confer as to the appropriate [ * ] for the manufacture of such Products, provided, however, that to the extent that the Recurring Manufacturing Services required to manufacture any such new Product are substantially similar to the Recurring Manufacturing Services, both in terms of nature and quantity, as are required to manufacture the [ * ] or [ * ] Products, the [ * ] shall apply thereto.

One [ * ] after the Effective Date, and on an [ * ] basis thereafter, the [ * ] may be adjusted only by mutual written agreement of the parties. If the parties are unable to agree upon any adjustment of the [ * ], the parties shall attempt to resolve the disagreement utilizing the Dispute Resolution Process set out in Section 31. The parties agree that the current [ * ] shall apply to all orders for Product pending resolution of the disagreement.

Pass Through Items. Supplier shall charge Sycamore a maximum of [ * ] the Supplier purchase price for Pass Through Items.

* 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. Asterisks within brackets denote omission.

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6.4 Supplier shall [ * ] require of Sycamore any [ * ] on a quarterly or annual basis.

7.0 ENGINEERING CHANGE ORDERS

7.1 Sycamore may by written notice initiate an ECO regarding components or Specifications by documenting and transmitting the proposed change to Supplier’s Coordinator, who shall acknowledge receipt. Supplier shall use all commercially reasonable efforts to provide a detailed response, including the amount of change in costs resulting therefrom, within five (5) business days of receipt of such change notice. In no event shall Supplier provide such response later than ten (10) business days after receipt of such notice. Sycamore will not be liable for any costs or expenses not covered in the detailed ECO response.

7.2 Supplier shall use its reasonable best efforts to implement an ECO as soon as possible. Neither party shall unreasonably withhold or delay agreement to an ECO and the parties will endeavor to agree and implement, at the earliest opportunity, change notices relating to personal and product safety or conformance to existing Specifications.

7.3 Until the parties have agreed in writing upon an ECO and any associated impact, the parties shall continue to perform their obligations under this Agreement without implementing the ECO. Notwithstanding the above, if such notice indicates that a change is required due to safety reasons, Supplier shall not continue to manufacture any affected Products without the prior written consent of Sycamore until the parties have implemented the change notice.

7.4 Supplier shall charge Sycamore a one time processing fee to cover the administrative cost to implement the ECO. Additional charges, if any, shall be as set out in Exhibit B or as otherwise agreed to by the parties in writing.

8.0 SCHEDULING

8.1 Supplier is authorized to ship Products to Sycamore only in accordance with a Purchase Order.

8.2 Sycamore may make changes to shipping instructions, quantities or delivery schedules specified in any Purchase Order as needed throughout the duration of this Agreement, in accordance with Table 8.2, or as otherwise mutually agreed by the parties in writing.

Table 8.2

Days prior to Ship Date	Reschedule Terms
0 - [ * ]	0%
[ * ] - [ * ]	up to [ * ] of a Purchase Order provided that such rescheduled order is to be delivered within [ * ] days of the originally scheduled Ship Date.
[ * ] +	up to [ * ] of a Purchase Order provided that such rescheduled order is to be delivered within [ * ] days of the originally scheduled Ship Date.

Notwithstanding the foregoing, (i) from and after [ * ] commencing on [ * ], Sycamore shall not be entitled to reschedule any Purchase Order(s) to the extent that such rescheduling would cause Sycamore to fail to [ * ] Purchase Orders to obtain the [ * ] for the total [ * ] from Schedule [ * ] selected for that [ * ] pursuant to Section [ * ] hereof; and (ii) with respect to any changes

* 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. Asterisks within brackets denote omission.

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to a Purchase Order to increase [ * ] within the percentages set forth in the above table, Supplier shall be required to use its reasonable best efforts to fulfill the same.

8.3 If Sycamore desires to reschedule any Purchase Orders in excess of the [ * ], the parties shall mutually agree upon the appropriate remedy for Supplier.

8.4 Supplier shall accept or reject Purchase Order changes within [ * ] business days or the changes will be deemed accepted.

9.0 CANCELLATION

9.1 Sycamore may cancel a Purchase Order, in whole or in part, at any time [ * ] Days or more from the scheduled Ship Date, provided, however, from and after [ * ] commencing on [ * ], Sycamore shall not be entitled to cancel any Purchase Order(s) to the extent that such cancellation would cause Sycamore to fail to [ * ] for the [ * ] range from Schedule [ * ] selected for that [ * ] pursuant to Section 6.3 hereof. Sycamore shall only be entitled to cancel a Purchase Order, in whole or in part, within [ * ] Days or less prior to the scheduled Ship Date by written agreement of Supplier.

9.2 To the extent that Sycamore cancels a Purchase Order, in whole or in part, within [ * ] to [ * ] Days prior to the scheduled Ship Date, Supplier shall, if requested by Sycamore, attempt to mitigate Sycamore’s liability for components, including but not limited to, any NCNR components, by using reasonable and prudent purchasing practices to minimize Sycamore’s liability to pay for components or services. Such reasonable and prudent purchasing practices include, without limitation, Supplier’s use of its reasonable best efforts (a) to obtain and secure rights to return, reschedule and/or cancel its purchase or order of such components or services, (b) to ascertain the restocking charge, if available, for such components, subject to the prior approval of Sycamore, and (c) to return, cancel, reschedule, resell or use such components or services elsewhere in Supplier’s business. To the extent that Supplier is able to mitigate Sycamore’s liability for components, Sycamore shall compensate Supplier for such efforts by [ * ] Supplier for any [ * ] paid by Supplier which were approved by Sycamore in advance [ * ] paying Supplier a fee equal to [ * ] of the price of the mitigated components per the then current SPF or SSP pricing file (excluding any [ * ]). The parties agree that the mitigation period shall not exceed [ * ] Days from the cancellation unless otherwise agreed to by the parties in writing. To the extent that Supplier is unable to mitigate as provided herein, then Sycamore shall direct disposition of those components for which mitigation was not achieved by Supplier pursuant to Section 11.2 below.

9.3 To the extent that Sycamore cancels the Purchase Order, in whole or in part, [ * ] Days or more prior to the scheduled Ship Date, then Supplier shall, if requested by Sycamore, attempt to mitigate Sycamore’s liability for NCNR components by using reasonable and prudent purchasing practices to minimize Sycamore’s liability to pay for components or services. Such reasonable and prudent purchasing practices include, without limitation, Supplier’s use of its reasonable best efforts (a) to obtain and secure rights to return, reschedule and/or cancel its purchase or order of such components or services, (b) to ascertain the restocking charge, if available, for such components, subject to the prior approval of Sycamore, and (c) to return, cancel, reschedule, resell or use such components or services elsewhere in Supplier’s business. To the extent that Supplier is able to mitigate Sycamore’s liability for NCNR components, Sycamore shall compensate Supplier for such efforts by [ * ] Supplier for any [ * ] paid by Supplier which were approved in advance by Sycamore [ * ] paying Supplier a fee equal to [ * ] of the price of the mitigated components per the then current SPF or SSP pricing file (excluding any [ * ]). The parties agree that the mitigation period shall not exceed [ * ] Days from the cancellation unless otherwise agreed to by the parties in writing. To the extent that Supplier is unable to mitigate as provided herein, Sycamore shall direct disposition of those NCNR components pursuant to Section 11.2 below.

9.4 Supplier shall (a) document and calculate all charges under this Section 9 and (b) provide to Sycamore sufficient documentation in a reasonable format to support all such charges and calculations. Labor standards, if any will be mutually agreed upon between 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. Asterisks within brackets denote omission.

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9.5 Supplier shall accept or reject all Purchase Order cancellations in writing within [ * ] business days or the changes will be deemed accepted, provided, however, that Supplier acknowledges that it must accept cancellations subject to Section 9.1 hereof.

10.0 INVENTORY MANAGEMENT

10.1 Supplier will provide an electronic interface to Sycamore’s business enterprise system for the purpose of transferring inventory management, ordering, shipment, and other information to Sycamore at no additional cost to Sycamore.

10.2 Inventory Reconciliation

10.2.1 Supplier shall maintain accurate inventory records of Consigned Inventory, Consigned Repairs Components, Direct Fulfillment Inventory, and Component Inventory using Sycamore’s part numbers.

10.2.2 Consigned Inventory and Consigned Repairs Components

Supplier and Sycamore shall reconcile Consigned Inventory and Consigned Repairs Components located at the Supplier on a monthly basis, the exact timing of which to be set by Sycamore.

a) Supplier shall provide Sycamore a Consigned Inventory and Consigned Repairs Components listing of inventory/repairs components located at the Supplier. The listing must include Sycamore part number and quantity per item.

b) Sycamore shall reconcile Supplier’s balances against Sycamore’s balances. Sycamore shall identify the quantity variances and provide to the Supplier for reconciliation. Supplier shall complete the reconciliation within four (4) working days.

c) Any unreconciled quantity variances shall be invoiced to Supplier and paid in accordance with Section 16.2 hereof. Notwithstanding the foregoing, if within sixty (60) days of Sycamore’s invoice therefor Supplier is able reconcile a quantity variance to Sycamore’s reasonable satisfaction Sycamore shall issue a credit to Supplier.

