Exhibit 10.3
BROCADE COMMUNICATIONS SYSTEMS, INC.
PERFORMANCE BONUS PLAN
Effective April 11, 2013
SECTION 1
ESTABLISHMENT AND PURPOSE
1.1 Purpose. Brocade Communications Systems, Inc. hereby establishes the Brocade
Communications Systems, Inc. Performance Bonus Plan (the “Plan”). The Plan is
intended to promote the success of the Company by motivating key executives to
achieve the Company's objectives. The Plan provides executives with incentive
awards based on the achievement of goals relating to the performance of the
Company and its business units. The Plan is intended to permit the payment of
bonuses that qualify as performance-based compensation under Code
Section 162(m).
1.2 Effective Date. The Plan is effective as of April 11, 2013 (the “Effective
Date”), subject to the approval of a majority of the shares of the Company's
common stock who are present in person or by proxy and entitled to vote at the
2013 Annual Meeting of Stockholders.
SECTION 2
DEFINITIONS
The following words and phrases shall have the following meanings unless a
different meaning is plainly required by the context:
2.1 “Actual Award” means as to any Performance Period, the actual amount (if
any) payable to a Participant for the Performance Period. Each Actual Award is
determined by the Payout Formula for the Performance Period, subject to the
Committee's authority under Section 3.5 to reduce the award otherwise determined
by the Payout Formula.
2.2 “Affiliate” means any corporation or other entity (including, but not
limited to, partnerships and joint ventures) controlled by the Company.
2.3 “Base Salary” means as to any Performance Period, 100% of the Participant's
annual salary rate on the last day of the Performance Period. Base Salary shall
be determined without regard to deductions for taxes or other items and before
any deferrals of compensation under any Company sponsored plan.
2.4 “Board” means the Company's Board of Directors.
2.5 “Cash Flow” means as to any Performance Period, cash generated from business
activities.
2.6 “Code” means the Internal Revenue Code of 1986, as amended. Reference to a
specific section of the Code or regulation thereunder shall include such section
or regulation, any valid regulation promulgated under such section, and any
comparable provision of any future legislation or regulation amending,
supplementing or superseding such section or regulation.
2.7 “Committee” means the committee appointed by the Board (pursuant to
Section 5.1) to administer the Plan. As of the Effective Date, the Compensation
Committee of the Board shall serve as the Committee.
2.8 “Company” means Brocade Communications Systems, Inc., a Delaware
corporation.
2.9 “Customer Satisfaction” means as to any Performance Period, the objective
and measurable goals approved by the Committee that relate to fulfillment of
customer expectations and/or attainment of customer satisfaction metrics and/or
ratings.
2.10 “Determination Date” means the latest possible date that will not
jeopardize a Target Award or Actual Award's qualification as performance-based
compensation under Section 162(m) of the Code.
2.11 “Disability” means a permanent and total disability determined in
accordance with standards adopted by the Committee from time to time.

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2.12 “Earnings Per Share” means as to any Performance Period, the Company's
Profit, divided by a weighted average number of common shares outstanding and
dilutive common equivalent shares deemed outstanding for the Performance Period.
2.13 “Financial Management” means as to any Performance Period, the objective
and measurable goals approved by the Committee for the administration of
financial assets, liabilities and/or risk.
2.14 “Fiscal Quarter” means a fiscal quarter within a Fiscal Year of the
Company.
2.15 “Fiscal Year” means the fiscal year of the Company.
2.16 “Margin” means as to any Performance Period, Revenue less appropriate costs
and expenses for the type of margin determined by the Committee (for example,
but not by way of limitation, gross margin, operating margin or contribution
margin).
2.17 “Market Share” means as to any Performance Period, the percentage of a
market segment with respect to one or more products or services.
2.18 “Maximum Award” means as to any Participant for any Fiscal Year, $5
million. The Maximum Award is the maximum amount which may be paid to a
Participant for or during any Fiscal Year.
2.19 “Operations Management” means as to any Performance Period, the objective
and measurable goals approved by the Committee that relate to the design and
management of the resources, processes, and supply chains used by the Company or
a business unit to produce products and/or supply services.
