exv10w7



 






Exhibit 10.7




BROCADE
COMMUNICATIONS SYSTEMS, INC.


1999 EMPLOYEE STOCK PURCHASE PLAN

(as amended and restated on October 21, 2005)




     1. Purpose. The purpose of the Plan is to provide employees of the Company and its
Designated Subsidiaries with an opportunity to purchase Common Stock of the Company through
accumulated payroll deductions. It is the intention of the Company to have the Plan qualify as an
“Employee Stock Purchase Plan” under Section 423 of the Internal Revenue Code of 1986, as amended.
The provisions of the Plan, accordingly, shall be construed so as to extend and limit participation
in a manner consistent with the requirements of that section of the Code.



     2. Definitions.



          (a) “Board” shall mean the Board of Directors of the Company.



          (b) “Code” shall mean the Internal Revenue Code of 1986, as amended.



          (c) “Common Stock” shall mean the Common Stock of the Company.



          (d) “Company” shall mean Brocade Communications Systems, Inc., a Delaware corporation,
and any Designated Subsidiary of the Company.



          (e) “Compensation” shall mean all base straight time gross earnings and commissions,
inclusive of payments for overtime, shift premium, incentive compensation, incentive payments,
bonuses and other cash compensation.



          (f) “Designated Subsidiary” shall mean any Subsidiary which has been designated by the
Board from time to time in its sole discretion as eligible to participate in the Plan.



          (g) “Employee” shall mean any individual who is an Employee of the Company for tax
purposes whose customary employment with the Company is at least twenty (20) hours per week and
more than five (5) months in any calendar year. 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 as long as such entities have
been designated by the Board as eligible to participate in the Plan.



          (h) “Enrollment Date” shall mean the first day of each Offering Period.



          (i) “Exercise Date” shall mean the last day of each Offering Period.



          (j) “Fair Market Value” shall mean, 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 Board deems reliable, or;



               (ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling
prices are not reported, its Fair Market Value shall be the mean of the closing bid and asked
prices for the Common Stock on the date of such determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable, or;



               (iii) In the absence of an established market for the Common Stock, the Fair Market Value
thereof shall be determined in good faith by the Board.



               (iv) For purposes of the Enrollment Date of the first Offering Period under the Plan, the Fair
Market Value shall be the initial price to the public as set forth in the final prospectus included
within the registration statement in Form S-1 filed with the Securities and Exchange Commission for the
initial public offering of the Company’s Common Stock (the “Registration Statement”).



 









 





          (k) “Offering Period” shall mean a period of approximately six (6) months during which
an option granted pursuant to the Plan may be exercised, commencing on the first Trading Day on or
after June 1 and terminating on the last Trading Day in the period ending the following November
30, or commencing on the first Trading Day on or after December 1 and terminating on the last
Trading Day in the period ending the following May 31; provided, however, that the first Offering
Period under the Plan shall commence with the first Trading Day on or after the date on which the
Securities and Exchange Commission declares the Company’s Registration Statement effective and
ending on the last Trading Day on or before November 30, 1999. The duration of Offering Periods
may be changed pursuant to Section 4 of this Plan.



          (l) “Plan” shall mean this Employee Stock Purchase Plan.



          (m) “Purchase Price” shall mean an amount equal to 85% of the Fair Market Value of a
share of Common Stock on the Enrollment Date or on the Exercise Date, whichever is lower; provided,
however, that the Purchase Price may be adjusted by the Board pursuant to Section 20.



          (n) “Reserves” shall mean the number of shares of Common Stock covered by each option
under the Plan which have not yet been exercised and the number of shares of Common Stock which
have been authorized for issuance under the Plan but not yet placed under option.



          (o) “Subsidiary” shall mean a corporation, domestic or foreign, of which not less than
50% of the voting shares are held by the Company or a Subsidiary, whether or not such corporation
now exists or is hereafter organized or acquired by the Company or a Subsidiary.



          (p) “Trading Day” shall mean a day on which national stock exchanges and the Nasdaq
System are open for trading.



     3. Eligibility.



          (a) Any Employee who shall be employed by the Company on a given Enrollment Date shall be
eligible to participate in the Plan.



          (b) Any provisions of the Plan to the contrary notwithstanding, no Employee shall be granted
an option under the Plan (i) to the extent that, immediately after the grant, such Employee (or any
other person whose stock would be attributed to such Employee pursuant to Section 424(d) of the
Code) would own capital stock of the Company and/or hold outstanding options to purchase such stock
possessing five percent (5%) or more of the total combined voting power or value of all classes of
the capital stock of the Company or of any Subsidiary, or (ii) to the extent that his or her rights
to purchase stock under all employee stock purchase plans of the Company and its subsidiaries
accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of stock (determined
at the fair market value of the shares at the time such option is granted) for each calendar year
in which such option is outstanding at any time.