10.2.3 Direct Fulfillment Inventory

Supplier and Sycamore shall reconcile Direct Fulfillment Inventory on a weekly basis, the exact timing of which shall be set by Sycamore.

a) Supplier shall provide Sycamore a Direct Fulfillment Inventory listing of material located at the Supplier. The listing must include Sycamore part number and quantity per item.

b) Sycamore shall reconcile Supplier’s balances against Sycamore’s balances. Sycamore shall identify the quantity variances and provide to the Supplier for reconciliation. Supplier and Sycamore shall use commercially reasonable efforts to complete the reconciliation within three (3) working days.

c) Any unreconciled quantity variances shall be invoiced to Supplier and paid in accordance with Section 16.2 hereof. Notwithstanding the foregoing, if within sixty (60) days of Sycamore’s invoice therefor Supplier is able reconcile a quantity variance to Sycamore’s reasonable satisfaction Sycamore shall issue a credit to Supplier.

Direct Fulfillment Inventory manufactured by Supplier will be invoiced by Supplier upon the same being placed in Sycamore’s finished goods inventory location at Supplier, at which time title and risk of loss to such Direct Fulfillment Inventory shall also pass to Sycamore. Notwithstanding, Supplier will insure such Direct Fulfillment Inventory held in Supplier’s facilities at the full replacement cost thereof under the terms and conditions of Supplier’s “all risk” insurance coverage. The Direct Fulfillment Inventory shall remain at Supplier’s facility until Supplier is instructed to ship the same by Sycamore. Supplier will segregate

* 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. Asterisks within brackets denote omission.

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the Direct Fulfillment Inventory from other customer manufactured product and Supplier will not use the Direct Fulfillment Inventory to fill other Supplier customer orders unless otherwise directed by Sycamore. The prices for the Direct Fulfillment Inventory shall be the prices set forth in those Sycamore Purchase Orders under which such inventory was manufactured. Sycamore has requested that Supplier hold such Product following invoicing in order to provide an inventory management and distribution service to Sycamore. In the event Product is held by Supplier for more than [ * ] days after title to the same has transferred to Sycamore, Supplier shall ship the Product to Sycamore or its designated agents as provided in Section 12 hereof. Notwithstanding the foregoing, risk of loss with respect to Consigned Inventory shall remain with Supplier pursuant to Sections 11.3 and 20.3 hereof.

10.2.4 Component Inventory

At Sycamore’s request from time-to-time, Supplier and Sycamore shall reconcile Component Inventory as mutually agreed upon.

10.3 Component Inventory Buy Down

Supplier and Sycamore shall conduct a Component Inventory buy down on a [ * ] basis to coincide with the SPF and Supplier Supplied Pricing reconciliation process set out in Section 6.2, the exact timing of which will be agreed to by both parties. If the newly mutually established cost of an item(s) in Component Inventory is less than the then-current inventory valuation on the Supplier Supplied Pricing or SPF file, then upon Sycamore’s written instruction, Supplier shall revalue such item(s). Supplier shall invoice, and Sycamore shall pay (in accordance with Section 16.2 hereof), the difference between the newly mutually established cost, and the previous valuation in the SFP or Supplier Supplied Pricing file.

10.4 Inventory Sellback Process

10.4.1 Supplier shall use Consigned Inventory or Consigned Repairs Components before purchasing components from third parties. As Consigned Inventory or Consigned Repairs Components are owned by Sycamore, the inventory sellback process shall be used to transfer title of these components to Supplier.

a) On a weekly basis, the Supplier shall provide Sycamore with usage report indicating what the Supplier has consumed from Consigned Inventory or Consigned Repairs Components. The listing should include quantity, Sycamore part number, and unit cost. The unit cost shall be the same price for the components as set forth in the current SPF or Supplier Supplied Pricing price file at the time of the sellback, without [ * ] or any other [ * ]. The weekly usage report is the record of the transfer of title of Consigned Inventory or Consigned Repairs Components from Sycamore to Supplier

b) Upon receipt of the Supplier usage report, Sycamore shall verify pricing, transact the inventory out of its stock and invoice the Supplier. Supplier shall pay such invoice(s) in accordance with Section 16.2 hereof.

10.5 Disagreement on any aspect of this Inventory Management section shall be resolved through the Dispute Resolution Process set out in Section 31.0.

11.0 OBSOLETE OR EXCESS COMPONENT INVENTORY

11.1 When Supplier is of the opinion that Component Inventory or components on order have been rendered Obsolete Inventory or Excess Inventory, Supplier shall within [ * ] Days following the [ * ] in which such purported event of obsolescence or excess occurred:

• provide to Sycamore a written notice of Obsolete Inventory or Excess Inventory;

• use reasonable and prudent business practices as set forth in Section 5.2 to mitigate Sycamore’s liability relating to such components; 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. Asterisks within brackets denote omission.

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• provide to Sycamore the P.O.(s), the documentation set forth in Section 5.9 for a PPV adjustment and date(s) of the Sycamore action(s) which created the event of Excess Inventory or Obsolete Inventory; such documentation may be provided electronically.

11.2 Upon receipt of the notice of the occurrence of Obsolete Inventory or Excess Inventory defined above, and to the extent that Supplier can reasonably demonstrate by documentary evidence that it placed all purchase orders in accordance with the terms and conditions of this Agreement, and used reasonable and prudent business practices, as set forth in Section 5.2, Sycamore shall provide written instruction to Supplier directing it to either: 1) move such Excess or Obsolete Inventory to Consigned Inventory in accordance with Section 11.3, 2) process such Obsolete Inventory or Excess Inventory as scrap in accordance with Section 11.4, or 3) continue to hold title to the such Excess Inventory in consideration of Sycamore paying a [ * ] of [ * ] each month for a period of up to [ * ] Days, at which point Sycamore must direct disposition of such inventory in accordance with subsections (i) or (ii) hereof.

11.3 If Sycamore’s written instruction is to move the Obsolete or Excess Inventory to Consigned Inventory, Supplier shall:

• hold such components on consignment for Sycamore at Supplier’s premises at no charge for a period not to exceed [ * ] year. Title to the Consigned Inventory shall pass to Sycamore upon delivery of the components to the consignment location, and risk of loss of or damage to the Consigned Inventory shall remain with Supplier, and

• invoice Sycamore the Supplier’s cost of the components as reflected in the then current SPF or Supplier Supplied Pricing file. Sycamore shall pay such invoice in accordance with Section 16.2 hereof.

When Sycamore moves such components out of consignment, Sycamore shall direct disposition thereof under either Section 11.4 hereof or shall direct that Supplier utilize the same in the manufacture of Products pursuant to Sycamore Purchase Orders.

11.4 If Sycamore’s written instruction is to scrap the Obsolete Inventory or Excess Inventory, Supplier shall:

• remove and make available such components for delivery to Sycamore. Title to and risk of loss of or damage to the components shall pass to Sycamore upon delivery to Sycamore F.O.B. Supplier’s dock.

• pack the components to Supplier’s commercial standards and Sycamore’s custom standards for shipment.

• invoice Sycamore the Supplier’s cost of the components as reflected in the then current SPF or Supplier Supplied Pricing file [ * ] for components with a per unit cost per item of more than [ * ] and [ * ] for components with a per unit cost per item of [ * ] or less. Sycamore shall pay such invoice(s) in accordance with Section 16.2 hereof.

11.5 If Supplier does not report to Sycamore all Obsolete Inventory or Excess Inventory within [ * ] Days following the end of the calendar month in which the event of obsolescence or excess occurred, Supplier waives its right to make any claim against Sycamore for such components.

11.6 Disagreement on any aspect of this Obsolete Inventory or Excess Inventory section shall be resolved through the Dispute Resolution Process set out in Section 31.

12.0 DELIVERY

12.1 Supplier shall include a packing slip with each shipment that lists at a minimum, Sycamore’s part number, Purchase Order Number, the Supplier’s Part Number, serial number and quantity. Supplier shall follow commercially accepted practices for packaging to protect the components from Electrostatic Discharges (ESD), Sycamore specifications for packaging, and normal handling by the selected freight forwarder.

12.2 Supplier shall not make partial shipments or over shipments without Sycamore’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. Asterisks within brackets denote omission.

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12.3 Supplier shall ship all Products F.O.B. Supplier’s shipping dock, freight prepaid in accordance with the schedule set forth in Sycamore’s Purchase Order as accepted by Supplier. Supplier shall use the freight forwarder chosen by Sycamore in its sole discretion. Supplier shall include freight charges as a separate line item on the applicable invoice(s).

