Exhibit 10.8
BROCADE COMMUNICATIONS SYSTEMS, INC.
1999 NONSTATUTORY STOCK OPTION PLAN
(as amended and restated on October 21, 2005)
     1. Purposes of the Plan. The purposes of this Nonstatutory Stock Option
Plan are:

  •   to attract and retain the best available personnel for positions of
substantial responsibility,     •   to provide additional incentive to Employees
and Consultants, and     •   to promote the success of the Company’s business.

          Options granted under the Plan will be Nonstatutory Stock Options.
     2. Definitions. As used herein, the following definitions shall apply:
          (a) “Administrator” means the Board or any of its Committees as shall
be administering the Plan, in accordance with Section 4 of the Plan.
          (b) “Applicable Laws” means the requirements relating to the
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options are, or will be, granted under
the Plan.
          (c) “Board” means the Board of Directors of the Company.
          (d) “Code” means the Internal Revenue Code of 1986, as amended.
          (e) “Committee” means a committee of Directors appointed by the Board
in accordance with Section 4 of the Plan.
          (f) “Common Stock” means the Common Stock of the Company.
          (g) “Company” means Brocade Communications Systems, Inc.
          (h) “Consultant” means any person, including an advisor, engaged by
the Company or a Parent or Subsidiary to render services to such entity.
          (i) “Director” means a member of the Board.
          (j) “Disability” means total and permanent disability as defined in
Section 22(e)(3) of the Code.
          (k) “Employee” means any individual, including Officers, employed by
the Company or any Parent or Subsidiary of the Company. For purposes of the
Plan, the employment relationship shall be treated as continuing intact while
the individual (i) is on any bona fide leave of absence approved by the Company
or (ii) transfers between locations of the Company or between the Company, its
Parent, any Subsidiary, or any successor. Neither service as a Director nor
payment of a director’s fee by the Company shall be sufficient to constitute
“employment” by the Company.
          (l) “Exchange Act” means the Securities Exchange Act of 1934, as
amended.
          (m) “Fair Market Value” means, as of any date, the value of Common
Stock determined as follows:
               (i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day on the date of such determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;

 

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               (ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;
               (iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
          (n) “Notice of Grant” means a written or electronic notice evidencing
certain terms and conditions of an individual Option grant. The Notice of Grant
is part of the Option Agreement.
          (o) “Officer” means a person who is an officer of the Company within
the meaning of Nasdaq guidelines, including all employees with the corporate
rank of vice-president or higher, and employees with lesser rank but comparable
authority.
          (p) “Option” means a nonstatutory stock option granted pursuant to the
Plan that is not intended to qualify as an incentive stock option within the
meaning of Section 422 of the Code and the regulations promulgated thereunder.
          (q) “Option Agreement” means an agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant. The
Option Agreement is subject to the terms and conditions of the Plan.
          (r) “Optioned Stock” means the Common Stock subject to an Option.
          (s) “Optionee” means the holder of an outstanding Option granted under
the Plan.
          (t) “Parent” means a “parent corporation,” whether now or hereafter
existing, as defined in Section 424(e) of the Code.
          (u) “Plan” means this 1999 Nonstatutory Stock Option Plan.
          (v) “Service Provider” means an Employee, Consultant or Director.
          (w) “Share” means a share of the Common Stock, as adjusted in
accordance with Section 12 of the Plan.
          (x) “Subsidiary” means a “subsidiary corporation,” whether now or
hereafter existing, as defined in Section 424(f) of the Code.
     3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
the Plan, the maximum aggregate number of Shares, which may be optioned and sold
under the Plan, is fifty-one million four hundred thousand (51,400,000)* Shares.
The Shares may be authorized, but unissued, or reacquired Common Stock.
     If an Option expires or becomes unexercisable without having been exercised
in full, the unpurchased Shares, which were subject thereto, shall become
available for future grant or sale under the Plan (unless the Plan has
terminated).
 

*   As adjusted from original authorization of 1,000,000 shares for: (i) 2/2/99
2:1 stock split; and (ii) increased by BOD to 5,000,000 shares on 1/21/00; and
(iii) as adjusted for additional 2:1 stock split; and (iv) as further increased
by BOD to 14,200,000 shares on 11/3/00; and (v) as further adjusted for
additional 2:1 stock split on 12/21/00; and (vi) as further increased by
23,000,000 shares by BOD on 2/21/01.