2.20 “Participant” means as to any Performance Period, an executive of the
Company or of an Affiliate who has been selected by the Committee for
participation in the Plan for that Performance Period.
2.21 “Payout Formula” means as to any Performance Period, the formula or payout
matrix established by the Committee pursuant to Section 3.4 in order to
determine the Actual Awards, if any, to be paid to Participants. The formula or
matrix may differ from Participant to Participant.
2.22 “Performance Goals” means the goal(s) (or combined goal(s)) determined by
the Committee, in its discretion, to be applicable to a Participant for a
Performance Period. As determined by the Committee (in its discretion), the
Performance Goals applicable to each Participant shall provide for a targeted
level or levels of achievement using one or more of the following measures:
(a) Revenue, (b) Profit, (c) Earnings Per Share (d) Margin, (e) Total
Shareholder Return, (f) Return on Capital, (g) Return on Equity, (h) Financial
Management, (i) Cash Flow, (j) Market Share, (k) Product Development and
Quality, (l) Customer Satisfaction, and (m) Operations Management. Any
Performance Goal used may be measured (1) in absolute terms, (2) in combination
with another Performance Goal or Goals (for example, but not by way of
limitation, as a ratio or matrix), (3) in relative terms (including, but not
limited to, as compared to results for other periods of time, and/or against
another company, companies or an index or indices), (4) on a per-share or
per-capita basis, (5) against the performance of the Company as a whole or a
specific business unit(s), business segment(s) or product(s) of the Company,
(6) on a pre-tax or after-tax basis and/or (7) on a GAAP (generally accepted
accounting principles) or non-GAAP basis. Prior to the Determination Date, the
Committee, in its discretion, will determine whether any significant element(s)
or item(s) will be included in or excluded from the calculation of any
Performance Goal with respect to any Participants (for example, but not by way
of limitation, the effect of mergers, acquisitions and/or dispositions). As
determined in the discretion of the Committee prior to the Determination Date,
achievement of Performance Goals for a particular Award may be calculated in
accordance with the Company's financial statements, prepared in accordance with
generally accepted accounting principles, or as adjusted for certain costs,
expenses, gains and losses to provide non-GAAP measures of operating results.

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2.23 “Performance Period” means any period of three (3) consecutive Fiscal
Quarters or such other longer period but not longer than three Fiscal Years (or
period of twelve (12) consecutive Fiscal Quarters), as determined by the
Committee in its sole discretion. With respect to any Participant, there shall
exist no more than four (4) Performance Periods under the Plan at any one time.
2.24 “Product Development and Quality” means as to any Performance Period, the
objective and measurable goals approved by the Committee for the design,
creation or manufacture of products, which goals may include (but not by way of
limitation) conformance to design or use specifications or requirements not to
exceed specified defect levels.
2.25 “Profit” means as to any Performance Period, net income.
2.26 “Return on Capital” means as to any Performance Period, Profit divided by
invested capital.
2.27 “Return on Equity” means as to any Performance Period, the percentage equal
to Profit divided by stockholder's equity.
2.28 “Revenue” means as to any Performance Period, net revenue.
2.29 “Section 16 Officer” means a person who is an officer of the Company within
the meaning of Section 16 of the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
2.30 “Section 409A” means Section 409A of the Internal Revenue Code of 1986, as
amended and the regulations and guidance thereunder, as they may be amended or
modified from time to time.
2.31 “Target Award” means the target award payable under the Plan to a
Participant for the Performance Period, expressed as a percentage of his or her
Base Salary, a dollar amount, or a result of a formula or formulas, as
determined by the Committee in accordance with Section 3.3.
2.32 “Total Shareholder Return” means as to any Performance Period, the total
return (change in share price, including treatment of dividends as determined by
the Committee) of a share of the Company's common stock.
SECTION 3
SELECTION OF PARTICIPANTS AND DETERMINATION OF AWARDS
3.1 Selection of Participants. On or prior to the Determination Date, the
Committee, in its sole discretion, shall select the executives of the Company
who shall be Participants for the Performance Period. The Committee, in its sole
discretion, also may designate as Participants one or more individuals (by name
or position) who are expected to become executives during a Performance Period.