12.4 Where Supplier causes a delay in the shipment of Products, Supplier shall bear the expense of all additional charges required to expedite shipment in order to meet the agreed upon shipment schedule. Sycamore shall be responsible only for standard lead-time costs and UPS “surface” freight charges, unless previously approved by Sycamore in writing.

12.5 Sycamore may reject Products which (a) were damaged when delivered by Supplier to the carrier for shipment to Sycamore or (b) do not conform to the relevant Specifications (“Rejected Products”).

12.6 Sycamore will notify the Supplier in writing of Rejected Products within [ * ] Days of original delivery and will return via the least expensive method possible Rejected Products to the Supplier at Supplier’s expense within an additional [ * ] Days. Supplier shall make reasonable best efforts to deliver a return components authorization form (“RMA”) to Sycamore within [ * ] business [ * ] days after Sycamore’s notice of Rejected Products. If Sycamore does not receive the RMA within such period, Sycamore shall elevate the RMA request to the Strategic Customer Manager and if the matter is not resolved within [ * ] business days, Sycamore shall have the right to return such Rejected Products. Sycamore will provide Supplier’s Strategic Customer Manager with the tracking number of all shipments sent back to Supplier without an RMA.

12.7 Supplier will, at its election, either repair or replace the Rejected Products. The cost associated with any such repair or replacement will be the responsibility of the Supplier. In the case of replacement, title to the Rejected Products shall pass to the Supplier on delivery to the Supplier. Supplier shall bear the expense of redelivering repaired or replaced Products to Sycamore or its customer.

12.8 In the absence of earlier notification of rejection, Sycamore will be deemed to have accepted Products [ * ] Days after delivery provided that the related Product invoice contains all pertinent information relating to Sycamore’s Purchase Order. Sycamore’s acceptance of the Products shall not be deemed a waiver of any warranty claims.

12.9 Supplier shall be liable for liquidated damages if Supplier fails to deliver Products on the Ship Dates specified in a Purchase Order which has been accepted in accordance with Section 4 hereof. In such event, and on and subject to the terms set forth below in this Section 12.9, Supplier shall pay to Sycamore a sum equal to [ * ] of the purchase price of the Products subject to such delay for each business day (or part thereof) of delay in delivery, up to a maximum of [ * ] of such purchase price. Supplier’s obligation to pay liquidated damages hereunder shall be expressly subject to the following conditions:

(a) In no event shall Supplier be liable for liquidated damages when its failure to meet any Ship Date is caused by any act or omission of Sycamore;

(b) Sycamore shall not be in default of any of its obligations under this Agreement;

(c) Supplier shall have a grace period of [ * ] business days from the Ship Date during which liquidated damages shall not apply unless the delay exceeds such grace period, in which case liquidated damages shall be due and owing from the first day of delay from the Ship Date;

(d) If Sycamore does not report to Supplier that it intends to avail itself of this liquidated damages remedy within [ * ] Days following the failure to deliver Products on the Ship Date, Sycamore waives its right to make any claim for liquidated damages under this Section 12.9 against Supplier for such delay; and

(e) Supplier shall not be liable for Liquidated Damages when its failure to meet any Ship Date is caused solely by an industry wide component shortage beyond its reasonable control.

In the event that Supplier fails to deliver Products within [ * ] Days of the Ship Date specified in a Purchase Order, then, in addition to the liquidated damages set forth above, Sycamore shall have the right, in its sole discretion, to cancel the Purchase Order without any liability to Supplier for any costs, including, but not limited to, the cancellation costs set forth in Section 9

* 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. Asterisks within brackets denote omission.

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above. For avoidance of doubt, Sycamore shall be entitled to cancel such order even if such cancellation would cause it [ * ] of the then designated [ * ].

13.0 SUPPLIER WARRANTY

13.1 Services. Supplier warrants that all Services will be performed in a workmanlike manner in conformity to [ * ]. Supplier further warrants that the Products and Services delivered hereunder (a) will be [ * ] and (ii) [ * ]. Supplier further warrants that all Products shall be manufactured [ * ]

This warranty shall apply for a period of [ * ] from the date Products are shipped, or Services are performed by Supplier and may be enforced by Sycamore.

13.2 Remedy. Sycamore’s remedy for breach of this warranty shall be, [ * ]. Prior to [ * ] any Product that Sycamore claims not to be as warranted by Supplier, Sycamore shall follow Supplier’s reasonable RMA procedures. Supplier shall promptly provide, and shall not unreasonably withhold or delay the issuance of an RMA number. Supplier shall be responsible for all warranty expenses, including the costs of incoming and outgoing shipment for warranty repair. Supplier will make all repairs and replacements, and return Products to Sycamore or another destination specified by Sycamore, within [ * ] Days of receipt by Supplier. Supplier shall replace any Products requiring repair [ * ]. In any instance where Supplier fails to deliver repaired or replaced Products within [ * ] Days after receipt of defective Products, Sycamore shall be entitled to a [ * ]. However, if Supplier fails, on a continuing and material basis, to meet the requirements for repairs set forth herein, Sycamore shall have its full rights and remedies at law or in equity for redress, subject to the limitations of damages as otherwise set forth in this Agreement.

13.3 [ * ]

13.4 The warranties provided in this Section 13 will apply in all circumstances except the following:

13.4.1 Products that have been (i) misused, modified, damaged, placed in an unsuitable physical or operating environment or maintained improperly, (ii) caused to fail by any product or service not supplied by the Supplier, or (iii) subjected to any repair not authorized in writing in advance by the Supplier;

13.4.2 any defect to the extent caused by (i) Sycamore or (ii) an error or omission or design or other fault in any Sycamore Information or in any other drawings, documentation, data, software, information, know-how or components provided or specified by Sycamore or (iii) Sycamore supplied inventory; provided, however, that in the event that both parties contribute to any defect, the warranty shall apply to the extent such defect was contributed to or caused by Supplier;

13.4.3 prototypes and pre-production or pilot versions of Products manufactured by Supplier, the warranty for which shall be limited to conformance to the Specifications supplied by Sycamore; or

13.4.4 Products that, at Sycamore’s specific request, did not undergo Supplier’s standard inspection and test procedure. Notwithstanding the foregoing, the warranties in this Section 13 will apply to the extent that some of Supplier’s standard inspection and test procedures are in place even if such tests and procedures are not considered all of Supplier’s standard inspection and test procedures, unless and to the extent that any defect in any Product which does not undergo all of Supplier’s standard inspection and test procedure at Sycamore’s request would reasonably have been likely to have been discovered by such omitted inspection and test procedure. Additionally, the warranties in this Section 13 will apply to assemblies to the extent that Supplier performed work on the assemblies, even if Sycamore or some other third party performs certain finish or back-end work on the assemblies, provided that any defect in the assemblies is related to a breach of Supplier’s warranties in this Section 13; in the event that both parties contribute to any defect, the warranty shall apply to the extent such defect was contributed to or caused by Supplier. Subject to the foregoing, Supplier’s warranty that the Products will be free from defects in workmanship will always apply.

* 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. Asterisks within brackets denote omission.

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13.5 Supplier shall repair and/or upgrade Products which are outside the warranty period at the direct labor prices and under the terms and conditions set forth in Exhibit B unless otherwise agreed to in writing by the parties.

13.6 THE FORGOING WARRANTIES ARE SOLELY ENFORCEABLE BY SYCAMORE AND ARE SUPPLIER’S SOLE OBLIGATION AND LIABILITY, AND SYCAMORE’S EXCLUSIVE REMEDIES, FOR CLAIMS BASED ON DEFECTS IN OR FAILURE OF ANY PRODUCT OR SERVICE OR THE SUBJECT MATTER OF ANY SERVICE AND ARE IN LIEU OF ALL OTHER WARRANTIES AND CONDITIONS EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, WARRANTIES OR CONDITIONS OF MERCHANTABILITY, RESPECTING NON-INFRINGEMENT OR FITNESS FOR A PARTICULAR PURPOSE.

13.7 Supplier agrees to maintain in good working order the items contracted for by Sycamore under Non-Recurring Manufacturing Services for the lifetime of this Agreement or as the parties may otherwise agree. Supplier is not obligated to maintain any such items that Sycamore has declared obsolete or that have deteriorated beyond the scope of general maintenance practices as a result of changes mandated by Sycamore.