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     4. Administration of the Plan.
          (a) Administration. The Plan shall be administered by (i) the Board or
(ii) a Committee, which Committee shall be constituted to satisfy Applicable
Laws.
          (b) Powers of the Administrator. Subject to the provisions of the
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:
               (i) to determine the Fair Market Value of the Common Stock;
               (ii) to select the Service Providers to whom Options may be
granted hereunder;
               (iii) to determine whether and to what extent Options are granted
hereunder;
               (iv) to determine the number of shares of Common Stock to be
covered by each Option granted hereunder;
               (v) to approve forms of agreement for use under the Plan;
               (vi) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder. Such terms and conditions
include, but are not limited to, the exercise price, the time or times when
Options may be exercised (which may be based on performance criteria), any
vesting acceleration or waiver of forfeiture restrictions, and any restriction
or limitation regarding any Option or the shares of Common Stock relating
thereto, based in each case on such factors as the Administrator, in its sole
discretion, shall determine;
               (vii) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan;
               (viii) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;
               (ix) to modify or amend each Option (subject to Section 14(b) of
the Plan), including the discretionary authority to extend the post-termination
exercisability period of Options longer than is otherwise provided for in the
Plan;
               (x) to authorize any person to execute on behalf of the Company
any instrument required to effect the grant of an Option previously granted by
the Administrator;
               (xi) to determine the terms and restrictions applicable to
Options;
               (xii) to allow Optionees to satisfy withholding tax obligations
by electing to have the Company withhold from the Shares to be issued upon
exercise of an Option that number of Shares having a Fair Market Value equal to
the amount required to be withheld (but not more than the amount required to be
withheld). The Fair Market Value of the Shares to be withheld shall be
determined on the date that the amount of tax to be withheld is to be
determined. All elections by an Optionee to have Shares withheld for this
purpose shall be made in such form and under such conditions as the
Administrator may deem necessary or advisable; and
               (xiii) to make all other determinations deemed necessary or
advisable for administering the Plan.
          (c) Effect of Administrator’s Decision. The Administrator’s decisions,
determinations and interpretations shall be final and binding on all Optionees
and any other holders of Options.
     5. Eligibility. Options may be granted to Service Providers; provided,
however, that Options may not be granted to Officers and Directors, except as an
essential inducement to an Officer entering into an employment agreement
regarding his or her initial service with the Company.

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     6. Limitation. Neither the Plan nor any Option shall confer upon an
Optionee any right with respect to continuing the Optionee’s relationship as a
Service Provider with the Company, nor shall they interfere in any way with the
Optionee’s right or the Company’s right to terminate such relationship at any
time, with or without cause.
     7. Term of Plan. The Plan shall become effective upon its adoption by the
Board. It shall continue in effect for ten (10) years, unless sooner terminated
under Section 14 of the Plan.
     8. Term of Option. The term of each Option shall be stated in the Option
Agreement.
     9. Option Exercise Price and Consideration.
          (a) Exercise Price. The per share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be determined by the
Administrator.
          (b) Waiting Period and Exercise Dates. At the time an Option is
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the
Option may be exercised.
          (c) Form of Consideration. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment. Such consideration may consist entirely of:
               (i) cash;
               (ii) check;
               (iii) other Shares which (A) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six months
on the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised;
               (iv) consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan;
               (v) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws; or
               (vi) any combination of the foregoing methods of payment.
     10. Exercise of Option.
          (a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement. An Option may not be exercised for a fraction of
a Share.
          An Option shall be deemed exercised when the Company receives:
(i) written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 12 of the Plan.
          Exercising an Option in any manner shall decrease the number of Shares
thereafter available, both for purposes of the Plan and for sale under the
Option, by the number of Shares as to which the Option is exercised.
          (b) Termination of Relationship as a Service Provider. If an Optionee
ceases to be a Service Provider, other than upon the Optionee’s death or
Disability, the Optionee may exercise his or her Option, but only within such
period of time as is specified in the Option Agreement, and only to the extent
that the Option is vested on the date of termination (but in no event later than
the expiration of the term of such Option as set forth in the Option Agreement).
In the absence