Participation in the Plan is in the sole discretion of the Committee, and on a
Performance Period by Performance Period basis. However, unless and until
otherwise determined by the Committee, an executive who is a Participant for a
given Performance Period automatically will be a Participant in subsequent
Performance Periods (so long as he or she remains an executive).
3.2 Determination of Performance Goals. On or prior to the Determination Date,
the Committee, in its sole discretion, shall establish the Performance Goals for
the Participants for the Performance Period. Each Participant's Performance Goal
shall be determined by the Committee and set forth in writing.
3.3 Determination of Target Awards. On or prior to the Determination Date, the
Committee, in its sole discretion, shall establish a Target Award for the
Participants. Each Participant's Target Award shall be determined by the
Committee in its sole discretion, and each Target Award shall be set forth in
writing.
3.4 Determination of Payout Formula. On or prior to the Determination Date, the
Committee, in its sole discretion, shall establish a Payout Formula for purposes
of determining the Actual Award, if any, payable to each Participant. Each
Payout Formula shall (a) be in writing, (b) be based on a comparison of actual
performance to the Performance Goals, (c) provide for the payment of a
Participant's Target Award if the Performance Goals for the Performance Period
are achieved, and (d) provide for an Actual Award greater than or less than the
Participant's Target Award, depending upon the extent to which actual
performance exceeds or falls below the Performance Goals. Notwithstanding the
preceding, no Participant's Actual Award under the Plan may exceed his or her
Maximum Award.

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3.5 Determination of Actual Awards. After the end of each Performance Period,
the Committee shall certify in writing (for example, in its meeting minutes) the
extent to which the Performance Goals applicable to each Participant for the
Performance Period were achieved or exceeded, as determined by the Committee.
The Actual Award for each Participant shall be determined by applying the Payout
Formula to the level of actual performance that has been certified by the
Committee. Notwithstanding any contrary provision of the Plan, the Committee, in
its sole discretion, may eliminate or reduce the Actual Award payable to any
Participant below the amount that otherwise would be payable under the Payout
Formula.
SECTION 4
PAYMENT OF AWARDS
4.1 Right to Receive Payment. Each Actual Award that may become payable under
the Plan shall be paid solely from the general assets of the Company. Nothing in
this Plan shall be construed to create a trust or to establish or evidence any
Participant's claim of any right other than as an unsecured general creditor
with respect to any payment to which he or she may be entitled.
4.2 Timing of Payment. Payment of each Actual Award shall be made after the end
of the Performance Period during which the Actual Award was earned but no later
than the end of the second (2nd) month after the end of the Fiscal Year in which
such Performance Period ended.
4.3 Form of Payment. Each Actual Award shall be paid in cash (or its
equivalent) in a single lump sum.
4.4 Payment in the Event of Death. If a Participant dies prior to the payment of
an Actual Award earned by him or her prior to death for a completed Performance
Period, the Actual Award shall be paid to his or her estate.
SECTION 5
ADMINISTRATION
5.1 Committee is the Administrator. The Plan shall be administered by the
Committee. The Committee shall consist of not less than two (2) members of the
Board. The members of the Committee shall be appointed from time to time by, and
serve at the pleasure of, the Board. Each member of the Committee shall qualify
as an “outside director” under Section 162(m) of the Code. If it is later
determined that one or more members of the Committee do not so qualify, actions
taken by the Committee prior to such determination shall be valid despite such
failure to qualify.
5.2 Committee Authority. It shall be the duty of the Committee to administer the
Plan in accordance with the Plan's provisions. The Committee shall have all
powers and discretion necessary or appropriate to administer the Plan and to
control its operation, including, but not limited to, the power to (a) determine
which executives shall be granted awards, (b) prescribe the terms and conditions
of awards, (c) interpret the Plan and the awards, (d) adopt such procedures and
subplans as are necessary or appropriate to permit participation in the Plan by
executives who are foreign nationals or employed outside of the United States,
(e) adopt rules for the administration, interpretation and application of the
Plan as are consistent therewith, and (f) interpret, amend or revoke any such
rules.