14.0 SYCAMORE WARRANTY

14.1 Sycamore warrants that, [ * ] of [ * ] and [ * ] and [ * ] (collectively, “Sycamore Information”) [ * ].

14.2 Supplier will promptly notify Sycamore of any manufacturing problems that Supplier believes are related to the Sycamore Information. The parties will cooperate to determine whether such manufacturing problems actually are attributable to the Sycamore Information. Supplier shall not implement any changes to any Sycamore Information without Sycamore’s prior written approval. If the parties determine that a problem does result from the Sycamore Information and initiate [ * ], Supplier will not be liable for [ * ] to the [ * ] from such Sycamore Information, but only to the [ * ] was [ * ] to or [ * ] by Sycamore.

15.0 INDEMNIFICATION

15.1 Sycamore agrees to indemnify Supplier against damages finally awarded by a court of competent jurisdiction arising out of claims for direct losses, damages, costs and expenses (including reasonable attorney’s fees) on account of personal injury, death, or tangible property damage as the result of Sycamore’s active negligence or willful misconduct in developing the Specifications, or any other components, information or instructions relating to the Specifications. This indemnification is conditioned upon Supplier giving Sycamore prompt written notice of the claims, sole control over the defense and/or settlement of the claim, and at Sycamore’s expense, Supplier’s full cooperation [ * ].

15.2 Supplier agrees to indemnify Sycamore against damages finally awarded by a court of competent jurisdiction arising out of claims for direct losses, damages, costs and expenses (including reasonable attorney’s fees) on account of personal injury, death, or tangible property damage as the result of Supplier’s active negligence or willful misconduct in the performance of Recurring Manufacturing Services and Non-Recurring Manufacturing Services. This indemnification is conditioned upon Sycamore giving Supplier prompt notice of the claims, [ * ] over the [ * ] of the claims, and at Supplier’s expense, Sycamore’s full cooperation in the defense of same.

15.3 Sycamore agrees to defend at its expense, hold harmless and indemnify Supplier, [ * ], from and against any judgments, liabilities, claims, demands, expenses, or costs (including attorneys’ fees) to the extent arising from any claim or action asserting that [ * ], or any part thereof, or [ * ], infringes on any intellectual property right, including, without limitation, patent, trademark, copyright, trade secret, or other proprietary right, of any third party, foreign or domestic. This indemnification is conditioned upon Supplier giving Sycamore prompt written notice of the claims, [ * ] and/or [ * ] of the claim, and at Sycamore’s expense, Supplier’s [ * ].

15.4 Supplier agrees to defend at its expense, hold harmless and indemnify Sycamore, [ * ], from and against any judgments, liabilities, claims, demands, expenses, or costs (including attorneys’ fees) to the extent arising from any claim or action asserting that [ * ] infringe on any intellectual property right, including, without limitation, patent, trademark, copyright, trade secret, or other proprietary right, of any third party, foreign or domestic. This

* 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. Asterisks within brackets denote omission.

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indemnification is conditioned upon Sycamore giving Supplier prompt written notice of the claims, [ * ] and/or [ * ] of the claim, and at Supplier’s expense, [ * ].

15.5 The above indemnities also apply to claims covered by such indemnities for [ * ] made by [ * ] for infringement of Intellectual Property rights and for [ * ]). However, no[ * ] third parties shall be deemed to be third party beneficiaries under such indemnities or this Agreement.

16.0 PAYMENT TERMS

16.1 Supplier shall render invoices to Sycamore for all Products provided and Services performed under this Agreement [ * ] of Products to Sycamore or its customer, or Sycamore’s acceptance of Non-Recurring Manufacturing Services, as applicable. Supplier shall send invoices to Sycamore Networks, Inc., Attention: Accounts Payable, at the address specified on Sycamore’s Purchase Order.

16.2 Sycamore shall pay Supplier [ * ] Days [ * ] from date of accurate invoice. Sycamore shall be entitled to a [ * ] from date of an accurate invoice. Supplier shall pay Sycamore [ * ] Days [ * ] from date of accurate invoice.

16.3 Supplier’s Invoices shall be in writing and shall contain at least the following information:

• Sycamore’s Purchase Order Number,

• Sycamore’s Part Number and Revision Level,

• Quantity of Products or Services,

• Unit Price of Products or Services,

• Extended Price,

• F.O.B. point

• Delivery location

• Applicable freight and insurance charges reflected as separate line items

• Date of invoice and date of shipment

All amounts due are payable to Supplier at its address specified herein or at such other place as Supplier may hereafter designate in writing to Sycamore.

16.4 [ * ] shall pay for those taxes imposed by any jurisdiction where Supplier assembles, tests, inspects, packages and/or manufactures Sycamore’s goods and which are directly imposed upon the goods or services provided by Supplier to Sycamore before title passes to Sycamore. [ * ] will be solely responsible for and will pay [ * ], as the case may be) for all taxes, including sales taxes (if the item is not for resale), value-added taxes, duties or other governmental or regulatory charges in any country, resulting from the transfer from Supplier to Sycamore of title to Products, except for any income, corporate or other related taxes based upon [ * ] income or property for which [ * ] is directly liable.

16.5 Supplier accepts the credit liability of any Purchase Order once it is accepted and cannot request Sycamore to pay down any credit amount after such acceptance.

17.0 INTELLECTUAL PROPERTY

17.1 Sycamore retains all rights to all existing intellectual property, including but not limited to, all patents, applications for patents, copyrights, mask works, trade secrets and other intellectual property rights (“Intellectual Property”) owned by or licensed to Sycamore. Sycamore grants to Supplier a limited license solely to use and disclose the Intellectual Property to the extent necessary for Supplier to perform its obligations hereunder. Sycamore warrants that all third-party Intellectual Property licenses to Sycamore are in good standing and include the right to grant Supplier all rights necessary to enable Supplier to perform its obligations hereunder this Agreement.

17.2 Supplier retains all rights to all existing Intellectual Property owned by or licensed to Supplier. Supplier warrants that all third-party Intellectual Property licenses to Supplier are in good standing and include all necessary rights to permit Supplier to perform its obligations hereunder.

* 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. Asterisks within brackets denote omission.

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17.3 Sycamore will own all rights to any Intellectual Property conceived, created or developed by Supplier in the course of performing its obligations hereunder, paid for by Sycamore, and relating to the design of the Products. Supplier agrees that all designs, production tooling, prototypes, documentation, and any other data or components generated or developed by Supplier under this Agreement, paid for by Sycamore, and relating to the design of the Products or furnished by Sycamore to Supplier shall be and shall remain the sole property of Sycamore. Supplier specifically agrees that all copyrightable components generated or developed under this Agreement, paid for by Sycamore, and applicable to the Products (other than solely related to the manufacture of the Products) shall be considered works made for hire and that such components shall, upon creation, be owned exclusively by Sycamore, provided, however, that to the extent that any such components have general application to Supplier’s manufacturing processes, Sycamore hereby grants to Supplier a non-exclusive, worldwide, royalty-free, non-transferable and irrevocable license to use such components in connection with Supplier’s regular and customary course of business as a contract manufacturer. To the extent that any such components, under applicable law, may not be considered works made for hire, Supplier hereby assigns to Sycamore the ownership of copyright in such components, without the necessity of further consideration, and Sycamore shall be entitled to obtain and hold in its own name all copyrights in such components.

17.4 If and to the extent Supplier may, under applicable law, be entitled to claim any ownership interest in the Intellectual Property Rights generated or developed by Supplier and granted to Sycamore under Section 17.3, Supplier hereby transfers, grants, conveys, assigns and relinquishes exclusively to Sycamore all of Supplier’s right, title and interest in and to such Intellectual Property Rights in perpetuity or for the longest period otherwise permitted by law. Supplier shall perform any acts, at Sycamore’s cost, that may be deemed necessary or desirable by Sycamore to evidence more fully transfer of ownership to Sycamore of all Intellectual Property rights designated under this subparagraph 17.4 to the fullest extent possible, including but not limited to, the making of further written assignments in a form determined by Sycamore. Supplier agrees that it shall have and maintain, during performance of this Agreement, written agreements with all employees, contractors, or agents engaged by Supplier in performing hereunder, granting Supplier rights sufficient to support all performance and grants of rights by Supplier. Supplier shall provide copies of such agreements to Sycamore promptly upon request.

17.5 Except to the extent provided in Section 17.3 above, Supplier will own all rights to any Intellectual Property conceived, created or developed by Supplier in the course of performing its obligations hereunder and solely relating to the manufacturing of the Products.

17.6 Except to the extent expressly stated herein or to the extent such Intellectual Property is incorporated into any Product or process related thereto, nothing in this Agreement grants or can be capable of granting to Sycamore (whether directly or by implication, estoppel or otherwise) any existing Supplier rights to any Intellectual Property owned by or licensed to Supplier. Supplier hereby grants to Sycamore a non-exclusive, worldwide, royalty-free, non-transferable and irrevocable license to use Intellectual Property owned by or licensed to Supplier and incorporated into any Product or process related thereto in connection with the manufacture, testing or service of the Products (such license to include Sycamore’s right to use the physical embodiment of such Intellectual Property, whether in the form of tooling or otherwise, for its business purposes).