     4. Offering Periods. The Plan shall be implemented by consecutive Offering Periods
with a new Offering Period commencing on the first Trading Day on or after June 1 and December 1
each year, or on such other date as the Board shall determine, and continuing thereafter until
terminated in accordance with Section 20 hereof; provided, however, that the first Offering Period
under the Plan shall commence with the first Trading Day on or after the date on which the
Securities and Exchange Commission declares the Company’s Registration Statement effective and
ending on the last Trading Day on or before November 30, 1999. The Board shall have the power to
change the duration of Offering Periods (including the commencement dates thereof) with respect to
future offerings without stockholder approval if such change is announced at least five (5) days
prior to the scheduled beginning of the first Offering Period to be affected thereafter.



     5. Participation.



          (a) An eligible Employee may become a participant in the Plan by completing a subscription
agreement authorizing payroll deductions in the form of Exhibit A to this Plan and filing it with
the Company’s payroll office prior to the applicable Enrollment Date.



          (b) Payroll deductions for a participant shall commence on the first payroll following the
Enrollment Date and shall end on the last payroll in the Offering Period to which such
authorization is applicable, unless sooner terminated by the participant as provided in Section 10
hereof.



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     6. Payroll Deductions.



          (a) At the time a participant files his or her subscription agreement, he or she shall elect
to have payroll deductions made on each pay day during the Offering Period in an amount not
exceeding fifteen percent (15%) of the Compensation which he or she receives on each pay day during
the Offering Period.



          (b) All payroll deductions made for a participant shall be credited to his or her account
under the Plan and shall be withheld in whole percentages only. A participant may not make any
additional payments into such account.



          (c) A participant may discontinue his or her participation in the Plan as provided in Section
10 hereof, or may increase or decrease the rate of his or her payroll deductions during the
Offering Period by completing or filing with the Company a new subscription agreement authorizing a
change in payroll deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall be effective with
the first full payroll period following five (5) business days after the Company’s receipt of the
new subscription agreement unless the Company elects to process a given change in participation
more quickly. A participant’s subscription agreement shall remain in effect for successive
Offering Periods unless terminated as provided in Section 10 hereof.



          (d) Notwithstanding the foregoing, to the extent necessary to comply with Section 423(b)(8) of
the Code and Section 3(b) hereof, a participant’s payroll deductions may be decreased to zero
percent (0%) at any time during an Offering Period. Payroll deductions shall recommence at the
rate provided in such participant’s subscription agreement at the beginning of the first Offering
Period which is scheduled to end in the following calendar year, unless terminated by the
participant as provided in Section 10 hereof.



          (e) At the time the option is exercised, in whole or in part, or at the time some or all of
the Company’s Common Stock issued under the Plan is disposed of, the participant must make adequate
provision for the Company’s federal, state, or other tax withholding obligations, if any, which
arise upon the exercise of the option or the disposition of the Common Stock. At any time, the
Company may, but shall not be obligated to, withhold from the participant’s compensation the amount
necessary for the Company to meet applicable withholding obligations, including any withholding
required to make available to the Company any tax deductions or benefits attributable to sale or
early disposition of Common Stock by the Employee.



     7. Grant of Option. On the Enrollment Date of each Offering Period, each eligible
Employee participating in such Offering Period shall be granted an option to purchase on the
Exercise Date of such Offering Period (at the applicable Purchase Price) up to a number of shares
of the Company’s Common Stock determined by dividing such Employee’s payroll deductions accumulated
prior to such Exercise Date and retained in the Participant’s account as of the Exercise Date by
the applicable Purchase Price; provided that in no event shall an Employee be permitted to purchase
during each Offering Period more than 3000 shares (subject to any adjustment pursuant to Section
19), and provided further that such purchase shall be subject to the limitations set forth in
Sections 3(b) and 12 hereof. Exercise of the option shall occur as provided in Section 8 hereof,
unless the participant has withdrawn pursuant to Section 10 hereof. The Option shall expire on the
last day of the Offering Period.



     8. Exercise of Option. Unless a participant withdraws from the Plan as provided in
Section 10 hereof, his or her option for the purchase of shares shall be exercised automatically on
the Exercise Date, and the maximum number of full shares subject to option shall be purchased for
such participant at the applicable Purchase Price with the accumulated payroll deductions in his or
her account. No fractional shares shall be purchased; any payroll deductions accumulated in a
participant’s account which are not sufficient to purchase a full share shall be retained in the
participant’s account for the subsequent Offering Period, subject to earlier withdrawal by the
participant as provided in Section 10 hereof. Any other monies left over in a participant’s
account after the Exercise Date shall be returned to the participant. During a participant’s lifetime, a participant’s option to purchase shares
hereunder is exercisable only by him or her.