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of a specified time in the Option Agreement, the Option shall remain exercisable
for three (3) months following the Optionee’s termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified by the Administrator, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
          (c) Disability of Optionee. If an Optionee ceases to be a Service
Provider as a result of the Optionee’s Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option
Agreement, to the extent the Option is vested on the date of termination (but in
no event later than the expiration of the term of such Option as set forth in
the Option Agreement). In the absence of a specified time in the Option
Agreement, the Option shall remain exercisable for twelve (12) months following
the Optionee’s termination. If, on the date of termination, the Optionee is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified herein,
the Option shall terminate, and the Shares covered by such Option shall revert
to the Plan.
          (d) Death of Optionee. If an Optionee dies while a Service Provider,
the Option may be exercised within such period of time as is specified in the
Option Agreement (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant), by the Optionee’s estate or by a
person who acquires the right to exercise the Option by bequest or inheritance,
but only to the extent that the Option is vested on the date of death. In the
absence of a specified time in the Option Agreement, the Option shall remain
exercisable for twelve (12) months following the Optionee’s termination. If, at
the time of death, the Optionee is not vested as to his or her entire Option,
the Shares covered by the unvested portion of the Option shall immediately
revert to the Plan. The Option may be exercised by the executor or administrator
of the Optionee’s estate or, if none, by the person(s) entitled to exercise the
Option under the Optionee’s will or the laws of descent or distribution. If the
Option is not so exercised within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
          (e) Buyout Provisions. The Administrator may at any time offer to buy
out for a payment in cash or Shares, an Option previously granted based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
     11. Non-Transferability of Options. Unless determined otherwise by the
Administrator, an Option may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee. If the Administrator makes an Option
transferable, such Option shall contain such additional terms and conditions as
the Administrator deems appropriate.
     12. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
          (a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been “effected
without receipt of consideration.” Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.
          (b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase

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option applicable to any Shares purchased upon exercise of an Option shall lapse
as to all such Shares, provided the proposed dissolution or liquidation takes
place at the time and in the manner contemplated. To the extent it has not been
previously exercised, an Option will terminate immediately prior to the
consummation of such proposed action.
          (c) Merger or Asset Sale. In the event of a merger of the Company with
or into another corporation, or the sale of substantially all of the assets of
the Company, each outstanding Option shall be assumed or an equivalent option or
right substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation. In the event that the successor corporation refuses to
assume or substitute for the Option, the Optionee shall fully vest in and have
the right to exercise the Option as to all of the Optioned Stock, including
Shares as to which it would not otherwise be vested or exercisable. If an Option
becomes fully vested and exercisable in lieu of assumption or substitution in
the event of a merger or sale of assets, the Administrator shall notify the
Optionee in writing or electronically that the Option shall be fully vested and
exercisable for a period of fifteen (15) days from the date of such notice, and
the Option shall terminate upon the expiration of such period. For the purposes
of this paragraph, the Option shall be considered assumed if, following the
merger or sale of assets, the option or right confers the right to purchase or
receive, for each Share of Optioned Stock, immediately prior to the merger or
sale of assets, the consideration (whether stock, cash, or other securities or
property) received in the merger or sale of assets by holders of Common Stock
for each Share held on the effective date of the transaction (and if holders
were offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding Shares); provided, however, that if
such consideration received in the merger or sale of assets is not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Option, for each Share of Optioned Stock to be
solely common stock of the successor corporation or its Parent equal in fair
market value to the per share consideration received by holders of Common Stock
in the merger or sale of assets.
     13. Date of Grant. The date of grant of an Option shall be, for all
purposes, the date on which the Administrator makes the determination granting
such Option, or such other later date as is determined by the Administrator.
Notice of the determination shall be provided to each Optionee within a
reasonable time after the date of such grant.
     14. Amendment and Termination of the Plan.
          (a) Amendment and Termination. The Board may at any time amend, alter,
suspend or terminate the Plan.
          (b) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator’s ability to exercise
the powers granted to it hereunder with respect to options granted under the
Plan prior to the date of such termination.
     15. Conditions Upon Issuance of Shares.
          (a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option unless the exercise of such Option and the issuance and
delivery of such Shares shall comply with Applicable Laws and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
          (b) Investment Representations. As a condition to the exercise of an
Option the Company may require the person exercising such Option to represent
and warrant at the time of any such exercise that the Shares are being purchased
only for investment and without any present intention to sell or distribute such
Shares if, in the opinion of counsel for the Company, such a representation is
required.
     16. Inability to Obtain Authority. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company’s counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
     17. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

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  Notice of Grant of Stock Options
and Option Agreement
  Brocade Communications Systems, Inc.
ID: 77-0409517
1745 Technology Drive
San Jose, CA 95110

 

     
Name:
Address:

  Option Number:
Plan: NSO
ID:

 
Effective [DATE], you have been granted a(n) Non-Qualified Stock Option to buy
[SHARES] shares of Brocade Communications Systems, Inc. (the Company) stock at
$[PRICE] per share.
The total option price of the shares granted is $[PRICE].
Shares in each period will become fully vested on the date shown.