17.7 Sycamore’s know-how, testing components, Intellectual Property or the terms of this Agreement, including but not limited to, prices, Specifications, production schedules and other performance activities hereunder are subject to the confidentiality provisions of Section 28 below.

17.8 To the extent transferable, Supplier shall pass through to Sycamore and its customers all intellectual property rights protection and indemnification secured from its Vendors. Supplier will use commercially reasonable efforts to obtain: (i) substantially similar intellectual property indemnification from its Vendors and (ii) the Vendors’ agreement to transfer the same to Sycamore and its customers.

18.0 CUSTOMER PROPERTY

18.1 Supplier shall use Sycamore Information only for the purposes contemplated by this Agreement.

18.2 Supplier will treat all Sycamore Information with substantially the same care as it treats its own property of a similar nature, but in no event less than a reasonable degree of care, and subject to the confidentiality provisions of Section 28

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below. Supplier shall sequester and conspicuously mark all Sycamore components and permit Sycamore to make site inspections to verify the treatment of such components upon reasonable notice. Supplier shall carry insurance coverage appropriate to cover the risk of loss of or damage to Sycamore’s tangible property in Supplier’s possession and control.

18.3 Sycamore shall bear the costs of all maintenance, calibration and repair of Sycamore tooling supplied by Sycamore. Supplier shall bear the costs of all maintenance, calibration and repair of Sycamore tooling with respect to which Sycamore pays Supplier to obtain on Sycamore’s behalf. Supplier must immediately notify Sycamore in the event that tooling or test equipment is found to be out-of-tolerance during calibration. The Supplier shall obtain authorization from Sycamore for any maintenance, calibration and repair costs in excess of [ * ] for such services obtained on Sycamore’s behalf.

19.0 QUALITY ASSURANCE

19.1 Supplier shall maintain quality assurance systems for the control of components quality, processing, assembly, testing, packaging and shipping in accordance with its usual policies and practices and reasonably satisfactory to Sycamore. Supplier shall use IPC A-610 Rev. B Class 2, as published by the Institute for Interconnecting and Packaging Electronic Circuits, as the workmanship standard in performing Services hereunder. Any deficiencies identified by Sycamore in such systems shall be communicated to Supplier in writing. The Supplier is responsible for correcting identified deficiencies in a mutually agreed upon timely fashion. The cost of such changes shall be the responsibility of Supplier.

19.2 Supplier must notify Sycamore in advance of any significant changes to process or equipment, for example, solder chemistries, assembly and test equipment, etc.

19.3 Supplier shall provide at its cost any required minor test equipment as specified by Sycamore. Minor equipment requirements shall be reviewed with the Supplier as part of the test process transfer. Minor equipment includes, but is not limited to, digital multimeters, scopes probes, and device programmers.

19.4 The Supplier shall maintain an inventory of test consumables as specified by Sycamore. Test consumables requirements shall be reviewed with Supplier as part of the test process transfer. Test consumables include, but are not limited to test cables, adapters, test fibers, and connector savers. Sycamore shall reimburse Supplier for the costs incurred to maintain such inventory of test consumables as specified by Sycamore upon Supplier’s written notification.

19.5 Supplier shall perform its processes and acceptance tests in accordance with procedures developed by Sycamore and agreed to by Supplier. The parties shall meet on a quarterly basis to establish minimum acceptable test yields.

19.6 Either party may, during normal business hours and following reasonable notice and subject to the other party’s normal security requirements, review the other party’s facilities and quality control procedures as reasonably necessary for the first party to satisfy itself of the other party’s compliance with its obligations under this Agreement.

19.7 The parties shall endeavor to meet quarterly to discuss and resolve any issues that may have arisen, including issues relating to quality, performance, engineering changes, obsolescence or surpluses.

19.8 Supplier shall retain and maintain the following records and supporting documentation for a period of five (5) years beyond the termination of the Agreement, and Supplier will provide a copy of the same to Sycamore upon request.

The data contained in these records are the sole and exclusive property of Sycamore.

• Quality Data

• FDA Records

• Optical Component Data Sheets

19.9 The parties shall evaluate and mutually agree upon any additional quality requirements.

20.0 SUPPLIER’S REPRESENTATIONS AND WARRANTIES

* 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. Asterisks within brackets denote omission.

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20.1 Supplier represents and warrants that it maintains insurance coverage with [ * ] rated carrier that is acceptable to Sycamore in the amounts listed below:

General Liability:	umbrella of US[ * ] million
Worker’s Compensation:	As required by local law of the state in which Supplier’s facility(ies) is(are) located
Errors and Omissions:	US[ * ] million per claim and US[ * ] million annual aggregate
Product Liability:	US[ * ] million per claim and US[ * ] million annual aggregate
Property Insurance:	US[ * ] million

20.2 Supplier represents and warrants that it will maintain at its sole expense an ISO 9001 or ISO 9002 certified quality system in any of the facilities in which Products are designed (ISO 9001) or manufactured (ISO 9001 or ISO 9002). In addition, Supplier will provide Sycamore on a quarterly basis information relating to ISO 14000 certified quality system until such time that Supplier registers its own ISO 14000 certified quality system.

Supplier agrees to maintain safety information as required for Sycamore agency approvals. This will include but not be limited to, maintaining the following as defined by Sycamore: UL/CSA/CE agency case files for safety critical parts, testing (Hi Pot) of Products per UL/CSA/CE defined procedures, labelling of Products per UL/CSA/CE requirements, and record keeping and maintenance per FDA Laser Safety requirements.

20.3 Supplier represents and warrants that it shall maintain all Direct Fulfillment Inventory, Consigned Inventory and Consigned Repairs Components on Supplier’s premises that have been purchased by Sycamore in a secure and separate location, labeled as Sycamore’s property and free of all liens and attachments. Supplier shall retain the risk of loss of all Consignment Inventory and Consigned Repairs Components while it is on its premises. Direct Fulfillment Inventory manufactured by Supplier will, in accordance with Section 10.2.3 hereof, be invoiced by Supplier upon the same being placed in Sycamore’s finished goods inventory location at Supplier, at which time title and risk of loss to such Direct Fulfillment Inventory shall pass to Sycamore; notwithstanding, Supplier will insure such Direct Fulfillment Inventory held in Supplier’s facilities at the full replacement cost thereof under the terms and conditions of Supplier’s “all risk” insurance coverage.

20.4 Supplier shall provide Sycamore with a certificate of insurance in a form reasonably acceptable to Sycamore naming Sycamore as a loss payee under Supplier’s insurance policies as set forth in Section 20.1 and which provides that Sycamore shall have the right to participate directly with the insurance carrier, broker, and Supplier in the negotiation of any claim for a loss made thereunder affecting Sycamore’s Direct Fulfillment Inventory, Consigned Inventory or Consigned Repairs Components on Supplier’s premises. Such certificate of insurance shall also include a provision whereby thirty (30) Days notice must be received, from Supplier or the applicable insurer, by Sycamore prior to coverage cancellation or material alteration of the coverage. Such cancellation or material alteration shall not relieve Supplier of its continuing obligation to maintain insurance coverage in accordance with the provisions of this Section 20.

21.0 HAZARDOUS MATERIAL/TOXIC SUBSTANCES

21.1 Supplier shall treat all material subject to the Toxic Substance Control Act, (15 USC 2601 et. seq.), the Resource Conservation and Recovery Act (42 USC 6901 et. seq.) and the Environmental Protection Agency Hazardous Waste Management Program (40 CFR 260 et. seq.) (“Hazardous Material Laws”) strictly in compliance with such Hazardous Material Laws and as provided herein. Supplier agrees that all such material shall be SHIPPED, TRANSPORTED, DISPOSED, MARKED, LABELED, TAGGED, PLACARDED, PACKAGED, IDENTIFIED, USED, PRESERVED, AND DOCUMENTED BY SUPPLIER AS REQUIRED BY APPLICABLE FEDERAL REGULATIONS INCLUDING BUT NOT LIMITED TO 49 CFR 172 ET. SEQ. AND 29 CFR 1910.1200 ET. SEQ. IN ADDITION, SUPPLIER SHALL SUPPLY THE FOLLOWING INFORMATION: DESCRIPTION OF HAZARDOUS

* 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. Asterisks within brackets denote omission.

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MATERIALS AND SHIPPING NAME, HAZARD CLASS OR DIVISION, IDENTIFICATION NUMBERS, PACKING GROUP AND LABELS PER 49 CFR 172.202 ET SEQ.

21.2 Supplier shall comply with the Hazard Communication Standard, 29 CFR 1910.1200. Supplier shall ensure that the names of the items identified on the applicable Material Safety Data Sheets are identical to the names that appear on the label of the Product shipped to Sycamore or its customer. Supplier shall provide a copy of the applicable Material Safety Data Sheets) with each such shipment.