5.3 Decisions Binding. All interpretations, determinations and decisions made by
the Committee, the Board, and any delegate of the Committee pursuant to the
provisions of the Plan shall be final, conclusive, and binding on all persons,
and shall be given the maximum deference permitted by law.
5.4 Delegation by the Committee. The Committee, in its sole discretion and on
such terms and conditions as it may provide, may delegate all or part of its
authority and powers under the Plan to one or more directors and/or officers of
the Company; provided, however, that the Committee may not delegate its
authority and/or powers in any manner that would jeopardize an award's
qualification as performance-based compensation under Section 162(m) of the
Code.
5.5 Tax Withholding. The Company shall withhold all applicable taxes (and any
other required amounts) from any payment, including any federal, Federal
Insurance Contributions Act (FICA), state, and local taxes.

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SECTION 6
GENERAL PROVISIONS
6.1 No Effect on Employment. Nothing in the Plan shall interfere with or limit
in any way the right of the Company or an Affiliate, as applicable, to terminate
any Participant's employment or service at any time, with or without cause. For
purposes of the Plan, transfer of employment of a Participant between the
Company and any one of its Affiliates (or between Affiliates) shall not be
deemed a termination of employment. Employment with the Company and its
Affiliates is on an at-will basis only. The Company expressly reserves the
right, which may be exercised at any time and without regard to when during or
after a Performance Period such exercise occurs, to terminate any individual's
employment with or without cause, and to treat him or her without regard to the
effect which such treatment might have upon him or her as a Participant.
6.2 Section 409A. It is intended that all bonuses payable under this Plan will
be exempt from the requirements of Section 409A pursuant to the “short-term
deferral” exemption or, in the alternative, will comply with the requirements of
Section 409A so that none of the payments and benefits to be provided under this
Plan will be subject to the additional tax imposed under Section 409A, and any
ambiguities or ambiguous terms herein shall be interpreted to so comply or be
exempt. Each payment and benefit payable under this Plan is intended to
constitute a separate payment for purposes of Section 1.409A-2(b)(2) of the
Treasury Regulations. The Company may, in good faith and without the consent of
any Participant, make any amendments to this Plan and take such reasonable
actions which it deems necessary, appropriate or desirable to avoid imposition
of any additional tax or income recognition under Section 409A prior to actual
payment to the Participant.
6.3 Participation. No individual shall have the right to be selected to receive
an award under this Plan, or, having been so selected, to be selected to receive
a future award.
6.4 Successors. All obligations of the Company and any Affiliate under the Plan,
with respect to awards granted hereunder, shall be binding on any successor to
the Company and/or such Affiliate, whether the existence of such successor is
the result of a direct or indirect purchase, merger, sale, consolidation, or
otherwise, of all or substantially all of the business or assets of the Company
or such Affiliate.
6.5 Nonassignability. A Participant shall have no right to assign or transfer
any interest under this Plan.
6.6 Nontransferability of Awards. No award granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or trust, by the laws of descent and distribution. All rights with
respect to an award granted to a Participant shall be available during his or
her lifetime only to the Participant.
6.7 Deferrals. The Committee, in its sole discretion, may permit a Participant
to defer receipt of the payment of cash that would otherwise be delivered to a
Participant under the Plan. Any such deferral elections shall be subject to such
rules and procedures as shall be determined by the Committee in its sole
discretion and, unless otherwise expressly determined by the Committee, shall
comply with the requirements of Section 409A.
6.8 Governing Law. The Plan and all award agreements shall be construed in
accordance with and governed by the laws of the State of California, excluding
its conflicts of laws provisions.
SECTION 7
AMENDMENT AND TERMINATION
7.1 Amendment and Termination. The Board may amend or terminate the Plan at any
time and for any reason; provided, however, that if and to the extent required
to ensure the Plan's qualification under Code Section 162(m), any such amendment
shall be subject to stockholder approval.