                                      Shares     Vest Type     Full Vest    
Expiration  

 
By your signature and the Company’s signature below, you and the Company agree
that these options are granted under and governed by the terms and conditions of
the Company’s Stock Option Plan as amended and the Option Agreement, all of
which are attached and made a part of this document.
 

     
 
   
 
   
 
   
Brocade Communications Systems, Inc.
  Date
 
   
 
   
 
   
[EMPLOYEE NAME]
  Date

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BROCADE COMMUNICATIONS SYSTEMS, INC.
1999 NONSTATUTORY STOCK OPTION PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have the
same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
You have been granted an option to purchase Common Stock of the Company, subject
to the terms and conditions of the Plan and this Option Agreement, as indicated
on this “Notice of Grant of Stock Options and Option Agreement.”
Vesting Schedule: Subject to the Optionee continuing to be a Service Provider on
such dates, this Option shall vest and become exercisable in accordance with the
provisions indicated on the attached “Notice of Grant of Stock Options and
Option Agreement,” subject to Optionee remaining a Service Provider on such
vesting dates.
Termination Period: This Option may be exercised for three months after Optionee
ceases to be a Service Provider. Upon the death or Disability of the Optionee,
this Option may be exercised for twelve months following Optionee’s termination
as a Service Provider. In no event shall this Option be exercised later than the
Term/Expiration Date as provided on the attached “Notice of Grant of Stock
Options and Option Agreement.”
II. AGREEMENT
1. Grant of Option. The Plan Administrator of the Company hereby grants to the
Optionee named in the Notice of Grant attached as Part I of this Agreement (the
“Optionee”) an option (the “Option”) to purchase the number of Shares, as set
forth in the Notice of Grant, at the exercise price per share set forth in the
Notice of Grant (the “Exercise Price”), subject to the terms and conditions of
the Plan, which is incorporated herein by reference. Subject to Section 14(b) of
the Plan, in the event of a conflict between the terms and conditions of the
Plan and the terms and conditions of this Option Agreement, the terms and
conditions of the Plan shall prevail.
2. Exercise of Option:
     (a) Right to Exercise. This Option is exercisable during its term in
accordance with the Vesting Schedule set in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement.
     (b) Method of Exercise. This Option is exercisable by delivery of an
exercise notice, in the form attached as Exhibit A (the “Exercise Notice”, which
shall state the election to exercise the Option, the number of Shares in respect
of which the Option is being exercised (the “Exercised Shares”), and such other
representations and agreements as may be required by the Company pursuant to the
provisions of the Plan. The Exercise Notice shall be completed by the Optionee
and delivered to the Stock Option Administrator. The Exercise Notice shall be
accompanied by payment of the aggregate Exercise Price as to all Exercised
Shares. This Option shall be deemed to be exercised upon receipt by the Company
of such fully executed Exercise Notice accompanied by such aggregate Exercise
Price.
     No Shares shall be issued pursuant to the exercise of this Option unless
such issuance and exercise complies with Applicable Laws. Assuming such
compliance, for income tax purposes the Exercised Shares shall be considered
transferred to the Optionee on the date the Option is exercised with respect to
such Exercised Shares.
3. Method of Payment. Payment of the aggregate Exercise Price shall be by any of
the following, or a combination thereof, at the election of the Optionee:

  (a)   cash;     (b)   check;     (c)   consideration received by the Company
under a cashless exercise program implemented by the Company in connection with
the Plan; or

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  (d)   surrender of other Shares which (i) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six (6)
months of the date of surrender, and (ii) have a Fair Market Value on the date
of surrender equal to the aggregate Exercise Price of the Exercised Shares.