     9. Delivery. As promptly as practicable after each Exercise Date on which a purchase
of shares occurs, the Company shall arrange the delivery to each participant, as appropriate, the
shares purchased upon exercise of his or her option.



     10. Withdrawal.



          (a) A participant may withdraw all but not less than all the payroll deductions credited to
his or her account and not yet used to exercise his or her option under the Plan at any time by
giving written notice to the Company in



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the form of Exhibit B to this Plan. All of the
participant’s payroll deductions credited to his or her account shall be paid to such participant
promptly after receipt of notice of withdrawal and such participant’s option for the Offering
Period shall be automatically terminated, and no further payroll deductions for the purchase of
shares shall be made for such Offering Period. If a participant withdraws from an Offering Period,
payroll deductions shall not resume at the beginning of the succeeding Offering Period unless the
participant delivers to the Company a new subscription agreement.



          (b) A participant’s withdrawal from an Offering Period shall not have any effect upon his or
her eligibility to participate in any similar plan which may hereafter be adopted by the Company or
in succeeding Offering Periods which commence after the termination of the Offering Period from
which the participant withdraws.



     11. Termination of Employment. Upon a participant’s ceasing to be an Employee for any
reason, he or she shall be deemed to have elected to withdraw from the Plan and the payroll
deductions credited to such participant’s account during the Offering Period but not yet used to
exercise the option shall be returned to such participant or, in the case of his or her death, to
the person or persons entitled thereto under Section 15 hereof, and such participant’s option shall
be automatically terminated. The preceding sentence notwithstanding, a participant who receives
payment in lieu of notice of termination of employment shall be treated as continuing to be an
Employee for the participant’s customary number of hours per week of employment during the period
in which the participant is subject to such payment in lieu of notice.



     12. Interest. No interest shall accrue on the payroll deductions of a participant in
the Plan.



     13. Stock.



          (a) Subject to adjustment upon changes in capitalization of the Company as provided in Section
19 hereof, the maximum number of shares of the Company’s Common Stock which shall be made available
for sale under the Plan shall be 200,000 shares [1,600,000 as adjusted for three 2:1 stock splits],
plus an annual increase to be added on the first day of the Company’s fiscal year beginning in 2000
equal to the lesser of (i) 2,500,000 shares [20,000,000 as adjusted for three 2:1 stock splits],
(ii) 2.5% of the outstanding shares on such date or (iii) a lesser amount determined by the Board.
If, on a given Exercise Date, the number of shares with respect to which options are to be
exercised exceeds the number of shares then available under the Plan, the Company shall make a pro
rata allocation of the shares remaining available for purchase in as uniform a manner as shall be
practicable and as it shall determine to be equitable.



          (b) The participant shall have no interest or voting right in shares covered by his option
until such option has been exercised.



          (c) Shares to be delivered to a participant under the Plan shall be registered in the name of
the participant or in the name of the participant and his or her spouse.



     14. Administration. The Plan shall be administered by the Board or a committee of
members of the Board appointed by the Board. The Board or its committee shall have full and
exclusive discretionary authority to construe, interpret and apply the terms of the Plan, to
determine eligibility and to adjudicate all disputed claims filed under the Plan. Every finding,
decision and determination made by the Board or its committee shall, to the full extent permitted
by law, be final and binding upon all parties.



     15. Designation of Beneficiary.



          (a) A participant may file a written designation of a beneficiary who is to receive any shares
and cash, if any, from the participant’s account under the Plan in the event of such participant’s
death subsequent to an Exercise Date on which the option is exercised but prior to delivery to such
participant of such shares and cash. In addition, a participant may file a written designation of
a beneficiary who is to receive any cash from the participant’s account under the Plan in the event
of such participant’s death prior to exercise of the option. If a participant is married and the
designated beneficiary is not the spouse, spousal consent shall be required for such designation to
be effective.



          (b) Such designation of beneficiary may be changed by the participant at any time by written
notice. In the event of the death of a participant and in the absence of a beneficiary validly
designated under the Plan who is living at the time of such participant’s death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of the Company), the
Company, in its discretion, may deliver such shares and/or cash to the spouse or to any one or more
dependents or relatives of the participant, or if no spouse, dependent or relative is known to the
Company, then to such other person as the Company may designate.



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     16. Transferability. Neither payroll deductions credited to a participant’s account
nor any rights with regard to the exercise of an option or to receive shares under the Plan may be
assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of
descent and distribution or as provided in Section 15 hereof) by the participant. Any such attempt
at assignment, transfer, pledge or other disposition shall be without effect, except that the
Company may treat such act as an election to withdraw funds from an Offering Period in accordance
with Section 10 hereof.



     17. Use of Funds. All payroll deductions received or held by the Company under the
Plan may be used by the Company for any corporate purpose, and the Company shall not be obligated
to segregate such payroll deductions.