21.3 Supplier shall comply with Section 313 of the Emergency Planning and Community Right to Know Act of 1986 and 40 CFR Part 372, if applicable. As part of such compliance, Supplier shall furnish the following information with the initial shipment of each Product to Sycamore or its customer:

21.3.1 A statement that the Products contain chemicals which are subject to Section 313 of Title III of the Superfund Amendments and Reauthorization Act of 1986 and 40 CFR 372.45.

21.3.2 The name and associated Chemical Abstract Service Registry number of each chemical which has been incorporated into the Products and which is listed in the specific Toxic Chemical Listings contained in 40 CFR 372.45.

21.3.3 The percentage by weight of each toxic chemical component of the Products shipped.

21.4 Supplier shall ship Products containing hazardous components by common carrier authorized to handle the components and in accordance with 49 CFR Parts 100-109 and the “ATA “Dangerous Goods Regulations” or “International Maritime Dangerous Goods Code” (if applicable). This includes, but is not limited to, compliance with the following requirements:

21.4.1 Supplier shall list an emergency contact number on all shipping papers.

21.4.2 Supplier shall list on all shipping papers and packages the technical names of all hazardous components in parenthesis format, the association to the basic description and, in the case of mixtures, the major hazardous components by percentage contributing to the hazard.

21.4.3 Supplier shall indicate on the shipping papers whether the components presents Poisonous by Inhalation (“PIH”) hazards.

21.4.4 At Sycamore’s request, Supplier shall provide test reports to Sycamore indicating Supplier’s compliance with Performance Oriented Packaging requirements to facilitate Sycamore’s reshipment of Products to customers.

21.4.5 Supplier shall clearly mark on all interior packages and shipping containers the closed cup flash point of flammable and combustible liquids.

21.5 Supplier may not perform Services hereunder with ozone depleting substances and may not incorporate ozone-depleting substances into the Products unless approved by Sycamore in advance in writing. In the event of such approval, Supplier shall affix the following warning statement to all affected Products and Services and associated paperwork: “WARNING: Manufactured with CFC-11, 12,13, 111, 112, 113, 114, 115, 211, 212, 213, 214, 215, 216, 217, Halons 12211, 1301, 2402, Carbon Tetrachloride or Methyl Chloroform substances which harm public health and environment by destroying the ozone in the upper atmosphere”.

21.6 DESCRIPTION OF HAZARDOUS MATERIALS ON SHIPPING PAPERS—Supplier must list a description of all hazardous material on all shipping papers associated with Products, as follows:

21.6.1 The proper shipping name prescribed for the material in Column 2 of 49 CFR 172.

* 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. Asterisks within brackets denote omission.

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21.6.2 The hazard class or division prescribed for the material as shown in Column 3 of 49 CFR 172 (Table) (Class names, IMO class and division numbers or subsidiary hazard classes may be entered in parentheses following the numerical hazard class).

21.6.3 The identification number (preceded by “UN” or “NA” as appropriate) prescribed for the material as shown in Column 4 of 49 CFR 172 (Table).

21.6.4 The packing group, if any, prescribed for the material in Column 5 of 49 CFR 172 (Table).

22.0 MINORITY/WOMEN BUSINESS ENTERPRISES

22.1 Supplier shall use its reasonable best efforts to award subcontracts to minority business enterprises in a monetary amount equal to [ * ] percent [ * ] of its annual revenue under this Agreement to the extent consistent with the efficient performance of this Agreement. As used in this Agreement, “minority business enterprise” means a business at least fifty percent (50%) of which is owned, controlled and operated by minority group members or, in the case of publicly-owned business, at least fifty-one percent (51%) of the stock of which is owned by minority group members. A women’s business enterprise means a business which is fifty-one (51%) owned, controlled and operated by women. For the purpose of this definition, minority group members are Blacks, Hispanics, Asian Pacific Islanders, American Indians and Alaskan Natives. Supplier may rely on written representations by subcontractors regarding their status as minority or women’s business enterprises in lieu of an independent investigation. Upon Sycamore’s written request, within ten (10) business days of the end of each Sycamore quarter, Supplier shall provide to Sycamore a written report signed by one of its officers which details the percentage of minority business enterprise subcontracts comprising the revenue generated by Supplier from Sycamore’s business that quarter under this Agreement.

23.0 EXCLUSIONS AND LIMITATION OF LIABILITY

23.1 Neither party excludes or limits its liability for death or personal injury resulting from its negligence nor liability for breach of any term implied by statute to the extent that such liabilities cannot by law be limited or excluded.

23.2 Subject only to subparagraph 23.1 above, under no circumstances shall either party have any liability in connection with this Agreement, whether in contract or for negligence or otherwise and whether related to any single event or series of connected events (but not relating to Sycamore’s inventory liabilities or obligations to pay invoices hereunder that are not subject to a bona fide dispute), for any of the following:

23.2.1 any liability in excess of:

23.2.1.1 in the case of damage to or loss of tangible property, the value of such property;

23.2.1.2 in the case of any warranty claims by Sycamore against Supplier, an amount equal to [ * ]; and

23.2.1.3 in any event, and in respect of any other liability, an amount equal to [ * ].

23.2.2 any liability for any incidental, indirect or consequential damages, including those relating to loss of business, loss of records or data, loss of use, loss of profits, revenue or anticipated savings or other economic loss, whether or not Supplier or Sycamore was informed or was aware of the possibility of such loss.

23.3 Neither party may bring an action under this Agreement more than [ * ] after the cause of action arose.

23.4 Neither party will have liability to the other for any failure to perform any obligation under this Agreement or any order to the extent such failure was due to the act or omission of the other party or any agent of the other party.

24.0 TERMINATION

* 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. Asterisks within brackets denote omission.

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24.1 After notice of termination is tendered, each party shall cause its Coordinator to prepare (a) an orderly termination of this Agreement and (b) for return to the owning party of its components, equipment, records, specifications, and confidential information. The parties agree to work together to achieve as orderly a transition as possible.

24.2 Sycamore may terminate this Agreement for any reason by providing written notice to Supplier at least [ * ] Days in advance of the requested termination date. Supplier may terminate this Agreement for any reason by providing written notice to Sycamore at least [ * ] Days in advance of the requested termination date. For avoidance of doubt, if either party resorts to the dispute resolution proceedings sets forth under Section 31 hereof, it shall not preclude either party from exercising its rights to terminate under Section 24.2 hereof.

24.3 Either party may terminate this Agreement at any time for cause in the event that any material default by the other remains uncured for more than [ * ] Days following written notice or in the event that other party files or has filed against it any bankruptcy, insolvency or receivership proceeding which prevents or presents a reasonable risk of preventing such party from fulfilling is obligations hereunder, and which is not cured within [ * ] Days of written notice. The non-defaulting party shall specify in the written notice the conditions constituting the default and the corrective action, if any, which must be undertaken to cure such default. If, on or before the noticed date of termination, the non-defaulting party, in the exercise of good faith, determines that the defaulting party has cured the noticed condition of default or has undertaken satisfactory arrangements to attempt the cure, then this Agreement shall continue in force and effect.

24.4 Upon termination [ * ], Sycamore shall be responsible for:

24.4.1 Supplier’s scheduled and actual work-in-process for Sycamore;

24.4.2 Finished Products;

24.4.3 Any investment incurred by Supplier specifically in relation to this Agreement with the prior written agreement of Sycamore and which has not been recovered by Supplier from Sycamore through Reasonable and Prudent Purchasing Practices, amortization or other means;

24.4.4 All Obsolete Inventory or Excess Inventory reported in accordance with Section 11;

24.4.5 Except for Sycamore’s termination due to the default of Supplier, all Purchase Orders placed and accepted by Supplier in accordance with this Agreement; and

24.4.6 Cancellation or restocking charges for Supplier purchase orders placed on behalf of Sycamore, provided that Supplier has employed Reasonable and Prudent Purchasing Practices with regard to such components and Supplier can reasonably demonstrate such practices by documentary or other evidence.

Supplier shall bear the expense of all packaging for shipment and Sycamore shall bear the expense of all freight charges in accordance with Section 12.4. Supplier shall calculate and document all charges under this section and shall provide Sycamore with reasonably sufficient documentation in a reasonable format to support all such charges and calculations. Either party shall be entitled to set-off against any sums due the other party pursuant to this termination provision any sums, liquidated or contingent, which in the good faith judgment of such party constitute sums owing or direct damages for which the other party would be responsible under the terms hereof.