4. Non-Transferability of Option. This Option may not be transferred in any
manner otherwise than by will or by the laws of descent or distribution and may
be exercised during the lifetime of Optionee only by the Optionee. The terms of
the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
5. Term of Option. This Option may be exercised only within the term set out in
the Notice of Grant, and may be exercised during such term only in accordance
with the Plan and the terms of this Option Agreement.
6. Tax Consequences. Some of the federal tax consequences relating to this
Option, as of the date of this Option, are set forth below. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
THE OPTIONEE SHOULD CONSULT A TAX ADVISOR BEFORE EXERCISING THIS OPTION OR
DISPOSING OF THE SHARES.
     (a) Exercising the Option. The Optionee may incur regular federal income
tax liability upon exercise of an NSO. The Optionee will be treated as having
received compensation income (taxable at ordinary income tax rates) equal to the
excess, if any, of the Fair Market Value of the Exercised Shares on the date of
exercise over their aggregate Exercise Price. If the Optionee is an Employee of
a former Employee, the Company will be required to withhold from his or her
compensation or collect from Optionee and pay to the applicable taxing
authorities an amount in cash equal to a percentage of this compensation income
at the time of exercise, and may refuse to honor the exercise and refuse to
deliver Shares if such withholding amounts are not delivered at the time of
exercise.
     (b) Disposition of Shares. If the Optionee holds NSO Shares for at least
one year, any gain realized on disposition of the Shares will be treated as
long-term capital gain for federal income tax purposes.
7. Entire Agreement: Governing Law. The Plan is incorporated herein by
reference. The Plan and this Option Agreement constitute the entire agreement of
the parties with respect to the subject matter hereof and supersede in their
entirely all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee’s interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by the internal substantive laws, but not
the choice of law rules, of California.
8. NO GUARENTEE OF CONTINUED SERVICE: OPTIONEE ACKNOWLEDGES AND AGREES THAT THE
VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY
CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (AND NOT THROUGH THE
ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES HEREUNDER).
OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS
COMTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT
CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE
PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT
INTERFERE WITH OPTIONEE’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE OPTIONEE’S
RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
     By your signature and the signature of the Company’s representative on the
attached “Notice of Grant of Stock Options and Option Agreement” of this Option
Agreement, you and the Company agree that this Option is granted under and
governed by the terms and conditions of the Plan and this Option Agreement.
Optionee has reviewed the Plan and this Option Agreement in their entirety, has
had an opportunity to obtain the advice of counsel prior to executing this
Option Agreement and fully understands all provisions of the Plan and Option
Agreement. Optionee hereby agrees to accept as binding, conclusive and final all
decisions or interpretations of the Administrator upon any questions relating to
the Plan and Option Agreement. Optionee further agrees to notify the Company
upon any change in the residence address indicated on the attached “Notice of
Grant of Stock Options and Option Agreement.”

3.

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BROCADE COMMUNICATIONS SYSTEMS, INC.
1999 NONSTATUTORY STOCK OPTION PLAN
EXERCISE NOTICE
Brocade Communications Systems, Inc.
Attention: Stock Option Administration
     1. Exercise of Option. Effective as of today, ___, ___, the undersigned
(“Purchaser”) hereby elects to purchase ___shares (the “Shares”) of the Common
Stock of Brocade Communications Systems, Inc. (the “Company”) under and pursuant
to the 1999 Nonstatutory Stock Option Plan (the “Plan”) and the Stock Option
Agreement dated, ___, ___ (the “Option Agreement”). The purchase price for the
Shares shall be $___, as required by the Option Agreement.
     2. Delivery of Payment. Purchaser herewith delivers to the Company the full
purchase price for the Shares.
     3. Representations of Purchaser. Purchaser acknowledges that Purchaser has
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.
     4. Rights as Shareholder. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the Shares, no right to vote or receive dividends or
any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares so acquired shall
be issued to the Optionee as soon as practicable after exercise of the Option.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date of issuance, except as provided in Section 12 of the
Plan.
     5. Tax Consultation. Purchaser understands that Purchaser may suffer
adverse tax consequences as a result of Purchaser’s purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
     6. Entire Agreement; Governing Law. The Plan and Option Agreement are
incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Purchaser with respect to the subject matter
hereof, and may not be modified adversely to the Purchaser’s interest except by
means of a writing

 

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signed by the Company and Purchaser. This agreement is governed by the internal
substantive laws, but not the choice of law rules, of California.

         
Submitted by:
      Accepted by:
 
       
PURCHASER
      BROCADE COMMUNICATIONS
SYSTEMS, INC.
 
       
 
             
Signature
      By
 
       
 
             
Print Name
      Title
 
       
 
             
 
      Date Received
Address:
       
 
       
 
       
 
       
 
       

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