Exhibit 10.3
BROCADE SENIOR LEADERSHIP PLAN
Revised: February 9, 2005
PURPOSE
The Brocade Senior Leadership Plan is designed to link incentive compensation
with Company performance.
TIMING
Performance against Company objectives is measured on six-month cycles (Plan
Periods), which run concurrently with the first and second halves of Brocade’s
fiscal year. Payout of earned cash bonuses, if any, occurs on an annual basis.
ELIGIBILITY
Regular full-time and part-time Vice President (VP) level employees are eligible
to participate in the Senior Leadership Plan Program.
Participants must be regular (full-time or part-time) employees at the end of
the fiscal year to be eligible to receive a Senior Leadership Plan Payout.
PARTICIPANT PERFORMANCE
As each Plan Period begins, participants must complete a VP Performance
Contract. Performance contracts should be tied to company and departmental goals
as outlined by the board of directors (i.e., company priorities and
initiatives). All goals must be tied to overall company objectives and have
defined measurements.
Before Performance Contracts are final, they are to be reviewed and approved by
Finance, Human Relations, and the Chief Executive Officer (CEO).
At the end of each Plan Period, actual performance against the plan’s financial
metric goals is determined by Finance and provided to the plan participants.
Performance against goals is then assessed by the Participant and then reviewed
and assessed by the VP’s manager, in order to determine each participant’s bonus
payout for the period. The Compensation Committee reviews and approves all
Section 16 Officers’ performance and bonus payouts annually. The CEO reviews and
approves all other VP cash bonus payouts.
COMPANY PERFORMANCE & SENIOR LEADERSHIP PLAN FUNDING
Each Plan Period, Brocade will set a target Operating Margin for the company to
achieve during the Plan Period (Target OM).

 

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At the end of each Plan Period, Brocade will fund the Senior Leadership Plan
based on the actual Operating Margin achieved by Brocade during the Plan Period
(Actual OM) relative to the Target OM (Actual Contribution).
The Actual OM will be communicated following the end of each Plan Period.
PARTICIPANT INCENTIVE TARGET
A Participant’s Incentive Target is determined by the Participant’s pay grade at
the end of the 12-month Plan Period, unless otherwise indicated in writing by
Brocade.

              Participant Pay Grade     Annual Incentive Target     X     75%  
  A&B     50%     C&D     40%    

SENIOR LEADERSHIP PLAN PAYOUTS
On an annual basis, the Compensation Committee reviews and approves Section 16
Officers’ performance and cash bonus payouts. The CEO reviews and approves all
other VP cash bonuses. Program payouts are made within eight (8) weeks following
the conclusion of the 12-month Plan Period. Payouts will be pro-rated for
Participants who are hired or transferred into the Senior Leadership Plan during
any Plan Period.
For each Participant, the cash bonus payout is calculated based on the following
formula (less applicable taxes and deductions):
Bonus Payout = (Actual Funding) x (Individual VP Goal Points Earned for the
year) x (Annual Incentive Target) x (Annual Salary)

                                Participant     Revenue     Operating Margin    
Individual Goals     Total     CEO     50%     50%     —     100%     VPs    
50%     40%     10%     100%    

Bonuses will be calculated using the salary as of the last day of the Plan
Period.
Departmental budgets are communicated at the beginning of each fiscal year and
may be updated quarterly throughout the year by the CEO and CFO. Adherence to
the individual’s departmental budget is a gate for the individual to qualify for
the Senior Leadership Plan bonus. Failure to adhere to the agreed upon budget
disqualifies the individual from a bonus payout.

 

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ADMINISTRATIVE PROCEDURES
Compensation Committee Approval
The Compensation Committee reserves the right to decrease or eliminate bonus
otherwise indicated.
New Hires and Promotions
Participants new to the company or who are promoted into the Senior Leadership
Plan must complete a VP Performance Contract within 60 days of beginning in the
new position.
Grade/Salary Factor
Payout will be based on the Participant’s salary and pay grade on the last day
of the Plan Period. Bonuses will be pro-rated if Participant received a cash
bonus on another bonus program.
Terminations: Anyone who is not on the payroll as of the end of the fiscal year
is not eligible to receive a cash bonus payout.
Leaves of Absences, Disability or Death: In the event of the Participant death,
disability time off, or leave of absence, Payouts will be made on a pro-rated
basis, based on the number of days the Participant was actively working at
Brocade. If the Participant is on a legally protected leave of absence (e.g.
Family Medical Leave or Military Leave), the Participant’s eligibility for
participation in Plan may be extended beyond the time above, in accordance with
the laws governing the legally protected leave. In the event of death, any cash
bonus payments will be paid to the Participant’s primary beneficiary as
designated in the Participant’s Brocade life insurance plan documentation, if
any.
Performance Improvement Plan/Disciplinary Situations (Development Needed): If a
Participant, at anytime prior to the cash bonus payout 12-month Plan Period, is
subject to a performance improvement plan, discipline or demotion, Brocade may,
in its sole discretion, reduce or eliminate the Cash Payment that the
Participant would otherwise have been eligible to receive. If, at the time prior
to the Payout for a 12-month Plan Period, it is determined that a Participant
may be subject to corrective action, discipline or demotion, then Brocade may
withhold the entire Cash Bonus Payout, or a portion thereof, until after a final
decision on such corrective action has been made. If a Participant is given a
performance rating of Development Needed, the Participant will not be eligible
to receive a Payout. Only the VP of Human Resources or CEO may approve
exceptions to this policy.
Other Provisions: Participation in the Senior Leadership Plan does not
constitute an agreement (express or implied) between the Participant and Brocade
that the Participant will be employed by Brocade for any specific period of
time, nor is there any agreement for continuing or long-term employment. Terms
and conditions regarding the Senior Leadership Plan and any participation
therein, including but not limited to Senior Leadership Plan eligibility, Senior
Leadership Plan funding, and performance and payout criteria and determinations,
are subject to change by Brocade at any time in its sole discretion. Brocade and
its Board of Directors retain the absolute right to interpret, revise, modify or
terminate the Senior Leadership Plan at any time in its sole discretion.

 

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ADDENDUM TO BROCADE SENIOR LEADERSHIP PLAN
(DATED FEBRUARY 9, 2005)
Notwithstanding any terms to the contrary in the Brocade Senior Leadership Plan,
the following terms shall apply to the Bonus Payout under the Senior Leadership
Plan for fiscal 2005:

  •   Participants must continue to be regular employees as of December 15, 2005
to be eligible to receive a Senior Leadership Plan Payout for fiscal 2005. In
addition, any references to the end of the 12-month Plan Period or fiscal year
for purposes of the Senior Leadership Plan for fiscal 2005 (including without
limitation, the subsections entitled “Termination” and “Performance Improvement
Plan/Disciplinary Situations (Development Needed)”) shall be deemed to refer to
December 15, 2005.     •   The Bonus Payout shall be calculated as follows:

Bonus Payout = (Individual CEO/VP Goal Points Earned for the year) x (Annual
Incentive Target) x (Annual Salary)

  •   Each participant shall also be eligible to receive an additional cash
bonus (the “Additional Bonus”) equal to the amount of such individual’s actual
Bonus Payout for fiscal 2005. The Additional Bonus for Mr. Jaworski shall be
equal to the actual Bonus Payout for fiscal 2005, multiplied by 1.67.