25.0 FORCE MAJEURE

25.1 Except for the payment of invoices due to Supplier that are not the subject of a bona fide dispute, neither party shall be liable for any delay in performance or failure to perform obligations, in whole or in part, when due to circumstances beyond its reasonable control, a labor dispute, strike, war or act of war (whether an actual declaration is made or not), acts of terrorism, insurrection, riot, civil commotion, fire, flood, or other act of God. If an event of Force Majeure

* 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. Asterisks within brackets denote omission.

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occurs, the party experiencing the Force Majeure event shall immediately notify the other party of the interruption of scheduled deliveries.

25.2 If an event of Force Majeure continues for a period of [ * ] Days, Sycamore shall have the right to terminate this Agreement immediately upon written notice to Supplier.

25.3 If Supplier experiences a Force Majeure event, Supplier shall use its reasonable best efforts immediately to put into effect an alternate plan to continue supplying Products and Services to Sycamore. Among other things, Supplier’s plan shall grant Sycamore priority treatment in moving the affected operations to another Supplier facility in order to continue production and minimize downtime.

26.0 NOTICES

26.1 In any case where a notice or other communication is to be given or made pursuant to any provision of this Agreement, such notice or communication will be deemed to be received when given or made as follows:

26.1.1 if by hand delivery, on the day delivered;

26.1.2 if by telex, cable, confirmed fax, or telegraph, on the next business day following the date sent; and

26.1.3 if by mail, on the third calendar day following posting by certified or registered mail, return receipt requested.

26.2 Supplier shall mail all such notices to Sycamore and addressed to:

Mr. John Dowling	Copy to: Law Department
Sycamore Networks, Inc.	Sycamore Networks, Inc.
220 Mill Road	220 Mill Road
Chelmsford, MA 01824	Chelmsford, MA 01824
FAX # (978) 256-0022	FAX # (978) 244-1097

26.3 Sycamore shall send all such notices to Supplier and addressed to:

President	Copy to: General Counsel
Plexus Services Corp.	Plexus Services Corp.
55 Jewelers Park Drive	55 Jewelers Park Drive
Neenah, Wisconsin 54957	Neenah, Wisconsin 54957

26.4 Coordinators, are:

For Supplier:

Steve Cohen

Plexus Services Corp.

4 Copeland Drive

Ayer, MA 01432

For Sycamore:

John Breda

Sycamore Networks, Inc.

220 Mill Road

Chelmsford, MA 01824

* 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. Asterisks within brackets denote omission.

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27.0 NON-ASSIGNMENT

27.1 Neither party may assign this Agreement without the prior written consent of the other party, which approval shall not be unreasonably withheld or delayed. Either party may, however, assign this Agreement in the event of a merger, acquisition, consolidation or sale of all or substantially all of such party’s business assets or stock, to which assignment both parties hereby consent.

28.0 CONFIDENTIALITY / NON-DISCLOSURE

28.1 The parties shall comply with the provisions of the confidentiality agreement between Supplier and Sycamore Networks, Inc. (the “Confidentiality Agreement”) effective August 16, 2000.

28.2 Neither party shall make any public announcement or other disclosure concerning the existence or terms of this Agreement without first obtaining the other party’s written consent and agreement upon the nature and text of such announcement, such approval and agreement not to be unreasonably withheld. This subparagraph 28.2 shall not apply to (a) any disclosure to a third party which a party determines is reasonably necessary in connection with any financing, strategic transaction, acquisition or disposition involving such party, provided that the third party signs a nondisclosure agreement with terms and conditions substantially similar to this subparagraph 28.2, or (b) any disclosure which a party reasonably determines is required by applicable law, regulation, regulatory authority, legal process or the rules of any stock market on which the securities of such party are listed or quoted for trading.

29.0 SUPERSEDING EFFECT

29.1 This Agreement, including all attachments, constitutes the entire Agreement between the parties with respect to the subject matter and supersedes all previous communications, representations, understandings and agreements, either oral or written, between the parties. This Agreement shall be modified only by an instrument in writing signed by duly authorized representatives of the parties.

29.2 Any standard or pre-printed terms and conditions set out in any Sycamore Purchase Order form or any Supplier invoice or order acknowledgement shall have no effect and are superseded by the terms and conditions of this Agreement.

29.3 Any rights or obligations under this Agreement which, by their nature and context, continue after termination will remain in effect until fully satisfied or fully performed.

29.4 If there is any conflict or inconsistency between the terms and conditions of any Purchase Order or other documents provided by either party to the other hereunder and the terms and conditions of this Agreement, the terms and conditions of this Agreement shall prevail.

30.0 GOVERNING LAW

30.1 This Agreement shall be interpreted in all respects in accordance with the laws of the State of New York, USA, exclusive of any provisions of the United Nations Convention on the International Sale of Goods and without regard to principles of conflict of laws. The parties submit to the nonexclusive jurisdiction of the courts of the State of New York. The parties further expressly waive any right they may have to a jury trial and agree that any proceedings under this Agreement shall be tried by a judge without a jury.

31.0 DISPUTE RESOLUTION PROCESS

31.1 Disputes between Supplier and Sycamore will be handled through this Dispute Resolution Process. This process shall be initiated when a party’s Coordinator completes a Dispute Resolution Form (contained in Exhibit C) and provided it to the other Coordinator. The dispute will be resolved within five (5) business days by the Coordinators and the issue will be closed.

* 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. Asterisks within brackets denote omission.

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31.2 In the event that the Coordinators are unable to resolve the dispute within five (5) business days of the notice thereof, either person may request that their Level 1 Managers (as defined herein below) meet to discuss the dispute. A meeting between the Level 1 Managers shall be held within seven (7) Days of the date on which such meeting is requested. In the event the Level 1 Managers are unable to agree on a plan for resolving the dispute within seven (7) Days of the requested meeting, either Level 1 Manager may raise the issue to the respective Level 2 Managers. In the event the Level 2 Managers are unable to agree on a plan for resolving the dispute within seven (7) Days of when the dispute is raised by a Level 1 Manager, either Level 2 Manager may raise the dispute to the respective Level 3 Managers. If the Level 3 Managers fail to resolve such dispute within ten (10) business days of when the dispute is raised by a Level 2 Manager, the Dispute Resolution Process is completed and the parties may exercise any and all rights under this Agreement.

To facilitate the Dispute Resolution Process, the parties agree to the following escalation path:

Level	Supplier	Sycamore
	Supplier Program Manager	Sycamore Coordinator
Level 1	Supplier Strategic Customer Manager	Sycamore Business Contact Vice President of Operations
Level 2	Supplier CFO	Sycamore CFO
Level 3	Supplier President	Sycamore CEO

Any level manager may authorize a designee to assume his/her responsibilities under this section provided such designee is given full authority to agree to a resolution of the dispute. During the pendency of the dispute resolution process, Sycamore will continue to make payments in accordance with the provisions of this Agreement and Supplier will continue to perform Services. So long as both parties follow the dispute resolution process, neither Supplier nor Sycamore shall institute any legal proceedings or resort to any remedy to enforce its rights under the Agreement, except that either party may apply for an injunction or other equitable relief if it believes in good faith that an injunctive or equitable relief is necessary to prevent if from incurring serious and irreparable harm.

32.0 GENERAL

32.1 Supplier shall comply with all applicable state and federal laws and regulations, including, without limitation, the requirements of the Fair Labor Standards Act of 1938 (as amended), and to provide disclosure as to all hazardous substances utilized in the manufacture of the Products and the performance of Services. The foregoing shall not be deemed, however, to create liability on the part of Supplier for intellectual property infringement (other than as provided under Section 15 hereof) or for non-compliance where such non-compliance arose out of Supplier’s conformance with the Specifications or Sycamore instructions or directives.

32.2 The parties are each independent contractors and not joint venturers, partners, agents or representatives of the other. Neither party has any right to create any obligation on the part of the other party. This Agreement shall not prevent Supplier from marketing, acquiring, or developing components, products or services that are similar or competitive to those of Sycamore. Supplier may pursue activities independently with any third party, even if similar to the activities under this Agreement.

THE REMAINER OF THIS PAGE IS INTENTIONALLY BLANK.

* 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. Asterisks within brackets denote omission.

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32.3 All provisions of this Agreement which by their nature must survive termination in order to achieve the fundamental purposes of this Agreement shall, except as otherwise provided herein, survive the expiration or earlier termination of this Agreement for any reason, including but not limited to the following Sections: Section 9—Cancellation, Section 10—Inventory Management, Section 11—Obsolete or Excess Component Inventory, Section 13—Supplier Warranty, Section 15—Indemnification, Section 16—Payment Terms, Section 17—Intellectual Property, Section 18—Customer Property, Section 19—Quality Assurance, Section 20—Supplier’s Representations and Warranties, Section 21—Hazardous Components/Toxic Substances, Section 23—Exclusions and Limitation of Liability, Section 24—Termination, Section 25—Force Majeure, Section 28—Confidentiality/Non-Disclosure, Section 30—Governing Law, and Section 32—General.