     18. Reports. Individual accounts shall be maintained for each participant in the
Plan. Statements of account shall be given to participating Employees at least annually, which
statements shall set forth the amounts of payroll deductions, the Purchase Price, the number of
shares purchased and the remaining cash balance, if any.



19. Adjustments Upon Changes in Capitalization, Dissolution, Liquidation, Merger or




          Asset Sale.



          (a) Changes in Capitalization. Subject to any required action by the stockholders of
the Company, the Reserves, the maximum number of shares each participant may purchase per Offering
Period (pursuant to Section 7), as well as the price per share and the number of shares of Common
Stock covered by each option under the Plan which has not yet been exercised 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 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 Offering Period then in progress shall be shortened by setting a
new Exercise Date (the “New Exercise Date”), and shall terminate immediately prior to the
consummation of such proposed dissolution or liquidation, unless provided otherwise by the Board.
The New Exercise Date shall be before the date of the Company’s proposed dissolution or
liquidation. The Board shall notify each participant in writing, at least ten (10) business days
prior to the New Exercise Date, that the Exercise Date for the participant’s option has been
changed to the New Exercise Date and that the participant’s option shall be exercised automatically
on the New Exercise Date, unless prior to such date the participant has withdrawn from the Offering
Period as provided in Section 10 hereof.



          (c) Merger or Asset Sale. In the event of a proposed sale of all or substantially all
of the assets of the Company, or the merger of the Company with or into another corporation, each
outstanding option shall be assumed or an equivalent option 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 Offering Period then in progress shall be shortened by setting a new Exercise
Date (the “New Exercise Date”). The New Exercise Date shall be before the date of the Company’s
proposed sale or merger. The Board shall notify each participant in writing, at least ten (10)
business days prior to the New Exercise Date, that the Exercise Date for the participant’s option
has been changed to the New Exercise Date and that the participant’s option shall be exercised
automatically on the New Exercise Date, unless prior to such date the participant has withdrawn
from the Offering Period as provided in Section 10 hereof.



     20. Amendment or Termination.



          (a) The Board of Directors of the Company may at any time and for any reason terminate or
amend the Plan. Except as provided in Section 19 hereof, no such termination can affect options
previously granted, provided that an Offering Period may be terminated by the Board of Directors on
any Exercise Date if the Board determines that the termination of the Offering Period or the Plan
is in the best interests of the Company and its stockholders. Except as provided in Section 19 and
Section 20 hereof, no amendment may make any change in any option theretofore granted which
adversely affects the rights of any participant. To the extent necessary to comply with Section
423 of the Code (or any



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other applicable law, regulation or stock exchange rule), the Company shall
obtain shareholder approval in such a manner and to such a degree as required.



          (b) Without stockholder consent and without regard to whether any participant rights may be
considered to have been “adversely affected,” the Board (or its committee) shall be entitled to
change the Offering Periods, limit the frequency and/or number of changes in the amount withheld
during an Offering Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the amount designated by
a participant in order to adjust for delays or mistakes in the Company’s processing of properly
completed withholding elections, establish reasonable waiting and adjustment periods and/or
accounting and crediting procedures to ensure that amounts applied toward the purchase of Common
Stock for each participant properly correspond with amounts withheld from the participant’s
Compensation, and establish such other limitations or procedures as the Board (or its committee)
determines in its sole discretion advisable which are consistent with the Plan.



          (c) In the event the Board determines that the ongoing operation of the Plan may result in
unfavorable financial accounting consequences, the Board may, in its discretion and, to the extent
necessary or desirable, modify or amend the Plan to reduce or eliminate such accounting consequence
including, but not limited to:



               (i) altering the Purchase Price for any Offering Period including an Offering Period underway
at the time of the change in Purchase Price;



               (ii) shortening any Offering Period so that Offering Period ends on a new Exercise Date,
including an Offering Period underway at the time of the Board action; and



               (iii) allocating shares.



     Such modifications or amendments shall not require stockholder approval or the consent of any
Plan participants.



     21. Notices. All notices or other communications by a participant to the Company
under or in connection with the Plan shall be deemed to have been duly given when received in the
form specified by the Company at the location, or by the person, designated by the Company for the
receipt thereof.



     22. Conditions Upon Issuance of Shares. Shares shall not be issued with respect to an
option unless the exercise of such option and the issuance and delivery of such shares pursuant
thereto shall comply with all applicable provisions of law, domestic or foreign, including, without
limitation, the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements of any stock
exchange upon which the shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.



     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 by any of the aforementioned applicable
provisions of law.



     23. Term of Plan. The Plan shall become effective upon the earlier to occur of its
adoption by the Board of Directors or its approval by the stockholders of the Company. It shall
continue in effect for a term of ten (10) years unless sooner
terminated under Section 20 hereof.




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