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective duly authorized representatives effective on the date referenced above.

SYCAMORE NETWORKS, INC.	PLEXUS SERVICES CORP.
By:	By:
Name:	Name:
Title:	Title:
Date:	Date:

* 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. Asterisks within brackets denote omission.

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EXHIBIT A

VARIANCE AUTHORIZATION FORM

Type of Request	Indicate Y for all that apply
PPV
Min Order Qty
NCNR Authorization
SPF Variance
Required for Production Build:
Required for NPI Build:
Date:
Part #:	SXXX-XXXXX-XX
Product Code (where used):	XXXXXX
Component lead-time
Qty for Approval:
Qty required:
Min. Order Qty:
Current Quoted Price:
SPF Price:
CM STD Price:
CM Purchase Order
Impact $ (PPV or Excess Inv):
Manufacturer Part #:
Supplier:
Reason/Comments:
Buyer Requesting:
Resolution:	SPF confirmed, Change SPF, order min., etc.
Approval Date:
Requestor
Requestor Action:
Date:
Notes:

* 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. Asterisks within brackets denote omission.

EXHIBIT B

NON-RECURRING SERVICES PRICING

[ * ]

* 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. Asterisks within brackets denote omission.

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EXHIBIT C

DISPUTE RESOLUTION FORM

Dispute Resolution Form

Sycamore/Plexus Manufacturing Services Agreement

Issue Resolution Number:	Date:
Requesting Coordinator	Organization:

Issue

Description:

Impact (If Not

Resolved)

Date Resolution Needed

Attachments (If Any)

Reviewer Review Completion Date

Reviewer Comments:

Reviewer Recommendations:     ( ) Accept    ( ) Reject    ( ) Need More Info.    ( ) Other

Disposition:                                  ( ) Accepted    ( ) Accept Conditionally    ( ) Rejected

Planned Completion Date:

Comments:

Resolved Date

Sycamore Coordinator Signature

Plexus Coordinator Signature

* 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. Asterisks within brackets denote omission.

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Exhibit D

Sycamore Networks

Operating/Financial Calendar

Fiscal 2003

	August ’03									February ’03
	S	M	T	W	TH	F	S			S	M	T	W	TH	F	S
1					1	2	3	QTR	27	26	27	28	29	30	31	1	QTR
2	4	5	6	7	8	9	10		28	2	3	4	5	6	7	8
3	11	12	13	14	15	16	17		29	9	10	11	12	13	14	15
4	18	19	20	21	22	23	24		30	16	17	18	19	20	21	22
	September ’03									March ’03
	S	M	T	W	TH	F	S			S	M	T	W	TH	F	S
5	25	26	27	28	29	30	31		31	23	24	25	26	27	28	1
6	1	2	3	4	5	6	7		32	2	3	4	5	6	7	8
7	8	9	10	11	12	13	14	1	33	9	10	11	12	13	14	15	3
8	15	16	17	18	19	20	21		34	16	17	18	19	20	21	22
	October ’03									April ’03
	S	M	T	W	TH	F	S			S	M	T	W	TH	F	S
9	22	23	24	25	26	27	28		35	23	24	25	26	27	28	29
10	29	30	1	2	3	4	5		36	30	31	1	2	3	4	5
11	6	7	8	9	10	11	12		37	6	7	8	9	10	11	12
12	13	14	15	16	17	18	19		38	13	14	15	16	17	18	19
13	20	21	22	23	24	25	26		39	20	21	22	23	24	25	26
	November ’03									May ’03
	S	M	T	W	TH	F	S			S	M	T	W	TH	F	S
14	27	28	29	30	31	1	2	QTR	40	27	28	29	30	1	2	3	QTR
15	3	4	5	6	7	8	9		41	4	5	6	7	8	9	10
16	10	11	12	13	14	15	16		42	11	12	13	14	15	16	17
17	17	18	19	20	21	22	23		43	18	19	20	21	22	23	24
	December ’03									June ’03
	S	M	T	W	TH	F	S			S	M	T	W	TH	F	S
18	24	25	26	27	28	29	30		44	25	26	27	28	29	30	31
19	1	2	3	4	5	6	7		45	1	2	3	4	5	6	7
20	8	9	10	11	12	13	14	2	46	8	9	10	11	12	13	14	4
21	15	16	17	18	19	20	21		47	15	16	17	18	19	20	21
	January ’03									July ’03
	S	M	T	W	TH	F	S			S	M	T	W	TH	F	S
22	22	23	24	25	26	27	28		48	22	23	24	25	26	27	28
23	29	30	31	1	2	3	4		49	29	30	1	2	3	4	5
24	5	6	7	8	9	10	11		50	6	7	8	9	10	11	12
25	12	13	14	15	16	17	18		51	13	14	15	16	17	18	19
26	19	20	21	22	23	24	25		52	20	21	22	23	24	25	26
									53	27	28	29	30	31

* 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. Asterisks within brackets denote omission.

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* 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. Asterisks within brackets denote omission.

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Sycamore Networks

Operating/Financial Calendar

Fiscal 2004

	August ’04									February ’04
	S	M	T	W	TH	F	S			S	M	T	W	TH	F	S
1						1	2	QTR	27	25	26	27	28	29	30	31	QTR
2	3	4	5	6	7	8	9	1	28	1	2	3	4	5	6	7	3
3	10	11	12	13	14	15	16		29	8	9	10	11	12	13	14
4	17	18	19	20	21	22	23		30	15	16	17	18	19	20	21
	September ’04									March ’04
	S	M	T	W	TH	F	S			S	M	T	W	TH	F	S
5	24	25	26	27	28	29	30		31	22	23	24	25	26	27	28
6	31	1	2	3	4	5	6		32	29	1	2	3	4	5	6
7	7	8	9	10	11	12	13		33	7	8	9	10	11	12	13
8	14	15	16	17	18	19	20		34	14	15	16	17	18	19	20
	October ’04									April ’04
	S	M	T	W	TH	F	S			S	M	T	W	TH	F	S
9	21	22	23	24	25	26	27		35	21	22	23	24	25	26	27
10	28	29	30	1	2	3	4		36	28	29	30	31	1	2	3
11	5	6	7	8	9	10	11		37	4	5	6	7	8	9	10
12	12	13	14	15	16	17	18		38	11	12	13	14	15	16	17
13	19	20	21	22	23	24	25		39	18	19	20	21	22	23	24
	November ’04									May ’04
	S	M	T	W	TH	F	S			S	M	T	W	TH	F	S
14	26	27	28	29	30	31	1	QTR	40	25	26	27	28	29	30	1	QTR
15	2	3	4	5	6	7	8	2	41	2	3	4	5	6	7	8	4
16	9	10	11	12	13	14	15		42	9	10	11	12	13	14	15
17	16	17	18	19	20	21	22		43	16	17	18	19	20	21	22
	December ’04									June ‘04
	S	M	T	W	TH	F	S			S	M	T	W	TH	F	S
18	23	24	25	26	27	28	29		44	23	24	25	26	27	28	29
19	30	1	2	3	4	5	6		45	30	31	1	2	3	4	5
20	7	8	9	10	11	12	13		46	6	7	8	9	10	11	12
21	14	15	16	17	18	19	20		47	13	14	15	16	17	18	19
	January ’04									July ’04
	S	M	T	W	TH	F	S			S	M	T	W	TH	F	S
22	21	22	23	24	25	26	27		48	20	21	22	23	24	25	26
23	28	29	30	31	1	2	3		49	27	28	29	30	1	2	3
24	4	5	6	7	8	9	10		50	4	5	6	7	8	9	10
25	11	12	13	14	15	16	17		51	11	12	13	14	15	16	17
26	18	19	20	21	22	23	24		52	18	19	20	21	22	23	24
									53	25	26	27	28	29	30	31

* 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. Asterisks within brackets denote omission.

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EXHIBIT E

[ * ]

* 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. Asterisks within brackets denote omission.

31

Schedule 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. Asterisks within brackets denote omission.

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EX-99.1(A)

Exhibit 99.1 (a)

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Sycamore Networks, Inc. (the “Company”) on Form 10-Q for the quarterly period ended April 26, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Daniel E. Smith, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company, as of, and for the periods presented in the Report.

/s/ Daniel E. Smith

Daniel E. Smith

Chief Executive Officer

Dated: June 5, 2003

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement required by the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-99.2 (B)

Exhibit 99.1 (b)

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Sycamore Networks, Inc. (the “Company”) on Form 10-Q for the quarterly period ended April 26, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Frances M. Jewels, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company, as of, and for the periods presented in the Report.

/s/ Frances M. Jewels

Frances M. Jewels

Chief Financial Officer

Dated: June 5, 2003

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement required by the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.